Admiral is one of the largest employers in South Wales and has over 7,000 people worldwide.
Strategic report 06 Admiral’s businesses and operations 08 Chief Executive’s Statement 10 10 years from float 12 Admiral’s business model 14 Admiral’s strategy 16 Questions and Answers 18 Group Financial Review 22 UK Insurance Review 28 International Car Insurance Review 32 Price Comparison Review 35 Other Group Items 36 Principal risks and uncertainties
Corporate governance 40 Chairman’s introduction 41 Admiral’s governance framework 42 Board of Directors 44 Governance Report 49 Report of the Audit Committee 53 Report of the Group Risk Committee 56 Report of the Nomination Committee 58 Report of the Remuneration Committee 60 Directors’ Remuneration Report 73 Directors’ Report
Another good year 2014 was another good year for the Admiral Group. The current year result included an increase in profit from the UK Car Insurance business and, encouragingly, a profit*1 from ConTe in Italy, which brings to three (out of seven) the number of businesses outside the UK that contribute positively to the Group’s result.”
@ Final dividend of 49.0 pence per share, bringing the 2014 total dividend to 98.4 pence per share down 1% (2013: 99.5 pence per share)
@ Group turnover*3 down 3% at £1.97 billion (2013: £2.03 billion)
@ Group customers up 9% to 4.05 million (2013: 3.70 million)
@ International car insurance turnover up 10% to £206 million, with customers up 15% to 592,600 (2013: £188 million and 515,300 customers)
A Great Place to Work! We pride ourselves on being a great place to work, and this is reflected in the many awards we win. We are particularly proud of these awards as they are voted for by staff.
@ An assessment of the French market suggests the potential for accelerated growth of direct motor insurance, benefiting both LeLynx and L’olivier Assurances
Our strategy In my statement last year I listed what I regarded to be the top ten attributes that had contributed in great measure to Admiral’s success over the last ten years that it has been a listed company. I spoke of management; our culture; our employees; focus; pricing; claims management; controlled test and learn; low cost; low capital employed; and low risk.
Organic growth, whilst slower, requires much less capital than growth by acquisition and avoids the significant risk associated with buying where one has little or no knowledge. By taking incremental steps one is able to construct, in all important respects, the platform one wants for the future, taking advantage to the degree relevant to each specific market of our differentiation in areas such as pricing and claims management.
2014 in overview We recognise that in a cyclical business there are periods for growth, and periods for consolidation, seeking purely to maintain one’s existing market position and focus on building capability to support growth when conditions render that both profitable and sustainable. 2014 was such a period of consolidation for three out of our five motor insurance businesses.
As a consequence our pre-tax profits, before reflecting our first material investment in our new US comparison business, were broadly flat on the previous year and our overall Group profits were £14 million lower at £357 million.
Our aim through this period has been to maximise value rather than volume, maintaining our book at around three million customers and focusing on a major systems upgrade that is scheduled to complete in 2015. When delivered, this will enable us to retain our flexibility and responsiveness when it is right to resume the growth of our UK business. As we test, we learn how to improve our effectiveness across all aspects of our operations whether it be marketing; pricing; sales; customer service; or claims handling. Then we institutionalise what we have learned by building this learning into the systems that support the processes we operate. Through processes, systems and detailed timely management information we can be confident that all our people undertake their activities in a controlled, efficient way. We can also assess what it is relevant to seek to export alongside our culture to other markets.
Whilst early days, it is making encouraging progress both with consumers and insurer partners and we are planning a material increase next year in the commitment of promotional support, following our same philosophy of test and learn.
Dividends Our dividend policy has been clear since flotation – we believe it is for our investors rather than Admiral to determine how they wish to invest funds surplus to the requirements of our business. We, therefore, 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, in particular, the buffer required during a period of transition between two different capital regimes. We also believe that the year-on-year progression of our dividend should largely mirror the movement in after-tax profits, subject to any abnormal demands on our capital resources.
Our final dividend for 2014 is therefore proposed at 49.0 pence per share, resulting in a full year dividend of 98.4 pence per share, within 1% of the 2013 full year dividend, against a backdrop of after-tax profits themselves 2% lower than last year. This comprises a normal dividend of 22.5 pence per share and a special dividend of 26.5 pence per share, bringing to £915 million the total of special dividends paid to shareholders since flotation, in addition to our £839 million normal dividends paid over this period.
Board changes With its distinctive culture and focus on making Admiral a great place to work the Company enjoys strong levels of retention amongst employees, management and Directors alike.
Senior Executives in the Group have either been with Admiral since the Company listed ten years ago or since their respective overseas business was formed. To encourage retention of our people, and therefore of their skills and experience, we seek to provide management with development opportunities that allow us to promote from within. I was, therefore, delighted to welcome Geraint Jones to the Board at the time of our interim results, succeeding Kevin Chidwick as CFO, who will now focus solely on his role as CEO of Elephant Auto in the US. Geraint has been with Admiral’s finance team since 2002, having been our Deputy CFO since 2012.
Roger Abravanel will not be seeking re-election at the forthcoming Annual General Meeting and I would like to thank him for his contribution to the Board, in particular the insight he has provided us into the Italian market. Balancing the loss of Roger we are delighted to welcome Penny James to the Board as a Non-Executive Director and member of the Audit Committee. Penny has been Director of Group Finance at Prudential plc since March 2011 and brings a wealth of commercial and financial experience to her role with Admiral.
Our presence An international presence spanning seven countries: Our people David Stevens Admiral, UK
Growing car insurance businesses in Spain, Italy, the US and France
In summary @ We’re investing in many different markets, all with great potential, all with different competitive landscapes and timetables to success
Admiral Group’s 2014 was the year of the Baked Alaska – hot and cold in a single bite.
The cold? For the first time since we went public and the first time this century, Admiral Group did not post a record profit. We still made a lot of money and had an enviable 52% return on equity, but, alas, the 2014 result is being dragged down by cyclicality and everything else, in sum, still required investment.
The hot? Profits emerging from some of those businesses outside the UK, including profit from ConTe, our Italian insurance business (in its sixth full year of operation) and record profits at Rastreator and LeLynx, our price comparison businesses in Spain and France, respectively.
What I will do is try to put you in my chair. What do I worry about? What do I look forward to? I will not be going over each business one at a time as Alastair has already provided a quick review of the businesses and further on in this report is a commentary from each of the business CEOs and plenty of numbers that will give you a lot of detail about those operations.
Let me start by reiterating our strategy: continue prosperous growth in the UK Car Insurance market while developing growing, profitable, sustainable businesses outside the UK and in the UK beyond car insurance.
9. That we won’t be able to stretch far enough to take advantage of new opportunities put in front of us.
8. An upward move in Baremo, which governs the costs of bodily injury claims in Spain, fails to materialise so price hikes in the market also fail to materialise and therefore there is a lot less shopping for car insurance.
7. French consumers refuse to believe they can now easily leave their insurer, which, due to the new law, Loi Hamon, is now the case. Allez les Français réveillez-vous!
4. Solvency II brings higher capital requirements than we’re currently expecting and reduces the efficiency of our business model.
3. Compare.com can’t reduce its cost per quote or cost per sale to a profitable level.
2. Guidewire, our new computer system currently being built and tested, doesn’t work efficiently in the UK or in France (it is currently running successfully in the US).
Henry Engelhardt, CBE Chief Executive Officer 08 WWW.ADMIRALGROUP.CO.UKANNUAL REPORT AND ACCOUNTS 2014
These are competitors who either don’t mind if they lose lots of money (perhaps it’s even in their plans) or fool themselves in believing they won’t lose lots of money (but eventually they do) or don’t realise they are actually losing lots of money (and, again, eventually they do). So they act irrationally and buy business and in the world of car insurance irrational they may be, but they’re unlikely to pay the price for that irrationality for several years.
9. Continued, efficient growth in Elephant Auto (US), particularly in Texas.
And the number one thing I’m looking forward to: David taking the odd afternoon off because he has nothing to worry about because results from the UK are so good.
Let me conclude by saying that we’re investing in many different markets, all with great potential, all with different competitive landscapes and timetables to success. I could spin a bit of veneer about the value we’re creating even without profits, but the truth of the matter is that in the past these investments were overshadowed by ever-growing profitability in the UK; in the past the UK business seemed immune to market cyclicality. But now we are just too big to be immune. And I think it’s very fair to say too that the competition is improving, which, besides being very annoying, demands that we improve too and I can assure you that we are working flat out to do so. The upshot is that UK profits in the future are likely to be far more cyclically influenced than before and so for the next few years the Group result is likely to follow this cyclical pattern. Longer term, in our view, there will be less UK cyclicality in the result as our reliance on the UK Car Insurance portfolio reduces.
High shareholder returns Over the past ten years, Admiral’s Total Shareholder Returns are in excess of 750%
On 23 September, Admiral floats on the London Stock Exchange with a share price of £2.75 and market capitalisation of £711 million.
As of 31 December, the closing share price is £13.23 and Admiral has a market capitalisation of £3.6 billion.
*1 Compare.com (formerly comparenow.com) simplified its name in February 2015 to better align with its services
In 2014 consumers voted Admiral the Best Motor Insurance Provider at the Personal Finance Awards for the second year in a row.
Shareholder returns We believe that keeping management hungry for cash keeps them 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.
Risk aversion Admiral has always sought to protect its downside and this is characterised by: the reinsurance model; a very conservative approach to claims reserving; an organic growth strategy; a test and learn approach of taking measured steps before investing further; and a conservative approach to investment management.
Our focus for 2015 Grow the customer base in the states in which we operate and raise the profile of Elephant Auto. This will be supported by the separate development of our price comparison website, compare.com, and focused marketing in important states to spread the understanding of price comparison and increase the number of visitors to both our compare.com and Elephant Auto websites.
Our focus for 2015 Continue to focus on household as more people embrace price comparison shopping for household cover. Control household costs to support a below market average expense ratio whilst maintaining control over pricing and claims to produce a good loss ratio.
Our focus for 2015 Respond to UK market conditions; implement price increases, control claims and expenses.
To learn about our diversity, ethics and human rights, please turn to the Directors’ Report on page 73
A quality service Everyone in the organisation has a part to play in ensuring quality, so departments within the Group are measured against sets of quality measures, which are meant to be a challenge; people have to work hard to achieve them, but they are still achievable.
Questions and answers with Henry Engelhardt, David Stevens and Geraint Jones
It’s great that ConTe has made a profit and you are optimistic that Admiral Seguros will follow suit. Is this a watershed year for the international businesses? We have always said that insurance businesses will take between six to ten years to break-even, due mainly to the start-up costs and the high expense ratio in the early years when premiums and customers are low. It is very encouraging that ConTe has produced its first profits at the lower end of this target period, in year six, albeit those profits came from back year releases rather than current year results. I’m confident Admiral Seguros will break even in 2015. This is in spite of very challenging economic conditions in Europe which have particularly affected both ConTe and Admiral Seguros.
Admiral is in the business of building profitable, sustainable and growing businesses and we expect the European operations to build on their performance to date and to match growth aspirations to local market conditions.
We would expect Elephant Auto to follow this six to ten year profile and, given the size of the US market, probably to be at the outer end of this target period, but we are already in year five, so halfway there! We have already achieved so much in establishing Elephant Auto as a direct insurer in an agent driven market. The development of an active price comparison market, led by compare.com, can only accelerate change.
Henry’s statement indicates that Admiral is now too big to be immune to the cyclicality in the UK market. What does that mean for Admiral’s UK loss ratio, reserves and reserve releases? The underwriting margin we earn per policy rises and falls as the insurance cycle drives prices up and down. Historically, when we had a small market share we had the opportunity to offset falling margin per policy through a rapid growth in policies. Now we have roughly 12% of the market it’s neither possible nor advisable to grow strongly during periods of falling margin – especially now that the price comparison market has largely reached maturity.
We’ve been going for 20 years now and the time has come for an overhaul of our insurance administration system. We expect to be able to deliver better service at a somewhat lower cost with our new systems.
How does the level of reserve conservatism compare to previous years and will Solvency II change your approach to reserving? Admiral has always reserved cautiously – initially setting provisions well above the projected ultimate outcomes. This tends to lead to higher than industry-average releases and you’ll see from the results that we have seen an increase in releases in 2014, which was due to some very positive development on the back years. However, despite the large releases there has been no deterioration in the level of conservatism in the reserves.
In summary @ The Group’s UK Car Insurance business accounts for 81% of Group turnover (2013: 84%) and 78% of customers (2013: 82%)
@ ConTe, our Italian car insurance business, joined our French and Spanish price comparison businesses in now contributing positively to the Group’s result
@ Our insurance operations in France, Spain and the US continue to require investment, though we remain encouraged by the progress made and have confidence in the operations and their future profitability
@ The UK Household Insurance business enjoyed another year of strong growth in policy numbers and again achieved break-even 2014 was another strong year for Admiral, with good financial results and lots of encouraging progress in businesses across the Group. Earnings per share at 103.0 pence was slightly lower than 2013 (104.6 pence), though the 2014 result included a further, small increase in profit from the UK Car Insurance business and, encouragingly, a small profit from ConTe, Admiral’s Italian insurance business. Taken together with Rastreator and LeLynx, this brings to three (out of seven) the number of businesses outside the UK that contribute positively to the Group’s result.
As noted earlier in this report, the main reason for the fall in 2014’s result was the investment made in the US comparison business compare.com (Admiral’s share of the loss was £15 million pre-tax). We believe this new business has developed well and has great potential. We will continue to invest in attracting customers to the website and growing the business, to the extent that compare.com is expected to post a loss in the region of £20 million to £30 million in 2015 (based on Admiral’s 68% ownership).
Our insurance operations in France, Spain and the US are still loss-making, although the combined loss for all international operations has reduced to £19.9 million from £22.1 million. We continue to be encouraged by progress made and have confidence in the operations and their future profitability. Admiral’s UK Household Insurance business enjoyed another year of very strong growth in policy numbers and another broadly break-even financial result. Much more detail on the performance of each of the businesses is set out on the following pages.
Alastair has articulated Admiral’s dividend policy in his statement and I won’t repeat it here. The final dividend proposed for 2014 is 49.0 pence per share – a 3% reduction compared to the final 2013 payment. The full year dividend for 2014 is £271 million (2013: £271 million) equating to a payout ratio of 95% of earnings.
Geraint Jones Chief Financial Officer 18 ANNUAL REPORT AND ACCOUNTS 2014 WWW.ADMIRALGROUP.CO.UK
Group results and dividend @ Admiral Group’s share of pre-tax profits decreased in 2014 by 4% to £356.5 million
@ UK Car Insurance profit increased by 1% to £398.0 million (2013: £393.9 million).
Note: Segment and business results also exclude share scheme charges which are accounted for in Other Group Items
Group turnover of £1,971.0 million decreased by 3% compared to 2013 (£2,030.2 million). This was mainly due to reductions in average premiums in the UK Car Insurance business. During 2014, the Group increased its customer base to 4.05 million from 3.70 million at 31 December 2013, year-on-year growth of just under 355,000.
Earnings per share decreased by 2% to 103.0 pence (2013: 104.6 pence). The decrease is lower than the 5% decrease in pre-tax profit due to the lower effective rate of corporation tax in 2014.
The payment date is 29 May 2015, the ex-dividend date is 7 May and the record date is 8 May.
In 2014, the UK business continued to focus on margin rather than volume, in the face of very strong competition in the UK market and continued pressure on rates, but increased marginally the number of vehicles insured to 3.2 million (2013: 3.0 million). Supported by strong releases from prior year claims reserves on the back of continued positive development in projected claims costs, and an improved expense ratio, the combined ratio improved to 79.5% (2013: 81.0%) and profit before tax was £398.0 million – up 1% on 2013’s result of £393.9 million.
Outside of the UK, Admiral’s International Car Insurance businesses continue to develop, with combined turnover rising 10% to £206.2 million (2013: £187.8 million) and customer numbers almost reaching 600,000 – an increase of 15% on a year earlier. The 2014 Group results include a small profit generated by ConTe. The combined loss from the international insurance operations was lower in 2014 at £19.9 million (2013: £22.1 million), primarily due to improved claims experience and the impact of the ConTe profit.
Other Group key performance indicators include: @ Group loss ratio 69.0% (2013: 69.2%) – a marginal reduction in the UK loss ratio resulting from higher reserve releases together with a significant improvement in the international loss ratio.
Investments and cash Investment strategy Admiral maintained a low risk investment strategy throughout the year and continued to invest in the same broad asset classes as previous years.
The main focus of the Group’s investment strategy is capital preservation, with additional priorities including low volatility of returns and high levels of liquidity. All objectives continue to be met.
The Group’s Investment Committee performs regular reviews of the strategy to ensure it remains appropriate.
Money market funds, fixed income and debt securities comprise the majority of the total; 79% at 31 December 2014, up from 77% at 31 December 2013.
Investment and interest income in 2014 was £15.4 million, up 8% on 2013 (£14.3 million). The increase was due to higher average balances along with the increased allocation of funds to fixed income and other short dated securities that took place across 2014. The increase would have been greater but was partially offset by an adjustment (of approximately £8 million) relating to notional investment income on quota share reinsurance funds withheld arrangements. If the combined ratio on the 2014 underwriting year (for the UK Car Insurance business) reduces to profitable levels, this adjustment will reverse.
The Group continues to generate significant amounts of cash and its capital-efficient business model enables the distribution of the majority of post-tax profits as dividends.
The main items contributing to the significant operating cash inflow are as follows: £m 2013 £m £m
Capital structure and financial position Admiral’s capital-efficient and profitable business model led to a return on equity of 52% (2013: 58%). A key feature of the business model is the extensive use of co- and reinsurance across the Group. During 2013 and in early 2014 Admiral announced extensions to its UK co- and reinsurance arrangements with capacity fully allocated until at least the end of 2016 and Munich Re committed to underwriting 40% of our UK motor business until at least the end of 2018. Similar long term arrangements are in place in the Group’s international insurance operations and UK Household Insurance business.
The majority of the Group’s capital requirement is derived from its European insurance operations, Admiral Insurance (Gibraltar) Limited (AIGL) and Admiral Insurance Company Limited (AICL) under their respective local regulations. The minimum capital requirements and surplus position at the end of 2014 for those companies, along with the overall Group position, were as follows: AIGL £m
During 2015, the Group’s capital requirement will be assessed under the ICAS regime in the UK with Individual Capital Guidance (ICG) applied by the Prudential Regulatory Authority (PRA) as appropriate. The Group expects to hold a significant buffer above ICG throughout 2015.
Maybe the rebranding’s premature. Car insurance still accounts for the vast majority of our turnover and almost all our profits. So I’ll write about that first.
@ Combined ratio remained broadly flat in 2014 at 80% (2013: 81%).
@ Profit generated from the portfolio of insurance products that complement the core car insurance product of £182 million (2013: £173 million).
@ 94% of staff say that Admiral is a friendly place to work according to the Best Workplaces survey.
@ 2nd Best Large Workplace in the UK, Great Place to Work Institute.
@ Britain’s Most Admired Company in the Life Assurance and Insurance sector.
@ FTSE Female Pipeline Award. This award recognises Admiral for the success of women in its workplace.
UK Car Insurance financial review Non-GAAP*1 format income statement £m £m £m
UK Car Insurance profit before tax*4 372.8 393.9 398.0 *1 GAAP – Generally Accepted Accounting Practice *2 Turnover (a non-GAAP measure) comprises total premiums written and Other Revenue. Refer to note 12 for a reconciliation to financial statement line items *3 Total premiums written (non-GAAP) includes premium underwritten by co-insurers *4 UK Car Insurance profit before tax includes Minority Interests. The Minority Interests’ share of profit before tax is insignificant
Profit from UK Car Insurance increased 1% to £398.0 million (2013: £393.9 million). Profit from underwriting and profit commission increased marginally to £234.7 million (2013: £233.4 million), resulting from an improved combined ratio.”
UK Car Insurance financial performance 2014 was the third successive year of premium reductions in the UK Car Insurance market. Admiral’s response has been to prioritise margin protection rather than attempting to grow market share materially. As a consequence, although strong renewal retention figures led to a 4% increase in vehicles insured, turnover fell to £1.6 billion from £1.7 billion. In the latter part of 2014, some evidence emerged of prices in the market increasing, though not yet in a material way.
Profit Profit from UK Car Insurance increased 1% to £398.0 million (2013: £393.9 million). Profit from underwriting and profit commission increased marginally to £234.7 million (2013: £233.4 million), resulting from an improved combined ratio offsetting a reduction in net insurance premium revenue. The combined ratio improvement was largely due to higher reserve releases that resulted from positive claims development, in particular from the 2011, 2012 and 2013 years. Net other income and instalment income increased by 2% to £163.3 million (2013: £160.5 million).
Admiral (in the UK and internationally) makes significant use of proportional risk sharing agreements, where insurers outside the Group underwrite a majority of the risk generated, either through co-insurance or quota share reinsurance contracts. These arrangements include profit commission terms which allow Admiral to retain a significant portion of the profit generated.
The two principal advantages of the arrangements are: @ Capital efficiency: a significant proportion of the capital supporting the underwriting is held outside the Group. As Admiral is typically able to retain much of the profit generated via profit commission (refer below for further details), the return on Group capital is higher than in an insurance company with a standard business model.
The proportion underwritten by Great Lakes (a UK subsidiary of Munich Re) is on a co-insurance basis, such that 40% of all motor premium and claims for the 2014 year accrues directly to Great Lakes and does not appear in the Group’s income statement. Similarly, Great Lakes reimburses the Group for its proportional share of expenses incurred in acquiring and administering the motor business.
After commutation, movements in booked loss ratios result in reduced or increased net claims costs (and not profit commission).
Co-insurance and reinsurance arrangements expose Admiral to two principal risks: @ The risk of reduced availability of co-insurance and reinsurance arrangements.
@ Credit risk of significant counterparties through default of a reinsurer.
Underwriting result and profit commission The UK Car Insurance motor combined ratio remained stable in 2014 as follows: UK Car Insurance Motor combined ratio 2013 2014
Loss ratio excluding reserve releases from original net share and commuted reinsurance 81.2% 86.9%
The reported motor combined ratio remained stable at 83.0% (2013: 83.0%) (both figures exclude the impact of reserve releases from commuted reinsurance contracts). This reflects a marginally increased reported loss ratio of 68.6% (2013: 68.0%), which was due to the impact of falling premiums offset by higher reserve releases (£66.8 million vs. £53.3 million).
These higher releases were possible due to positive claims development during 2014 that resulted in improvements in the projected ultimate loss ratios, especially for the 2011 to 2013 underwriting years.
The earned motor expense ratio decreased to 14.4% from 15.0% due to the current year benefiting from a one-off adjustment to levy costs as a result of a change in accounting standards. Excluding the adjustment the earned motor expense ratio would have increased to 16.3%, the increase being due to lower average premiums (which also led to an increase in the written basis expense ratio to around 16% from 15%).
The projected ultimate loss ratio for Admiral for the 2014 accident year is 82% (2013 accident year: 68%). The increase between years is due to a combination of lower average premiums and increases in average claims costs.
The reported motor combined ratio remained stable at 83.0% (2013: 83.0%).”
Profit commission Admiral is potentially able to earn material amounts of profit commission revenue from co- and reinsurance partners, depending on the profitability of the business. Revenue is recognised in the income statement in line with the booked loss ratios on Admiral’s retained underwriting.
The most material contributors to net Other Revenue are: @ Profit earned from motor policy upgrade products underwritten by Admiral, including breakdown, car hire and personal injury covers.
Other Revenue per vehicle net of internal costs £68 £57 £58 *1 Included in underwriting profit in income statement but re-allocated to Other Revenue for purpose of KPIs *2 Other Revenue (before internal costs) divided by average active vehicles, rolling 12 month basis
Additional products underwritten by Admiral There are a number of products that are core to providing car insurance to customers (including personal injury insurance, breakdown cover and car hire cover). Contribution from these products underwritten by Admiral during 2014 was £18.7 million and this is included in underwriting profit in the income statement, but reallocated to Other Revenue for the purpose of management key performance indicators.
During 2014 there were some modest positive signs in the economy including a 20% increase in car sales, a shift in the declining trend of fuel consumption and signs of an increase in claims frequency. This trend coupled with an expected change in Baremo (BI costs) may result in price increases in the market. The aggregator market grew by only 4%, despite the launch of a new aggregator, with Rastreator continuing to lead the market growth.
Despite the difficult economic conditions, Admiral Seguros enjoyed another year of growth. Turnover grew by 8% and policy count by 20%, finishing the year with 164,000 customers on our books. This growth is mainly due to the continued success of our second brand, Qualitas Auto, launched in 2013. In addition, we have continued working to improve the offering to our customers and at the end of the year we launched our motorbike insurance product and started testing a telematics product.
The 2013 Italian insurance market reported a combined ratio of 88%! As a result, and not unsurprisingly, 2014 was characterised by strong price reductions and aggressive competition. With an average premium decrease of c.6%, almost stable claims cost and a modest frequency decrease (c.3%), the insurance cycle finally turned. The combined ratio increased and it is expected to increase further in 2015, also reflecting higher fuel consumption driven by fuel price reductions.
During 2014, whilst price comparison continued its unstoppable growth and the number of customers using their mobile phones to access insurance sites doubled, the voice of the major traditional groups was also very prominent, with innovative propositions and aggressive media investments.
Achievements International Car Insurance achievements in 2014 @ Admiral insured 592,600 customers across its Spanish, Italian,
@ ConTe voted 9th Best Company to Work for in Italy, awarded by Great Place to Work.
Goals International Car Insurance goals for 2015 @ Admiral Seguros targeting break-even on written basis.
@ ConTe to leverage the expected cycle turn and grow customers and revenue.
In terms of pricing, there is no excitement to report from the US. Collective data for 2014 is not available, but industry analysis would suggest that claims inflation continued its long term trend of benign but persistent increases and prices seem to have followed suit. So price inflation of around 3–5% was once again the direction in which the industry moved in, in the year.
The main objective for 2015 is to gain market share. The new regulatory environment (from 1st January 2015) which reinforces rights for consumers should support this objective. Motorists can now switch insurance providers anytime after one year without penalty and that should make the motor insurance market more fluid. In this context, L’olivier Assurances is planning to invest more in its brand and grow faster in 2015.
Vehicles insured at period end 436,000 515,300 592,600 *1 Loss ratios and expense ratios have been adjusted to remove the impact of reinsurer caps so the underlying performance of the business is transparent *2 Adjusted 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 2014: 145%; 2013: 152%; 2012: 177%
The Group’s largest international operation is ConTe in Italy, which insured 285,100 vehicles at the end of 2014, up 2% year-on-year. ConTe was launched in 2008 and has benefited from a period of generally favourable market conditions, which has recently come to an end. ConTe enjoyed positive development of projected ultimate claims outcomes on its back years during 2014 and was able to record its first profit on the back of strong reserve releases. Despite the releases, the level of conservatism in the booked reserves at year end increased compared to the position at the end of 2013.
Admiral’s youngest and smallest international insurance business is L’olivier Assurances, launched in 2010 in France. L’olivier Assurances insured 34,200 vehicles at the end of 2014, up almost 20% on the prior year. L’olivier Assurances was initially established with a different start-up model to Admiral’s other operations, with certain functions outsourced to keep expenses low in the initial phases of development. During 2014 L’olivier Assurances has brought a number of these functions in-house and vehicle count growth was intentionally lower.
The Group’s US insurer, Elephant Insurance Company, is regulated by the Virginia State Corporation Commission’s Bureau of Insurance. The Company is required to maintain capital at levels prescribed by the regulator and holds a surplus above these requirements at all times.
People who like what they do, do it better! Admiral puts a lot of effort into making sure staff enjoy their job. Each month a different department is elected ministry of fun, and is responsible for coordinating competitions, and fun activities.
The UK Car Insurance price comparison market is characterised by three aspects: @ It is one of, if not the, most mature in Europe, with almost 70% of new business sales in the market originating via price comparison. A consequence of this high level of adoption, together with a reduction of car insurance premiums in 2014 for the third year in a row, is that the price comparison market as a whole did not grow as much as in previous years.
@ The market is also on the verge of commoditisation with less and less differentiation between the different players in customer minds.
Overall the context in which Confused operates has changed over the last 12 months and this makes the market more challenging for incumbents.
Five and a half years after Rastreator´s launch, we maintain our leading position in Spain’s rising price comparison world.
During 2014, we implemented our strategic goals, firstly developing not just the leading brand but also a preferred brand, and secondly becoming a portal that is recognised as a source of transparency on insurance, telephony, finance and energy costs, helping all users to simplify their lives.
Our brand recognition of 91% has allowed us to successfully expand our comparison lines and all have grown substantially, as demonstrated by a 24% increase in our quotes.
Finally, Rastreator received awards for the Best Website of the Year and the Most Popular Website during the year.
Achievements UK Price Comparison achievements in 2014 @ Confused.com continued success in non-motor products such as comparison of home and life insurance.
@ Compare.com returned rates in 49 of the 51 US markets.
Goals UK Price Comparison goals for 2015 @ Leverage Confused.com’s brand icon to build preference and loyalty and strengthen market position.
@ Compare.com – continued lowering of acquisition cost while increasing the number of carriers and rates presented to consumers.
France LeLynx (Paris, France) Launched in January 2010 and offers comparison on a range of products: the leading price comparison site in France.
LeLynx is now a well recognised brand with an experienced team, hence the business is very well positioned to make the most of the legislative changes.
In May 2014 insurance industry guru Brian Sullivan claimed that comparison sites were one of the biggest trends of the year. We think his prognostication was good, as compare.com was joined by an array of new entrants and re-energized existing players in the broader aggregator space.
As optimistic as our future may look, we caution that success is not guaranteed. Pitfalls remain on numerous sides. Will companies continue to join and then return rates for a money saving experience for consumers? Will consumers follow through and actually switch insurers? Will competitors join too quickly and depress the revenue per sale earned?
UK Price Comparison – Confused.com Confused.com produced a reduced result, with revenue 8% lower at £80.8 million (2013: £87.7 million) and profit down 27% to £15.8 million (2013: £21.7 million).
The European operations are all structured as branches of UK companies, with the UK insurance intermediary permission passported into Europe.
Interest income Interest income in 2014 was £3.7 million (2013: £1.9 million). The increase is materially due to the gilt holdings purchased with the proceeds of the debt issue.
Share scheme charges These costs relate to the Group’s two employee share schemes, further detail on which is set out in the notes to the financial statements. The decrease in the charge is due to a combination of a lower share price at the end of 2014 compared to 2013 offset by an increase in the number of awards across the Group resulting from headcount growth.
Other central overheads Other central overheads include Group Directors’ remuneration and other Group central costs.
The UK household insurance business enjoyed another year of strong growth.”
Celebrating excellent performance We host a series of annual award ceremonies to reward and recognise our people, both for their own individual achievements and for the collective performance of their team, department or site.
Admiral holds a margin in booked reserves to cover significant legislative changes impacting earned claims. Furthermore, Admiral continues to hold an additional margin in its reserves in excess of the projected ultimate outcomes to cover other potential claim shocks.
For very large claims Admiral purchases excess of loss reinsurance, which mitigates the loss to the selected deductible amount.
@ Capability to identify and resolve underperformance promptly through changes to key performance drivers, particularly pricing.
@ Continuous appraisal of and investment in staff, systems and processes.
There is a risk that support will not be available in the future if the results and/or future prospects of either the UK business or (more realistically) one or more of the newer operations are not satisfactory for the co- and/or reinsurers.
Admiral also has relationships with a number of other reinsurers, including Amlin Re, Hannover Re, XL Re, Mapfre Re, New Re and Swiss Re.
A worse UK Car Insurance result and lower return on equity.
@ Keen focus on maintaining a low-cost infrastructure and efficient acquisition costs.
Admiral’s approach to expansion remains conservative, applying the ‘test and learn’ philosophy that has proven successful for previous operations. International insurance businesses have executed cautious launch strategies and are all backed by proportional reinsurance support which provides substantial mitigation against start-up losses in the early years.
Admiral seeks to minimise reliance on any single source by earning revenue from a range of products. This mitigates the impact of a regulatory change which might affect a particular product or income stream.
The impact on Confused.com of higher levels of competition in the price comparison market, either through the aggressive activities of existing players or the entry of significant new participants, would be to lower profits.
The management of Confused.com maintain a very keen awareness of the risks of continued competition.
With respect to investment counterparties, there are no specific concentrations of credit risk due to the structure of the 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.
In addition, the risk of project failure. More specifically, projects relating to system upgrades and Solvency II.
Unable to successfully carry out Admiral Group strategy and achieve goals.
Failure of projects would most likely result in additional costs for the Group.
Failure to invest in, and successfully implement, appropriate technology (particularly Guidewire implementation in the UK) to support the Group’s future business development, mitigated by regular review of the effectiveness of the Group’s IT capability by Executive management and the Board. In addition, the emerging risk relating to IT security and cyber risk are areas of growing focus for the Group.
Exposure to regulatory intervention and/or censure and/or enforcement action through fines and other tools available to the regulator.
Solvency II progress has primarily been mitigated through significant investment in resources for the Solvency II Project, with regular communication with both the Board and the regulators on progress against the agreed project plan.
We centre our business on four of our significant stakeholders These four stakeholders also drive the core focus of our corporate social responsibility strategy: our customers, our people, our community and our environment.
Admiral serves a real social purpose Our business is to protect people, as much as we can, from the adverse consequences of car accidents, or from damage to their home. In addition to providing protection for our customers, we aim to contribute positively to the wider communities in which we operate.
Dear Shareholder, On behalf of the Board I am pleased to present the Corporate Governance Report for the financial year ended 31 December 2014. The Board remains committed to maintaining the highest standards of corporate governance. This Report sets out the Admiral framework of governance and the approach the Board has taken during 2014 to achieve the standards of good corporate governance for which it is accountable to the Group’s shareholders.
As the Group undertook in 2013 an external Board evaluation facilitated by an independent external consultant, the evaluation process this year consisted of each Board member completing a questionnaire detailing the extent to which the Board had achieved each of the recommendations identified in the 2013 external evaluation together with Board members identifying areas where further review was required to ensure that the Board continued to operate effectively. The results of the evaluation and areas for development are set out in more detail on page 46 of this report
This Corporate Governance Report is structured in order to demonstrate to shareholders that the Board has complied during 2014 in all respects with each section of the Code – Leadership; Effectiveness; Accountability; and Relations with Shareholders. Remuneration is dealt with in the separate Directors’ Remuneration Report.
Read more about gender diversity within the Company on page 73
David Stevens, CBE (53) Chief Operating Officer, appointed in October 1999
* Roger Abravanel will not be seeking re-election at Admiral Group plc’s forthcoming Annual General Meeting on 29 April 2015 and will be stepping down as a Non-Executive Director of Admiral Group plc effective from that date.
In his executive career Alastair has been Chief Executive Officer (CEO) of the National Provident Institution and of the National & Provincial Building Society, Managing Director of the Insurance Division of Abbey National plc and Director of Corporate Projects at National Westminster Bank plc. He has also been a Non-Executive Director of both the Department for Transport (DfT) and the Department for Work and Pensions (DWP), as well as of its predecessor, the Department of Health and Social Security (DHSS).
Henry Engelhardt, CBE (57) Chief Executive Officer, appointed in October 1999
Henry is a founder Director of Admiral and was recruited by the Brockbank Group in 1991 to set up the Admiral business. Henry has an MBA from INSEAD, a BA from the University of Michigan and was awarded an honorary CBE in 2008 for services to business in Wales.
Margaret has worked for the international advertising agency Leagas Delaney for the past 16 years. Margaret was awarded an OBE in 2013 in recognition of her services to the creative industries and her voluntary work for charities.
Between 2007 and 2010 Annette was CEO of Europe General Insurance for Zurich Financial Services and a member of the Group Executive Committee. Annette is former CEO of the Direct Line Group (formerly known as RBS Insurance). In this role Annette was also a member of the RBS Group Executive Management Committee. Annette has previously served as a member on the Board of the Association of British Insurers (ABI).
Colin was formerly a member of the Executive Committee of Tesco plc and during his 22 year career at Tesco held a wide range of positions, including UK Finance Director and CEO of Tesco Express. Previously, Colin was a Non-Executive Director of Bovis Homes Group plc, where he chaired the Remuneration Committee. Colin is a Chartered Management Accountant and a member of the Institute’s Advisory Panel.
The Board has adopted a formal schedule of matters reserved for the Board’s consideration. This is monitored by the Company Secretary and reviewed by the Board on an annual basis. Specific matters reserved for the Board include the approval of: @ The Group’s long term objectives and corporate strategy.
@ Operating and capital budgets, financial results, and any significant changes to accounting practices or policies.
@ Changes to the structure, size and composition of the Board, including new appointments.
Board activity during 2014 At each scheduled meeting the Board receives updates from the Chief Executive, Chief Operating Officer and Chief Financial Officer on the financial and operational performance of the Group and any specific developments in the areas of the business for which they are directly responsible and of which the Board should be aware. Items that are considered on an annual basis are included in an annual schedule of rolling agenda items to ensure that they are considered at the appropriate point in the financial and regulatory cycle. Meetings are structured so as to allow for consideration and debate of all matters. Mindful of the need to ensure effective Director succession through senior managers below Board level having exposure to and gaining experience of the operation of the Board, the heads of the Group’s US, Italian and Spanish direct insurance businesses (respectively Kevin Chidwick, Milena Mondini and Cristina Nestares) are invited to attend every Board meeting and Board dinner, as was the Group’s Deputy Chief Financial Officer, Geraint Jones, until his appointment as Chief Financial Officer in August 2014.
In addition to the regular consideration of financial and operating performance and risk management and compliance, the Board considered each of the Group’s businesses in depth once during the year, receiving detailed presentations from the businesses’ management teams on their strategy, plans and performance. The Board also considered specific presentations on a variety of topics associated with the Group’s strategy and development
Lucy Kellaway joined the Group Risk Committee from April 2014 and attended all Group Risk Committee meetings after this time.
Annette Court took over as Chair of the Remuneration Committee from April 2014 and attended all Remuneration Committee meetings held after this time.
The Nomination Committee met formally on one occasion in 2014 although 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.
Board effectiveness As the Board carried out an externally facilitated evaluation of the Board last year, led by an independent external consultant, this year the Chairman led an internal Board evaluation process. As well as considering the effectiveness and performance of the Board, the objective of the evaluation was to assess progress made against the recommendations from the last evaluation in order to continue the development of the collective contribution of the Board as a whole and also the effectiveness of each individual Director. When considering the evaluation process, the Chairman considered feedback received from Directors after one-to-one meetings held with him during the year as to areas of focus to improve Board effectiveness.
The evaluation process involved the Chairman circulating to all Directors and Board attendees, the recommendations from the 2013 Board effectiveness review and inviting respondents to assess progress made and comment on each recommendation. Respondents were also invited to raise any new issues of significance that they felt had developed since the last review a year ago and on which they believed the Board should focus in the coming year.
The particular areas identified by the Board during the 2014 review where further progress was required included: @ Although good progress had been made by the Chair of Risk to develop the appropriate strategy to achieve the requisite balance and focus between procedural and substantive aspects of risk and to create the most efficient and effective reporting materials, it was felt that further work was needed to embed fully the Group’s risk framework within the organisation.
@ Focus on finding the right balance to ensure that gaps in international experience were addressed through greater competitive analysis or contributions from external experts such that the collective knowledge of the Board does not become ‘UK centric’.
@ Reinforcement of the approach to create a clear structure in presentation materials that show the original forecast, the agreed approach and any assumptions made at the time and the bridge to the current position showing changes to current forecast and suggested approach.
The Chief Executive, to whom they report, appraises annually the performance of the individual Executive Directors. The Chairman, taking into account the views of the other Directors, reviews the performance of the Chief Executive (who is also appraised by an internal 360-degree feedback process). The performance of the Chairman is reviewed by the Board led by the Senior Independent Director (SID). Following the latest review, the SID considered and discussed with the Chairman the comments and feedback that had been received from the Directors as part of the Chairman’s evaluation questionnaire, and was able to confirm that the performance of the Chairman continues to be effective and that he continues to demonstrate appropriate commitment to his role.
The Board currently comprises 12 Directors, the Chairman (who was independent on appointment), three Executive Directors, seven independent Non-Executive Directors, and one Non-Executive Director, Manfred Aldag, who is employed by a significant shareholder and is not, therefore, considered independent. There is no requirement that the significant shareholder has representation on the Board and, accordingly, Mr Aldag’s appointment is subject to the same appointment and removal process as the other Board Directors. As can be seen from the Directors’ biographies on pages 42 to 43, the Directors have a broad range of skills and experience and can bring independent judgement to bear on issues of strategy, performance, resources and standards of conduct which are integral to the success of the Group.
In the context of two of the Non-Executive Directors reaching their maximum term over the next two years, the Nomination Committee initiated the process of recruiting a Non-Executive Director to ensure that the balance and composition of the Board was maintained. Appointments to the Board are the responsibility of the Board as a whole, acting on the advice and recommendations of the Nomination Committee. Appointments are made on merit and against objective criteria, having due regard to the benefits of diversity, including gender. Following a formal, rigorous and transparent process implemented and led by the Nomination Committee, the Board was delighted to appoint Penny James as an independent Non-Executive Director with effect from 1 January 2015. Penny joined as a member of the Audit Committee on appointment and will be subject to election by shareholders at the forthcoming AGM.
Although the Chairman has served in that role since July 2000 the Board remains of the view that he should continue in office. The Chairman, along with all the Directors, seeks election by shareholders annually.
John Sussens stepped down as the Senior Independent Non-Executive Director (SID) in April 2014 and was succeeded by Colin Holmes, who has the requisite knowledge and experience gained through his Board tenure and Chairmanship of the Audit Committee. He is available to shareholders if they have concerns that contact through the normal channels of Chairman, Chief Executive or Chief Financial Officer has failed to resolve or for which such contact is inappropriate. He is also responsible for leading the Board’s discussion on the Chairman’s performance and the appointment of a new Chairman, as and when appropriate. From April 2014, Annette Court replaced John Sussens as Chair of the Remuneration Committee and Jean Park replaced Martin Jackson as Chair of the Group Risk Committee.
In accordance with the requirement under the Code for annual election of Directors, all Directors, except for Roger Abravanel, will be submitting themselves for re-election by shareholders at the forthcoming AGM. The Board is satisfied that all are properly qualified for their reappointment by virtue of their skills and experience and their contribution to the Board and its Committees.
Current length of service as a Non-Executive Director at 31 December 2014 The table below details the length of service of the Chairman and each of the Non-Executive Directors and illustrates the balance of experience and fresh perspectives.
Penny James 1 January 2015 n/a 14 yrs 6 mths 11 yrs 9 mths 8 yrs 4 mths 8 yrs 4 mths 4 yrs 1 mth 2 yrs 10 mths 2 yrs 9 mths 11 mths
This induction is supplemented by visits to the Group’s head office in Cardiff and overseas offices, and meetings with members of the senior management team and their departments. Development and training of Directors is an ongoing process. Throughout their period in office the Directors are regularly updated on the Group’s business; legal matters concerning their role and duties; the competitive environments in which the Group operates; and any other significant changes affecting the Group and the industry of which it is a part. All Board members are also encouraged to attend relevant training courses at the Company’s expense.
Report that 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.
Board Committees The Board has delegated authority to a number of permanent Committees to deal with matters in accordance with written Terms of Reference. The principal Committees of the Board – Audit, Remuneration, Group Risk and Nomination – all comply fully with the requirements of the Code.
The Company attaches considerable importance to communications with shareholders and engages with them regularly. Open and frequent dialogue with investors enables them to understand fully the Group’s strategy, objectives and governance.”
The Committee studied a number of key control issues, highlighted through a range of different sources including the risk register, Internal Audit and the Committee’s previous work. In each case the Committee found the responses and action plans from management appropriate to the issues raised. With the planned implementation in 2015 of a new IT system in the UK business the Committee received regular updates from the project’s manager, ensuring that the impact of implementation issues were being fully considered and mitigated against. The Committee also reviewed with the Head of IT the plans of the business to ensure that IT security issues are being appropriately managed.
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 that they contain.
@ Keep under review the effectiveness of the Group’s internal financial controls, internal control and risk management systems.
@ Review the external auditor’s independence and objectivity and the effectiveness of the audit process.
Summary of key activities during 2014 During the year the Committee reviewed the following: @ The Annual Report and interim results.
@ Reports from the Internal Audit departments within the Group on the effectiveness of the Group’s risk management and internal control procedures, details of key audit findings and actions taken by management to manage and reduce the impact of the risks identified.
@ Reports from the external auditor on the principal findings from its review of the Group’s systems and controls, and on the key accounting and audit issues and conclusions on the half and full year reporting.
@ Reports from the Chair of the Group Risk Committee on the principal risks faced by the Group and the work undertaken by the Committee to ensure risk is appropriately managed.
@ Presentations from independent actuaries to assist the Committee in concluding on the adequacy of the Group’s reserves.
@ Significant findings from Internal Audit including management responses to the conclusions set out in the reports.
@ Reports from the CEO and Internal Auditors of the significant international businesses.
@ The effectiveness of the Group’s Whistleblowing Policy, which sets out the arrangements for raising and handling allegations from whistleblowers.
@ The plans and governance of the project to implement a new IT system for the UK business in 2015.
@ The pre-planning work to facilitate a smooth and effective tender of the External Audit work.
Membership of the Committee at the end of the year was: Colin Holmes (Chair), Margaret Johnson and Annette Court, with Penny James joining the Committee with effect from her appointment as a Non-Executive Director on 1 January 2015. Composition of the Committee is well balanced, with Committee members having a broad range of financial and business experience such that they are able to effectively analyse, challenge and debate the issues that fall within the Committee’s remit.
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: insurance liabilities; profit commissions; and both co-insurance and reinsurance contracts.
Insurance liabilities The Audit Committee considered the provision for claims outstanding comprising provisions for the estimated cost of settling all claims incurred but unpaid as at the balance sheet date, whether reported or not. The Board has approved a Reserving Policy that sets out the methodology by which management sets reserves in the financial statements. The approach is to ensure that an appropriate margin is provided above actuarial best estimates to allow for uncertainty and volatility.
Co-insurance and reinsurance The Group has in place a number of proportional risk sharing agreements, where insurers outside the Group underwrite a majority of the risk generated, either through co-insurance or reinsurance contracts. There is judgement involved in the assessment of whether significant risk has transferred which impacts on the appropriate accounting.
In particular, the Committee considered the accounting treatment of the caps contained in the Group’s international quota share reinsurance contracts that limited the losses of the reinsurer when certain combined ratio and/or expense ratio limits had been breached. The Committee discussed the accounting options available to account for these cap accruals and had challenged management as to the merit of the accounting options available. The Committee accepted the view of management that the most appropriate presentation was to allocate the impact of expense ratio caps to insurance expenses and to split the impact of combined ratio caps between insurance expenses and insurance claims.
IFRIC 21 levies The impact of IFRIC 21 on levies was considered by management and the Group’s auditor, with the implication to Admiral being on the amounts it pays to the Motor Insurers Bureau and the Financial Services Compensation Scheme. The standard is not mandatory until 2015 but the Committee agreed with management that in the interest of transparency it was appropriate for the Group to early adopt, with full disclosure of its implications being provided in the Report and Accounts.
Misstatements The Committee considered all misstatements reported by the auditor and were satisfied that no material amounts remain unadjusted. The Committee confirms that it is satisfied that the auditor has fulfilled its responsibilities with diligence and professional scepticism.
The Group’s auditor, KPMG LLP, provides some non-audit services, the majority of which comprise compliance and advisory services related to various taxation issues within the Group, and which are not considered by the Committee to compromise their independence and objectivity as auditor. This decision is typically based on the merit of using KPMG’s existing knowledge of the Group’s business; their particular expertise in relation to the advice sought on each relevant transaction and the consequent value added and inherent saving of fees. The level of non-audit fees is reviewed at each Committee meeting and details are included in the Annual Report.
In view of the high quality of service received by the Group from the current external auditor, and the above intention to undertake a full tender of the audit for the 2016 financial year, the Committee recommends the reappointment of KPMG for the next financial year. A resolution for the reappointment of KPMG as auditor will, therefore, be proposed at the forthcoming AGM. There are no contractual obligations that restrict the Group’s choice of external auditor.
Internal Audit The Group Head of Internal Audit attends all Audit Committee meetings and provides a range of presentations and papers to the Committee, through which the Committee monitors the effectiveness of the Group’s internal controls. The Committee reviewed and approved the Group Internal Audit Terms of Reference which set out the role; objectives; reporting lines and accountability; authority; independence; and objectivity of the Internal Audit function. The role and competence of each Internal Audit function across the Group was also assessed and considered by the Committee. It was agreed that the Group Head of Internal Audit would have increased responsibility over the Internal Audit activities in the Group’s overseas locations.
In accordance with agreed parameters, the overseas businesses of ConTe, Admiral Seguros and Elephant have their own locally based internal auditors, who report to their respective CEOs. All reports are evaluated by the Group Head of Internal Audit to ensure the quality and effectiveness of the reported findings. In addition, the UK Internal Audit department carries out high level governance reviews of all foreign operations, assessing the internal control frameworks and system of risk management. The overseas internal auditors attend Committee meetings periodically.
INTRODUCTION OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTION STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
Dear Shareholder, As you are aware, I took over the Chair of the Group Risk Committee in April 2014. At a similar time we appointed a new Director of Risk, James Armstrong, and subsequently we have spent significant time building on the risk management activities undertaken by the Group.
@ Monitoring the adequacy and effectiveness of the Group’s Compliance functions.
@ Considering and recommending to the Board for approval the Group’s risk appetite, including any changes to the appetite for each material type of risk faced by the Group.
Summary of key activities in 2014 During the year the Committee: @ Reviewed the Group’s updated risk strategy in the context of the Group’s agreed strategic objectives.
@ Reviewed the Group’s updated risk appetite including an updated suite of Key Risk Indicators (KRIs) with associated triggers and limits.
@ Reviewed the Group’s Enterprise Risk Management Framework in preparation for Solvency II implementation.
@ Oversaw the development of customer outcome risks and the aggregation of these risks into tier one categories that will be used for reporting purposes in 2015. This included the establishment of a Conduct Risk Committee that manages the Conduct Risk MI on behalf of the business.
@ Monitored the Group’s progress towards implementation of Solvency II and plans for compliance with the EIOPA interim guidelines.
@ Reviewed the Group’s proposed dividend level in line with the capital policy.
@ Recommended to the Board approval of the 2014 ORSA Report prior to submission to the UK and Gibraltar regulators.
@ Approved the Terms of Reference for the Group Asset and Liability Committee (GALCO).
@ Approved a number of new/revised key risk management policies in preparation for Solvency II.
@ Received internal presentations on a number of key risk areas including ORSA and capital modelling.
Membership Membership at the end of the year was: Annette Court, Lucy Kellaway, Jean Park (Chair) and David Stevens.
The Company Secretary acts as Secretary to the Committee. The Committee met five times during the year.
Duties and responsibilities The duties and responsibilities of the Committee are set out in Terms of Reference that were approved by the Board in January 2013 and updated and approved in January 2015. The responsibilities of the Committee can be summarised on page 53.
In the context of several Directors retiring from the Board over the next two years, the Committee continued the development of a clear structured succession plan that would ensure appropriate action was taken well ahead of the dates on which individuals would be retiring in order to achieve their replacement, if appropriate, with individuals of the appropriate skills, experience and fit to the Board.
The Committee continued the development of a clear structured succession plan.” Alastair Lyons Chairman of the Nomination Committee
@ Ensure there is a formal, rigorous and transparent procedure for the appointment of new Directors to the Board.
Membership The membership of the Committee at the year end was Alastair Lyons (Chairman), Colin Holmes and Lucy Kellaway. The Company Secretary acts as Secretary to the Committee. The Committee invites the Chief Executive to attend meetings when it deems appropriate. The Nomination Committee met formally on one occasion in 2014 although 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.
During the year During 2014, having regard to the length of service of some of the existing Board members, the Board decided to initiate a search for a new Non-Executive Director to join the Board and to ensure continuity across the process of succession that will ensue over the next couple of years. The Group has in place a policy of recruiting well ahead of impending retirements in order to ensure continuity of knowledge and Board dynamics.
The Nomination Committee led this process and assessed the balance of skills, knowledge, independence, diversity and experience on the Board. The Committee developed an appropriate specification for this role identifying the need for the successful candidate to have insurance experience and a technical accounting qualification, with preferably experience in a senior finance role within the insurance sector.
Each Committee member met separately with Penny and agreed that she would bring invaluable insurance experience to the Board given her current role with Prudential plc. The Board approved the Committee’s recommendation and following regulatory approval Penny was formally appointed to the Board with effect from 1 January 2015.
In August 2014 the Committee recommended for approval by the Board the appointment of Geraint Jones as Chief Financial Officer (CFO). Geraint took over from Kevin Chidwick, who was handing over his CFO duties to focus on his role in the US as CEO of the Group’s rapidly growing Elephant Auto Insurance business. Despite stepping off the Board, Kevin continues to be involved in Group matters and to attend and contribute to all Group Board meetings. Geraint joined Admiral in 2002 and has since then held a number of senior finance positions including Head of Finance, before being promoted to Deputy Chief Financial Officer in January 2012. A Fellow of the Institute of Chartered Accountants in England and Wales, Geraint has also worked as an external auditor at Ernst & Young and KPMG. Geraint’s appointment demonstrates the depth of talent that exists within Admiral’s senior management team and his deep understanding of Admiral’s business and culture, coupled with strong leadership and financial skills, made him the natural choice to succeed Kevin as CFO.
Detailed information of individual Directors can be found on pages 42 to 43
Succession plan The Board, at its meeting in March 2014, considered the Group’s current Succession Plan, which considered the senior roles within the Group and identified whether there was emergency short term cover in place in the event that an individual left the organisation, and whether there was a permanent replacement available within the organisation, or whether the position would need to be filled externally. It also identified where there were individuals who, with further experience and guidance, would be capable of moving into particular senior management roles.
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 its strategy and compete effectively in the markets in which it operates.
Board diversity The Group remains strongly supportive of the principle of boardroom diversity, of which gender is an important, but not the only, aspect. 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 not just to achieve an externally prescribed number. Given five of the twelve current members of the Group Board are women, the Group has already met the target set for 2015 by Lord Davies in his report: Women on Boards. The Group remains committed to providing equal opportunities, eliminating discrimination and encouraging diversity amongst its workforce both in the UK and overseas. A breakdown of the gender of Company Directors and senior employees at the end of the financial year together with details of the Group’s Equality, Diversity and Dignity at Work Policy are set out in the Directors’ Report on pages 73 to 75.
Remuneration Committee Full details of the membership, responsibilities and activities of the Remuneration Committee can be found in the Directors’ Remuneration Report set out on pages 60 to 72.
Dear Shareholder, I am pleased to introduce the Directors’ Remuneration Report (the Report) for the year ended 31 December 2014, which has been prepared by the Remuneration Committee (the Committee) and approved by the Board. This is the first report I have prepared in my capacity as new Committee Chairman, a role I assumed on 9 April 2014, replacing John Sussens.
2014 has been another good year for the Admiral Group despite challenging conditions in the cyclical core UK motor insurance market. Earnings per share in the year were 103.0 pence (2013: 104.6 pence) with a return on equity of 52% (2013: 58%). Total dividends for the financial year (including the proposed final dividend of 49.0 pence per share) will be 98.4 pence per share, representing 95% of our earnings. The Group’s strategy remains to continue to maximise our position in the UK while taking what we know and do well, which is internet and telephone delivery of car insurance and price comparison, to our overseas businesses.
My predecessor, John, advised in his letter last year that one of the Group’s share plans – the DFSS (Discretionary Free Share Scheme) – is due to expire in 2015, and that the Company would carry out a comprehensive review of the plan in the context of the Group’s Remuneration Policy in 2014, with any proposed changes put to shareholders for approval at the Group’s AGM in 2015. The review took into account the changes to the business in both size and geography since the last review in 2004, shortly after flotation, and recent trends in FTSE incentive design and pay levels particularly in the context of the Group maintaining base salary levels for most senior management positions at well below the lower quartile of their peer group in the FTSE 350.
As a result of the review, a number of changes are proposed to the DFSS in order to ensure that senior managers remain motivated; are appropriately rewarded and that the Group continues to be an attractive employer that talented individuals want to join, whilst at the same time providing appropriate incentives, and rewards, for the 2,300 employees that participate in the DFSS across the Group. I am confident that the proposed changes will continue to support the view, held by the Board, that share ownership drives outstanding performance and promotes the long term success of the business whilst remaining in alignment with shareholder interests.
@ Introduction of 100% performance related awards to key senior employees where their award exceeds a threshold.
In addition to consideration of the proposed DFSS changes set out above, the Committee also considered the following matters during the year ended 31 December 2014: @ Reviewing the salary arrangements and fee proposals for the Executive Directors, the Chairman and senior management.
@ Reviewing the Company’s performance against the performance conditions applicable to the DFSS and SIP awards and where appropriate authorising the vesting of awards.
@ Reviewing and authorising the grant of awards under both the DFSS and SIP.
The main principles underlying the Remuneration Policy are: @ Competitive – the Group aims to combine salaries with attractive performance-related incentives which provide the potential for competitive total reward packages for the achievement of superior performance. Base salaries reflect the role, job size and responsibility together with individual performance and effectiveness. Prevailing market and economic conditions and developments in governance are also considered, as are general salary levels throughout the organisation. In considering total remuneration for the Executive Directors, the Committee takes into account remuneration in companies of a similar size in the Financial Services sector.
Salary levels/increases take account of: @ Scope and responsibility of the position.
The Committee retains the discretion to approve a higher cost in exceptional circumstances (e.g. relocation), or in circumstances driven by factors outside the Company’s control (e.g. material increases in insurance premiums).
The SIP is an all-employee scheme and Executive Directors participate on the same terms as other employees. The acquisition of shares is therefore not subject to the satisfaction of a performance target.
Remuneration policy for other employees The Company’s approach to annual salary reviews is consistent across the Group, with consideration given to the role size, experience required, individual performance and pay levels in comparable companies.
Change of control Immediately Any outstanding award will be pro-rated for time and extent to which the Committee determines that the performance conditions have been met or are likely to be met at the point of change of control.
Fees are currently paid entirely in cash, but the Board retains discretion to part-pay fees in Company shares.
Any fee increases are applied in line with the outcome of the review.
Pay-for-performance: scenario analysis The following charts provide an estimate of the potential future reward opportunities for the Executive Directors, and the potential split between the different elements of pay under three different performance scenarios: ‘Minimum’, ‘On-target’ and ‘Maximum’. As described on page 61, Admiral’s DFSS bonus is directly aligned with dividends received by shareholders. As such, there is no ‘threshold’ or ‘target’ performance defined for this element of pay. The figures shown in the chart below for the CFO’s DFSS bonus include the value of the actual DFSS bonus paid in 2014. Under all scenarios, potential reward opportunities are based on expected awards for 2015 (in accordance with Admiral’s Remuneration Policy), applied to salaries as at 31 December 2014. The ‘On-target’ column includes a 20% vesting for DFSS awards which would occur for achieving threshold performance targets.
£2 million. Awards over £1 million are subject to a maximum of 600% of base salary.
The Committee may also make an award in respect of a new 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 these awards and the likelihood of those conditions being met to ensure that the value of the buy-outs are no greater than the fair value of the awards they replace. The Committee may also avail itself of Listing Rule 9.4.2 R if appropriate in respect of buy-out incentive arrangements.
NED recruitment In recruiting a new Non-Executive Director, the Committee will use the policy as set out in the table on page 63. A base fee would be payable for Board membership, with additional fees payable for acting as Senior Independent Director or as Chair or member of a Board Committee as appropriate.
Other directorships Executive Directors are permitted to, although none currently do, accept appointments as Non-Executive Directors of companies with prior approval of the Group Chairman. Approval will only be given where the appointment does not present a conflict of interest with the Group’s activities and the wider exposure gained will be beneficial to the development of the individual.
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. Whilst the Committee does not currently consult specifically with employees on the Executive Remuneration Policy, it consults with and receives updates on employee pay arrangements from the Head of People Services and takes this into consideration when reviewing Executive remuneration.
Considerations of shareholder views When determining remuneration, the Committee takes into account best practice guidelines issued by institutional shareholder bodies. The Committee is open to feedback from shareholders on Remuneration Policy and will continue to monitor trends and developments in corporate governance and market practice to ensure the structure of the Executive remuneration remains appropriate.
This section of the report provides details of how Admiral’s Remuneration Policy was implemented in 2014 and the remuneration arrangements proposed for 2015.
At the end of 2014 the Committee consisted of Margaret Johnson, Roger Abravanel and Jean Park under the Chairmanship of Annette Court. The Committee met eight times during the year.
The Group Chairman and CEO are invited to meetings where the Committee considers it appropriate to obtain their advice on Group strategy and performance and Senior Executive pay strategy. The members of the Committee do not have any personal financial interests (other than shareholdings), or any conflicts, that relate to the business of the Committee. The Committee members do not have any day-to-day involvement in the running of the Group.
Directors’ Remuneration Policy Total number of votes 202,909,688 3,045,740 205,955,428 2,548,073
Annual Report on Remuneration Total number of votes 207,649,080 771,144 208,420,224 82,528
2. Benefits: the taxable value of annual benefits received in the year. 3. Pension: the value of the Company’s contribution during the year.
4. SIP: the face value at grant. 5. DFSS: the value at vesting of shares vesting on performance over the three-year periods ending 31 December 2014 and 31 December 2013. For the 2014 calculations, given that vesting occurs in October 2015, after the Directors’ Remuneration Report is finalised, the figures are based on the average share price in the last three months of 2014 (£12.62). The 2013 calculations have been based on the actual share price on vest (£13.50).
7. Kevin Chidwick was paid £177,104 in 2014 (2013: £165,000) to reimburse him for expenses incurred in relation to his being based in the US after taking on CEO responsibility for the Group’s US insurer Elephant Auto.
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 2014 and the prior year.
John Sussens*2 £21,323 £72,000 *1 Jean Park was appointed to the Board on 17 January 2014. Her total single figure remuneration for 2014 includes amounts relating to the month immediately prior to her appointment to the Board when she prepared for and attended, as an observer, a Group Risk Committee meeting and Group Board meeting *2 Martin Jackson and John Sussens retired from the Board with effect from 9 April 2014
Incentive outcomes for financial year to 31 December 2014 DFSS awards vesting on performance to 31 December 2014 Awards were made under the DFSS to Kevin Chidwick and Geraint Jones on 11 October 2012. Vesting is dependent on the Company’s EPS performance in excess of a risk-free return, defined as average three-month LIBOR, over a three-year period commencing on 1 January 2012. 10% of shares vest for matching LIBOR, full vesting occurs for outperforming LIBOR by 10% p.a., with straight-line vesting in between. No vesting occurs for EPS growth below LIBOR. The table below details the Company’s EPS performance against targets and vesting outcomes over the performance period ending on 31 December 2014.
Geraint Jones*3 16,000 126 points 102 points 24 points *1 36 points are required for 100% vesting *2 Calculated based on the average share price in the last three months of 2014 (£12.62) *3 Only 50% of Geraint Jones’ 2012 DFSS award was subject to performance, as the award was made prior to his appointment to the Board
DFSS bonus in respect of 2014 The Group paid a bonus to all holders of DFSS shares in 2014, which was equivalent to the dividend payable on all outstanding DFSS shares awarded but not yet vested. The Committee continues to feel that having a Group-wide bonus equivalent to the dividend flow received by investors further aligns the incentive structure with shareholders.
In 2014, Kevin Chidwick and Geraint Jones received DFSS bonuses of £176,525 and £87,250, respectively (2013 – Kevin Chidwick: £148,680).
Scheme interests awarded in 2014 DFSS In September 2014, Kevin Chidwick was granted an award under the DFSS of 35,000 shares with a value at the date of award of £429,520. Following his appointment as CFO, in September 2014 Geraint Jones was granted an award of 35,000 shares with a value at the date of award of £429,520. The three-year period over which performance will be measured will be 1 January 2014 to 31 December 2016. The award is eligible to vest in its entirety on the third anniversary of the date of grant (i.e. October 2016), subject to performance and to continued employment. Henry Engelhardt and David Stevens again declined to be included given their significant shareholdings.
SIP In March and September 2014, Kevin Chidwick and Geraint Jones were granted awards under the SIP of 100 shares in March 2014, with a face value of £1,506, and 114 shares in September 2014, with a face value of £1,489. The shares will vest on 14 March and 5 September 2017 respectively subject to continued employment only. Henry Engelhardt and David Stevens again declined to be included given their significant shareholdings.
Geraint Jones was appointed to the Board on a relatively low salary and the Committee expects to make salary increases that are above general inflation in the next few years to reflect his demonstrated development in the CFO role and the performance of the business. The Committee will determine the levels of future increases taking into account both his individual and Company performance, and with reference to market pay levels. Geraint’s current salary of £200,000 is significantly below the median level for companies of a similar size.
Geraint Jones will continue to participate in the Group Personal Pension Plan, where employee contributions are matched up to a maximum 6% of base salary with maximum employer contribution of £9,000. David Stevens will also continue to participate in the plan, on the same basis as in 2014. As in previous years, Henry Engelhardt has declined to be included in the plan for 2014. All Executive Directors will continue to receive benefits in line with the policy.
DFSS The Company held a comprehensive review of the DFSS in 2014, taking into account the changes to the business in both size and geography since the last review in 2004, and recent trends in FTSE incentive design and pay levels. As a result of the review, a number of changes to the DFSS have been proposed in order to ensure that senior managers remain motivated; are appropriately rewarded; and that the Group continues to be an attractive employer that talented individuals want to join whilst at the same time providing appropriate incentives, and rewards, for the 2,300 employees that participate in the DFSS across the Group.
The key changes that have been made to the DFSS include: @ Increased maximum DFSS opportunity of £2 million. Awards above £1 million are subject to a 600% of salary limit.
In advance of each DFSS cycle, the Committee reviews the appropriateness of the performance measures and corresponding targets. Vesting of the 2015 award will be linked to three-year EPS growth vs. LIBOR, TSR vs. FTSE 350 (excluding investment companies), and ROE, weighted equally. The Committee intends to make DFSS awards in September 2015 and indicative targets are shown in the table below.
Chairman and Non-Executive Directors The fee payable to the Chairman of the Board is £232,793 p.a. with effect from 1 January 2015. The basic fee payable to each NED is £55,000 p.a. The fees payable for chairing the Audit, Group, Risk, Remuneration and Nomination Committees are £20,000, £20,000, £10,000 and £5,000 p.a., respectively. The additional fee paid for being Senior Independent Director is £10,000 p.a. The fees payable for membership of the Audit and Group Risk Committees are £12,000 p.a. each.
Percentage change in CEO remuneration The table below shows the percentage change in CEO remuneration from 2013 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 2013 and 2014 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.
CEO CFO Other employees *1 Based on the sum of remuneration paid to Kevin Chidwick up to and including 13 August 2014 and to Geraint Jones from 13 August 2014 *2 In January 2014 Kevin Chidwick was provided with a cash reimbursement of 177,104 in relation to expenses incurred in his relocation to the US *3 DFSS bonus change represents the change in dividends paid, which is the driver of the level of bonus payable to holders of unvested DFSS shares *4 CFO DFSS bonus includes full DFSS bonus paid to both Geraint Jones (£87,250) and Kevin Chidwick (£176,525) during the year
Pay for performance The following graph sets out a comparison of Total Shareholder Return (TSR) for Admiral Group plc shares with that of the FTSE 100 Index, of which the Company is a constituent, over the six-year period to 31 December 2014. The Directors consider this to be the most appropriate index against which the Company should be compared. TSR is defined as the percentage change over the period, assuming reinvestment of income.
Historical TSR performance Growth in the value of a hypothetical £100 holding over the six years to 31 December 2014
CEO single figure of remuneration £328,027 £343,106 £358,199 £373,759 £387,546 £393,260
DFSS vesting outcome (% of maximum) n/a n/a n/a n/a n/a n/a
Incumbent Kevin Chidwick Kevin Chidwick Kevin Chidwick Kevin Chidwick Kevin Chidwick Kevin Chidwick Geraint Jones
CFO single figure of remuneration £632,312 £1,269,535 £1,048,130 £1,431,218 £1,444,443*1 £1,102,116 *1 £325,361
Total shareholdings of Directors (audited) Executive Directors have agreed to (acquire and) retain a beneficial shareholding equal to at least 200% of base salary, which can be built up over a period of five years from the date of appointment.
As at 31 December 2014, the Directors have the following shareholdings: Shares held
*1 Geraint Jones was appointed to the Board on 13 August 2014 *2 Kevin Chidwick left the Board on 13 August 2014 *3 Total includes SIP shares both matured and awarded *4 Total includes 26,000 unvested DFSS shares, awarded to Geraint Jones before he was appointed CFO, that are not subject to performance conditions *5 Jean Park was appointed to the Board on 17 January 2014
There have been no changes to Directors’ shareholdings since 31 December 2014.
Current Chief Financial Officer Geraint Jones’ interests in shares under the DFSS and SIP (audited)
The closing price of Admiral shares on 31 December 2014 was £13.23 per share. Performance conditions for DFSS awards made in 2012 and 2013 are the same as those for awards made in 2014, as detailed in the Remuneration Policy table.
The Directors present their Annual Report and the audited financial statements for the year ended 31 December 2014.
Statutory disclosures Group results and dividends The profit for the year, after tax but before dividends, amounted to £281.6 million (2013: £286.9 million).
The Directors declared and paid dividends of £273.5 million during 2014 (2013: £255.8 million) – refer to note 11b for further details.
The Directors have proposed a final dividend of £136 million (49.0 pence per share) payable on 29 May 2015.
The Group’s principles of respect for human rights, diversity, health and safety and workplace ethical standards not only apply to staff directly employed by Admiral, but also to staff employed by the Group’s outsourced partner in Bangalore, India. To meet this commitment, Admiral Group maintains regular contact with its outsourcer’s management team and the Group’s senior managers visit the outsourcer on a regular basis, whilst the Group also provides training and development to ensure that the team uphold these principles. In addition, Admiral Group has appointed a manager based permanently at the outsourced operation, who is responsible for ensuring that the Group’s principles are adhered to by the outsourced partner, and that the wellbeing of outsourced staff is monitored.
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 no agreements between the Company and its Directors or employees providing for compensation for loss of office or employment (whether through resignation, purported redundancy or otherwise) that occurs because of a takeover bid.
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 Reinsurance (UK) plc. Details relating to this agreement are contained in the Strategic Report.
A further special resolution passed at that meeting granted authority to the Directors to allot equity securities in the Company (up to a maximum of 5% of the issued share capital of the Company) for cash, without regard to the pre-emption provisions of the Companies Act 2006. This authority also expires on the date of the Annual General Meeting to be held on 29 April 2015 and the Directors will seek to renew this authority for the following year.
Articles of Association The Articles may only be amended by special resolution of the shareholders.
Annual General Meeting (AGM) It is proposed that the next AGM be held at The Old Library, Cardiff CF10 3ND on Wednesday 29 April 2015 at 2.00pm, notice of which will be sent to shareholders with the Annual Report.
The FRC issued a revised version of the Code in September 2014 which applies to companies with a financial year beginning on or after 1 October 2014. Therefore, the edition of the Code published in September 2012 applied throughout the financial year ending 31 December 2014. The Company’s Annual Report and Accounts, taken as a whole, addresses the requirements of the 2012 Code.
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 performance, business model and strategy.
@ Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Parent Company will continue in business.
Disclosure of information to auditors 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.
Auditor The Company’s auditor, KPMG 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.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ADMIRAL GROUP PLC ONLY
Opinions and conclusions arising from our audit 1. Our opinion on the financial statements is unmodified We have audited the financial statements of Admiral Group plc for the year ended 31 December 2014 set out on pages 78 to 113. In our opinion: @ the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2014 and of the Group’s profit for the year then ended; @ the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU); @ the Parent Company financial statements have been properly prepared in accordance with UK Accounting Standards; and
@ the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation.
Insurance liabilities (£2,097.4 million) Refer to page 51 (Audit Committee Statement), note 5d (accounting policy and financial disclosures).
@ The risk – The Group has in place a number of proportional risk sharing agreements, where insurers outside the Group underwrite a majority of the risk generated, either through co-insurance or quota share reinsurance contracts. For reinsurance contracts, there is judgement involved in the assessment of whether risk has been transferred, which impacts on the appropriate accounting including whether premium income and insurance claims are presented gross or net of reinsurance. A number of the reinsurance arrangements also include reinsurance caps, whereby the Group is limited as to the amount it can recover against insurance claims and operating expenses based on the cap in place. This impacts the underlying profit of the Group. For co-insurance contracts, the accounting is driven by the fact that the Group does not retain the underlying risks and rewards of the business underwritten. The outcome of these judgements affect the recognition and timing of revenue along with profit recognition and disclosure of income and expenses associated with these risk sharing agreements.
Profit commission (£71.8 million) Refer to page 51 (Audit Committee statement), note 5c (accounting policy and financial disclosures).
@ Our response – Our audit procedures included, in addition to our procedures over insurance liabilities noted above, forming an expectation of the profit commission income based on loss ratios applied and contractual terms of each arrangement, comparing this to actual profit commission income recognised and corroborating any changes to the profit commission arrangements during the year. We have also considered the adequacy of the Group’s disclosures about the arrangements in place.
3. Our application of materiality and an overview of the scope of our audit The materiality for the Group financial statements as a whole was set at £18.5 million, determined with reference to a benchmark of Group profit before taxation (of which it represents 5%). We report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £0.9 million, in addition to other identified misstatements that warranted reporting on qualitative grounds.
Of the Group’s 12 reporting components, we subjected four to audits for Group reporting purposes, two to specified risk focused audit procedures and one to a review of financial information (including enquiry). The components for which we performed specified risk focused procedures and a review of financial information were not individually financially significant enough to require an audit for Group reporting purposes, but did present specific individual risks that needed to be addressed.
The components within the scope of our work accounted for 94% of Group net revenue, 97% of Group profit before tax and 97% of Group total assets.
The remaining 6% of total Group net revenue, 3% of Group profit before tax and 3% of total Group assets is represented by 5 reporting components, none of which individually represented more than 2% of any of total Group net revenue, Group profit before tax or total Group assets.
5. We have nothing to report in respect of the matters on which we are required to report by exception Under ISAs (UK and Ireland) we are required to report to you if, based on the knowledge we acquired during our audit, we have identified other information in the annual report that contains a material inconsistency with either that knowledge or the financial statements, a material misstatement of fact, or that is otherwise misleading.
In particular, we are required to report to you if: @ we have identified material inconsistencies between the knowledge we acquired during our audit and the directors’ statement that they consider that 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 performance, business model and strategy; or
@ the Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or
@ certain disclosures of directors’ remuneration specified by law are not made; or
Insurance claims and claims handling expenses recoverable from reinsurers 535.4 523.7
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2014
Total comprehensive income for the period attributable to: Equity holders of the parent 298.6 286.1
Change in trade and other receivables, including from policyholders 14.7 14.3
Change in trade and other payables, including tax and social security (49.4) 8.0
Cash flows from operating activities, net of movements in investments 253.9 321.5
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2014
Total comprehensive income for the period — — — (0.9) 287.0 286.1 (0.5) 285.6
Changes in ownership interests without a change in control — — — — 0.3 0.3 (0.3) —
Total transactions with equity holders — — — — (227.4) (227.4) 5.2 (222.2)
Deferred tax credit on share scheme credit — — — — 3.1 3.1 — 3.1
@ IFRS 10, 11 and 12 (‘the consolidation suite of standards’)
Subsidiaries As a result of IFRS 10 (2011), the Group has changed its accounting policy for determining whether it has control over and consequently whether it consolidates its investees. IFRS 10 introduces a new control model that focuses on whether the Group has power over an investee, exposure or rights to variable returns from its involvement with the investee and ability to use its power to affect those returns.
The Group is currently assessing the impact of both IFRS 9 and IFRS 15 on its results, financial position and cash flows, along with any impacts of the other standards and amendments which have yet to be endorsed.
@ Recognition of deferred tax assets relating to unused tax losses: Management applies judgement in determining the probability of future taxable profits of an entity against which to utilise accumulated losses in determining the recognition of deferred tax assets. In applying this judgement, management makes an assessment of the reliability of approved business plan projections using both qualitative and quantitative factors including the age and status of the business, the Group’s previous experience in similar markets, historic performance against business plans and the application of a number of stress and sensitivity tests to the projections.
The sum of these provisions is compared with projected ultimate costs using a variety of different projection techniques (including incurred and paid chain ladder and an average cost of claim approach) to allow an actuarial assessment of their potential outcome. They include allowance for unreported claims.
4. Group consolidation and operating segments 4a. Accounting policies (i) Group consolidation The Consolidated financial statements comprise the results and balances of the Company and its subsidiaries (together referred to as the Group) for the year ended 31 December 2014 and comparative figures for the year ended 31 December 2013. The financial statements of the Company’s subsidiaries are consolidated in the Group financial statements. The Company controls 100% of the voting share capital of all its principal subsidiaries, except Rastreator.com Limited, Inspop USA LLC, Admiral Law Limited, BDE Law Limited and the indirect holding in comparenow.com Insurance Agency LLC.
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.
(ii) Foreign currency translation Items included in the financial statements 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 millions of pounds sterling, which is the Group’s presentation currency.
@ Income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the date of the transaction).
@ All resulting exchange differences are recognised in other comprehensive income and in a separate component of equity except to the extent that the translation differences are attributable to non-controlling interests.
4b. Segment reporting The Group has four reportable segments, as described below. These segments represent the principal split of business that is regularly reported to the Group’s Board of Directors, which is considered to be the Group’s chief operating decision maker in line with IFRS 8 Operating Segments.
4. Group consolidation and operating segments continued 4b. Segment reporting continued International Car Insurance The segment consists of the underwriting of car insurance and the generation of revenue from additional products and fees, from underwriting car insurance outside of the UK. It specifically covers the Group operations Admiral Seguros in Spain, ConTe in Italy, L’olivier Assurances in France and Elephant Auto in the US. None of these operations are reportable on an individual basis, based on the threshold requirements in IFRS 8.
An analysis of the Group’s revenue and results for the year ended 31 December 2014, by reportable segment, are shown below. The accounting policies of the reportable segments are consistent with those presented in the notes to the financial statements for the Group.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2014 4. Group consolidation and operating segments continued 4b. Segment reporting continued Revenue and results for the corresponding reportable segments for the year ended 31 December 2013 are shown below.
The total of Price Comparison revenues from transactions with other reportable segments is £9.5 million (2013: £10.8 million). These amounts have not been eliminated on consolidation as the Directors consider that not doing so results in a better overall presentation of the financial statements. The impact on the financial statements in the current and prior period is not material. There are no other transactions between reportable segments.
Revenues from external customers for products and services are consistent with the split of reportable segment revenues as shown on page 85.
4. Group consolidation and operating segments continued 4b. Segment reporting continued Segment assets and liabilities The identifiable segment assets and liabilities at 31 December 2014 are as follows: As at 31 December 2014
Unallocated assets and liabilities consist of other central assets and liabilities, plus deferred and current corporation tax balances. These assets and liabilities are not regularly reviewed by the Board of Directors in the reportable segment format.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2014 5. Premium, claims and profit commissions 5a. Accounting policies (i) Revenue – premiums Premiums relating to insurance contracts are recognised as revenue proportionally over the period of cover. Premiums with an inception date after the end of the period are held in the statement of financial position as deferred revenue. Outstanding collections from policyholders are recognised within policyholder receivables.
The provision for claims outstanding comprises provisions for the estimated cost of settling all claims incurred but unpaid at the balance sheet date, whether reported or not. Anticipated reinsurance recoveries are disclosed separately as assets.
Total profit commission 71.8 99.3 5d. Reinsurance assets and insurance contract liabilities (i) Objectives, policies and procedures for the management of insurance risk The Group is involved in issuing motor insurance contracts that transfer risk from policyholders to the Group and its underwriting partners.
The Board implements certain policies in order to mitigate and control the level of insurance risk accepted by the Group. These include pricing policies and claims management and administration processes, in addition to reserving policies and co- and reinsurance arrangements as detailed on the following page.
@ Use of a Reserving policy which informs management’s reserving decisions for the purposes of the Group’s financial statements. As described in note 3, critical accounting judgements and estimates, the policy determines that reserves should be set within a range above projected best estimate outcomes to allow for unforeseen adverse claims development.
The impact is stated net of reinsurance and includes the change in net insurance claims along with the associated profit commission movements that result from changes in loss ratios. The figures are stated net of tax at the current rate.
Total insurance liabilities – net 1,267.6 1,080.1 *1 The claims outstanding recoverable from reinsurers at 31 December 2014 includes £21.4 million representing outstanding recoveries from excess of loss reinsurance contracts
5. Premium, claims and profit commissions continued 5d. Reinsurance assets and insurance contract liabilities continued (iv) Analysis of UK car insurance claims incurred The following tables illustrate the development of gross and net UK Car Insurance claims incurred for the past five financial periods, including the impact of re-estimation of claims provisions at the end of each financial year. The first table shows actual gross claims incurred, the second shows actual net claims incurred and the third shows the development of UK loss ratios. Figures are presented on an underwriting year basis.
International and other net claims incurred (15.9) (28.3) (54.2) (59.9) (70.2)
Total gross release (International Car Insurance) — — — — 12.6
Total net release (UK Car Insurance) 23.5 10.3 17.6 94.2 137.4
Net claims reserve at end of period*1 1,057.8 863.0 *1 The increase in net claims reserve from £863.0 million at 31 December 2013 to £1,057.8 million at 31 December 2014 is partly as a result of the increase in the size of gross claims reserves but largely due to the impact of commutations of reinsurance contracts in the UK Car Insurance business
5. Premium, claims and profit commissions continued 5d. Reinsurance assets and insurance contract liabilities continued (vii) Reconciliation of movement in net unearned premium provision £m £m
Net unearned premium provision at end of period 209.8 217.1 6. Investments 6a. Accounting policies (i) Investment income and finance costs Investment income from financial assets comprises interest income and net realised gains on financial assets classified as ‘fair value through profit or loss’ and ‘available for sale’, and interest income on holdings in term deposits and gilts.
The Group’s investments in money market liquidity funds and short term debt securities are designated as FVTPL at inception.
AFS Fixed income and Asset Backed Securities are stated at fair value.
Impairment of financial assets The Group assesses at each balance sheet date whether any financial assets or groups of financial assets held at amortised cost are impaired. Financial assets are impaired where there is evidence that one or more events occurring after the initial recognition of the asset, may lead to a reduction in the estimated future cash flows arising from the asset.
Finance costs represent interest payable on the £200 million subordinated notes.
6. Investments continued 6d. Financial assets and liabilities The Group’s financial instruments can be analysed as follows: £m £m
Total financial assets per Consolidated Statement of Financial Position 2,547.4 2,265.0
The nominal £200 million subordinated notes were issued on 25 July 2014 at a fixed rate of 5.5% and have a redemption date of 25 July 2024.
Fair value measurement The measurement of investments at the end of the period, for investments held at fair value and short term debt securities held at fair value, is based on active quoted market values (level one).
The deposits are held with well rated institutions; as such the approximate fair value is the book value of the investment as impairment of the capital is not expected. There is no quoted market for these holdings and as such a level two valuation is used. The book value of term deposits is £263.1 million (2013: £288.4 million).
NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2014 6. Investments continued 6d. Financial assets and liabilities continued The maturity profile of financial assets and liabilities at 31 December 2014 is as follows: On demand £m
Economic and financial market conditions have led the Directors to consider counterparty exposure more frequently and in significant detail. The Directors consider that the policies and procedures in place to manage credit exposure continue to be appropriate for the Group’s risk appetite and, during 2014 and historically, no material credit losses have been experienced by the Group.
The other principal form of credit risk is in respect of amounts due from policyholders, largely due to the potential for default by instalment payers. The impact of this is mitigated by the large customer base and low average level of balance recoverable. There is also mitigation by the operation of numerous high- and low-level controls in this area, including payment on policy acceptance as opposed to inception and automated cancellation procedures for policies in default.
There were no significant financial assets that were past due at the close of either 2014 or 2013.
As noted above, the Group invests the following asset types: @ Money market liquidity funds and cash plus liquidity funds, which in turn invest in a mixture of short dated fixed and variable rate securities, such as cash deposits, certificates of deposits, floating rate notes and other commercial paper.
@ Available for sale debt securities. These securities are held within two segregated mandates. The guidelines of the investments retain a similar credit quality of the money market funds (all holdings are investment grade). The duration of the securities is relatively short and similar to the duration of the on book claims liabilities (the average duration is three years).
@ UK Government gilts. These are classified as term and valued at amortised cost. Therefore neither the capital value of the gilts, nor the interest return, will be impacted by fluctuations in interest rates.
In 2014, the Group issued £200 million of subordinated notes with a ten year maturity and fixed rate coupon of 5.5%. This liability is valued at amortised cost and therefore neither the carrying value of the deposits, nor the interest payable, will be impacted by fluctuations in interest rates.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2014 6. Investments continued 6d. Financial assets and liabilities continued Objectives, policies and procedures for managing financial assets and liabilities continued Liquidity risk Liquidity risk is defined as the risk that the Group does not have sufficient, available financial resources to enable it to meet its obligations as they fall due, or can only secure them at excessive cost.
Fair value For cash at bank and cash deposits and other receivables, the fair value approximates to the book value due to their short maturity. For assets held at fair value through profit and loss, their value equates to level one (quoted prices in active markets) of the fair value hierarchy.
7. Other Revenue 7a. Accounting policy (i) Contribution from additional products and fees and Other Revenue Contribution from additional products and fees and Other Revenue includes revenue earned on the sale of products supplementing the core motor insurance policy, administration and other charges paid by the policyholder, referral fees, revenue from policies paid by instalments and vehicle commission charges paid by co- and reinsurers. Revenue is credited to the income statement over the period matching the Group’s obligations to provide services. Where the Group has no remaining contractual obligations, the revenue is recognised immediately. An allowance is made for expected cancellations where the customer may be entitled to a refund of amounts charged.
Refer to the Strategic Report for further detail on the sources of revenue.
8. Expenses 8a. Accounting policies (i) Acquisition costs and operating expenses Acquisition costs incurred in obtaining new and renewal business are charged to the income statement over the period in which those premiums are earned. All other operating expenses are charged to the income statement in the period that they are incurred.
(ii) Employee benefits Pensions The Group contributes to defined contribution personal pension plans for its employees. The contributions payable to these schemes are charged in the accounting period to which they relate.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2014 8. Expenses continued 8b. Operating expenses and share scheme charges continued
Total and net expenses are before and after co- and reinsurance arrangements respectively.
Refer to the Corporate Governance Report for details of the Audit Committee’s policy on fees paid to the Company’s auditor for non-audit services. The ratio of non-audit fees to audit fees in 2014 was 109% (2013: 108%).
Retirement benefits are accruing to the following number of Directors under: – Money purchase schemes 2 1
(i) The Approved Share Incentive Plan (the SIP) Eligible employees qualified for awards under the SIP based upon the performance of the Group in each half-year period. The current maximum award for each year is £3,000 per employee. The awards are made with reference to the Group’s performance against prior year profit before tax. Employees must remain in employment for the holding period (three years from the date of award) otherwise the shares are forfeited.
@ EPS growth is equal to RFR – 10% of maximum award vests.
Number of free share awards committed at 31 December 2014 Awards outstanding*1 Vesting date
During the year ended 31 December 2014, awards under the SIP H210 and H111 schemes and the DFSS 2011 scheme vested. The total number of awards vesting for each scheme is as follows.
Tax treatment of share scheme charges through reserves (2.1) — — — (2.1)
Tax treatment of share scheme charges through reserves (3.1) — — — (3.1)
The deferred tax asset relating to carried forward losses of £13.4 million (2013: £7.8 million) relates to losses incurred in the Group’s US businesses, Elephant Auto and compare.com, and is calculated at the local US rate of tax (35%).
At 31 December 2014 the Group had unused tax losses amounting to £33 million (2013: £nil), relating to these businesses, for which no deferred tax asset has been recognised.
(ii) Impairment of property and equipment In the case of property and equipment, carrying values are reviewed at each balance sheet date to determine whether there are any indications of impairment. If any such indications exist, the asset’s recoverable amount is estimated and compared to the carrying value. The carrying value is the higher of the fair value of the asset, less costs to sell and the asset’s value in use. Impairment losses are recognised through the income statement.
(iv) Intangible assets Goodwill All business combinations are accounted for using the acquisition method. Goodwill has been recognised in acquisitions of subsidiaries, and represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired.
The goodwill held on the balance sheet at 31 December 2014 is allocated solely to the UK Car Insurance segment.
The value in use calculations use cash flow projections based on financial budgets approved by management covering a three year period. Cash flows beyond this period are considered, but not included in the calculation. The discount rate applied to the cash flow projections in the value in use calculations is 6.8% (2013: 9.8%), based on the Group’s weighted average cost of capital, which is in line with the market (source: Bloomberg).
Deferred acquisition costs Acquisition costs comprise all direct and indirect costs arising from the conclusion of insurance contracts. Deferred acquisition costs represent the proportion of acquisition costs incurred that correspond to the unearned premiums provision at the balance sheet date. This balance is held as an intangible asset. It is amortised over the term of the contract as premium is earned.
Total trade and other receivables 82.0 77.5 10e. Trade and other payables £m £m
Of amounts owed to co-insurers and reinsurers, £585.7 million (2013: £629.3 million) is held under funds withheld arrangements.
10. Other assets and other liabilities continued 10f. Obligations under finance leases Analysis of finance lease liabilities: At 31 December 2014 At 31 December 2013
Between one and five years — — — — — —
Operating lease payments represent rentals payable by the Group for its office properties. The increase in operating lease commitments from the prior period is due to the agreement of long term lease agreements relating to new premises in South Wales.
March 2013 (45.5 pence per share, paid June 2013) — 123.1
A final dividend of 49.0 pence per share (£136 million) has been proposed in respect of the 2014 financial year. Refer to the Chairman’s Statement and Strategic Report for further detail.
During 2014 2,548,310 (2013: 2,617,838) new ordinary shares of 0.1 pence were issued to the trusts administering the Group’s share schemes.
1,800,000 (2013: 1,700,000) were issued to the Admiral Group Employee Benefit Trust for the purposes of the Discretionary Free Share Scheme to give a closing number at 31 December 2014 of 12,861,948 (31 December 2013: 11,061,948). The Trustees have waived the right to dividend payments, other than to the extent of 0.001 pence per share, unless and to the extent otherwise directed by the Company from time to time.
The Group’s dividend policy is to make distributions after taking into account capital that is required to be held a) for regulatory purposes; b) to fund expansion activities; and c) as a further buffer against unforeseen events. This policy gives the Directors flexibility in managing the Group’s capital.
Bell Direct Limited England and Wales Ordinary 100 Dormant comparenow.com Insurance Agency LLC United States of America Ordinary 67.79 (indirect)
Inspop USA LLC United States of America Ordinary 67.79 Insurance Intermediary
11g. Related party transactions Details relating to the remuneration and shareholdings of key management personnel are set out in the Directors’ Remuneration Report. Key management personnel are able to obtain discounted motor insurance at the same rates as all other Group staff, typically at a reduction of 15%.
The Board considers that only the Executive Directors of Admiral Group plc are key management personnel. Aggregate compensation for the Executive Directors is disclosed in the Directors’ Remuneration Report on pages 60 to 72.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2014 12. Reconciliations The following tables reconcile significant key performance indicators and non-GAAP measures included in the Strategic Report to items included in the financial statements.
Total premiums written before co-insurance arrangements per note 5b of financial statements 1,675.6 1,737.6
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014
As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the Parent Company is not presented. Under FRS 1 Cash Flow Statements the Company is exempt from having to present a cash flow statement on the grounds that its cash flows are included in the Group’s published Consolidated financial statements.
The Parent Company audit fee is not disclosed in these accounts as it is disclosed in the Consolidated financial statements for Admiral Group plc, which precede them at note 8c.
2. Investments Shares in Group undertakings are valued at cost less any provision for impairment in value.
4. Employee share schemes The Group operates a number of share schemes for its employees. For equity settled schemes commencing 1 January 2004 and after, the fair value of the employee services received in exchange for the grant of free shares under the schemes is recognised as an expense in the Parent Company’s subsidiaries, with a corresponding increase in equity in the Parent Company.
A full list of the Company’s subsidiaries is disclosed in note 11 of the Consolidated financial statements.
Corporation tax payable — 63.0 9. Other Creditors – due after one year £m £m
Share scheme charges — — 23.2 23.2 11. Share Capital Full details of the Company’s share capital are included in note 11 of the Consolidated financial statements.
Actuarial best estimate The probability-weighted average of all future claims and cost scenarios calculated using historical data, actuarial methods and judgement.
Co-insurance An arrangement in which two or more insurance companies agree to underwrite insurance business on a specified portfolio in specified proportions. Each co-insurer is directly liable to the policyholder for their proportional share.
Underwriting year The year in which the policy was incepted, also referred to as the written basis. Claims incurred are allocated to the calendar year in which the policy was underwritten.
Company Secretary Mark Waters Ty Admiral David Street Cardiff CF10 2EH
The Group’s commitment to environmental issues is reflected in this Annual Report which has been printed on Revive 100 Silk which is made from 100% post-consumer fibres, FSC® certified and PCF (Process Chlorine Free). Printed in the UK by using their and environmental printing technology, and vegetable inks were used throughout. is a CarbonNeutral® company. Both manufacturing mill and the printer are registered to the Environmental Management System ISO14001 and are Forest Stewardship Council® (FSC) chain-of-custody certified.
Corporate website The Group’s corporate website is at www.admiralgroup.co.uk. A range of information about the Admiral Group is presented, including the Group’s history: financial reports and press releases; corporate responsibility and governance.
A ccounts 2014 3rd Best Multinational Workplace in Europe, Great Place to Work Institute’s Best Multinationals in Europe, 2014