1. Alternative performance measure (APM) – refer to the Glossary for definition and explanation 2. Alternative performance measure (APM) – refer to Glossary for definition and explanation, and to note 13 for reconciliation to Financial Statements 3. 2018 dividend includes an additional dividend of 11 pence per share relating to the increase in post-tax profits from the change in Ogden discount rate assumption.
4. Unaudited: refer to capital structure and financial position section on pages 38 to 39 for further information.
Outside of the UK, Admiral owns four insurance and six comparison businesses.
Corporate Governance 74 Introduction from the Chair 76 Board of Directors 78 Governance Report 88 The Audit Committee 94 The Group Risk Committee 99 The Nomination and Governance Committee 102 The Remuneration Committee 105 Remuneration at a Glance 106 Directors’ Remuneration Policy 114 Annual Report on Remuneration 124 Directors’ Report
Admiral Group plc · Annual Report and Accounts 2019 0101Admiral Group plc · Annual Report and Accounts 2019
Other businesses in the UK include comparison website Confused.com, law firm Admiral Law Limited and Admiral Financial Services Limited offering personal loans and car finance. Outside of the UK Admiral owns four insurance and six comparison businesses.
Read more in our Business Model on page 16 to 17 02 Admiral Group plc · Annual Report and Accounts 2019
Where we are based Admiral Group Headquarters is located in Cardiff in South Wales, and we are proud to be Wales’ only FTSE 100 Company.
Admiral Group has five insurance and seven comparison businesses. It has nearly 7 million customers and employs over 11,000 staff globally.
*1. Alternative Performance Measure (APM) – refer to Glossary for definition and explanation, and to note 13 for reconciliation.
Kudos is a customer experience measurement programme, used across all our customer facing contact centres. The programme focuses on three key areas which directly impact, or are influenced by, our customers. These areas are: average speed of answer, customer SMS feedback and external call monitoring by senior management.
Through external call monitoring, senior managers evaluate customer calls on a monthly basis and provide feedback to agents about the service the customer received. Over 5,000 calls were monitored by senior managers in 2019, and our average internal feedback score was a pleasing 80%.
In 2019, we introduced a new cross-departmental project called Customers Matter. This project aims to improve the way we interact with our customers by tracking metrics such as average speed of answer, kudos scores, SMS feedback scores, and complaint percentages. As part of this project we also asked our employees to submit selfies representing their thoughts on the meaning of service, using the hashtag #CustomersMatter.
In November, we held the Admiral Customer Service Awards for the first time, a night dedicated to the celebration of outstanding customer service throughout the business. Awards included: ‘Most Customer Centric Team’, ’Consistently Cares’ award and ‘Best Use of Insight and Feedback’. We welcomed 160 staff from the Group’s customer-facing departments to celebrate and received over 200 award nominations across 13 categories.
External Recognition In 2019 we were named Best Motor Insurance Provider at the Personal Finance Awards for the seventh year in a row. We were also named Best Home Insurer and Best Big Insurance Company at the Insurance Choice Awards.
Continuous Improvement We are always looking to improve our services. In 2019, we saw improvements to both our average call answer rate and the average call waiting time in Customer Services.
1 Average Reevoo score for 2019. Based on 9,325 responses 2 Average Reevoo score for 2019. Based on 27,211 responses 3 For UK-based Customer Services
The four pillars of our culture are: Communication, Equality, Reward & Recognition and Fun
In 2019 the Group was recognised as a ‘Centre of Excellence in Wellbeing’ by the Great Place to Work Institute. We received high scores in areas including: Fulfilment at work, interpersonal relationships, worklife balance and mental and physical health and more.
Similar rooms already existed at Ty Admiral Cardiff and Admiral Group House in Newport, and David was quick to instruct our facilities team to create a similar space at our Swansea location. The room was available for use from August 2019 onwards.
This year was BHMW’s 12th anniversary and their theme was ‘Movers, Shakers and Legacy Makers’ which we thought was very apt for our culture.
Development We recognise that our future success relies on our ability to develop and retain our people. Our Admiral Academy offers support, learning opportunities, and career advice to all employees. We have a team of over 100 learning and development professionals across the Group, with the skills necessary to support the needs of our business and our people.
Admiral Seguros – Charity support In Spain, Admiral Seguros collaborated with Pulseras Rosas (Pink Bracelets), an association that supports patients and families throughout cancer treatment.
These initiatives, along with the wider awareness campaigns of the Green Team, are important parts of our strategy to support our communities and the environment.
Admiral Law – Fundraising for Headway In 2019, Admiral Law’s serious injury team supported the charity Headway, a brain injury association set up to help people with brain injuries. Through their fundraising efforts the team contributed to essential services, that provide assistance to patients and their families.
The serious injury team were recognised for their efforts by being awarded ‘Headway Champions for Cardiff and the South East.’
Meaningful Contributions Giving back to our communities is an important part of our culture and translates into the initiatives we take to drive positive impacts for those in need.
Depth of Relationships With so many of our employees coming from the communities we operate in, we feel a strong sense of responsibility to foster and maintain deep community relationships through outreach programmes; such as developing employability skills and promoting diversity.
1 Group-wide results to the 2019 Great Place to Work Survey
“ On behalf of the Board I would like to thank everyone at Admiral for their continued hard work and contribution to the Group’s results in 2019.”
Having been through a comprehensive and robust succession process, the Board is confident that in Milena we have a natural successor and a leader for the next generation. We have a wealth of management talent at Admiral and bringing this through has always been a central pillar to Admiral’s management philosophy as the business evolves alongside its customers. Milena brings a deep appreciation of the special Admiral culture, entrepreneurial spirit, commercial track record and people development skills.
The Group has continued to grow with turnover increasing by 5% to £3.5 billion, whilst customer numbers are 7% higher than 2018 at 6.98 million. The Group’s share of pre-tax profit increased by 10% to £526 million driven by UK Motor Insurance, with strong releases of prior year claims reserves. Once again we were impacted by Ogden (the Personal Injury Discount Rate). Although the final rate was set at -0.25%, and therefore lower than our expectations, we were able to deliver significantly increased profits resulting in an early trading update to notify the market of higher than expected profit. Earnings per share rose by 8% and return on equity was 52%. The Group’s solvency ratio remains robust at 190% (194% at the end of 2018).
This strong performance was due to contributions from businesses across the Group. Particularly of note was UK Insurance (Motor, Household, Travel), European Insurance and Confused. com. Our Loans business continues to develop well and we continue to build this business with our usual cautious approach. We have encountered more challenges in the US, so we still continue to strengthen fundamentals there.
Focusing on the UK, we maintained a disciplined approach and prioritised profitability over growth, by increasing prices as a result of continued claims inflation. This led to modest growth over the period. The regulatory environment in the UK continues to evolve, with whiplash reform and the FCA market pricing study being key features of 2019 and 2020. Approximately 80% of Admiral customers shop around at renewal, so we are encouraged that the majority choose to remain with us as an indicator of our good customer experience and competitive pricing.
As a result of our Brexit restructuring, 1 January 2019 marked the start of operations for our European insurance hub in Madrid. The hub allows us to underwrite and support our growing European insurance businesses and ensures that we are well placed for a full range of potential circumstances without disrupting our customers.
Dividend Our dividend policy remains that we pay a normal dividend of 65% of post tax profit and distribute each year the available surplus over and above what we retain to meet regulatory requirements, the future development of our business and appropriate buffers. The Directors have recommended a final dividend of 77 pence per share (2018: 66 pence per share) for the year to 31 December 2019 representing a distribution of 90% of our second half earnings.
In 2019 we also improved upon our comprehensive suite of manager training sessions, to include courses on ‘Stress Awareness’ and ‘Emotional Resilience.’
We pride ourselves at Admiral Group on having a happy, supportive, and productive atmosphere, and we run several initiatives to help our employees stay both physically and mentally healthy.
Group Board in 2019 The Board recognises the need for a strong corporate governance framework and supporting processes across the Group and believes that good governance, with the tone set from the top, is a key factor in delivering sustainable business performance and creating value for all the Group’s stakeholders.
We reviewed our Group strategy in 2019 which remains straightforward and highly focused on building customer-centric, sustainable businesses for the long term. We strive to keep doing what we’re doing, and do it better year after year.
In our UK insurance business, we remain determined to strengthen our core competitive advantages and pursue our culture of innovation and test and learn approach. For example, we are continuing to deploy technology relating to digital and self-service to improve the customer experience and overall efficiencies.
We also continue to take what we do well and what we learn to new markets and new products, both in the UK and abroad. We are agile enough to adapt to evolving business environments and encourage entrepreneurial initiatives to solve challenges and offer the best outcome to our customers, people and investors. One example is the launch of Household insurance in France.
From a governance perspective, we have applied the principles of the new Corporate Governance Code which ensures that we will continue to take on board the views of all of our stakeholders in our discussions and decision making. As you would expect, we already have strong links with our people and in 2019, the Board revisited and enhanced several areas of focus including our culture, engagement, diversity, our impact on the environment and climate change, and how we give back and participate in the communities in which we operate through our Ministry of Giving.
There is further work to do to ensure that views of our international employees across the Group are better represented, so we will be building on this approach over the next 12 months.
• Invest in the development and growth of our people – we have focused on the quality and development of our senior management team, added to our talent base with some external hires, and reviewed our succession pipeline
Our role in Society Admiral takes its role in society very seriously and has an active approach to Corporate Responsibility (more information in Corporate Social Responsibility Report on the Admiral website.) We are proud to be Wales’ only FTSE 100 headquartered company and employ over 7,000 people in South Wales. Our people play an active part in the communities in which we operate. We carefully consider our impact on the community and environment, including factors such as the green credentials of our buildings, raising funds for multiple charities, and considering the impact of climate change across the business.
This year we reviewed our responsible investment policy with regard to our ESG positioning. We aim to be an economically strong and responsible business over the long term, guided by a clear purpose, to make a positive and significant impact not just to our customers and our people but to the economy and society.
• At each meeting, a Non-Executive Director of the Admiral Group Board attends1
• Our Coffee Morning managers (senior managers), are also regularly invited to attend, as are our Executive Directors
• Elected ECG members are invited to present recommendations at Group Board meetings
• The Board can add actions to the ECG agenda to explore, and vice versa2
We have always encouraged our employees to ask questions, provide feedback and communicate with our senior managers via initiatives such as the Friendly Forums, Employee Surveys, Tea Parties and Online Chats.
At the start of 2019, we launched the Employee Consultation Group (ECG). The ECG views employees as key stakeholders and acts as a platform for two-way communication between Admiral Group Board and the employees of its UK businesses.
Through open debate and interactions with Group Board and senior management, employees can be confident that their views and opinions are discussed at the highest level.
1 Non-Executive Directors (NEDs) participate on a rotational basis to maximise two-way communication and to access the expertise and knowledge of different Board members.
We value customers above everything else and strive to design products that customers want and that represent value for money.
Unique company culture We go out of our way to make this a GREAT place to work and believe that if people like what they do, they’ll do it better. We have created an environment where Admiral employees look forward to coming to work, can learn and develop, and provide a great service to customers.
Shareholder returns We are committed to returning excess capital to shareholders. We believe that with limited cash, management remains focused on the most important aspects of the business. We don’t starve our businesses, but neither do we allow them the luxury of excess capital.
Efficient capital employment Admiral shares a large proportion of risk with co- and reinsurance partners – and these relationships are generally underpinned by strong underwriting results. Sharing risk allows Admiral to hold less capital as it bears less risk, resulting in a superior return on capital for Admiral shareholders whilst also providing protection for losses.
Focus on sustainable profitability Admiral focuses on bottom-line profitability in the short, medium and long term, and this perspective guides decisions made across all of our business operations. The business continues to innovate and improve key competitive advantages including cost efficiencies, pricing and claims management.
Controlled test and learn All our growth, at home and overseas, has been organic. We have built each business from the ground up, identifying and understanding the opportunity, taking measured steps to test how well we understand challenges and the effectiveness of our solutions, and then to learn from that experience.
Management, Board and Investor Relations regularly interact with shareholders through conferences, roadshows and meetings
Our Environment 100% UK Energy sourced from green energy sources 0% of recyclable waste sent to landfill (UK)
The assessment of the business model also includes an assessment of the projected solvency of the business as part of the capital plan and ORSA assessment, which includes consideration of the principal risks facing the Group, as well as consideration of emerging risks such as climate change.
In January 2019, the Group’s lawyers, gave a presentation to remind the Board of their
Why we engage Examples of how we engage Examples of actions taken in 2019 How we monitor the impact of our actions
We invested in staff training and digital automation, to ultimately improve the customer experience.
In 2019, all customer-facing staff (over 6,000 individuals) were trained to enhance our identification and support of vulnerable customers.
• Feedback and insight relating to products and services from all customer facing teams across the business
We perceive that key material issues for our people generally relate to a friendly and productive workplace where staff are engaged, and where their views are heard and considered. Our priorities consider; open lines of communication, fair treatment, opportunities for career progression, reward and recognition.
Formal launch of the Employee Consultation Group, with NEDs attending on a rotational basis.
We undertook a Mental Health Strategy review and appointed a ‘Healthy Heads Ambassador.’ Training sessions for staff to better understand neurodiversity were introduced too.
Improved digital and self-service options, including the revamp of the MyAccount portal.
• #3: Best Workplace for Women in the UK, Great Places to Work
The ECG met five times in 2019 and several improvement suggestions relating to ways of working were put forward, and have since been addressed and actioned by People Services and Facilities.
We have taken positive steps to further enhance our employee policies relating to gender, diversity and inclusion.
The Board reviewed how stakeholder interests are taken into account at Board meetings and reflected on how our corporate governance structure maintains and protects our reputation for upholding high standards of business conduct.
presented, along with an explanation of how stakeholder interests were considered prior to raising the matter at the Board meeting. The accompanying papers also shared the likely consequence of any Board decision on each stakeholder group identified, and how the impact on stakeholders could be monitored.
A Board agenda planner set out the matters to be considered by the Board during the year, and this was subsequently reviewed and updated at each Board meeting in 2019.
All Board papers during the year were accompanied by a separate document outlining which stakeholders could be affected or impacted by the paper
We perceive that key material issues for our communities generally relate to; support and ongoing dialogue, financial and resource-based contributions, and consistency and integrity relating to our promises
The Board receives updates on the key community initiatives of our UK, European and Global operations and provides direction on how the Group can continue to make long lasting, positive impacts.
Admiral Seguros in Spain hosted a ‘Parents Open Day’, where parents of employees were invited to learn more about our culture and history, whilst promoting the importance of work/ life balance.
We hosted an exhibition of Welsh LGBT+ Icons and Allies at our Head Office in Cardiff.
We also delivered employability training to over 400 children across nine schools in Wales.
• Dialogue with organisations including Stonewall, Stop Smoking Wales and NHS Direct
A range of third parties benefit from consistent financial contributions, volunteering activities and increased visibility. For example, in Cardiff, we sponsored Pride for the 20th year in a row.
Our Community Chest fund had a budget of £130,000 in 2019 to support staff and their families who are involved with local charities, clubs and organisations.
• The Chair and Senior Independent Director also host meetings with shareholders
The Board receive feedback and use it to shape their approach to Corporate Governance, ensuring that any issues or concerns raised are considered and addressed.
We also signed a pledge with Cardiff Commitment to help young people from various social backgrounds progress in education, employment and training.
We perceive that key material issues for our shareholders generally relate to; financial returns, two-way communication, viability of long term success and products and services that are fit for purpose.
Feedback relating to investor meetings, roadshows and conferences were all recorded by the IR team and shared with the Board.
Key parties have internal relationship managers responsible for ongoing dialogue, for example with co- and reinsurance partners, and strategic partners.
We have supervisory teams that have oversight for the Group, who provide ongoing reviews of key and strategic suppliers, and Group procurement functions and systems.
• Directors are kept up to date with UK, European and Global initiatives on ESG matters.
In June 2019, the Group Board approved the updated Responsible Investment Policy.
We successfully reduced CO2e emissions per employee, and Group-wide emissions in 2019.
• We track and measure CO2e emissions per employee and at Group level
Proposed acquisition (Rastreator/Acierto) In April the Board considered the proposed acquisition of Spain’s second largest price comparison business that, it was intended, would combine with the Group’s existing price comparison business in Spain (Rastreator). The Board considered the acquisition in the context of the impact on the Group’s stakeholders including Rastreator’s employees, suppliers and partners in Spain as result of the merger, and also discussed whether the transaction was in the best commercial interests of the Group’s shareholders as a whole. The Board concluded that the long term value creation of Rastreator combining with Acierto was a transaction from which shareholders and stakeholders would benefit in the long term as the combined business grew and contributed more materially to Group profit. However, due to unforeseen time delays and costs relating to the regulatory approval process, the Board concluded that it was in the best interests of the Group not to proceed with the acquisition.
We perceive that key material issues for our external partners generally relate to; being treated fairly during the sourcing stage, solid two-way communication channels, financial returns and timely financial payments, strong collaborative relationships and meeting our cyber security requirements.
The Group’s dedicated Regulatory Relationship teams maintain channels of communication with the FCA and PRA in the UK, and all our international regulated intermediaries and insurers.
The CFO provides regular updates on the activities related to the renewal of the Group’s reinsurance and quota share contracts, including maintaining the ongoing strategic relationship with Great Lakes co-insurance partners.
Arrangements relating to the global procurement of the Group’s IT equipment were agreed over a four-year term.
The Board monitors announcements and developments by the UK government on matters of strategic interest – for example the banning of sales of diesel and petrol cars, and the rising trend of electric vehicle technology is on the Board agenda for ongoing discussion.
We perceive that key material issues for our environment generally relates to; the direction of travel and progress relating to environmental concerns, awareness of topical issues and the sharing of best practice, reducing carbon emissions and the Group’s overall environmental footprint, and the creation of a sustainable business for the future.
• 85% of our staff believe we are working to reduce our environmental footprint
The Board reviewed and amended the Group’s purpose statement in 2019, to include ‘...whilst building a sustainable business for the long term.’ This reflects a commitment that the Company’s operations will consider the impact on the community and the environment, both now and into the future.
• Focus on customer retention by putting customers at the front of all that we do
Continued Product Development Maximise the value of our core business and lay the foundation for future growth with new products.
• Leading telematics provider • Voted Best Home Insurer in the 2019 Insurance Choice Awards • 6% improvement in customer net promotor score (NPS) • MyAccount online servicing further enhanced, increasing the number of customers who reach us through digital channels
• Take advantage of new technologies to improve our customers' experience, including improved digital and self-service offering
Investing in our future Demonstrate that Admiral can be a great insurer beyond the UK and develop sources of growth and profits beyond insurance.
• Continue to develop and grow a multi-product strategy in Europe and beyond
• Continue our path towards long-term value creation in Europe and the US
• In the US, continue to focus on attracting customers that stay with us in the long term, using technology to improve efficiencies and protecting margins
New Product Diversification Develop a competitive advantage in products in insurance and beyond.
6 • Launch of niche Household Insurance product in France, named ‘Homebrella'
Ensure Admiral remains a great place to work At Admiral, we have created an environment where our employees look forward to coming to work and providing great service to customers. As responsible employers we aim to create an inclusive working environment and to support our employees wherever possible.
• Over 200,000 online courses and almost 1,000 classroom sessions completed by UK employees in 2019
• Build on our strong track record of encouraging diversity across the Company
Principal risks have been considered against each of our strategic objectives. For more information on Principal Risks and Uncertainties, please refer to page 66.
UK Motor and Household customer numbers increase in UK Van customers increase in Comparison Quotes
We constantly look at efficiencies and improvements in order to support our position as a market leader of products and services. One area of growing significance in 2019 included digital and self-service.
During this seven-year period, we also answered more than 4.2 million customer calls, were voted as the Best Home Insurer in 2019 in the Insurance Choice Awards and launched a Landlord Insurance product in 2019. Looking ahead, we aim to build upon the successes of our MultiCover product and InstaQuote (quick quote) channel.
Risks that could impact investing in our core include: • Reserving Risk in the UK and international insurance
During the year, all our International Insurance businesses allowed customers to purchase polices online and to download policy documents without speaking to a customer service representative. These developments in functionality improved the overall satisfaction scores of our customers in these markets4, and we expect the trend to further improve expense efficiencies in the longer term.
Meanwhile in the UK, our loans business (AFSL) announced that they would be running an Open Banking trial for referred customers. This trial is helping us understand customer appetite for sharing their information through Open Banking and will also help our credit risk and pricing team review new sources of data to see how predictive of risk it is.
Looking ahead, AFSL aims to continue developing their risk selection, product development and expense control processes. Additionally, AFSL trains and develops employees to help improve the customer experience and take-up rates for successful applicants.
Building on Economies of Scale 3 See page 21 of HY19 Results Presentation ‘Expanding on the functionality’
The combination of a new decade and an imminent, if not immediate, change of leadership at Admiral provides me with a valid excuse to comment across a longer time period than a typical CEO statement in an annual report
But I did love “going like a freight train”. A freight train – not racy, not glamorous (who needs a glamorous insurance company); but progressing ever onwards with a relentless, implacable forward momentum.
That relentless forward momentum has seen us grow, year in year out, over the decade with the number of customers we serve growing from 1.9 million to 7.0 million overall, and from just over 100k to 1.4 million beyond the UK, while also growing our profits from £206 million to £526 million.
Alongside this rapid progress on many fronts, some data points were stubbornly stable. The number of consecutive years amongst the top performers in the “Best Places To Work” only nudged up from 19 years to 20.
The percentage of staff saying they are proud to work for Admiral was stuck in a narrow band in the mid-90’s. As was the percentage of customers who said they wanted to renew with Admiral following a claim.
Reassuringly stable outcomes, that are fundamental to our relentless forward momentum; a momentum fuelled by a sustainably healthy culture: • A culture that, in many different ways, attracts and retains people, at all levels, who are simply better at their jobs than most of their peers in the industry
• A culture that respects and promotes a set of fundamental skills in risk selection, claim handling, customer support and expense control that are core to success in insurance
• A culture that emphasises the long term over the short term; long-term prosperity ahead of short-term financials; a sustainable balance in the outcomes for staff, customers and shareholders
Thereby ensuring that Admiral will continue to “go like a freight train” in the years to come.
Customer Care Week Celebrations We celebrated National Customer Service Week in October, highlighting ways in which different departments all contribute to the service that we provide.
Admiral sponsors Swansea Bay’s 10K Run In September, over 150 employees took part in the Admiral Swansea Bay 10K run, an event which has become a firm fixture in the UK's running calendar.
UK Motor market – have we reached the turning point, how has Admiral reacted, and what are your expectations for pricing in 2020? [Cristina]
Although there are potential early signs of a turn in the cycle towards market prices increasing, there are also several moving pieces that lead to uncertainty.
Claims inflation experienced in recent years continued in 2019, particularly for damage claims and Large Bodily Injury (BI). In addition, the increase in the cost of excess of loss reinsurance creates additional pressure for prices to increase. 2019 also saw clarity in the Ogden rate, which was announced slightly less favourably than expected and was set for up to five years at -0.25% (previously at -0.75%).
Admiral prioritised margin over volume in 2019, and given these market pressures, increased prices throughout the year.
This was a very strong set of results, mainly driven by exceptional reserve releases in UK Motor due to better than expected development of prior years. The main factor contributing to this result is the increased Ogden certainty (rate was set at -0.25% in August 2019 for up to five years after several years of uncertainty) which led to an increased speed of large bodily injury settlements in the latter part of 2019. In addition, we were able to settle a few unusual large claims in 2019 which resulted in substantial releases.
Although this was an exceptional year for reserve releases, the strong performance also reflects a rigorous and prudent approach to underwriting and reserving. The margin held within the reserves remains consistent and strong year-on-year.
I cover the breakdown of the results in more detail in my CFO commentary on page 34.
The UK Motor expense ratio has increased in 2019 – what are the drivers, and are you able to maintain your competitive advantage for expense efficiency in the market? [Geraint]
Admiral has always had a very costconscious culture, and that has not changed. Our employees are shareholders in the business, and they understand the importance of maintaining our competitive advantage which includes expense efficiency.
The main driver for the expense ratio increase was external levies, particularly the FSCS levy.
David, on the US, do you believe Elephant has achieved enough in 2019, especially given the loss ratio deterioration and impairment? [David]
However, the financial outcome has been less satisfactory, partly because of loss ratio challenges and partly because of a cyclical increase in competitor marketing spend. We have responded to the former by aggressive pricing action, which has paused our growth. These factors, along with Admiral’s instinctive conservatism and the use of shorter-term projections (five-year cash flows) have led us to a write down in the carrying value of the US insurance business.
In all of these areas, the potential synergies for learning and transferring skills are high across the UK and European businesses, and we will continue to focus on building our digital and online self-service capabilities as well as take advantage of new product opportunities in a test and learn environment until we are confident of the relevant potential.
Our Corporate Social Responsibility report covers further initiatives that we are working on in more detail – you can find this on our website.
The standout item is the £41 million improvement in UK Insurance profit. £11 million of that comes from an improved household result (more below). UK Motor profitability moved ahead by around £30 million to £591 million.
It’s also worth noting that the level of conservatism in the reserves (we usually think of it in terms of the margin above best estimate in percentage terms) is unchanged year-on-year. We were expecting it to reduce somewhat at 2019 year end, but the scale and nature of the positive moves on the back years has led us to continue being as cautious as at the end of 2018 for the time being.
We would expect (though can’t guarantee of course) significant releases again in 2020, though possibly not quite of the magnitude seen in 2019. We might expect the level of conservatism within the reserves to reduce if 2020 trends are a bit more usual.
• The Comparison segment produced a very pleasing (stellar even?) doubling of profit (£18 million v £9 million). Confused.com led the way and more detail on that is below. Revenue growth was also strong at 14%
• Admiral Loans grew its outstanding balances to around £455 million (+52%) whilst revenue doubled. Importantly, headcount was basically flat, a nice insight into the efficiency of the business. The loss reduced to £8 million in line with expectation and arrears were also in line with plan
• Finally, ‘other’ costs were up around £8 million on last year. The biggest component as you can see is the Admiral share scheme charge which increased (£49 million to £53 million) as a result of improved vesting assumptions (improved financial results and strong shareholder return) and the higher share price. We will also pay all our employees a cash bonus of £500 in recognition of the huge contribution to the Group’s strong 2019 results (around £6 million)
Further details on the numbers are set out throughout the strategic review section of the report.
Highlight – Confused.com Picking a highlight from such a strong set of results was reassuringly tough. Options included a good turnaround in UK Household profit (plus decent growth, surpassing one million customers), strong growth and an improved result at L’olivier in France, continued great progress in Admiral Loans (not forgetting the UK Motor profit). But there’s one standout for me, so let’s hear a bit more about Confused.com.
From a marketing perspective, brand awareness has significantly improved and, in particular, spontaneous awareness almost doubled in 2019. No doubt you’ll have enjoyed Confused.com’s sponsorship of the Rugby World Cup on TV whilst desperately hoping for a Welsh win ( ) Marketing efficiency was also improved.
Confused.com’s product offering is better than it was two years back, as is the customer journey. Results from products beyond car insurance comparison have improved significantly.
The last few years have seen some great progress at Elephant. Some examples from 2019 include notable improvements in service levels (leading to a big increase in Net Promotor Score) and technology (online self-service as one example), launching a second brand and diversifying distribution channels, amongst others.
But 2019 will probably be most remembered for a deterioration in loss ratio (2019 underwriting year is projected around 77% v 74% for 2018 at the same point of development) when we were expecting the opposite. Much action is being, and has been, taken (including underwriting rule changes and significant rate increases) and improving the loss ratio will continue to be a (or actually, the) major area of focus in 2020. Some additional conservatism has also been built into the booked reserves at the end of 2019.
The project steering group consists of senior managers across the business, including our Group CRO, Group CFO, Head of Investor Relations and Head of Facilities, amongst others. Our Group Strategic Risk Lead drives the steering committee, ensuring that the group meets on a monthly basis, is updated on regulatory and market developments, and that the project progresses towards incorporating climate-related risks into business as usual risk management. The Chair of our Group Risk Committee is kept updated on related developments on an ad hoc basis, and the Admiral Group Board are to expect updates and progress updates as deemed suitable by the steering group.
Looking ahead, we intend to further investigate the impacts to claim costs, and the wider business and investment performance.
I have faith in our team in Richmond to improve the results in 2020 (no pressure Alberto!).
In terms of next steps – we expect to move into a pre-application phase with the PRA and Gibraltar regulators in the middle of 2020. That process involves an assessment of our application against the requirements and can last six months. After that there would be a further number of months for us to fix any issues that came out of that review. Then we’d be in a position to make a formal application, and realistically we’d now expect that to be in 2021.
In March 2016’s CFO statement I counted myself very lucky to have worked for Admiral’s first CEO, Henry Engelhardt, who was about to retire after a reasonable 25 year shift in charge. The exact same sentiment applies to my current boss – Admiral’s second CEO and cofounder, David. We’ll pay fuller tribute when David actually steps down after the transition, so I’ll just say that I’m very delighted we’ve been able to name Milena as David’s successor. Having sat back-to-back to her for a year or so (occasionally getting a word in ), I know she’ll do an amazing job as Admiral’s third CEO and I’m really looking forward to working with her and continuing to be part of Admiral’s leadership team for the foreseeable. Congratulations Milena!
• Group’s share of pre-tax profits of £526.1 million (2018: £479.3 million) and statutory profit before tax of £522.6 million (2018: £476.2 million)
• The European insurance businesses delivered a higher profit of £8.7 million (2018: £6.4 million), offset by an increased loss in the US insurance business (£9.6 million in 2019 v £7.5 million in 2018). The overall international insurance loss was £0.9 million (2018: £1.1 million loss).
Admiral assumed a 0% rate in setting best estimate claims reserves at 31 December 2018 and 2018’s pre-tax profit was positively impacted by £66 million as a result of the move from minus 0.75%. As a result of the actual rate being 25 basis points lower than the assumed 0%, 2019’s profit before tax is adversely impacted by around £33 million.
Earnings per share Earnings per share increased by 8% to 148.3 pence (2018: 137.1 pence), with growth slightly lower than the pre-tax profit growth of 10% due to an increase in the weighted average number of shares.
Dividends The Group’s dividend policy is to pay 65% of post tax profits as a normal dividend and to pay a further special dividend comprising earnings not required to be held in the Group for solvency capital requirements including management internal risk appetite above the regulatory minimum.
This final dividend is 17% ahead of the 2018 final dividend (66.0 pence per share), with a pay-out ratio of 90% for H2 2019. .
The total dividend for the 2019 financial year is 140.0 pence per share, reflecting an 11% increase on 2018 and a 94% payout ratio.
Return on equity The Group’s return on equity was 52% in 2019, lower than the 56% in 2018. Whilst the Group’s share of post tax profits grew by 9%, the Group’s share of average equity grew faster at 19% resulting in a lower overall return. The significant growth in profits in the second half of 2019 contributed to the increase in the Group’s share of equity.
Capital structure and financial position The Group’s co-insurance and reinsurance arrangements for the UK Car Insurance business are in place at least until the end of 2020. The Group’s net retained share of that business is 22%. Munich Re will underwrite 40% of the business, through co-insurance (30%) and reinsurance (10%) arrangements, until at least the end of 2020. Extensions beyond 2020 are expected to be confirmed during the first half of 2020.
Similar longer-term arrangements are in place in the Group’s International insurance operations and the UK Household and Van businesses.
The Group continues to develop its partial internal model to form the basis of future capital requirements and expects to enter the PRA’s pre-application process during 2020. Formal application for regulatory approval to use the model is expected to follow in 2021. In the interim period before submission, the current capital add-on basis will continue to be used to calculate the regulatory capital requirement.
Estimated sensitivities to the current Group solvency ratio are presented in the table below. These sensitivities cover the two most material risk types, insurance risk and market risk, and within these risks cover the most significant elements of the risk profile. Aside from the catastrophe events, estimated sensitivities have not been calibrated to individual return periods.
Currency – 25% movement in euro and US dollar -3% -3%
Taxation The tax charge reported in the consolidated income statement is £94.2 million (2018: £85.7 million), equating to 18.0% of pre-tax profit (2018: 18.0%).
• Widening the opportunity set of investments to achieve greater returns without material change in market risk capital allocated to investments. Examples included high quality (AAA) asset backed securities, private debt assets and global bond strategies, actively managed on a total return basis
Money market funds and other fair value instruments 1,160.2 1,301.1 1,074.3
Investment and interest income in 2019 was £35.3 million, a decrease of £0.7 million on 2018 (£36.0 million). 2019 investment income is negatively impacted by an accrual of £12.9 million relating to quota share reinsurance arrangements (2018: nil). Excluding this, investment and interest income in 2019 was £48.2 million, an increase of £12.2 million compared to 2018 due to higher average balances and an increase in the average rate of return in 2019, partly due to the changes noted above. Fixed income was increased by rebalancing other holdings, and new mandates including very high-quality asset backed securities and senior private debt.
“ Our 2019 strategy review has strengthened our belief that sustainable growth for Admiral Group will be achieved by building on our competitive advantages and driving product diversification in all the countries in which we operate.”
What an eventful year! I’m sure that 2019 will remain particularly memorable for breaking the half billion profit record. In the UK, unusually high reserve releases in UK Motor was the driver, whilst the European operations showed a combined profit for the second year.
Our 2019 strategy review has strengthened our belief that sustainable growth for Admiral Group will be achieved by building on our competitive advantages and driving product diversification in all the countries in which we operate. On both points, it has been great to witness stronger collaboration amongst our insurance businesses across the world over the past 12 months.
In the UK, we saw our Household team hit a key milestone of one million customers, and continued growth in our Van and Travel Insurance businesses. In Europe, we expanded into the Household Insurance market with the launch of Homebrella in France, a renter focused product, prior to the launch of a fully-fledged renters and owner proposition in early 2020.
Overall, 2019 was a good year focusing on what we do best, and what we do next – supported by a strong team and an even stronger focus to continue to build a longterm business for the future.
ConTe, Admiral Seguros, and L'olivier hosted tournaments across three office-based sports, namely ping-pong, darts, and table football.
The best three players from each country were invited to Lille to play a tournament against their rivals. This was a great opportunity to build team spirit and spend time with colleagues in the other operations.
After a few nail-biting rounds, L'olivier narrowly swept into the lead, claiming victory. Well done to L’olivier!
To encourage teamwork and collaboration across our European businesses (along with a little healthy competition!), the European operations decided to host the ‘Admiral Olympics’ in 2019.
“ This year's results are a new high for the business, as very strong back year developments have resulted in record releases and our highest ever recorded profits.”
This year’s results are a new high for the business, as very strong back year developments have resulted in record releases and our highest ever recorded profits. Whilst this release is much higher than we’ve seen in recent years and largely influenced by increased settlement speeds due to Ogden certainty, I believe that it also demonstrates our market-leading ability to price risks and our effective claims handling processes.
An example is the launch of our InstaQuote Household product. Throughout our history, we’ve recognised that our customers want quick, efficient and value-for-money services, which is exactly what this tool provides. It’s dramatically reduced the time taken to get a price, which makes life easier for the customer, and has helped us to break through the one million customers mark just seven years after launching! We also won the Moneyfacts Personal Finance Best Household Insurer award in 2019!
In the last couple of years, this increased investment has contributed to the slight increase in our expense ratio (albeit from a very low base, and with additional levies being the greatest contributor to the expense ratio increase in 2019). However, these changes leave us well placed to deal with the challenges and customer demands of 2020 and beyond. The development of digital channels and automating our backoffice processes are also important for the claims reforms (or Civil Liability Bill) that come into force in the second half of 2020, which should allow us to service claims under the lower cost regime and pass the savings to customers whilst maintaining our competitive advantage.
In conclusion, I’d like to thank our people for their hard work in 2019 and our customers for their trust in us – as ultimately, we are here to serve our customers!
Group share of UK Insurance Profit Before Tax £597.4m (2018: £555.6m)
Group’s share of UK insurance profit before tax*1 597.4 555.6 465.5 *1 Alternative Performance Measures – refer to note 13 at the end of this report for definition and explanation
• This is partially offset by an adverse change in the ‘one-off’ Ogden impacts (favourable impact in 2018, adverse impact in 2019). Refer to the UK Motor section below for further analysis of the underlying growth on key metrics such as loss ratio, reserve releases and profit commission
*2 Motor loss ratio adjusted to exclude impact of reserve releases on commuted reinsurance contracts. Reconciliation in note 13b.
Key performance indicators continued UK Motor profit increased by 5% during 2019 to £591.5 million (2018: £561.7 million) and vehicles insured rose very modestly to 4.37 million (2018: 4.32 million), whilst the reported combined ratio improved to 79.8% (2018: 81.9%). Net insurance premium revenue was consistent with the prior period. The results were impacted by a number of factors: • The current period loss ratio was 87.6% (2018: 88.1%). As highlighted below, there are a number of offsetting movements that net to the overall improvement of 0.5 ppts1: Reported Motor Loss Ratio
Add Impact of Ogden change (0% to -0.25%) +1.0% +2.4% +3.4%
• This underlying improvement in the level of reserve release is unusually large and the main driver of the increase in reported profits. It is the result of a significant level of favourable development in ultimate projections of prior underwriting years which in turn can be broadly attributed to an increase in the speed of settlements in larger bodily injury claims following the confirmation of the new Ogden rate.
• Reserve releases from commuted reinsurance and profit commission were higher in 2019, as follows: £m
Add Impact of Ogden change (0% to -0.25%) -9.0 -8.9 -17.9
• There are a number of offsetting underlying movements, including a lower impact of the accounting loss on commutation (2019: £4.9 million; 2018: £31.9 million) and an underlying improvement in the level of commuted releases in line with the favourable development noted above, offset by an unfavourable net impact of one-off Ogden changes in both years
• The trend is similar for profit commission which improved to £112.2 million (2018: £95.0 million). Underlying profit commission improved by £44.5 million, primarily as a result of the favourable development of prior underwriting years 1 Refers to percentage points
• Investment income was slightly lower than 2018 at £30.4 million (2018: £32.2 million) with an underlying increase of £11.1 million (due to both an increase in yield and growth in the asset base) more than offset by notional investment income accruals on reinsurance funds withheld balances of £12.9 million (2018: £nil)
• Other revenue (including ancillary products underwritten by Admiral) and instalment income decreased to £235.7 million (2018: £243.2 million) primarily resulting from lower contribution from optional ancillaries
Market prices remained subdued during the year with some evidence of increases in the later months as a result of elevated levels of claims inflation. Admiral continued to prioritise margin over growth, and increased prices ahead of the market. As a result, slight new business growth and good retention contributed to customer numbers (2019: 4.37 million; 2018: 4.32 million) and turnover (2019: £2.46 billion; 2018: £2.42 billion) being both up by 1%.
Munich Re and its subsidiary entity, Great Lakes will underwrite 40% of the UK Motor business until at least 2020, with future extension options available to Munich Re until 2022. 30% of this total is on a co-insurance basis, with the remaining 10% under a quota share reinsurance agreement from 2017 onwards.
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.
Note 5c to the Financial Statements analyses profit commission income by business, type of contract and by underwriting year.
During the first half of 2019, the majority of the 2017 quota share contracts were commuted. At 31 December 2019, quota share reinsurance contracts remained in place for a small portion of 2017 and the full 2018 and 2019 underwriting years. No further contracts were commuted in the second half of 2019 (as is usual).
As noted above, in 2019 Admiral recognised reserve releases from commuted reinsurance contracts of £121.7 million (2018: £109.6 million).
Refer to note 5d(v) of the Financial Statements for analysis of reserve releases on commuted quota share reinsurance contracts.
Other Revenue and Instalment Income UK Motor Insurance Other Revenue – analysis of contribution: Contribution from additional products & fees 202.1 206.5 187.3
Admiral generates Other revenue from a portfolio of insurance products that complement the core Car Insurance product, and also fees generated over the life of the policy.
The most material contributors to net Other revenue continue to be: • Profit earned from motor policy upgrade products underwritten by Admiral, including breakdown, car hire and personal injury covers
Overall contribution (Other revenue net of costs plus instalment income) decreased to £235.7 million (2018: £243.2 million). This is in line with the half year expectation of a small reduction. Whilst there were a number of smaller offsetting changes within the total, the main reasons for the decrease is reduced optional ancillary contribution and fees, which reflects an increase in transactions completed digitally and changes to the customer journey. This was slightly offset by an increase in instalment income primarily due to the growth in the underlying book and an increase in customers paying by instalments.
UK Household insurance profit before tax 7.5 (3.0) 4.1 *1 Alternative Performance Measures – refer to the end of this report for definition and explanation *2 Underwriting profit/(loss) excluding contribution from underwritten ancillaries
Households insured at year end*1 1,011,900 865,800 659,800 *1 Alternative Performance Measures – refer to the end of this report for definition and explanation
We managed to increase our new business sales by 16% while the comparison market was shrinking. This was made possible by the structural changes on Rastreator where the user experience was significantly improved by guaranteeing the final price to customers, having a significant impact on conversion. Our strategy to diversify our acquisition channels has also been bearing fruit with the development of a broker channel that is contributing to the accelerated growth.
It was pleasing to see our overall technical results moving in the right direction despite challenges in the cost of growth. Loss ratios are improving on prior years as expected, whilst being slightly higher than anticipated for the 2019 underwriting year as a result of new business growth. This was offset by a decrease in our expense ratio as we improved internal efficiencies.
In 2020, we’re planning to keep exploring alternative acquisition channels. In our core business, we’re about to launch new initiatives to improve loss ratio (e.g. improved anti-fraud capabilities and innovation in risk selection). We’ll also be accelerating in improving customer experience through digital capabilities (self-service) and operational optimisation (automation).
Pascal Gonzalvez Acting CEO, Admiral Seguros (Sarah Harris is on maternity leave)
It was a year of fast growth despite unfavourable market conditions. Our portfolio increased by 32%, while at the same time the aggregator market (our main acquisition channel) was shrinking. We're pleased to see our efforts on brand awareness, direct acquisition, and conversion showing progress and paving the way for further development in the coming years.
Not only did we grow fast, but we also grew stronger. Our portfolio grew while having some significant operational improvements. As a consequence, our customers like us more and more! The benefits of our investments toward an effortless customer journey started to materialise with peaks in customer satisfaction (net promoter score), persistency, and referrals, to name a few.
On the claims side, loss ratios have developed well for prior years, resulting in reserve releases. However, the business experienced a deterioration in the 2019 loss ratio, partly due to the strong growth of new business in 2019.
“ It has been great to witness stronger collaboration amongst our insurance businesses across the world over the past 12 months.” Milena Mondini de Focatiis Group CEO Designate
Spain In 2019, Admiral Seguros accelerated its growth despite difficult market conditions and we finished the year with more than 290,000 customers.
France 2019 was another year of strong performance for L’olivier Assurance.
As mentioned at our half year results presentation, Elephant saw a higher than expected claims ratio, deteriorating by four points compared to 2018. The main driver was increased claims frequency as well as general market inflation, in particular in damage claims and medical costs. As a consequence, we took a defensive approach towards margins, at the expense of growth. We responded with numerous initiatives, including significant rate increases, especially towards certain lowerperforming segments; and a reduction in our acquisition spend. With regard to the first point, some segments of the book have seen sharp increases with obvious impact on sales and cancellations while allowing us to have better performance on the loss ratio in the coming years. As per the second point, we have been more selective in some distribution channels, favouring some online advertising and doing less on traditional media, enabling us to be more efficient in our spend.
At the same time, Elephant made some significant progress in a number of areas: we further developed our self-servicing functionalities, especially in claims management; we expanded our acquisition channels to include some agency business; and we deployed some important new features to our risk selection. We expect that these will ultimately translate into further growth, within profitable segments, at very good incremental costs. Finally, I am grateful to all Elephant employees for their high level of commitment in delivering such a high volume of projects, and for building such a strong foundation for a sustainable long-term business.
Italy ConTe closed 2019 with a profit for the sixth year in a row, whilst also achieving significant growth in turnover of 16% year-on-year.
USA Over the last year Elephant has continued with our strategy to focus on customer retention, to service these customers efficiently by leveraging technology, and to make Elephant a great insurer for our shareholders, customers and staff.
Vehicles insured at period end 1.42m 1.22m 1.03m *1 Alternative Performance Measures – refer to the end of this report for definition and explanation.
*2 Loss ratios and expense ratios have been adjusted to remove the impact of reinsurer caps so the underlying performance of the business is transparent.
*3 Combined ratio is calculated on Admiral’s net share of premiums and excludes Other revenue. It excludes the impact of reinsurer caps. Including the impact of reinsurer caps the reported combined ratio would be 2019: 113%; 2018: 113%; 2017: 124%.
*4 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 2019: 102% 2018: 102%; 2017: 112%.
Vehicles insured at period end (m) 0.29 0.69 0.23 0.21 1.42
• A relatively flat combined ratio (net of other revenue) of 104% (2018: 105%) reflecting reduced acquisition costs, pricing improvements and operational efficiencies as well as positive back year development in Europe offset by a deteriorating loss ratio in Elephant Auto
• Continued investment and improvements in technology, people and the customer experience across all operations
The combined International expense ratio improved to 37% (2018: 40%) as all businesses grew, and continued to pursue operational efficiencies, albeit growth was slower in Elephant as prices were increased in response to the loss ratio pressure.
International Car Insurance co-insurance and reinsurance In 2019 Admiral retained 35% (Italy), 30% (France and Spain) and 33% (USA) of the underwriting risk respectively. The arrangements for 2020 will remain the same in Italy, France and Spain. In the USA, 50% of the risk will be retained within the Group.
International Car Insurance regulatory environment Admiral’s European Insurance operations are now primarily regulated by the Spanish insurance regulator, the DGS. This shift is a result of restructuring completed ahead of Brexit. More information on Company changes due to Brexit can be found on page 59.
Our goal to empower the world to choose better has not changed. We continue to focus on service diversification and geographic expansion, driven by a desire to innovate the customer experience leveraging technology and data.
We achieved this by standing firmly on the side of our customers and continuing to differentiate ourselves against the competition. Confused.com is the brand that cuts through the noise and confusion in order to help people make clear decisions. Our marketing was more effective, and more focus was placed on the products our customers need and want beyond car insurance. Making better use of our data has helped our insurance partners deliver the right product to the right customer for the right price at the right time. All of this and the dedication of the Confused. com team has resulted in our revenue and
In the USA, we downsized the business to adjust to market conditions, allowing for increased agility whilst we further develop our customer proposition.
It wasn’t a year without challenges. The highly competitive market continues to necessitate focus on marketing channel effectiveness and diversification which in 2019 saw us introduce a successful B2B offering and drive innovation in the customer experience.
In 2020 we’ll continue to make decisions based on what is best for our customers, empowering them to choose better.
UK It’s been 18 years since Confused.com was formed, and we’re still making history. In 2019, our revenue exceeded £100 million for the first time.
While motor Insurance comparison mainly benefited from a better online user experience which improved conversion, energy comparison (launched in 2018) saw great operational improvements and moved past test and learn phase to become an integrated product for LeLynx in 2019 in line with our diversification strategy.
Improving the customer experience has been a focus, from improving user pain points and providing more information, to further improving the journey to allow customers to make the best choice and receive the best possible service. I am enthusiastic about the evolution of LeLynx as we head into 2020 and beyond. We will keep working on user-centric new projects to improve our customer experience and to strengthen our product base.
The French market is large and slowly evolving and LeLynx is perfectly placed to capture that opportunity.
The proposed joint venture with Acierto and Oakley Capital was a focus area for management in 2019, but due to challenges in completing the transaction within a reasonable timeframe related to the anti-trust process and associated costs, the final decision was not to proceed. We delivered modest revenue growth, mainly due to our mortgage broker and data businesses.
I would like to thank the fantastic and enthusiastic team who are always hungry for growth and to improve the experience for our customers, for all their support in a challenging year. We are looking forward to the opportunities we see in 2020 and beyond.
We substantially enhanced the customer experience with our Price Accuracy strategy for insurance, meaningfully improving our net promoter score. More efficient traffic acquisition led to a 13% increase in profit.
I am optimistic about the future of Compare.com and look forward to 2020 in my new role as CEO.
2020 is expected to be the year of consolidation for Rastreator.mx, growth for Tamoniki.com and Gosahi.com and to also deliver further geographic expansion. Thanks to the Preminen team for the hard work – we’re looking forward to an even better 2020!
Emerging Markets Preminen had an exciting year of growth and saw the launch of a new comparison business. In Mexico, Rastreator.mx continues to see positive signs of growth and we are confident in the sustainability of the business.
*1 Alternative Performance Measure – refer to the end of this report for definition and explanation
Admiral has comparison businesses in the UK (Confused.com), Spain (Rastreator), France (LeLynx) and the US (Compare.com). In addition, Preminen, the Group’s joint venture holding company for comparison ventures in new markets, oversees operations in Mexico (Rastreator.mx), Turkey (Tamoniki.com) and India (GoSahi.com).
Admiral Group owns 75% of Rastreator, 59% of Compare.com and 50% of Preminen.
Combined revenue grew by 14% to £171.6 million (2018: £151.0 million) and the businesses made a combined profit (excluding minority interests’ shares) of £18.0 million (2018: £8.8 million).
The key features of the Comparison result are: • In the UK, Confused.com saw market share increases in motor and home insurance comparison and efficient media spending leading to significantly increased profit of £20.4 million (2018: £14.3 million)
The UK comparison market remains very competitive with increasing advertising spend across all marketing channels, however increases in market share across products and a focus on customer experience resulted in a 19% increase in turnover for Confused.com to £112.7 million (2018: £95.1 million).
Compare.com lowered losses to £4.3 million (2018: £6.9 million) as a result of downsizing to allow for a more agile approach, together with reduced marketing spend and increased efficiencies. A non-cash impairment of £2.0 million in the second half of 2019 (full year impairment total of £27.7 million) was recognised by the parent company in respect of its investment in Compare.com. This impairment is in line with the reduction in Compare.com’s net assets since half year 2019. The impairment charge is recognised in the income statement of the parent company and has no impact on the Group’s consolidated profit for the period or the Group’s 2019 regulatory capital position.
Turning to 2020, we expect to benefit from a continued market shift to comparison and credit score marketplaces which now account for over 20% of personal loans distributed in the UK. I would therefore expect to see continued growth in our loan balances towards the £700-900 million range in the next two years that we identified at the 2019 half year results.
We remain acutely aware of and responsive to the macro-economic backdrop in the UK and anticipate continued investment in our people, technology, product and risk selection capabilities. I’d like to thank all our staff in Admiral Loans for the tremendous progress we made last year.
Share scheme charges relate to the Group’s two employee share schemes (refer to note 9 to the Financial Statements). Charges increased by £3.7 million in 2019, to £52.7 million reflecting the improved vesting outcomes resulting from the increased level of profit in 2019 and a higher share price.
Other central overheads of £20.0 million continue to reflect the cost of a number of significant group projects. In addition, a £6 million cost relating to a one-off cash bonus of £500 per employee, is included in 2019 (2018: £nil).
Coronavirus (COVID-19) Admiral is closely monitoring government updates in relation to the coronavirus during recent months and is considering any potential impacts on the business.
The response to date has focused on the wellbeing of staff in the Group’s offices and also in ensuring that appropriate plans are in place to ensure that Admiral’s operations can continue to service customers.
Ongoing stress testing work, overseen by the Group Risk Committee, is focused on operational resilience plans and potential financial impacts. As the situation develops Admiral will implement appropriate business continuity plans to mitigate potential impacts.
Admiral Community Chest fund allocated 1st Best Big Company to Work for in the UK at the Sunday Times Best Companies award in 2019
At Admiral we pride ourselves on being different. We adopt a fair and principle-based responsible approach across our business to create positive impacts for our stakeholders and the wider community.
Strategically, we continued to improve our understanding of ever evolving customer expectations and to build upon our digital and automation capabilities. We also considered the move towards electric vehicles and the impact on the industry and our supply chain.
The following section seeks to provide colour on some activities that we undertake, as a responsible business that considers key stakeholders; Our Customers, our People, our Communities, our Shareholders, our External Partners and our Environment.2
As technology has evolved, we have adapted to provide new and effective methods for us to stay connected with our customers. For example, this year we launched our revamped MyAccount Portal, which enables customers to quote for, and accept, policy changes online and in real-time.
• Continue to improve customer experience through leveraging technology and data
Our community engagement builds on long-standing financial support programmes such as the Admiral Community Chest scheme. In 2019, over 350 initiatives submitted by employees received either grants or matched funding, totalling £130,000. Our People Services department also signed a pledge with Cardiff Commitment to help young people from various social backgrounds to develop their employability skills, demonstrating that both departments and individuals are encouraged to engage in active community outreach.
• Continue to engage with our community through charity and employment initiatives
• Continue to empower our people to give back to our local communities through initiatives such as optional charity breaks6, Community Chest and volunteering opportunities
Festival of Sport In 2019, over 200 Admiral employees volunteered at the Festival of Sport in Margam Park (Wales) where children with disabilities get involved in sports, activities and games.
• Equality: Promoting a sense of fairness and equality in Admiral and representing people of all genders, sexual orientation, ethnicities and abilities
• Fun: We celebrate as many events and occasions as possible to build strong relationships and boost morale
• Our Group Board aims to maintain a minimum of 33% of its members as women and aims to achieve this ratio in subsidiary boards
of our employees believe that People care about each other here5 85% of our employees feel good about the ways in which we contribute to communities5 4 Shares are given to our people who have been employed for one year or more; prorated for part-time employees 5 Great Place to Work Survey 2019 6 Our people are entitled to up to one-month unpaid leave to carry out charity work every three years
Global procurement agreement with external IT hardware provider In 2019, Admiral entered into a three-year global agreement with our external IT hardware provider. The global sourcing arrangement means that we have improved our agreement with the IT provider and increased their coverage across the Group, so that all businesses and brands of the Admiral Group will now have access to the same hardware equipment. The pricing agreement is based on consolidated volumes and will contribute to several internal efficiencies and cost savings.
We recognise the importance of openly and actively engaging with our shareholders
In 2019 we undertook over 300 Investor activities, including roadshows across London, New York, Boston and Toronto, and frequent conferences and investor meetings in Cardiff. In addition, The Chair, Senior Independent Director, Group CEO and Group CFO also hosted face to face meetings with some of our largest shareholders.
• Continue to treat all shareholders fairly by providing accurate and timely information
All our employees are shareholders All of our people who have been fully employed for one year receive the same number of shares (pro-rated for part time employees) through our Approved Free Share Plan (SIP). Some management additionally receive shares through the DFSS scheme.
As a global business, we have taken steps to explore the growing impact of climate change and to mitigate our impact on the environment. As an insurance and financial services provider our environmental footprint mainly stems from our office operations and business travel. We continuously work to minimise our footprint and raise awareness through our Green Teams, who are aligned with our vision for sustainable growth and our focus on profitability, as outlined by our Group business model and strategy on pages 16 and 17 of this report.
• Continue to explore best practice developments and to mitigate our impact on the environment
Climate Change Project In 2019, Admiral established a Climate Change working group, with the aim of understanding the risks climate change could mean for the business and broader trends likely to impact us in the future8. For more information read our case study on page 36.
The Admiral Group Board constantly considers the Group’s key stakeholders and engagement methods, and reflects on how best to integrate our stakeholders' interests at the heart of our decision making.
• Recognised as a Centre of Excellence in Wellbeing by the Great Place to Work Institute
We also have several ESG-related policies in place including: Anti-bribery and Corruption Policy • We prohibit any inducement which results in a personal gain and is intended to influence action which may not be solely in the interests of the Group.
Modern Slavery Policy • Admiral Group, and all its subsidiaries and branches, is opposed to the exploitation of people in any way and has a zero-tolerance approach to modern slavery.
Board Diversity Policy • The Group Board aims to maintain a minimum of 33% of its members as women and aims to achieve this ratio in subsidiary boards as well.
Non-Financial Reporting Statement Stakeholders can find information as required under the regulations on reporting non-financial information in the following sections: • Being a Responsible Business
The table below sets out the principal risks which Admiral has identified through its Enterprise Risk Management Framework (‘ERMF’). The impact of those risks and actions taken to mitigate them are explained below.
Risks that could impact investing in our core include: Insurance Risk: Reserving Risk in the UK and international insurance
Linking risks to our strategic drivers For more information refer to pages 24 to 27
This is a particular risk for motor insurance liabilities, where the amount payable for bodily injury claims (particularly large claims) can change significantly during the lifetime of the claim as a result of external risks such as changes in Ogden rates and impacts of increased levels of Periodical Payment Orders. The update to the Ogden discount rate in 2019 reduces the likelihood of a further change in 2020.
Adverse run-off leading to higher claims costs in the Financial Statements.
The Group continues to reserve conservatively, setting claims reserves in the Financial Statements well above actuarial best estimates to create a margin held to allow for unforeseen adverse development.
Regular reviews of both settled and potential PPO cases are undertaken by the Claims and Actuarial teams, with independent Actuarial analysis provided as part of the external reserving process.
Admiral’s investment strategy is the result of a structured, disciplined and transparent investment process which considers settled and potential future PPOs.
The risk of increased claim costs and reduced business volumes could be driven by potential economic, environmental, regulatory or political change such as the UK’s withdrawal from the European Union.
Admiral is exposed to the risk of higher losses than anticipated due to the occurrence of man-made catastrophes or natural weather events, potentially increased in frequency and severity due to climate change.
A large flood or windstorm causing extensive property damage (both motor and household) to a significant proportion of the portfolio, could lead to a larger than anticipated total claims cost.
There are a number of aspects which contribute to Admiral’s strong UK underwriting results, including: • Experienced and focused senior management and teams in key business areas including pricing and claims management; • Highly data-driven and analytical approach to regular monitoring of claims and underwriting performance; • Capability to identify and resolve underperformance promptly through changes to key performance drivers, particularly pricing
• Admiral monitors the impact arising from Climate Change risks, covering both physical and transitional risks, that are captured as Emerging Risks.
A potential need to raise additional capital to support an increased underwriting share. This could be in the form of equity or debt.
Admiral continues to enjoy a long-term relationship with a number of different reinsurers some of which are amongst the world’s largest.
Risk: Admiral earns other revenue from a portfolio of products and services in addition to the core insurance products.
This risk could be exacerbated by irrational competitor pricing and/or new technologies used within the insurance market. It may arise from new or existing competitors.
Increased defaults would lead to a growth in bad debt provisioning which could impact future profitably and lending capabilities.
Concentrations of credit risk are managed by investing in liquidity funds which invest in a wide range of short duration, high quality securities. Cash balances and deposits are placed only with highly rated credit institutions. Some long- term investments are held in Government bonds to further mitigate the exposure to credit risk.
Risk: Admiral is dependent on the four main UK comparison websites as an important source of new business and growth.
Growth in this distribution channel could slow, cease or reverse, or Admiral could lose one or more of the websites as a source of customers.
Admiral also contributes materially to the revenues of other comparison businesses and has a strong brand presence and therefore it is not considered probable that a material source of new business would be lost.
Admiral continues to grow its multicover and multicar products, with a direct offering to new and existing customers.
As Admiral operates globally, it is exposed to a number of differing legal jurisdictions and regulators.
The investment strategy focuses on preservation of the amount invested, low volatility of returns and strong liquidity. The majority of the portfolio is invested in high quality fixed income and other debt securities, and money market funds and other similar funds in order to achieve these objectives.
The principal categories of operational risk for Admiral are: • Conduct Risk • IT Systems • Information Security/Cyber Risk • Business Continuity
Possible impact on our strategy: 1 2 3 4 5 6
Potential customer detriment and/ or potential regulatory censure/ enforcement and/or reputational damage as a result of Admiral’s action.
The risk of reductions in earnings and/or value, through financial or reputational loss, from inadequate or failed internal and outsourced projects, processes and systems, or from people related or external events.
Risk to Admiral occurs through the losses that could materialise if the internal control framework managing these business processes fails.
Within IT there is a major incident team which is tasked with maintaining system availability, with business continuity and disaster recovery plans in place which are regularly tested.
Data is backed up to allow for its recovery in the event of corruption
There are regular reviews of the effectiveness of the Group’s IT capability by Executive Management and the Board.
Internal controls are in place and monitored to mitigate risks and the control framework is regularly reviewed.
Admiral monitors its outsourced and offshore activities, through ongoing supplier relationship and performance management, with regular due diligence reviews.
Risk: Admiral Group monitors emerging risks which are defined as issues that are perceived to be potentially significant, but which may not be fully foreseen, assessed or allowed for in strategic and operation business decisions. By their very nature, emerging risks are many and varied. They arise from changing political, social, economic, environmental and technological landscapes, impacted by changing legal and regulatory considerations, and are characterised by a complex interaction between these drivers. The timescale of their impact is unknown, but frequently is for longer than standard business planning cycles. They are considered to have potentially significant impact to the Group, with a high degree of uncertainty around the likelihood of occurrence, severity and/or timescales.
The management of emerging risks is a key element of Admiral’s strategic risk management. Admiral has developed a framework for monitoring Emerging Risks, based on the guidelines of the International Risk Governance Council and the CRO Forum
“ On behalf of the Board, I am pleased to present the Group’s Governance Report for the financial year ended 31 December 2019.”
Dear Shareholder, Governance has been a key area of focus for the Board, given the changes to the corporate governance landscape brought about by the introduction in July 2018 of the revised UK Corporate Governance Code which applies to the Group with effect from 1 January 2019. In order to ensure that the Board was fully prepared for the changes set out in the revised Code, a project was initiated, led by the Company Secretary, which included scheduling presentations, updates and training for the Board throughout the year to ensure that the Group’s governance framework and standards of good corporate governance were aligned with the requirements set out in the Code.
The Board reviewed and agreed the Group’s purpose, which sets out the Group’s values and strategy, to ensure that it was aligned with the Group’s culture and supported the Group’s long-term sustainable strategy. A number of sessions were held during the year at which the Board spent time reflecting on the Group’s unique culture and reviewed the measures that had been put in place to make sure it was appropriately monitored so that it remained aligned with the Group’s purpose and values. The Board considered how the Group’s purpose and values had been embedded in the Group’s policies and procedures and were satisfied that management had taken the appropriate steps to communicate values and expected behaviours widely and clearly across the Group and that reward structures provided appropriate incentives that encourage desired behaviours and responsible risktaking. The Group’s purpose is set out on page 01.
The Board also reflected on the importance of its key stakeholder groups and had a Board session in April at which all the Group’s stakeholders were considered and engagement with them discussed to ensure that the views of stakeholders were properly considered in decisions made by the Board in compliance with s172(1) that the Directors should take stakeholder concerns into account in their decision making.
The customer remains central to our culture and we strive to ensure fair outcomes for all of the Group’s customers and empower front-line staff to meet the needs of individual customers. The Board had a session in March on the treatment of existing customers, and in April on customer outcomes. Both sessions gave the Board valuable insight into how the needs of customers were evolving and how the development of customer experience and oversight was being monitored to ensure that our customer centric culture is maintained.
CEO of Europe General Insurance for Zurich Financial Services and a member of the Group Executive Committee from 2007-2010. Former CEO of Direct Line Group (formerly RBS Insurance) and member of the RBS Group Executive Management Committee. Previously a member on the Board of the Association of British Insurers (ABI).
David is a founder Director of Admiral and helped to set up the Admiral business in 1991.
Prior to joining Admiral David worked at McKinsey & Company, in the Financial Interest Group, and Cadbury Schweppes in the UK and the USA. David has an MBA from INSEAD and he was awarded a CBE in 2010 for services to business and the community in Wales.
Mike was CFO of Metro Bank PLC between 2009 and 2018, helping lead the business from start-up to listing on the FTSE. He spent seven years at Capital One Europe in various roles including CFO Europe, CFO UK and Chief Risk Officer Europe. He has also served as CFO for Royal Trust Bank, Financial Controller at Industrial Bank of Japan, London Branch, Director Business Risk at Barclaycard and was Co-founder and CFO of Gentra Limited. Mike is a Fellow of the Institute of Chartered Accountants in England and Wales. In 2019 Mike was appointed Chair of Admiral Group subsidiary, Admiral Financial Services Limited (AFSL).
Chief Executive Officer and Director of White Mountains Insurance Group, Ltd
Non-Executive Director and Chair of Audit Committee at Vitality Health Ltd and Vitality Life Ltd
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.
Andy was Chief Financial Officer at Domestic & General Group from 2014 to 2017. He spent 14 years at Prudential plc from 2000 as Director, Group Finance; Group Chief Risk Officer; and CFO and Deputy Chief Executive Officer of Prudential UK. He previously held senior manager roles at Legal & General Group plc, where he was Group Financial Controller, and Lloyds Bank plc. Andy is a Fellow of the Institute of Chartered Accountants in England and Wales.
Employees are not specifically consulted on Executive remuneration, however all employees are encouraged to participate in Admiral’s annual staff survey, which provides valuable insight to the Board on a range of topics, including compensation. Relevant feedback is shared with the Group Remuneration Committee. In addition, the Employee Consultation Group provides a regular forum for employee queries to be discussed with senior management, by way of elected representatives. The Chair of the Group Remuneration Committee joins the Employee Consultation Group meetings annually. The Group will be seeking shareholder support for a revised Remuneration Policy at the 2021 AGM and as part of the review process in 2020, the Committee anticipates adopting a post employment shareholding policy.
Our Responsible Investment Policy In 2019 Admiral fully integrated a Responsible Investment Policy related to our investment portfolio.
• Changes to the structure, size and composition of the Board, including new appointments
In addition to the regular consideration of financial and operating performance and risk management and compliance, the Board received presentations on a variety of topics including updates from the management teams of each of the Group’s businesses and regular reviews of Solvency II related activities such as progress of the Internal Model Application Process (IMAP).
In addition to her visits to the Group’s UK operations, the Chair has sought to visit each of the Group’s overseas operations this year and Non-Executive Directors are invited to join either her or the Chief Executive Officer on one or more of their overseas visits each year. The Non-Executive Directors and the Chair met during the year without the Executive Directors being present. NonExecutive Directors also attended briefing sessions in Cardiff and Newport on different aspects of the Group’s UK business. In order to increase their understanding of the depth and breadth of management across the Group below Board level, the NonExecutive Directors and the Chair also attended a dinner with members of the Group’s senior management team without the Executive Directors being present. When management teams present to the Board on their operations, they are also invited to join the Board for dinner which gives the opportunity for informal interaction between Directors and management.
Meetings and attendance Directors are expected to attend all meetings of the Board and the Committees on which they serve and to devote sufficient time to the Group to perform their duties. Where Directors are unable to attend meetings they receive papers for that meeting giving them the opportunity to raise any issues with the Chair in advance of the meeting. The number of scheduled Board meetings and Committee meetings, of which they are a member, attended by each Director during 2019 is provided in the table below. In addition to the seven scheduled Board meetings held during the year, there was an additional Board meeting held in June 2019 that was called at short notice and was attended by all Board members. Similarly, the ten Audit Committee meetings, set out in the table below, includes three additional Audit Committee meetings that were called at short notice.
Due to a prior commitment, Manning Rountree was unable to attend an additional Risk Committee meeting that was called at short notice as part of the Internal Model Approval Process (IMAP).
Culture: Monitoring and Assessment It is critical that our culture evolves and adapts as the business environment we operate in changes but it is also critical that those parts of our culture which have given us a competitive advantage and been a driver of success in the past are maintained. The culture of providing our customers with great products and services whilst caring for our employees and other key stakeholders in the business is key to what we do. Our culture is embedded and reinforced by The Four Pillars (Communication; Reward and Recognition; Fun and Equality) which are built into the fabric of our training, communication and the way we do business. We recognise the need to ensure that our employees are highly skilled and motivated and have a recognition culture where our employees can thrive, be innovative and contribute to the future success of the Group.
In addition to staff participation in regularly monthly staff surveys together with an annual employee engagement survey – Best Companies and Great Places to work survey, there are a number of the mechanisms that the Group uses to monitor culture including regular culture audits conducted by Internal Audit that include survey results, policies and processes; “Meet the Manager” meetings; “Ask David” scheme and regular online manager chats. All are felt to be valuable methods of capturing the mood of employees and to gauge the health of our culture.
The focus of the independent evaluation was on the dynamics of the Board and Committees to assess their effectiveness and, where applicable, to make some practical suggestions for enhancements. Matters considered included: the dynamics, behaviour and culture including relationships around the Board table; the Board’s decision making and strategic approach; the process for Board Succession; together with individual feedback to the Chair and Committee Chairs on their particular roles.
The results of the questionnaire were then discussed in one to one interviews with Ian and Board members and regular Board attendees. Any particular areas of focus that came out of the results of the questionnaire were discussed together with an assessment of progress since the previous reviews and any material matters identified in the individual questionnaire results. Ian also met a selection of employees to ask about their views on the Board.
As part of the evaluation process, Ian also had access to the papers for and attended, as an observer, one Group Board meeting and one meeting of each of the Group Audit, Remuneration, Nomination and Governance, and Risk Committees in order to assess, at first hand, the dynamics and effectiveness of each meeting.
Ian presented the results of the review to the Board in December 2019 and the Board discussed the specific recommendations that had been proposed to enhance the Board’s effectiveness. The Board agreed that good progress had been made in implementing the recommendations identified in the internal evaluation carried out in 2018, particularly around understanding the views and requirements of the Group’s stakeholders; improvements in the quality of Board papers; and increased Board focus on customer insight and experience and technological issues facing the Company.
Overall the results of the review concluded that the Board continues to operate effectively. The dynamics of the Board are of a collegiate Board with a good balance of experience, who work well together and are keen to promote the success of the Company. The Board operates as an open and transparent forum for discussion and debate. Everyone has an opportunity to be heard and is encouraged to participate, which contributes to a positive and supportive culture. In addition, the Board has a good understanding of the matters it must focus on and is in touch with its major stakeholders.
The performance of the Chair is reviewed by the Board led by the Senior Independent Director (“SID”). Following the latest review, the SID considered and discussed with the Chair the comments and feedback that had been received from the Directors as part of the Chair’s evaluation questionnaire and was able to confirm that the performance of the Chair is effective and that she demonstrates appropriate commitment to her role. As the Chair will reach her nine year tenure as a Non-Executive Director on the Group Board in March 2021, the Board considered the position of the Chair remaining in post for a period beyond the nine year term. To facilitate effective succession planning and the continued development of a diverse Board and given the performance of the Chair, it is intended, that subject to annual approval by shareholders, she will remain as Chair for up to three years beyond March 2021, with the expectation that she would serve two years.
The Board are satisfied that a transparent, robust and comprehensive succession and selection process has been followed. The Board is confident that, in Milena, the Group has a natural successor and a leader for the next generation. Milena brings a deep appreciation of the special Group culture, entrepreneurial spirit, commercial track record and people development skills.
Division of Responsibilities The Chair is primarily responsible for leading the Board, setting its agenda, promoting a culture of openness and debate and monitoring its effectiveness. The Chair is supported by the Senior Independent Director, who acts as a sounding board and serves as an intermediary for the other Directors. Neither are involved in the day-to-day management of the Group.
Save for the matters reserved for the Board, the Chief Executive Officer (with the support of the Executive Directors and the senior executives) is responsible for proposing the strategy to be adopted by the Group, running the business in accordance with the strategy agreed by the Board and implementing Board decisions.
• Ensures the Board has an appropriate balance of skills, knowledge, experience and diversity.
• Proposes and develops the Group’s strategy, in close consultation with the Group’s senior management, the Chair and the Board.
Owen Clarke was the Senior Independent Non-Executive Director (SID) for the year under review. The Board is satisfied that Owen has the requisite knowledge and experience gained through his Board position, his Chairmanship of the Remuneration Committee, his membership of the Audit and Nomination and Governance Committees. In addition, Owen has financial services experience, gained through his appointment as Chairman, and formerly Chief Investment Officer of Equistone Partners Europe. Owen is available to shareholders if they have concerns that contact through the normal channels of Chair, Chief Executive Officer, or Chief Financial Officer have failed to resolve or for which such contact is inappropriate. As Chair of the Remuneration Committee, Owen is also available to discuss remuneration matters with shareholders. He is also responsible for leading the Board’s discussion on the Chair’s performance and the appointment of a new Chair, as and when appropriate.
The Directors are given access to independent professional advice at the Group’s expense, should they deem it necessary to carry out their responsibilities.
Professional development On appointment, Directors take part in a comprehensive induction programme whereby they receive financial and operational information about the Group; details concerning their responsibilities and duties; as well as an introduction to the Group’s governance, regulatory and control environment.
Whistleblowing The Board has in place arrangements by which members of staff can raise concerns in confidence and if necessary, anonymously. During the year, the Board reviewed and approved the Group’s Whistleblowing Policy and were satisfied that the arrangements in place were proportionate for independent investigation of the matters raised and supported an ethical business culture where employees felt safe raising concerns. In addition, the Board received regular updates from the Chair of the Audit Committee (the Group’s regulatory Whistleblowing Champion) in respect of reports arising from matters that had been raised by employees under the Policy.
During the year, the Board has focused on ensuring that there is effective engagement with its stakeholders. Detailed information is set out in the Strategic Report as to how the Board has discharged its duties under s172(1), particularly as regards how the Group has sought to engage with its employees.
This is supplemented by feedback to the Board on meetings between management and investors. The Investor Relations team also regularly produces a report on their activities in the previous quarter which is circulated to the Board for their consideration. The Report contains an analysis of share price performance; a summary of analyst reports received during the month and of meetings that have been held with investors and analysts; together with details of any significant changes to the shareholders’ register.
The Group maintains a corporate website (www.admiralgroup. co.uk) containing a wide range of information of interest to institutional and private investors. The major shareholders of the Company are listed in the Directors Report on page 126.
Governance Report continued 1 For more information please refer to pages 18 to 23 of the Strategic Report
Group 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 Group has put in place a Conflicts of Interest Policy to deal with conflicts of interest and this was reviewed and approved by the Board in December 2019. The Policy sets out the process and procedure by which the Board manages potential conflicts of interest that may arise at Board level and within Board Committees, and within the Group’s Subsidiary Boards. Following this review, the Board concluded that the process continued to operate effectively. In addition, each Board member is asked to complete, annually, a conflicts 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.
All Committees are chaired by an independent Non-Executive Director, except the Nomination and Governance Committee which is chaired by the Chair 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 Chairs 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 Chair 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.
The Committee undertook a comprehensive evaluation of the performance of the external auditor and concluded that Deloitte continued to work effectively as external auditor. The Committee spent time considering the audit fee proposed for 2019 and discussed with Deloitte the rationale for the year-on-year increase. The Committee also reviewed the position in relation to its external audit services contract and considered the timing of tendering for the external audit.
Although the introduction of the new insurance accounting standard, IFRS 17 Insurance Contracts has, at the time of writing, been deferred to January 2022, the Committee has continued to focus on management’s preparedness for its introduction and, the implications for the Group to ensure these are well understood. In this context the Committee received several updates on the introduction of IFRS 17. The Committee also had a separate education session, recapping on the implementation of IFRS 9 and considered the Group’s financial assets, including loans, within its scope. In addition, the Committee held an education session, which included a “deep dive” on insurance claims reserving, with presentations from the Group’s Actuarial Reserving and Claims Management teams on the Group’s case reserving process and methodology and from the Group’s external actuarial experts to provide further insight into their reserving review methodology and process. The Committee also reviewed management’s proposals to transition to using Admiral’s internal actuarial estimates for UK Motor Insurance claims reserving in 2020. In addition, the Committee received an update on the Group Finance function and the key systems involved in the financial reporting processes.
The Committee considered and reviewed the Group’s whistleblowing policy and received updates on the use of the policy and the instances of whistleblowing that had been raised across the Group during the year. The Group’s whistleblowing policy was recommended to the Board for approval and, after discussion and review, the Board concluded that the current whistleblowing arrangements were an appropriate means by which staff could raise concerns in confidence and anonymously.
The Committee also considered a letter from the Financial Reporting Council (FRC) relating to certain aspects of the Group’s Annual Report and Accounts 2018. The Committee reviewed and agreed the comprehensive response proposed by management, with input from the external auditor, to the questions raised by the FRC. As a result, a small number of enhancements have been made to the accounting disclosures in the Financial Statements.
The Audit Committee’s primary responsibilities are to: • Monitor the integrity of the Group’s Financial Statements and any formal announcement relating to the Group’s financial performance, reviewing any significant financial reporting judgements which they contain; • Keep under review the effectiveness of the Company’s internal financial controls, internal control and risk management systems; • Review the Group’s procedures for handling allegations from whistleblowers and for detecting fraud; • Monitor and assess the role and effectiveness of the Group’s Internal Audit functions in the context of the Group’s overall internal control and risk management systems; • Consider and make recommendations to the Board, to be put to shareholders for their approval at the AGM, in relation to the appointment, reappointment and removal of the Group’s external auditor; • Review the external auditor’s independence and objectivity and the effectiveness of the audit process; • Review the policy on the engagement of the external auditor to provide nonaudit services, considering the relevant regulatory guidance regarding the provision of non-audit services by the external auditor.
• Reports from Deloitte, the external auditor, on their proposed audit scope, plan and findings; • Proposed external audit fee and the drivers of the year-on-year increase; • Confirmation of the external auditor’s independence; • The effectiveness of the Group’s Whistleblowing Policy which sets out the arrangements for raising and handling allegations from whistle blowers and receiving regular reports on instances of whistleblowing that have been raised; • Reports on the controls in place, including any breaches or incidents, in respect of the Group’s overseas subsidiaries and in relation to cyber security; • Updates from the European Head of Internal Audit and subsequently from the Chair of the European Audit Committee (of the Group’s subsidiary Admiral Europe Compañía de Seguros, S.A., which underwrites the Group’s European insurance businesses) on the activities of that committee; • The Committee also had presentations and discussions on a range of important issues including: the impact of the forthcoming IFRS 17 accounting changes, an accounting update on the Group’s loans business focused on the requirements and implementation of IFRS 9, an update on the implementation of Group Minimum Control Standards’ framework and Solvency II Technical Provisions and other Solvency II reporting; • A separate Committee “deep dive” session on reserving by the Group’s claims management and actuarial reserving teams and external actuary; • Letter and response from management to the Financial Reporting Council (FRC) letter on the 2018 Annual Report & Accounts dated 16 October 2019; • Its own Terms of Reference; • Its own effectiveness; • Meetings held with the external auditors and also with the Head of Internal Audit without management being present.
Significant issues considered by the Committee After discussion with both management and the external auditor, the Audit Committee determined that the key risks of misstatement of the Group’s Financial Statements related to valuation of insurance claims reserves and the valuation of the projected excess of loss reinsurance recoveries.
Valuation of insurance claims reserves The Committee continued to spend significant time reviewing and challenging the approach and methodology adopted by management in setting reserves for insurance liabilities in the Financial Statements to ensure that it remained consistent with the Group’s stated reserving approach to set claims reserves at a prudent level. In this context, the Committee challenged management on the important judgements and assumptions used in estimating outstanding claims. Further information is set out in more detail in the critical accounting judgements section of Note 1.
The Committee held separate meetings with the Group’s UK external actuaries, at which there was challenge and debate on the best estimates developed by the external actuaries. At these meetings management provided further information on the reserving levels proposed and were challenged by the Committee as to their adequacy and level of inherent prudence.
The Committee monitored the uncertainty around the changes to the Ogden discount rate, which is used in setting personal injury compensation, and reviewed the impact on the Group’s Financial Statements of the new discount rate of minus 0.25% that was announced in July 2019 and was applicable from 5 August 2019. The Committee compared this to the previous rate of minus 0.75% that had been applicable since February 2017 and the assumed rate of 0%, which was adopted in the Group’s 2018 year end Financial Statements and challenged management’s assessment of the impact of the new discount rate on the cost of claims.
The Committee also received an update from the auditor regarding their challenge that they had applied to management’s qualitative and quantitative justifications for the margin held over actuarial best estimate reserves through review of management’s accounting judgement papers. Based on their review of these procedures the auditor was satisfied that the booked reserves remain appropriate and were consistent with the Group’s prudent accounting policy.
Valuation of the projected excess of loss reinsurance recoveries The Committee considered the changes made by the Group’s independent actuarial experts to the methodology that they used for modelling excess of loss reinsurance recoveries during the first half of 2019, that were carried out as part of the regular enhancements to the reserving methodologies used in projecting both the large bodily injury claims in the gross analysis and the excess of loss recoveries arising from these projected claims. In this context the Committee challenged the external actuary on the judgemental actuarial methodology they had applied to their analysis of projected excess of loss reinsurance recoveries on large bodily injury claims.
Impairment testing on the Group’s investment in subsidiaries The Committee reviewed and challenged the results of management’s impairment testing of the Group’s investment in subsidiaries, performed where indicators of impairment were present. A total impairment charge of £93.6 million has been recognised in relation to the Group’s investments in its US comparison business, Compare.com (£27.7 million) and its US insurance business, Elephant Auto (£65.9 million).
The Committee was comfortable that management performed a thorough and robust process in line with the relevant accounting standard.
Further information is set out in the critical accounting judgements section of Note 1 to the parent company financial statements.
Unless required by law, or regulation any non-audit services will: a) be subject to prior approval from the Committee and b) in aggregate, shall not cost more than 70% of the average statutory audit fee for the past three financial years. In considering whether to approve such non-audit services, the Committee shall ensure that: • There is no direct effect, or in the view of an objective, reasonable and informed third party, would have an inconsequential effect, on the audit services on the Group’s Financial Statements; • The estimation of the effect on the Financial Statements is comprehensively documented and explained in a report to the Committee; • The non-audit services provided comply with the principle of independence; and
Audit Tender The Group last completed an audit tender in 2015 for the 2016 year end 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.
In last year’s Annual Report and Accounts the Committee reported that they had reviewed the arrangements with the current external auditor and had considered whether it was appropriate to initiate a tender process in order that the current arrangements could be reviewed against those offered by other audit firms in the market.
The Committee considered the results of various reviews and consultations on the audit services market as well as other factors relating to a potential tender process and concluded that it was appropriate to continue with the planned tender timetable.
Members of the Committee also receive all issued audit reports, enabling them to challenge the reports’ content and related recommendations. The Committee approves the Internal Audit programmes at the start of each calendar year whilst the effectiveness and workload of the Internal Audit functions and the adequacy of available resources are monitored throughout the year.
Dear Shareholder, During the year the Committee reviewed the Board’s risk strategy and risk appetite across the Group. This included updates on the UK Insurance business as well as developments within the other businesses as a key part of the Group’s Enterprise Risk Management Framework (‘ERMF’). The developments focused on the establishment of the European insurance entity, Admiral Europe Compañía de Seguros S.A. (AECS) and the growth of Admiral Financial Services Limited (AFSL). A further refresh of the suite of Key Risk Indicators with associated triggers and limits was completed, reflecting the updates to the Group risk appetite.
The Committee also continues to focus on key operational risks that affect the Group. The governance of the risk event process continues to improve, providing greater assurance to the Committee regarding the management of major risk events. The Committee has continued to spend time reviewing material risk events reported during the year.
Jean Park Chair of the Group Risk Committee 4 March 2020
The Committee held five scheduled meetings during the year with a further three meetings dedicated to the Internal Model process.
The responsibilities of the Committee are: • Overseeing the development, implementation and maintenance of the Group’s overall Risk Management Framework and ensuring that it is in line with emerging regulatory, corporate governance and best practice guidelines.
• Monitoring the Group’s prudential risk exposure, which includes ensuring that the Group’s capital resources and liquidity profile are appropriate to its needs whilst meeting minimum regulatory requirements, including overseeing and challenging the design and execution of the Group’s stress and scenario testing.
• Ensuring the adequacy and effectiveness of the Group’s systems and controls for the prevention of financial crime, data protection systems and controls.
• Monitoring the adequacy and effectiveness of the Group’s Compliance functions.
• Approving the annual plans for the Group Risk and Compliance functions which include reviewing regulatory developments and regular meetings with the PRA and FCA.
• Reviewing and approving the Solvency II Actuarial Function Reports on Reinsurance and Underwriting each year.
• Reviewing and approving the remuneration report from the Chief Risk Officer (CRO) prior to Remuneration Committee sign off.
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. At each meeting, the Risk Management Committees consider significant movements in the operation’s risk profile, 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. The Risk Management Committees receive regular information on Conduct Risk, such as complaint handling reports and other related management information. The Group Risk Management function reviews and collates information from across the Group for consideration by the Group Risk Committee (GRC).
• Considered the adequacy of risk mitigation measures and contingency plans including a review of the Group’s reinsurance provisions.
• Received regular risk monitoring reports on performance of Key Risk Indicators within the overall risk management framework.
• Received updates on the impact of a number of notifiable risk events throughout 2019.
Internal Control and Risk Management Statement The system of risk management and internal control over insurance, operational, market, credit and group risks is designed to manage rather than eliminate the risk of failure to achieve business objectives and breaches of risk appetites and can only provide reasonable and not absolute assurance against material misstatement or loss. The Board is ultimately responsible for the Group’s system of risk management and internal control and, through the Audit Committee, has reviewed the effectiveness of this system.
The Board is of the view that there is an ongoing process for identifying, evaluating and managing the Group’s risks and internal controls; that it has been in place for the year ended 31 December 2019; and that, up to the date of approval of the Annual Report and Accounts, it is regularly reviewed by the Board and accords with the internal control guidance for Directors provided in the 2018 UK Corporate Governance Code.
The Board has delegated the development, implementation and maintenance of the Group’s overall risk management framework to the GRC. The GRC reports on its activities to the Board and the Audit Committee, supporting the overall assurance provided by the Audit Committee that the Group’s internal control, risk management and compliance systems continue to operate effectively.
An annual assessment of the completeness of the risk management reviews and testing of internal controls is supported by the production of an Integrated Assurance Map, summarising the reviews performed and assurance provided by all three lines of defence, in relation to the key risks facing the Group. The Integrated Assurance Map is reported to the GRC at least annually. The Chair of the GRC provides a written report to the Group Board of the activities carried out by the Committee on an annual basis. In addition, the Group Board receives reports from the Chair of the Group Audit Committee as to its activities, together with copies of the minutes from subsidiary Board meetings and the Group Risk and Audit Committees.
The Group Audit Committee’s ability to provide assurance to the Group Board depends on the provision of periodic and independent confirmation, primarily by Internal Audit, that the controls established by management are operating effectively and where necessary provides a high-level challenge to the steps being taken by the GRC to implement the risk management strategy.
Viability In accordance with Provision 31 of the 2018 UK Corporate Governance Code, the Directors have assessed the prospect of the Company over a longer period than the 12 months required by the ‘Going Concern’ statement. The Board reviews five-year financial projections twice a year, three-year solvency projections at least three times a year and approves a one-year financial budget for the forthcoming 12 months on an annual basis.
The principal risks and uncertainties faced by the Group are set out on pages 66 to 73 and note 6i to the Financial Statements sets out the Group’s objectives, policies and procedures for managing financial assets and liabilities.
Group Audit Committee and the Group Internal Audit function. Internal Audit undertakes a programme of risk-based audits covering all aspects of both the first and second lines of defence. The findings from these audits are reported to all three lines, i.e. Management, the executive and oversight Committees, and the Group Audit Committee.
Second Line of Defence The ‘second line of defence’ is led by the Chief
Quantitative and qualitative assessments of risks are performed as part of the ORSA process. The quantitative assessment considers how the regulatory capital requirements, economic capital needs, own funds and solvency position of the Group is projected to change over the three-year horizon, with a requirement to maintain a solvency ratio above the approved capital risk appetite buffer throughout the projection. The assessment also includes a series of sensitivity, stress and scenario tests and reverse stress tests which assess the Group’s principal risks and uncertainties, identifying and quantifying the operational, financial and solvency impacts of these stresses alongside potential mitigating factors and management actions. The results of the stress tests also form part of the process to set the Group’s capital risk appetite, which ensures that a buffer is held on top of the Group’s regulatory capital requirement to protect its regulatory capital position against potential shocks and stresses.
Key strategic decisions including the setting of dividend payments, consider the solvency impact against the Board approved capital risk appetite of 130%, which is a key criterion for the Board in assessing viability. Refer to the Strategic Report for information on sensitivities to the reported 2019 solvency ratio position.
Based on the results of this analysis, the Directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due, for the next three years.
The Group Board has ultimate oversight of climate-related issues. Climate changerelated risks and disclosures are reviewed and discussed at several Committees and within the Board, including the GRC, the Group Audit Committee, and at subsidiary Boards and subsidiary Risk Management Committees.
Through stress and scenario testing and reverse stress testing, considered in-depth analysis of a number of the Group’s most significant risk areas.
Recommended to the Board approval of the 2019 ORSA Report prior to submission to the regulator and approved the ORSA policy.
Received updates on the impact of a number of notifiable risk events throughout 2019.
Considered the adequacy of risk mitigation measures and contingency plans including a review of the Group’s reinsurance provisions.
Attendance information can be found in the table on page 81
Mindful of the changes introduced under the revised Corporate Governance Code that was applicable for the year under review, the Committee focused its time on ensuring that the Group’s policy on diversity and inclusion, gender balance of the Group’s senior management and their direct reports and the approach to succession planning were appropriately considered by the Committee during the year.
The Nomination and Governance Committee Statement from Annette Court, Chair of the Nomination and Governance Committee
“ The Committee focused its time on ensuring that the Group’s policy on diversity and inclusion, gender balance of the Group’s senior management and their direct reports and the approach to succession planning were appropriately considered during the year.”
Membership The membership of the Committee at the year end was Annette Court (Chair), Owen Clarke and Justine Roberts. The Company Secretary acts as Secretary to the Committee. The Committee invites the Chief Executive Officer and/or the Chief Financial Officer to attend meetings when it deems appropriate. The Committee met formally on seven occasions in 2019. In addition, members of the Committee corresponded and met informally on a number of occasions to consider and meet with individuals that the Committee had identified as possible candidates to join the Board.
The Committee also reviewed a skills matrix that identified the skills of current Board members that were already represented and to identify areas such as technology where enhancements to the composition of the Board in these areas were needed. The time commitments required of NonExecutive Directors were also considered by the Committee and the conclusion reached that each Director was able to devote sufficient time and commitment to the performance of their duties.
Board Appointments The Committee leads the process for making appointments to the Board or where the appointee is likely to become a Board member. The policy on Board appointments involves the Committee developing an appropriate specification that identifies the required skills and experience for the role and, in most instances, engaging external recruitment consultants, to lead the recruitment process and identify suitable candidates. Interviews of the shortlisted candidates are held with the Chair and members of the Committee. After consideration by the Committee, a recommendation is made to the Board to appoint the preferred candidate. The Committee is satisfied that this constitutes a formal, rigorous and transparent process for the appointment of new Directors to the Group Board and its subsidiaries embracing a full evaluation of the skills, knowledge and experience required of Directors.
Succession planning and talent management The Committee ensures plans are in place for orderly succession for appointments to the Board and reviews the succession plans for other senior management positions. Responsibility for making senior management appointments rests with the Chief Executive Officer.
There have also been several NED 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.
Gender and Diversity The Committee reviewed the gender balance of those in senior management and their direct reports and considered the initiatives that have been proposed to focus on improving gender balance. In this context, the Group continues to focus on meeting the Hampton Alexander Review target of 33% women’s representation across executive committees below Board level and direct reports to those committees and despite the fact that the percentage of women in this combined group has marginally fallen, the Group still remains close (32%) to meeting the target. This is shown in more detail in the gender diversity table on page 125. The Group has already exceeded the target set by both Lord Davies in his report: Women on Boards, and the Hampton Alexander Review (that builds on the Davies Review) which encourages FTSE 350 companies to achieve at least 33% women on Boards by 2020 as women already constitute 40% of our plc Board.
In April, the Committee reviewed the Group’s Board Diversity and Inclusion Policy and discussed the appropriateness of the measurable targets to increase diversity and inclusion across the Group. The Policy sets out the approach to Board diversity for Boards within the Admiral Group and supports the principle of boardroom diversity and inclusion and the promotion of diverse board composition. Measures that are covered under the Policy include: having one member of the senior executive team who is responsible and accountable for gender diversity and inclusion; setting internal targets for gender diversity in senior management; publishing progress annually against these targets in reports on the Group’s website; and linking the pay of the CEO to the progress made against these internal targets on gender diversity. The Committee seeks to ensure that a clear recruitment strategy for Board appointments is in place and is aligned to this Policy.
However, the Group remains strongly supportive of the principle of boardroom diversity, of which gender and ethnicity are important, but not the only, aspects. What is important is diversity of thought, experience and approach and each new appointment must complement what already exists at the Board table. Accordingly, appointments will always be made on merit against objective criteria, including diversity and gender, and not just to achieve an externally prescribed number.
I would also like to thank our shareholders for approving our Annual Report on Remuneration at the April 2019 AGM which was approved by 99.8% of our shareholders.
Recap of remuneration structure at Admiral Admiral has a simple remuneration structure which reinforces our unique culture and creates strong alignment with our shareholders: • Base salaries are targeted at the lower end of our peer group, and Executives are encouraged to build up significant shareholdings in the Group to maximise shareholder alignment.
• Shareholder alignment is further reinforced by granting DFSS awards as a fixed number of shares, ensuring the value at grant is directly aligned with the shareholder experience. The Committee reviews award sizes annually, taking into account factors such as the shareholder dilution impact of all employee share schemes and share price movement since the last award, in particular, whether a material share price increase has resulted from general market, or other external, factors.
• Our CFO’s remuneration package includes an annual award of ‘salary shares’, released over a 5-year period; similar to the DFSS structure, this award is based on a fixed number of shares, with Committee discretion to reduce the number in the event of material increases in share price through external factors.
“ Admiral has a simple remuneration structure which reinforces our unique culture and creates strong alignment with our shareholders”
The Committee recognises that some aspects of the structure of pay at Admiral are unusual compared to the typical practice at other large UK-listed companies, but we believe that the structure contributes to our culture of focusing on collective success, and is aligned with our philosophy around the efficient use of capital and distribution of surplus profits, all of which aligns to shareholder interests. The remuneration structure also reflects individual and business unit performance through the allocation of DFSS awards and, for certain senior managers, the application of adjustments to their vesting and DFSS bonus.
Admiral’s business performance 2019 has again been a positive year for the Admiral Group. Earnings per share in the year were 148.3 pence (2018: 137.1 pence) and return on equity was 52% (2018: 56%). Total dividends for the financial year (including the proposed final dividend of 77.0 pence per share) will be 140.0 pence per share (2018: 126.0 pence per share).
• Geraint Jones also received a DFSS bonus of £201,600. This bonus is equivalent to dividends that would have been paid during the year on all outstanding DFSS and salary shares awarded but not yet vested plus a +/- 20% adjustment for performance against a set of risk and customer measures. The 2019 performance year was the first year in which the DFSS bonus for the CFO was adjusted (within a +/- 20% range) for performance against a scorecard of risk and customer measures which include four different categories of measures covering assessment against conduct risk management information (‘CRMI’) metrics, customer feedback, governance outcomes and internal stakeholder feedback. In addition, the payment of the DFSS Bonus was subject to an overall adjustment to take into account any risk events which were considered to have a material customer, regulatory or financial impact. The full details of the DFSS Bonus calculations are on page 117.
• Geraint Jones received an award of 5,000 salary shares, equivalent to £108,050, in two tranches of 2,500 shares on 18 March 2019 and 30 August 2019. This compares with an award of 5,000 salary shares equivalent to £98,225, in 2018. The Committee intends that the number of salary shares granted to Geraint Jones each year is fixed at 5,000, unless the Committee believes that a reduction should be made to take into account exceptional factors impacting the share price. In 2019, the Committee determined that no such reduction was required. In line with Policy, these shares will vest after three years subject to continued employment. An additional two-year holding period will apply and malus and clawback provisions will apply during the vesting and holding periods. Further details on these shares can be found on page 115.
• The Committee anticipates that Geraint Jones will continue to receive 5,000 salary shares during 2020, in two equal tranches. The Committee has reviewed the size of the award and has concluded that no change should be made to reflect any exceptional factors impacting the share price. The value of the 5,000 salary shares granted to Geraint Jones will be disclosed in next year’s Annual Report.
• David Stevens’s salary will be increased by 2.5% to £426,449 effective from 1 September 2020 and the cash element of Geraint Jones’s salary was also increased by 2.7% to £258,000, effective from 1 January 2020. These increases are below the average increase across the Group for 2019.
For the second year, Admiral has disclosed a CEO pay ratio comparing the remuneration of the CEO and that of the UK employee population. As our CEO receives only fixed pay and does not participate in the DFSS, the usefulness of this ratio (required by legislation to be disclosed) is limited. We therefore also disclose a CFO pay ratio, as Geraint Jones’s pay structure is more consistent with that of the wider workforce. The Committee references these pay ratios when considering the Executive Directors’ pay outcomes, and is satisfied that current ratios are reasonable taking into account the size of the business.
Other activities During the year ended 31 December 2019, additional to its regular activities, the Committee also: • Reviewed the DFSS vesting and bonus arrangements for Executive Directors, senior management and relevant staff (Material Risk Takers) covered under Solvency II
• Reviewed the customer and risk measures introduced for adjustment of variable pay 2020 Remuneration Policy Review The current Remuneration Policy was approved by shareholders at the 2018 AGM, effective for a maximum of 3 years. Consequently, the Committee will be seeking shareholder support for a revised Remuneration Policy at the 2021 AGM. During 2020, the Committee will review the existing Remuneration Policy with a view to consulting major shareholders at the end of the year to discuss proposed changes. This review will take into account alignment of Admiral’s strategic priorities as well as best practice including new provisions of the UK Corporate Governance Code. The Committee already complies with most of the provisions adopted by the new code including malus and clawback provisions, and pension contributions aligned to the workforce. Employees are not specifically consulted on Executive remuneration, however all employees are invited to participate in Admiral’s annual staff survey, which provides valuable insight to the Board on a range of topics including compensation. Relevant feedback is shared with the Committee. The Committee anticipates adoption of a post employment shareholding policy, as required by the Code, as part of the 2020 review.
The Annual Report on Remuneration (subject to an advisory vote) will be put to our shareholders at the AGM in 2020. We do hope that you vote in favour of the report. I am available to discuss our Remuneration Policy and Annual Report on Remuneration with shareholders.
Dec 09 Dec 10 Dec 12 Dec 15Dec 11 Dec 14Dec 13 Dec 16 Dec 17 Dec 19Dec 18 10 year TSR performance: Admiral vs. FTSE100 and FTSE350 indices Growth in the value of a hypothetical £100 holding over ten years to 31 December 2019
• DFSS bonus of £201,600 for the CFO, including an adjustment for performance against the scorecard of risk and customer measures.
Compliance Statement This Remuneration Report has been prepared according to the requirements of the Companies Act 2006 (the Act), Regulation 11 and Schedule 8 of the Large and Medium-Sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2018 and other relevant requirements of the FCA Listing Rules. In addition, the Board has adopted the principles of good corporate governance set out in the UK Corporate Governance Code (the Code) and the guidelines issued by its leading shareholders and bodies such as ISS, the Investment Association, and the Pensions and Lifetime Savings Association.
The following Remuneration Policy was approved, and therefore came into effect, at the April 2018 AGM. There have been only minor changes to the description of the Remuneration Policy since the 2019 AGM. These include clarification that DFSS awards and salary share awards are granted on a fixed share basis, clarification that the value of these awards will remain within the maximum opportunity detailed in the Policy, and rationale for the application of risk and customer measures to DFSS awards from 2019 onwards.
Key Principles of Admiral Remuneration Arrangements The Group is committed to the primary objective of maximising shareholder value over time in a way that also promotes effective risk management and excellent customer outcomes, and ensuring that there is a strong link between performance and reward. This is reflected in the Group’s stated Remuneration Policy of paying competitive, performance-linked and shareholder-aligned total remuneration packages comprising basic salaries coupled with participation in performance-based share schemes to generate competitive total reward packages for superior performance. The Board is satisfied that the adoption of this Policy continues to meet the objectives of attracting and retaining Executives of the highest quality across the Group.
The Committee reviews the remuneration framework and packages of the Executive Directors and the most senior managers and recognises the need to ensure that the Remuneration Policy is firmly linked to the Group’s strategy, including its risk management approach. In setting the Policy and making remuneration decisions, the Committee takes into account pay and conditions elsewhere in the Group. The main principles underlying the Remuneration Policy are: • Competitive total package – the Group aims to deliver total remuneration packages that are market-competitive, taking into account the role, job size, responsibility, and the individual’s performance and effectiveness. Prevailing market and economic conditions and developments in governance are also considered, as are general salary levels throughout the organisation; • Significantly share-based – our base salaries are targeted towards the lower end of market, but are combined with meaningful annual share awards that vest on long term performance to ensure strong alignment with shareholders and the long term interests of the Group. Executives are also encouraged to build up significant shareholdings in the Group to maximise shareholder alignment; • Long term perspective – a significant part of senior Executives’ remuneration is based on the achievement of stretching performance targets that support the delivery of the Group’s strategy and shareholder value. The extended performance and vesting horizons promote a long term perspective that is appropriate to the insurance sector; • Effective risk management – incentives are designed to ensure they do not encourage excessive risk-taking. They are aligned with the delivery of positive customer outcomes and reinforce the Group’s risk policy; • Open and honest culture – the Group has a strong culture of focusing on collective success, whilst still recognising individual contribution to the Group’s performance, and this is reflected in our remuneration structure across the business; and
• Transparency to stakeholders – the remuneration structure is designed to be simple and easy to understand, and all aspects are clear to employees and openly communicated to employees, shareholders, and regulators.
The CFO receives an annual award of ‘salary shares’ in addition to his cash salary. The salary share award vests after three years subject to continued employment, and an additional two-year holding period applies, during which time shares may not be sold, save to meet income tax, NI or other regulatory obligations. Malus and clawback provisions apply during the vesting and holding periods. The salary share award is not included in base salary when calculating the CFO’s pension benefit.
None of the existing Executive Directors received total taxable benefits exceeding 5% of base salary during the most recent financial year, and it is not anticipated that the cost of benefits provided will exceed this level over the term of this Policy.
DFSS shares are granted as a fixed number of shares (subject to the quantum limits of the plan, as described above). The number granted is reviewed and may be adjusted by the Committee, for example, if there has been a significant change in share price.
To further align incentive structures with shareholder interests through the delivery of dividend equivalent bonuses.
The DFSS bonus is subject to a +/- 20% adjustment based on performance against a set of risk and customer measures. The measures will be set each year for all significant areas of the business with specified targets to determine the amount of any DFSS bonus adjustment. Many of these measures will be directly related to customer outcomes. Whilst the bonus may be adjusted upwards or downwards by up to 20% in any given year, it is not anticipated that the adjustment will increase the Executive Directors’ remuneration on average over the long term.
The DFSS bonus is subject to malus and clawback provisions, i.e. forfeiture or reduction of unvested awards and recovery of vested awards. Events which may lead to the application of malus and clawback are set out in the Group’s Malus and Clawback Framework and include material financial misstatement, responsibility for conduct which results in significant losses, material failure of risk management and misconduct.
The Committee is satisfied that the above Remuneration Policy is in the best interests of shareholders and does not promote excessive risk-taking. The Committee retains discretion to make changes required to satisfy legal or regulatory requirements and other non-significant changes to the Remuneration Policy without reverting to shareholders.
Executive Directors are eligible to receive payment from any award made prior to the approval and implementation of the Remuneration Policy. This includes all outstanding awards under the previous 2015 Remuneration Policy, or any awards made prior to appointment to the Board. Details of any such payments will be set out in the Annual Report on Remuneration as they arise.
Vesting under the DFSS is linked to financial metrics including EPS vs. LIBOR1, ROE, and relative TSR. EPS vs. LIBOR has been selected as a performance measure as the Committee feels it is a strong indicator of both long-term shareholder return and the underlying financial performance of the business. It is transparent and visible and provides good line-of-sight to Executives. ROE has been selected as the Committee believes that a returns metric reinforces the focus on capital efficiency and delivery of strong returns for our shareholders, thereby further strengthening the alignment of incentives with Admiral’s strategy. Relative TSR vs. the FTSE 350 (excluding investment companies) has been selected to reflect value creation for Admiral’s shareholders as compared with the general market. For 2019 awards onwards, vesting of DFSS awards is also linked to non-financial customer and risk measures. The Committee believes that the additional emphasis on risk and customer reinforces Admiral’s focus on risk management and our customers, whilst also more clearly demonstrating alignment of Group remuneration practices with the requirements of Solvency II.
The specific performance measures and their respective weightings in respect of each DFSS award may vary to reflect the strategic priorities at the time of the award.
Service Contracts and Leaver/Change of Control Provisions 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.
Change of control. Any unvested award will be pro-rated for time with reference to the proportion of the vesting period remaining at change of control, at the point of change of control, unless the Committee determines otherwise.
Justine Roberts 3 years 17 June 2016 17 June 2019 One month
The value of DFSS awards is calculated based on the average share price in the last three months of 2019 (£21.05) and the number of DFSS shares awarded in 2019 (45,000 shares) and salary shares expected to be awarded in 2020 (5,000 shares).
Base salary • Annual cash salary and salary shares (CFO only) for 2020 • Same as other scenarios but with 50% share price appreciation on salary shares
DFSS bonus • Based on DFSS bonus paid in 2020 (for 2019 performance)
Approach to Remuneration Relating to New Executive Director Appointments External Appointments
The Committee may also make an award in respect of a new Executive Director appointment to ‘buy out’ incentive arrangements forfeited on leaving a previous employer. In doing so, the Committee will consider relevant factors including any performance conditions attached to the forfeited awards and the likelihood of those conditions being met to ensure that the value of the buyout award is no greater than the fair value of the awards it replaces. The Committee may also avail itself of Listing Rule 9.4.2 R if appropriate in respect of buy-out incentive arrangements.
Considerations of Conditions Elsewhere in the Group The Committee considers the pay and employment conditions elsewhere in the Group when determining remuneration for Executive Directors.
Considerations of Regulatory Requirements The Committee regularly reviews the Remuneration Policy and structure in the context of Solvency II remuneration guidance. The Chief Risk Officer periodically attends Committee meetings as part of this process and provides support to the Committee in understanding any risk-related implications of remuneration decisions. Whilst the Remuneration Policy includes several features which help ensure compliance with current regulatory guidance, the Committee reserves the discretion to adjust the Remuneration Policy, and its execution, to take into account any developments in such regulatory guidance.
Remuneration Committee Membership in 2019 The Board sets the Group’s Remuneration Policy and, through the authority delegated to it by the Board, the Committee is responsible for making recommendations to the Board on the structure and implementation of the Remuneration Policy across the Group with consideration to the prevailing economic climate within the economies in which the Group operates. Its remit includes recommending the remuneration of the Group Board Chairman, the Executive Directors and the Company Secretary; approving the remuneration of senior management; and reviewing the composition of and awards made under the performance-related incentive schemes.
At the end of 2019 the Committee consisted of Owen Clarke, Jean Park and Justine Roberts. The Committee met seven times during the year.
Adviser to the Committee During the year, in order to enable the Committee to reach informed decisions on Executive remuneration, advice on market data and trends was obtained from independent consultants, Mercer Kepler. Mercer Kepler reports directly to the Committee Chairman, and is a signatory to and abides by the Code of Conduct for Remuneration Consultants (which can be found at www. remunerationconsultantsgroup.com). Other than advice on remuneration, no other services were provided by Mercer Kepler to the Company. The fees paid to Mercer Kepler in respect of work carried out in 2019 (based on time and materials) totalled £113,598 excluding expenses and VAT.
In line with good governance practice, the Committee will be reviewing suppliers by conducting a tender for remuneration advice services in 2020.
Executive Director salary 2. Benefits 3. Pension Total fixed pay 4. SIP 5. DFSS
The figures have been calculated as follows: 1. Base salary/fee: amount earned for the year. For Geraint Jones, this also includes 2,500 salary shares awarded on each of 18 March 2019 and 30 August 2019 with a value of £54,375 and £53,675 which have been valued using closing share price at date of grant of £21.75 and £21.47 respectively. The 2018 values include the 2,500 salary shares granted on each of 9 March 2018 and 24 August 2018. These have been valued using closing share price at date of grant of £18.70 and £20.59 respectively. David Stevens received a salary increase of 2.5% on 1 September 2019 which increased his annual salary to £416,048.
6. DFSS bonus: the bonus equivalent to dividends that were paid during the year on all outstanding DFSS shares awarded but not yet vested. The bonus is paid in two tranches annually. From the 2019 performance year the bonus is subject to a +/- 20% multiplier based on a scorecard of customer and risk measures. Due to these timings and this being the first year of implementation of the multiplier, the multiplier was only applied to the October 2019 payment which the Committee approved based on the outcomes of the scorecard of risk and customer measures over the first half of 2019. The Committee also approved an adjustment to the bonus expected to be paid in May 2020 based on the outcome of the scorecard of risk and customer measures over the second half of 2019. Due to an administration error, the actual application of the adjustment to the October 2019 award was not executed; this error will be rectified through the value of the adjustment (£8,593) being made to Geraint Jones’s DFSS bonus paid in June 2020.
Total Single Figure of Remuneration for Non-Executive Directors (audited) The table below sets out the total single figure remuneration received by each NED for the year ended 31 December 2019 and 31 December 2018.
Colin Holmes8 n/a n/a £91,525 £702 1. The 2019 fee for Annette Court is £315,187 (a cash fee of £220,631 and a share fee of £94,556). The 2019 fee above includes a payment of £3,062 in respect of Annette Court’s annual fee for 2018 which was paid for in 2019. The 2018 fee included an amount of £15,000 that related to 2017.
5. Andy Crossley was appointed to the Board on 27 February 2018.
7. The fees for Andy Crossley and Michael Brierley include additional fees in relation to their positions as Chairman of the EUI Limited and Admiral Financial Services Limited Board of Directors respectively 8. Colin Holmes retired from the Board with effect from 14 December 2018.
Vesting of the award was based 100% on the achievement of performance conditions, being EPS growth vs. LIBOR, TSR vs. FTSE 350 (excluding investment companies), and ROE, weighted equally and all measured over the three-year period 1 January 2017 to 31 December 2019. Over this period, the returns to our shareholders were strong, with TSR in the top of the second quartile versus FTSE350 companies and with ROE of 54%. The combination of these shareholder returns and EPS growth contributed to a vesting level of 88.8%.
The Committee reviewed this vesting outcome and concluded that it was appropriate.
10% for achieving threshold with straight line relationship to 100% for maximum performance 86.6 points in excess of
Median Upper quartile 25% for median, with straight line relationship to 100% for upper quartile 64th percentile
Return on Equity (ROE) (33%) 25% 55% 25% for achieving threshold with straight line relationship to 100% for maximum performance
Based on performance, the total amount that will vest to Geraint Jones in September 2020 will therefore be 88.8% of his award (i.e. 44,400 shares), subject to his continued employment on the vesting date.
Governance outcomes Metrics covering: risk event escalation, staff attrition, % of activity plans completed for Risk, Audit and Compliance, audit report outcomes and support of initiatives.
For the first three categories, quantitative data was assessed for various measures of performance relevant to the category and an overall outcome is determined for that category. For the stakeholder feedback element of the scorecard, input was obtained from a number of individuals within Admiral based on their assessment of the CFO’s performance to determine the outcome of this element.
The three-year period over which performance will be measured is 1 January 2019 to 31 December 2021. The award is eligible to vest on the third anniversary of the date of grant (i.e. September 2022), subject to performance and to continued employment. Vested awards will be subject to an additional two-year post vest holding period. David Stevens again declined to be included given his significant shareholding.
The award will vest on three-year EPS growth vs. LIBOR†, TSR vs. FTSE 350 (excluding investment companies), ROE and a scorecard of risk and customer measures. The performance conditions are summarised in the table below.
EPS growth vs. LIBOR 26.67% Growth in line with LIBOR Growth of 36 points (equivalent to 10%
Return on Equity (ROE) 26.67% 25% 55% 25% for achieving threshold with straight line relationship to 100%
Scorecard of risk and customer measures 20% Vesting of between 0% and 100% of this element is based on the aggregate outcomes of the scorecard of risk and customer measures, used to determine the DFSS Bonus adjustments, over the 3-year performance period. Further details of the aggregation of the scorecard of risk and customer measures will be provided upon vesting
DFSS awards are subject to malus and clawback provisions, i.e. forfeiture or reduction of unvested awards and recovery of vested awards. Events which may lead to the application of malus or clawback are set out in the Group’s Malus and Clawback Framework and include material financial misstatement, responsibility for conduct which results in significant losses, material failure of risk management, business failure and misconduct.
In March and August 2019, Geraint Jones was granted awards under the SIP of 84 shares with a face value of £1,827, and 83 shares with a face value of £1,782 respectively. The shares will vest on 18 March 2022 and 30 August 2022 respectively subject to continued employment only. David Stevens again declined to be included given his significant shareholding.
Exit Payments (audited) No exit payments were made to an Executive Director during the year.
As in prior years, the Committee intends to make an award under the DFSS to Geraint Jones in September 2020. In advance of each DFSS cycle, the Committee reviews the appropriateness of the performance measures and corresponding targets. The Committee will determine the award size for the 2020 DFSS award closer to the award date (expected to be in September 2020). In determining whether the award size should differ from the number of shares offered under the 2019 award (45,000), the Committee will review if any large share price changes over the year is due to external factors out of management control. This will be disclosed in the 2020 Annual Report on Remuneration. It is currently anticipated that the vesting of 2020 DFSS award for the CFO will continue to be assessed across the three-year performance period depending 80% on three-year EPS growth vs. LIBOR†, TSR vs. FTSE 350 (excluding investment companies) and ROE, and 20% on customer and risk measures. As per award size, the Committee will determine the performance conditions and targets to be attached to the 2020 DFSS award closer to the award date, and will disclose them in the 2020 Annual Report on Remuneration.
As in prior years, Geraint Jones will be eligible to receive a DFSS bonus in 2020. The bonus is calculated to be equivalent to dividends that would have been payable during the year on all outstanding DFSS shares and any salary shares awarded but not vested. The DFSS bonus will include a +/- 20% adjustment based on performance against a scorecard of customer and risk measures. The details of the measures and any adjustment applied will be provided in the 2020 Annual Report on Remuneration.
Fees for the Board Chair and other Non-Executive Directors were reviewed in January 2020 having been last reviewed in 2018. Increases were made, effective 1 January 2020, to the Chair fee and the Remuneration Committee Chair fee to reflect the increased time commitment of these roles.
Additional fee for being Senior Independent Director £13,500 £11,025 1. The 2020 fee for the Board Chairman increased by 3.5% from £315,187 to £326,218 and comprises a cash fee of £228,353 and a share fee of £97,865 with which the Chair is required under a Share Agreement entered into with the Group to use the net proceeds in two equal instalments to purchase Group shares after the Group’s Full Year Results and Half Year Results are announced each year. The Board Chair does not receive any additional fees (e.g. for Committee membership) as these are included in the overall Chair fee.
2. The fee payable for 2019 and 2020 to Jean Park includes an additional fee of £20,000 per annum in recognition of the continued increased time commitment required as a consequence of the Solvency II regulations and Internal Model Application Process.
Percentage Change in CEO Remuneration The table below shows the percentage change in CEO remuneration from 2018 to 2019 compared to the average percentage change in remuneration for all other employees. The analysis is based on a consistent set of employees, i.e. the same individuals appear in the 2018 and 2019 populations. As the CEO does not participate in the DFSS bonus scheme, to provide a meaningful comparison we have also included data for the CFO who receives DFSS awards.
CEO CFO Other employees 1. DFSS bonus change represents the change in dividends paid plus any adjustment for performance against a scorecard of risk and customer measures for 2019 bonus for the CFO and other senior managers, which is the driver of the level of bonus payable to holders of unvested DFSS shares.
2. The employee salary change figure of 6% reflected increases, particularly in respect of employee basic pay, that were made to recognise movements in the Minimum Wage and adjustments to reflect local market pressures.
Year Method Lower quartile Median Upper quartile 2019 Option A 17:1 15:1 10:1 2018 Option A 18:1 15:1 11:1
Year Method Lower quartile Median Upper quartile 2019 Option A 62:1 54:1 38:1 2018 Option A 62:1 54:1 38:1
The lower quartile, median and upper quartile employees were determined using calculation methodology A which involved calculating the actual full-time equivalent remuneration for all UK employees for 2019. From this analysis, three employees were then identified as representing the 25th, 50th and 75th percentile of the UK employee population. Admiral chose this method as it is the preferred approach of the government and that of investor bodies and Admiral had the systems in place to undertake this method. It is also consistent with the approach used to calculate the ratios (on a voluntary basis) for 2018.
The employee pay levels for 2019 are detailed below: CEO CFO P25 (lower quartile) P50 (median) P75 (upper quartile)
1. The single figure of remuneration for the CEO and CFO includes actual salary and pension costs paid during 2019, in line with The Companies (Miscellaneous Reporting) regulations 2018. For other employees, salary and pension costs are included on an FTE basis, in line with the legislation. While the basis of calculation differs between CEO/ CFO and other employees, management considers this a fair comparison of remuneration.
The Directors are proposing a final dividend for the year ended 31 December 2019 of 77.0 pence per share bringing the total dividend for 2019 to 140.0 pence per share (2018: 126.0 pence per share).
n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
3. Geraint Jones was appointed to the Board as CFO on 13 August 2014. His 2014 remuneration includes salary, pension and benefits in respect of his service as CFO, his full year DFSS and his full year DFSS bonus.
5. 88.8% of Geraint Jones’ 2017 DFSS award will vest in September 2020 subject to his continued employment on the vesting date.
10-Year TSR Performance: Admiral vs. FTSE 100 and FTSE 350 indices Growth in the value of a hypothetical £100 holding over the 10 years to 31 December 2019
Dilution The Company currently uses newly-issued shares to fund the DFSS, SIP and salary shares. The Company has controls in place to ensure that shares awarded under the incentive schemes operated by the Company within any rolling ten-year period do not exceed 10% of the number of ordinary shares in the capital of the Company in issue at the time of each award. It is currently anticipated that a combination of attrition and actual vesting will result in dilution of less than 10%. As required by the rules of our share schemes, the Company will in any event ensure that the actual dilution level does not exceed 10% in any rolling ten-year period by funding of any vested (and future) share scheme awards as appropriate with market-purchased shares.
Interests held by Directors (audited) The Company has adopted Executive Director shareholding guidelines whereby all Executive Directors are required to acquire and retain a beneficial shareholding in the Company equal to at least 300% of base salary (excluding salary shares, where applicable), which can be built up over a period of five years from the later of the introduction of the guidelines and the individual’s date of appointment. All Executive Directors currently hold shares in excess of the guideline.
Vested/ matured during year At end of year Price at award (£) Value at award date (£)
Final vesting/ maturity date 1. The value at maturity relates only to shares vested.
The profit for the year, after tax but before dividends, amounted to £428.4 million (2018: £390.5 million).
The Directors declared and paid dividends of £367.8 million during 2019 (2018 £332.7 million) – refer to note 12b for further details.
The Directors have proposed a final dividend of £221.5 million (77.0 pence per share). Subject to shareholders’ approval at the 2020 Annual General Meeting (AGM), the final dividend will be paid on 1 June 2020 to shareholders on the register at the close of business on 11 May 2020.
Detailed information on the Group’s employment practices is set out in the Strategic Report and on the corporate website. The Group purchases appropriate liability insurance for all staff and Directors.
In addition, representatives from the ECG, together with the Chair of the ECG, regularly attend Board meetings to highlight matters discussed and any areas of concern. Through this interaction, the Board has been able to have regard to the views of employees when making decisions such as measures introduced to safeguard the Group’s culture such as increased flexible working opportunities for employees. Further work is ongoing to ensure that existing work forums for employees of the Group’s overseas businesses are aligned with the operation of the ECG.
There are a wide range of communication tools used by the Group to communicate matters that concern employees which assists in the understanding of business goals and objectives and economic and financial factors affecting the performance of the Group including; through the staff portal (Atlas), internal newsletters, videos, team briefings, suggestion schemes, staff forums, updates on the staff share scheme and the annual Staff General Meeting (SGM).
The transparency of our communication philosophy extends to senior managers and Directors, who sit amongst their teams which encourages a dialogue between staff of all levels of seniority across all areas of our business. Furthermore, our Chief Executive Officer (CEO) operates an ‘open door’ policy so if any member of our staff wants to ask him a question, they can email him directly through our ‘Ask David’ intranet initiative. Our senior managers and Directors also participate in regular online chats with staff.
During the year, the Board has continued to focus on, and take into account in the decisions that it makes, the relationships with its customers, employees, suppliers, business partners, the wider community and other stakeholders. The Board recognises that there are a wide range of business relationships that are important to the long-term success of the business. Further information on Board engagement with the Group’s stakeholders can be found in the s172 statement in the Strategic Report on page 18.
In addition, the Board also considered the channels to its distribution partners brought about by improvements in technology and disrupters entering the insurance market. During the year, the Board also visited one of the garages that forms part of the Group’s garage repair network to see at first-hand how the Group’s strategy for the future in this area was being implemented. The Board agreed that the visit had been extremely valuable in increasing their understanding of this part of the claims process and agreed that further such visits should be organised in the future.
The relationship with the Group’s reinsurance and co-insurance partners are integral to the long term strategy decisions made by the Board, particularly as regards to the discussion and approval of the Group’s five year business plan and the established reinsurance and coinsurance arrangements that the Group has in place which are a key part of the Group’s business model.
The Group’s Anti Bribery policy strictly prohibits the solicitation or the acceptance of any bribe, whether cash or inducement, to or from any person or Company, wherever they are situated and whether they are a public official or body or private person or Company, by any individual employee, Board member, agent or other person or body on the Group’s behalf. The Group’s Anti Bribery Policy is reviewed and approved by the Board on an annual basis to ensure that the arrangements in place to prevent bribery are operating effectively and that the Policy supports the development of a culture where business is conducted fairly, honestly and openly.
Further information on the Group’s approach to diversity is also set out in the Nomination and Governance Committee section on page 100.
Admiral has a Disability Forum to help promote inclusivity in the Group for those with a disability. In 2019 the Company was awarded Level 2 status of the Disability Confident Award. In June 2019 we created a Workplace Support Team to provide support for those with physical disabilities, neurodiversity and short-term mental health problems. Training sessions were also introduced for staff in 2019 to help better understand those with neurodiversity.
The annual level of greenhouse gas emissions, resulting from activities for which the Group is responsible, was 3,720 CO2e (2018: 3,926 CO2e), equivalent to 0.36 tonnes (2018: 0.39 tonnes) per employee*1. In accordance with GHG Protocol Scope 2 guidance released 20 Jan 2015, Admiral is exempt from reporting greenhouse gas emissions from electricity supply to the three largest UK offices which meets the GHG Protocol Corporate Standard. Note that, L’olivier in France and Elephant in the USA, have been unable to provide data for 2019 and are excluded from the results in this and future reports until they are able to do so. LeLynx in France is also excluded but is immaterial to the overall view due to its size.
Detailed information on the Group’s environmental performance and the methodology for the measurement of greenhouse gas emissions is available on the corporate website, www.admiralgroup. co.uk.
At 31 January 2020, the Company had received notifications in accordance with the FCA’s DTRs of the following notifiable interests in the voting rights in the Company’s issued share capital: Number of shares %
The rights and obligations attached to the Company’s ordinary shares are set out in the Articles of Association of the Company, copies of which can be obtained from Companies House.
On a poll, every member present in person or by proxy and entitled to vote shall have one vote for every ordinary share held. The notice of the general meeting specifies deadlines for exercising voting rights either by proxy notice or present in person or by proxy in relation to resolutions to be passed at general meeting. All proxy votes are counted and the numbers for, against or withheld in relation to each resolution are announced at the Annual General Meeting and published on the Company’s website after the meeting.
There are no restrictions on the transfer of ordinary shares in the Company other than: • Certain restrictions may from time to time be imposed by laws and regulations (for example, insider trading laws).
There are a number of agreements that alter or terminate upon a change of control of the Company following a takeover bid, such as commercial contracts. None are considered to be significant in terms of their impact on the business of the Group as a whole except for the long-term co-insurance agreement in place with Great Lakes Insurance SE. Details relating to this agreement are contained in the Strategic Report
In line with the new principles published by the Pre-Emption Group in March 2015, and their template resolutions published in May 2016, allowing a company the ability to seek authority over a further 5% of the issued ordinary share capital on a non-pre-emptive basis subject to certain conditions, it is the intention of the Company, at the AGM on 30 April 2020, to seek this additional authority by special resolution and will confirm in the Notice of AGM that such additional shares are only issued in connection with a specified acquisition or capital investment.
The Company’s Articles of Association (the Articles) give the Directors power to appoint and replace Directors. Under the Terms of Reference of the Nomination and Governance Committee, any appointment must be recommended by the Nomination and Governance Committee for approval by the Board of Directors. At the Group’s AGM on 26 April 2018, new Articles of Association were approved by shareholders which provide that all Directors will retire and offer themselves for re-election at each AGM, in accordance with the UK
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 and buyback of shares are also included in the Articles and such authorities are renewed by shareholders at the Annual General Meeting each year.
Directors and Officers insurance cover is in place for all Directors to provide cover against certain acts or omissions on behalf of the Company. A Deed Poll of Indemnity was executed in October 2015, indemnifying each of the Directors, and Company Secretary, in relation to certain losses and liabilities that they might incur in the course of acting as Directors of the Company. The Deed Poll of Indemnity is categorised as qualifying third party indemnity provisions as defined by Section 234 of the Companies Act 2006 and remains in force for all past and present Directors of the Company.
The Board is of the view that it is in the best interests of the Group to attract and retain the services of the most able and experienced Directors by offering competitive terms of engagement, including the granting of such indemnities. Neither the Deed Poll of Indemnity nor insurance cover would provide any coverage in the event that a Director is proved to have acted fraudulently or dishonestly.
The Directors confirm that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position and performance, business model and strategy.
Company law requires the Directors to prepare Group and parent company financial statements for each financial year. Under that law they are required to prepare the Group Financial Statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare the parent company financial statements in accordance with UK Accounting Standards, including FRS 101 Reduced Disclosure Framework.
The Directors who held office at the date of approval of this Directors’ Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company’s auditor is unaware; and each Director has taken all the steps that they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Company’s auditor is aware of that information.
The Company’s auditor, Deloitte LLP, has indicated willingness to continue in office and resolutions to reappoint it and to authorise the Directors to fix its remuneration will be proposed at the Annual General Meeting.
We have audited the Financial Statements which comprise: • the Consolidated and Parent Company Income Statements; • the Consolidated and Parent Company Statements of Comprehensive Income; • the Consolidated and Parent Company Statements of Financial Position; • the Consolidated Cash Flow Statement; • the Consolidated and Parent Company Statements of Changes in Equity; • the related notes 1 to 13 to the Group Financial Statements, excluding the capital adequacy disclosures in note 12e calculated in accordance with the Solvency II regime which are marked as unaudited; and
The financial reporting framework that has been applied in the preparation of the Group Financial Statements is applicable law and IFRSs as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice).
We are independent of the Group and the parent company in accordance with the ethical requirements that are relevant to our audit of the Financial Statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We confirm that the non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the parent company.
• Valuation of investment in subsidiaries (Admiral Group plc parent company only).
Materiality The materiality that we used for the Group Financial Statements was £26.1 million which was determined with reference to profit before tax.
Scoping We identified eight reporting components which we determined should be subjected to audits for group reporting purposes this year.
The components within the scope of our audit procedures account for 97% of the Group’s profits and losses before tax, 95% of revenue and 94% of the Group’s net assets.
Based solely on reading the directors’ statements and considering whether they were consistent with the knowledge we obtained in the course of the audit, including the knowledge obtained in the evaluation of the directors’ assessment of the Group’s and the company’s ability to continue as a going concern, we are required to state whether we have anything material to add or draw attention to in relation to: • The disclosures on pages 66 to 73 that describe the principal risks, procedures to identify emerging risks, and an explanation of how these are being managed or mitigated; • the directors' confirmation on page 66 that they have carried out a robust assessment of the principal and emerging risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity; or
We have identified one new key audit matter in the 2019 audit pertaining to the valuation of projected excess of loss reinsurance recoveries related to the UK Car Insurance business underwritten by the Group following an enhancement to the methodology applied in calculating such recoveries during the current period.
We have removed one key audit matter from the 2018 audit, being the recognition of profit commission income. This is because the profit commission calculation is mechanical in nature and has not been subject to change during either the current or prior period. Moreover, there have been no changes to the underlying profit commission agreements or any one-off adjustments which would result in additional complexity during the current period.
Furthermore, we have identified an additional key audit matter in respect of the audit of the parent company financial statements related to the valuation of its investment in the Group’s US insurance subsidiary, Elephant Insurance Company LLC (“Elephant”). We have determined this to be a key audit matter for the current period as Elephant’s trading losses were larger than forecast in the yearended 31 December 2019, which gave rise to an indication of impairment.
Refer to page 91 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.
We have assessed the design and implementation and tested the operating effectiveness of relevant controls relating to the key actuarial assumptions identified and the setting of the reserve margin. These controls include those concerning the oversight and challenge of management’s external actuarial expert by management and the Audit Committee.
The projected excess of loss reinsurance recoveries on large bodily injury claims, related to the UK Car Insurance business underwritten by the Group, are inherently uncertain and their calculation is reliant upon the judgemental actuarial methodology applied in their projection. The total reinsurers’ share of claims outstanding in the Group’s Financial Statements is £1,354 million as at 31 December 2019 (2018 year-end: £1,220 million).
The value of the excess of loss reinsurance recoveries depends on the number of claims that ultimately settle above the reinsurance retention and the placements in each layer which vary between individual underwriting years. Small changes in the frequency assumptions for excess of loss reinsurance recoveries can have a material impact on the final booked reserves and consequently represent a significant area of judgement and complexity.
Management’s external expert actuary enhanced their methodology for calculating excess of loss reinsurance recoveries during the first-half of 2019, as part of regular enhancements in the reserving methodologies used in projecting both the large bodily injury claims in the gross analysis and the excess of loss recoveries arising on these projected claims.
Key observations Based on the procedures described above, we consider that the methodology used to project the excess of loss reinsurance recoveries within the net best estimate reserves is appropriate.
In addition to the key audit matters for the Group audit, above, we have identified a further key audit matter for the parent company only audit of Admiral Group plc, being the valuation of the parent company’s investment in its subsidiary Elephant Insurance Company LLC, as set out in the table below. This key audit matter does not affect the consolidated Group Financial Statements.
Valuation of investment in subsidiaries (Admiral Group plc parent company only)
Elephant’s trading losses were larger than forecast in the year-ended 31 December 2019, which gave rise to an indication of impairment.
The most significant judgement is in projecting the cash flow forecasts for future years. Management’s forecasts include profitable growth; for this reason, this is the focus of our audit challenge. The driver of this profit growth is increasing premiums, while decreasing the loss ratio (an industry measure of profitability, being claims divided by premiums in a given period).
In order to challenge the cash flow forecasts, we made enquiries with the senior management of Elephant, as well as with Group senior management, regarding the business plans, and vouched their assertions to corroborating evidence, including evidence of initiatives in place to increase efficiency and reduce claims leakage.
Materiality £26.1 million (2018: £20.7 million) £3.0 million (2018: £1.8 million)
3% of two-year average of net assets (2018: 3% of net assets).
We consider profit before tax to be the critical benchmark of the performance of the Group and consider this benchmark to be suitable having compared to other benchmarks: our materiality equates to 1% of gross earned premium and 3% of equity (2018: 1% of gross earned premium and 3% of equity).
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £1.0 million (2018: £1.0 million), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the Financial Statements.
Independent Auditor’s Report continued to the Members of Admiral Group plc
An overview of the scope of our audit The eight financially significant components of the Group which were identified in our audit planning are Admiral Insurance (Gibraltar) Limited, Admiral Insurance Company Limited, EUI Limited, Inspop.com Limited, Admiral Financial Services Limited, Admiral Europe Compañía de Seguros, Elephant Insurance Company LLC and the Admiral Group plc parent entity itself.
Each of these significant components was subjected to a full-scope audit for Group reporting purposes, completed to individual component materiality levels which ranged from £1.7 million to £18.6 million (2018: £0.3 million to £14.1 million) dependent upon the relative significance of each individual component.
For the remaining components, which were not subject to audit or specified audit procedures, we performed analysis at an aggregated Group level to re-assess our evaluation that there were no significant risks of material misstatement presented by any of these components. The components within the scope of our audit procedures account for 97% of the Group’s profits and losses before tax, 95% of revenue and 94% of the Group’s net assets (2018: 96% of profits and losses before tax, 95% of revenue and 94% of net assets).
Profit before tax coverage is stated in absolute terms – i.e. based on contribution to Group profit less Group loss.
The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the Financial Statements and our auditor’s report thereon.
In connection with our audit of the Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Financial Statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the Financial Statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
In this context, matters that we are specifically required to report to you as uncorrected material misstatements of the other information include where we conclude that: • Fair, balanced and understandable – the statement given by the directors that they consider the annual report and Financial Statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy, is materially inconsistent with our knowledge obtained in the audit; • Audit Committee reporting – the section describing the work of the Audit Committee does not appropriately address matters communicated by us to the Audit Committee; or
A further description of our responsibilities for the audit of the Financial Statements is located on the FRC’s website at: www.frc.org.uk/ auditorsresponsibilities. This description forms part of our auditor’s report.
• obtaining an understanding of the legal and regulatory frameworks that the Group operates in, focusing on those laws and regulations that had a direct effect on the Financial Statements or that had a fundamental effect on the operations of the Group. The key laws and regulations we considered in this context included the UK Companies Act, Listing Rules, and relevant tax legislation. In addition, compliance with terms of the Group’s regulatory capital requirements were fundamental to the assessment of the Group’s ability to continue as a going concern.
In our opinion, based on the work undertaken in the course of the audit: • the information given in the strategic report and the directors’ report for the financial year for which the Financial Statements are prepared is consistent with the Financial Statements; and
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.
Our audit opinion is consistent with the additional report to the Audit Committee we are required to provide in accordance with ISAs (UK).
Deferred tax charge in relation to movement in fair value reserve (1.5) 0.7
Other comprehensive income for the period, net of income tax 23.3 (21.4)
– Movement in provision for loans and advances to customers 7 13.8 8.9
– Accrued interest income from loans and advances to customers (0.6) (1.4)
Cash flows from operating activities, net of movements in investments 329.4 239.7
Finance costs paid, including interest expense paid on funding for loans (14.0) (14.1)
Cash and cash equivalents at end of period 6 281.7 376.8
Initial application of IFRS 9 – – 0.4 – – (0.4) – – –
Movements in fair value reserve – – 34.6 – – – 34.6 – 34.6
Contributions by NCIs – – – – – – – 2.2 2.2
Total transactions with equity holders – – – – – (305.0) (305.0) 0.8 (304.2)
2. Basis of preparation The accounts have been prepared on a going concern basis. 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 accounting policies set out in the notes to the Financial Statements have, unless otherwise stated, been applied consistently to all periods presented in these Group Financial Statements.
The Group has adopted the following IFRSs and interpretations during the year, which have been issued and endorsed by the EU: • IFRS 16 “Leases”; • Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7); • Annual Improvements to IFRS Standards 2015 – 2017 Cycle; • Amendments to IAS 28: Long-term Interests in Associates and Joint Ventures.
IFRS 16 introduced a single, on-balance sheet accounting model for lessees. As a result, the Group, as a lessee, has recognised right-ofuse assets representing its right to use the underlying assets and lease liabilities representing its obligations to make lease payments.
As permitted by the transitional provisions of IFRS 16 the Group has elected to use the modified retrospective approach, and as such has not restated prior year comparatives (which are presented, as previously reported, under IAS 17 and related interpretations).
Previously, the Group determined at contract inception whether an arrangement was or contained a lease under IFRIC 4 Determining Whether an Arrangement contains a Lease. The Group now assesses whether a contract is or contains a lease based on the new definition of a lease, which under IFRS 16 is where a contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.
The Group has also used the following practical expedients permitted by the standard: • the use of a single discount rate for a portfolio of leases with reasonably similar characteristics; • the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease; • the exclusion of initial direct costs for the measurement of the right-of-use assets at the date of initial application.
The associated right-of-use assets have been measured retrospectively, at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued payments relating to that lease recognised in the statement of financial position as at 31 December 2018. There were no onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of initial application.
The following adjustment was recognised on the date of initial application: £m
For the Group’s accounting policy in relation to right-of-use assets and lease liabilities, see notes 6 and 11.
2. Basis of preparation continued Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)
In September 2019, the IASB issued Interest Rate Benchmark Reform – Amendments to IFRS 9, IAS 39 and IFRS 7. These amendments modify specific hedge accounting requirements to allow hedge accounting to continue for affected hedges during the period of uncertainty before the hedged items or hedging instruments affected by the current interest rate benchmarks are amended as a result of the on-going interest rate benchmark reforms.
• The Group will retain the cumulative gain or loss in the cash flow hedge reserve for designated cash flow hedges that are subject to benchmark interest rate reforms even though there is uncertainty arising from the interest rate benchmark reform with respect to the timing and amount of the cash flows of the hedged items. Should the Group consider the hedged future cash flows are no longer expected to occur due to reasons other than interest rate benchmark reforms, the cumulative gain or loss will be immediately reclassified to profit or loss.
The Group has chosen to early apply the amendments to IFRS 9 for the reporting period ending 31 December 2019, which are mandatory for annual reporting periods beginning on or after 1 January 2020. Adopting these amendments allows the Group to continue hedge accounting during the period of uncertainty arising from interest rate benchmark reforms.
As at 31 December 2019, the following amendments to standards had been endorsed by the EU but are not yet effective: • Amendments to IAS 1 and IAS 8: “Definition of Material”; • Amendments to references to the Conceptual Framework in IFRS Standards.
The Group continues to assess the impact of IFRS 17 on its results and financial position, taking into account the proposals in the revised exposure draft, along with any impacts of the other standards and amendments which have yet to be endorsed.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
The following are the critical judgements, apart from those involving estimations (which are presented separately below), that the directors have made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in Financial Statements.
The accounting treatment of the SPE has been assessed and it has been concluded that it should be fully consolidated into the Group’s Financial Statements under IFRS 10. This is due to the fact that despite not having legal ownership, the Group has control of the SPE, being exposed to the returns and having the ability to affect those returns through its power over the SPE.
There are two further significant accounting estimates within the Financial Statements that also require management to apply judgement: • Calculation of insurance claims provisions and reinsurance assets: The Group’s reserving policy requires management to set provisions for outstanding claims for the purpose of the Financial Statements, above the projected best estimate outcome to allow for unforeseen adverse claims development. In the application of this policy, Management applies judgement in: – calculating the best estimate of the gross ultimate total cost of settling claims that have been incurred prior to the balance sheet date; – calculating the best estimate of the non-proportional excess of loss reinsurance recoveries relating to outstanding claims; and
– determining where, above the projected best estimate outcomes of gross outstanding claims and reinsurance recoveries, the insurance claims provisions should sit in line with the Group’s reserving methodology.
The Group is required to calculate an expected credit loss (‘ECL’) allowance in respect of the carrying value of the Admiral Loans book in line with the requirements of IFRS 9. Due to the increase in the size of the loan book the calculation of the ECL is deemed to be a critical accounting judgement and includes key sources of estimation uncertainty. Management applies judgement in: – Determining the appropriate modelling solution for measuring the ECL; – Calibrating and selecting appropriate assumptions; – Setting the criteria for what constitutes a significant increase in credit risk; and
– Identification of key scenarios to include and determining the credit loss in these instances.
• Calculation of insurance claims provisions and reinsurance assets: Estimation techniques are used in the calculation of the provisions for claims outstanding, which represent a projection of the ultimate estimated total cost of settling claims that have been incurred prior to the balance sheet date and remain unsettled at the balance sheet date, along with a margin to allow for unforeseen adverse claims development.
The primary areas of estimation uncertainty are as follows: Calculation of gross best estimate claims provisions
Independent actuarial advisors project the best estimate claims reserves using a variety of different recognised actuarial projection techniques (for example incurred and paid chain ladders, and initial expected assumptions) to allow an actuarial assessment of their potential outcome. This includes an allowance for unreported claims.
Implicit assumptions in the actuarial projections include average cost per claim and average claim numbers by accident year, future rates of claims inflation and loss ratios by accident year and underwriting year. These metrics are reviewed and challenged as part of the process for making allowance for the uncertainties noted.
As for the underlying gross claims, independent actuarial advisors project the best estimate excess of loss reinsurance recoveries using a variety of actuarial projection techniques that focus on both the ultimate frequency of reported recoveries and the average size of the recovery.
– Qualitative assessment of the level of uncertainty and volatility within the reserves and the change in that assessment compared to previous periods.
For further detail on objectives, policies and procedures for managing insurance risk, refer to note 5 of the Financial Statements.
Future changes in claims reserves also impact profit commission income, as the measurement of this income is dependent on the loss ratio booked in the Financial Statements, and cash receivable is dependent on actuarial projections of ultimate loss ratios.
The consolidated Financial Statements comprise the results and balances of the Company and all entities controlled by the Company, being its subsidiaries and SPE (together referred to as the Group), for the year ended 31 December 2019 and comparative figures for the year ended 31 December 2018. The Financial Statements of the Company’s subsidiaries and its SPE are consolidated in the Group Financial Statements.
The Parent Company Financial Statements present information about the Company as a separate entity and not about its Group. In accordance with IAS 24, transactions or balances between Group companies that have been eliminated on consolidation are not reported as related party transactions in the consolidated Financial Statements.
Items included in the financial records of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated Financial Statements are presented in pounds sterling, the Group’s presentational currency, rounded to the nearest £0.1 million.
The segment consists of the underwriting of car insurance, van insurance, household insurance, travel insurance and other products that supplement these insurance policies within the UK. It also includes the generation of revenue from additional products and fees from underwriting insurance in the UK. The Directors consider the results of these activities to be reportable as one segment as the activities carried out in generating the revenue are not independent of each other and are performed as one business. This mirrors the approach taken in management reporting.
The ‘Other’ segment is designed to be comprised of all other operating segments that do not meet the threshold requirements for individual reporting. It includes the Admiral Loans business and the Group’s commercial van insurance broker, Gladiator.