Financial calendar Final 2011 dividend 2 May 2012 – Ex dividend date 4 May 2012 – Record date 1 June 2012 – Payment date
The interim results will be available on the corporate website from 30 August 2012.
In the UK, the Group has an 11% share of private car insurance through four brands; Admiral, Elephant, Diamond, and Bell. It also owns Confused.com, one of the leading UK price comparison websites.
• No debt and cash balances conservatively managed • Use of co and reinsurance • Test and learn approach
• 2011 saw continued market gain in market share (to around 11%)
• Profit increased by 14% to £313.6 million • Higher combined ratio primarily driven by lower reserve releases
• The Group has four car insurers outside the UK, in Spain, Italy, the US and France
• Modest improvement in combined ratio * figures include AdmiralDirekt, which was sold in January 2011
• The Group remains low-risk in its investment strategy. Investment and interest income increased on higher total cash and investment balances
The largest market in which the Group operates is the USA. Elephant Auto launched there in October 2009. At the end of 2011 Elephant was operating in: • Virginia • Maryland • Illinois • Texas
Admiral Seguros is the Group’s Car Insurance based in Seville, Spain. It launched its first brand, Balumba in 2006. Rastreator a Spanish price comparison website launched in March 2009.
Each year since we floated in 2004 Admiral has increased its turnover, its profitability, and its dividends to shareholders. 2011 was no exception, with our turnover growing by 38%, our pre-tax profits by 13%, and our dividends by 11%. Admiral now insures 3.36 million vehicles across all its operations and has an estimated 11% share of the UK private motor market.
• Grow profitably our share of the UK private motor insurance market
• Operate a ‘capital-light’ business model transferring a significant proportion of our underwriting risk to reinsurance partners, which in turn allows Admiral to distribute the majority of our earnings as dividends
With our staff, management and Directors as shareholders we have all shared directly the disappointment of our broader shareholder base at the need in November to caution that our result for 2011 was likely to be somewhat lower than the prevailing analyst consensus. This mainly arose from the UK insurance business earned during 2011 which, whilst remaining very satisfactory at a 91% combined ratio, was not as profitable as we had previously expected.
When all is said and done, Admiral’s group pre-tax profits for 2011 at £299m represent a 13% growth on the previous year and deliver a 59% return on capital employed. They support total dividends for the year of 75.6 pence per share which represents a distribution of 92% of our earnings. Our normal dividend, growing in line with our growth in profits based on a 45% pay-out ratio, amounted to 36.8 pence per share, whilst our available surplus, after taking into account our required solvency, provision for our overseas expansion plans, and a margin for contingencies, made possible a further special dividend of 38.8 pence per share. In addition to this margin, we retain a significant buffer within our booked loss reserves against any future development, such as periodic payment orders, that might increase the cost of claims beyond what we currently project to be their ultimate cost.
We are very conscious of the impact on our customers of the significant increases in motor insurance premiums that the market has had to impose over the last two years to reflect the increasing cost of claims, in particular those relating to bodily injury. As the second largest player in the UK private motor market with 2.9 million customers we, therefore, fully support any action that will drive down the cost of claims. We also believe in open fair competition as we gain market share by pricing competitively and offering covers that meet the needs of our customers, such as Admiral MultiCar, which is now in its 7th year.
Our international expansion continues to make good progress across both car insurance and price comparison notwithstanding the impact on our customers of the challenging economic environment, particularly in southern Europe. In line with our strategy, we have advanced over the last five years in relatively small steps supported by a cautious level of investment.
We now have over 300,000 customers outside the UK and last year we provided close to 4 million quotes across our non-UK price comparison sites. Nowhere demonstrates better our test and learn approach than the US where we are now writing business in four states as we build our understanding of market dynamics and consumer buying behaviour. With this growth, Kevin Chidwick has moved his commercial focus, alongside his CFO responsibilities, from oversight of Confused.com to that of our US insurance operations.
“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way.”
Pre-tax profit increased by 13% to £299.1 million from £265.5 million and earnings per share rose similarly to 81.9 pence (2010: 72.3 pence). Dividends for the 2011 financial year total 75.6 pence (including a 36.5 pence recommended final dividend) – up 11% on the 68.1 pence paid in respect of 2010.
The Group’s core UK Car Insurance operation again accounted for 90% of Group turnover and a similar proportion of customers. The business continued to grow market share over the year, closing with 2.97 million vehicles insured. Though it contributed £37.8 million to the total Group profit increase of £33.6 million, a higher combined ratio than in 2010 (resulting predominantly from lower reserve releases) and lower profit commissions meant that the growth in profit was more modest than in recent years, increasing by 14% to £313.6 million from £275.8 million last year.
The Group’s International Car Insurance operations insured a total of 306,000 vehicles at year-end, an increase of 88% over the end of 2010. Turnover for the businesses rose by 79% to £115.0 million (comparatives here exclude the AdmiralDirekt business in Germany which was sold in January 2011). Good progress continues to be made in all locations, and each grew market share over the year. The combined result from these young businesses was a loss of £9.5 million (up from £8.0 million in 2010).
In UK Price Comparison, Confused.com performed well in a tough environment, generating profit of £16.1 million – marginally down on 2010 (£16.9 million). Market share in the core car insurance product was stable. Sustained investment in developing International Price Comparison grew revenue and quotes significantly, resulting in a loss of £5.6 million (2010: £4.8 million).
• The Group’s core business is selling and underwriting private car insurance in the UK through four brands – Admiral, Bell, Diamond and elephant.co.uk
• We estimate that we account for over 11% of the UK market, insuring nearly 3 million cars at the end of 2011. Total UK premium in 2011 was over £1.7 billion
The strategy for our UK business is unchanged and remains relevant and simple: • We aim to grow profitably our share of the UK private motor insurance market • At the same time, we endeavour always to give excellent service to our customers, whilst providing a positive environment in which our staff can work and develop
• Combined ratio increased in 2011 to 91% from 84% due to increased loss ratio (77% from 68%)
Admiral Great Lakes (Munich Re) Hannover Re New Re Swiss Re Mapfre Re XL Re
Net insurance claims (138.7) (192.6) (335.5) Net insurance expenses (30.3) (32.4) (46.7)
Claims reserve releases £31.3m £23.5m £10.3m Vehicles insured at year-end 1.86m 2.46m 2.97m Ancillary contribution per vehicle £72 £77 £76 Other revenue (including ancillary contribution) per vehicle £77 £84 £84
UK Car Insurance *1 GAAP = Generally Accepted Accounting Practice *2 Turnover (a non-GAAP measure) comprises total premiums written and other revenue *3 Total premiums written (non-GAAP) includes premium underwritten by co-insurers
Arrangements for 2011 to 2014 In early 2012 the Group was pleased to announce extensions to its arrangements such that capacity is fully placed until the end of 2014. The underwriting splits can be summarised as below.
The European and US arrangements are explained below in the International Car Insurance section.
• Pricing action to shift the portfolio away from high bodily injury claims frequency segments
The attractiveness of the profit commission arrangements under Admiral’s co- and reinsurance contracts also results in a level of volatility in the income statement, as, despite only underwriting around one quarter of the risk on its own books, Admiral earns the majority of the profit achieved on the whole book.
Further commentary on the UK business and market conditions is provided by David Stevens, in his Chief Operating Officer’s review.
In line with expectations, the UK business again grew significantly during 2011, though the rate of growth slowed in the second half of the year.
Admiral’s price changes over the course of 2011 have run ahead of the market (according to price surveys and internal data) and this contributed to the slow-down in growth in the second half of the year (vehicle count in H2 grew by 5%). Admiral’s rates ended 2011 around 15% higher than a year earlier. Average written premium increased by around 12%.
Development during 2011 of underwriting years prior to 2009 was more positive in the second half of the year than in the first and was in line with past patterns.
Claims reserving There has been no change in Admiral’s reserving policy, which is initially to reserve conservatively, above independent and internal projections of ultimate loss ratios. This is designed to create a significant margin held in reserves to allow for unforeseen adverse development in open claims and would typically result in Admiral making above industry average reserve releases.
As profit commission income is recognised in the income statement in line with loss ratios accounted for on our own claims reserves, the reserving policy also results in profit commission income being deferred and released over time.
The expense ratio benefited from increased average premiums, and fell to 14.0% from 15.2% in 2010. Admiral’s expense ratio continues to run at around half the market average.
As a result of the higher loss ratio, only slightly offset by the improved expense ratio, the combined ratio in 2011 increased to 91.3% from 83.5%. Although the ratio has worsened, the business remains highly profitable and management currently estimate the ultimate combined ratio on the business earned in 2011 will be between 85% and 90%.
Ancillary contribution and other revenue Ancillary contribution is generated from a portfolio of insurance products that complement our core car insurance, and also fees generated over the life of the policy. There is also some (less significant) income from other products unconnected to car insurance.
We classify ancillary contribution in three categories: • Compulsory products – legal expenses insurance
For the market as a whole, the middle of the year marked the point when the dramatic premium inflation that kicked off in late 2009 ground to a halt. Over the 21 months to mid-2011 market price surveys suggested new business rate increases of almost 50%. These surveys significantly overstate the level of premium increases actually achieved, but it was undoubtedly a period of rapid premium inflation. In contrast, in the following six months the market drifted down by 1% as the shedders slowed their rate of market share decline and the growers, including ourselves, continued to add share.
A combination of benign weather, higher policy excesses, higher petrol prices and lower disposable income led to a fall in claims frequency of over 10% for the market as a whole. This also tempered insurers’ appetite for price increases, and helped slow the relentless rise in the cost of bodily injury claims in the UK market.
The rapid increase in premiums put car insurance unusually high on the political agenda during 2011. The legislation following the Jackson recommendations, Jack Straw’s private members’ bill, scrutiny by the House of Commons Transport
Our focus in 2012 will be on realising opportunities that we have identified to continue to do things better.
+40% Total premiums written in the UK increased by 40% during 2011
+14% UK car insurance pre-tax profit grew by 14% in 2011
Disappointment should perhaps be set in context. The currently anticipated combined ratio for 2011 is in the late eighties, a pretty attractive outcome both absolutely and relative to the combined ratio of the market as a whole. However, given our price increases and our established history of substantial over performance versus market, the outcome, if confirmed by the subsequent development of these claims, would qualify as a ‘disappointment’. There remain, however, many opportunities that we have identified to continue to do things better, and avoid some of the issues we encountered in 2011, notably in terms of risk selection. After the rapid growth in 2010 and 2011, our focus in 2012 will be very much on realising these opportunities.
What we do The Group has four direct car insurance businesses operating outside the UK: • Admiral Seguros (Seville, Spain) is our most mature international business, having traded for over five years. It delivered a second profitable year in 2011 • ConTe (Rome, Italy), which launched in May 2008 • Elephant Auto (Richmond, Virginia, USA) has been trading since October 2009 and now provides car insurance in four US states (Virginia, Maryland, Illinois and Texas) • L’olivier Assurances (Paris, France) is the Group’s newest business and enjoyed its first birthday in December 2011
An important element of Group strategy is to exploit the knowledge, skills and resources attaching to Admiral’s established UK businesses in order to promote our expansion overseas in both private motor and price comparison, aiming to create profitable, sustainable and growing businesses.
Our overseas strategy is summarised in the table below, where we also comment on our progress to date.
– now sold • Italy, ConTe, May 2008 • USA, Elephant, October 2009 • France, L’olivier Assurances, December 2010 1. Establish new, direct car insurance businesses in selected countries outside the UK
• All businesses remain in early stages • Admiral Seguros has been profitable since 2010 • ConTe, Elephant Auto and L’olivier Assurances are each making good progress • Each business grew market share in 2011 and in total now insure over 300,000 vehicles 3. Minimise where possible the financial impact on the Group
• Elephant Auto has reinsurance support for two thirds of its business
• The Group takes a ‘slow and steady’ approach to expansion and aims to build sustainable businesses before pushing for significant growth
Net ancillary income 3.3 5.3 8.0 Other revenue and charges 0.2 0.3 (0.4)
Ancillary contribution per vehicle £32 £33 £31 Other revenue per vehicle £35 £34 £32 *1 Figures include AdmiralDirekt (sold in January 2011)
Combined turnover reached £115.0 million (2010: £64.3 million, again excluding AdmiralDirekt) and in aggregate, the combined ratio improved to 164% from 173%.
The overall underwriting loss of £17.1 million (2010: £13.6 million) was mitigated by net other revenue of £7.6 million (£5.6 million) to give an overall loss of £9.5 million, up from £8.0 million in 2010.
Each market the Group operates in provides different challenges, but the Group is satisfied with the progress made in each business during 2011.The combined businesses continued to develop and increase market share during 2011, ending the year with a combined total of over 300,000 vehicles insured.
International Car Insurance Co-insurance and Reinsurance Significant use of reinsurance is also a feature of the Group’s insurance operations outside the UK.
In Spain and Italy, Admiral retains 35% of the risks, with the remaining 65% underwritten by Munich Re. In France, Admiral retains 30%, with 70% reinsured among three reinsurers.
Following the sale of AdmiralDirekt in early 2011, all premiums written and earned in 2011 in Germany are 100% reinsured to the acquirer. The only risk retained by the Group relates to the development of open claims on accidents prior to 1 January 2011. The total exposure is insignificant.
Success in delivering against the strategy is measured against a large number of key performance indicators which are common across the UK and international businesses. These include market share, quote volumes, conversion rates, sales volumes, income per sale, revenue per customer and cost per sale.
We have three price comparison businesses operating outside the UK: • Rastreator in Spain (launched in 2009) • LeLynx in France (launched in 2010) • Chiarezza in Italy (launched in 2010)
• Operating in the UK, the site allows consumers to compare a range of general insurance and financial services products across price and policy benefits
• Confused’s income is primarily generated from commissions paid by the product provider on the sale of an insurance policy or financial product
• To date we have targeted three markets (Spain, France, Italy), and we now have comparison websites (alongside car insurers) operational in these markets
• Confused’s strategy is focussed on car insurance comparison and is aimed at making Confused the most competitive price comparison website in the UK market
Revenue: Confused.com profit 25.7 16.9 16.1 International Price Comparison result (0.8) (4.8) (5.6)
UK Price Comparison – Confused.com 2011 was a much more stable year for Confused than 2010, with a broadly flat profit of £16.1 million on the prior year (2010: £16.9 million). This was a strong achievement in a market that has become yet more competitive, with ever higher amounts spent on media by the main competitors.
Revenue grew by around 8% to £77.6 million (2010: £71.8 million), though the competitive market required greater media investment and resulted in a fall in operating margin to 21% (24% in 2010).
Market share in car insurance comparison ended the year broadly in line with the end of 2010.
International Price Comparison The combined operations grew strongly in 2011, delivering revenue of £12.8 million, a substantial increase on 2010 (£3.9 million). Momentum built through the year, with £7.8 million of the full year total generated in the second half of the year.
The three businesses made a combined loss of £5.6 million, up from £4.8 million in 2010.
Regulatory environment Confused is regulated by the UK FSA as an insurance intermediary and is subject to all relevant mediation rules, including those on solvency capital.
Gladiator faced a challenging market in 2011 with significant price competition. Revenue was lower than in 2010 as a result of lower sales resulting from the increased competition.
• Higher number of shares awarded: In 2011, a total of 2.6 million shares were awarded under the Group’s schemes – 10% higher than in 2010 (2.4 million), reflecting growth in Group headcount
The key focus of the Group’s investment strategy is capital preservation, with an additional priority being a focus on low volatility of investment return.
Money market funds 333.8 29.8 – – 363.6 Long-term cash deposits 283.0 6.6 – 10.0 299.6
The main change in the allocation of funds between the two main investment types (money market funds and term deposits) was an increase in the proportion allocated to money market funds (to 62% of total cash plus investments, from 40%). This was in order to reduce relative exposure to deposit counterparties. All investment objectives continue to be met. The Group’s holding of non-UK sovereign debt is insignificant.
Average balances held during 2011 continued to grow substantially, in line with the growth of the business in the UK and internationally. Total investment and interest income rose to £13.7 million from £9.5 million in 2010. With little or no change in benchmark or market interest rates, the average rate of return on invested sterling funds (composing the large majority of total balances) was just over 1% in 2011 (up marginally on 2010).
The main items contributing to the significant operating cash inflow are as follows: Profit after tax 156.9 193.6 221.3
The key features to note are: • Total cash plus investments increased by £474 million (52%), largely driven by significant growth in the UK Car Insurance business. A higher portion of the cash inflow was transferred into investments, resulting in a small decrease in the amount of cash held at 31 December 2011
• Operating cashflow, before transfers into investments, was £779 million (an increase of 49%) – consistent with the increase noted above
Capital structure, financial position The Group manages its capital to ensure that all entities within the Group are able to continue as going concerns and also to ensure that regulated entities comfortably meet regulatory requirements. Excess capital above these levels within subsidiaries is paid up to the Group holding company in the form of dividends on a regular basis.
At 31 January 2012, the company had received notifications in accordance with the FSA’s DTRs of the following notifiable interests, in the voting rights in the company’s issued share capital: Number of shares %
Basic earnings per share rose by 13% to 81.9 pence from 72.3 pence.
Admiral’s UK business has grown every year since the business was launched in the early 1990’s, and has enjoyed regular outperformance against the market throughout that time. We now insure over 11% of the UK market and continue to write very profitable business.
The Directors remain confident that the key strengths of the business which contribute to the outperformance (including targeted pricing and claims handling on the loss ratio side; lower cost infrastructure, efficient acquisition costs and cost control on the expense ratio side) are sustainable.
The Group’s ownership of Confused.com, which is one of the leading UK price comparison websites and operates independently of the UK car insurance business, helps to mitigate the risk of over-reliance on this distribution channel. Admiral also contributes materially to the revenues of the other price comparison businesses and therefore it is not considered probable that a material source of new business would be lost.
A number of factors might contribute to this, including: a) Flat or falling average premiums as Admiral’s portfolio trends towards the market average (expense ratio impact)
In the case of legislative changes impacting existing claims, the Group holds an appropriate and explicit buffer in reserves to cover significant changes.
• IT Development risk – failure to invest in appropriate technology 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
New price comparison businesses also focus on modest starts with low set-up costs and relatively small initial media spend budgets. This tends to mean that the losses a new operation can incur are minimised whilst management assess the likelihood of the business succeeding.
Admiral earns ancillary profits from a portfolio of products and seeks to minimise reliance on any single item. This would mitigate the impact of a regulatory change which affected a particular product or income stream. Admiral continuously assesses the value of the ancillary products it offers, and makes changes to ensure the products offer value to policyholders.
The Group’s risk management framework leads to potential risks to ancillaries being identified and monitored, providing management time to respond appropriately to any such regulatory changes and minimise financial impacts where possible.
There is a risk that the level of ancillary profit earned per customer will diminish. This might be due to regulatory or legal changes, or customer or market behaviour.
The impact on the Group would be less profit earned on the car insurance portfolios and a lower return on capital employed.
Confused.com operates in a highly competitive UK market with four main businesses currently attempting to increase their market share through aggressive media activity.
In the UK, co- and reinsurance arrangements have been agreed up to the end of 2014, reflecting confidence in the Admiral UK car insurance business. Pricing on these deals was in line with existing arrangements. The long-term co-insurance agreement with Munich Re will remain in place (at 40% of the business) until at least the end of 2016.
The impact on the Group would be the need to raise additional capital to support underwriting. This could be in the form of equity or debt. Return on capital would potentially be lower than current levels.
7. Credit risk Admiral is exposed to credit risk primarily in the form of a) default of reinsurer; b) failure of banking or investment counterparty.
Corporate Responsibility This report focuses on two key areas: Admiral’s employees and customers.
Details on Admiral’s commitment to charitable giving and community work and efforts to reduce our impact on the environment can be found on our website at www.admiralgroup.co.uk
Employees If people like what they do, they will do it better.
This is a simple philosophy that runs throughout the Group. At the core of Admiral’s success is a skilled and motivated workforce and the Group invests significant time and money in 4 key areas which underpin this: i) Communication ii) Equality iii) Reward and Recognition iv) Fun
Communication at Admiral is designed to be open, transparent and two-way. Employees are provided with a wide range of communication tools to assist in understanding the Company’s goals and objectives. We work to communicate these in as many ways as possible. For example everyone is encouraged to attend the annual Staff General Meeting (SGM).
The survey results are analysed by department and each department manager is expected to share the survey results with their team, explore issues and concerns, and then make recommendations to address them.
Admiral was again listed as one of The Sunday Times 100 Best Companies to Work For. Since its first publication 12 years ago, we have been listed every year, something we are very proud of and this year received special recognition for this achievement. In the 2012 list we were extremely pleased to be placed in sixth position – an excellent result for Admiral and everyone who works within the Group. We were also extremely pleased to receive the Well Being award and for Henry Engelhardt’s ranking in the Best Leader category.
• Personal growth: to what extent people feel stretched by their job
• Giving something back: how much companies are thought to put back into society and the community
• Wellbeing: how people feel about stress, pressure and the balance between their work and home life
Morale is high within Admiral 76% 89% 90% 93% 89% 90% Morale is high in my department 87% 82% 90% 86% 84% 85% Taking eveything into account I am happy at Admiral 92% 87% 90% 91% 88% 89% Every effort is made to understand the opinions and thinking of employees
Admiral is truly customer oriented 90% 88% 90% 90% 86% 87% Admiral treats its customers fairly 86% 84% 87% 88% 86% 86%
Across the Group we participate in a number of independently managed surveys such as; The Sunday Times Best Companies to Work For, the Great Place to Work Institute UK’s Best Workplaces and the Great Place to Work Best Workplaces in Europe.
The table below provides the overall scores (out of 7) compared to the previous 3 years.
Admiral Group plc Annual Report 2011 29Admiral Group plc Annual Report 2011 29
The Group’s US operation, Elephant Auto, based in Richmond, Virginia, was this year named as being one of the top 50 Most Engaged Workplaces in America for the first time. This annual award recognises top employers in the USA that display leadership and innovation towards engaging their employees.
Rewards & Recognition, Professional & Personal Growth, Accountability & Performance, Vision & Values, and Corporate Social Responsibility. These are deemed to be vital benchmarks in determining an employee’s engagement and something we pride ourselves on as an employer.
In addition, there is another of our brands who have been steadily climbing up the rankings in their own country. 2011 saw ConTe placed 8th in the Italian Great Places To Work. ConTe, our Italian direct insurer, has improved its place in the survey in each of the last three years. This is a fantastic achievement for everyone at ConTe, and demonstrates that the Admiral culture is thriving in our start-up operations overseas.
The Board firmly believes that share ownership motivates employees, decreases attrition and improves the Group’s recruitment prospects in the regions where its offices are located. Even with the share price fall experienced in 2011, 79% (2010: 78%) of employees say they are more likely to stay with Admiral because of the share schemes.
Customer service call answer rate 95% 93% 91% 94% >90% Claims call answer rate 92% 93% 94% 96% >90% Customer comment form score 9.37 9.39 9.31 9.28 >9.0 Claims Service Customer Comment forms 8.80 8.75 8.65 9.01 >8.5 % Customer who would renew following a claim 93% 93% 92% 91% >85% Call Answer rate for complaint lines 91% 93% 93% 91% >90%
The Top 10 awards are designed to give recognition to staff and the work they do throughout the year. Each department is posed a question and they have to respond with a presentation demonstrating their answer. 2011’s question focussed on the benefits of teamwork.
As well as this, all staff across the company are asked to complete a questionnaire about how they feel their department is doing with regards to morale and how they are engaged as employees.
The award ceremony takes place in Cardiff’s City Hall, with hundreds of staff attending from all sites across South Wales and overseas. The winners are recognised across the company and highlighted in the Column, the news pages of our intranet and the four best presentations are available to view on Admiral TV (our in house video channel).
As part of our commitment to engage with staff, feedback is given to departments regarding their performances with special attention being given to the questionnaire responses.
Customers Ensuring that we give a great service to our customers is essential to the future growth of the business, both in the UK and our overseas businesses. As at 31 December 2011 the Group had 3.36 million customers, up 22% from 2.75 million the year before.
The Group works within the regulatory framework of the Financial Services Authority (FSA) in the UK. One of the FSA’s statutory objectives is to help customers get a fair deal. There is a comprehensive monthly Treating Customers Fairly (TCF) Management Information pack, pulling together specific measures that demonstrate we are consistently treating our customers fairly. This is now adopted throughout the Group.
The TCF management information is embedded in the culture of the Company. If either a red or amber grade occurs the department manager investigates the issues and provides information on the reason for the score along with a plan to improve the results.
During 2011 the average red grades for the measures amounted to 3.99% (2010: 2.58%). 88% of the measures throughout the period achieved a green grade (2010: 88%).
The increase in red grades was due to lower scores being achieved when customer calls are internally monitored for quality. During 2011 Admiral recruited heavily, naturally a newer member of staff may not be able to achieve the same level of quality as a more experienced team member. With time, as new employees gain experience, we hope to see improvements in this area.
Balumba, our direct insurer in Spain which launched in October 2006 has also embraced the company culture of giving back to the local and international community. Balumba runs a corporate volunteering program whereby employees work together to improve an impoverished community.
Admiral’s Community Chest is a scheme set up to enable staff to have a very direct say in where our charitable budget is spent. If a member of staff or their family has involvement in an organisation, charity, school or local sports club and that group needs funding for something, then a member of staff can apply to the Community Chest for the funding. Since its launch in 1998, over £500,000 has been donated to organisations in the local area (with over 1000 successful applicants). In 2011 alone, the entire budget of £70,000 has been given as donations.
The Admiral Group Board 1. Alastair Lyons, CBE (58) Chairman Alastair was appointed Chairman of the Company in July 2000. He is also Non-Executive Chairman of Serco and of the Towergate Insurance Group, Deputy Chairman of Bovis Homes Group Plc, and Senior Independent Director at the Phoenix Group.
2. Henry Engelhardt, CBE (54) Chief Executive Officer Henry is a founder Director of Admiral and was recruited by the Brockbank Group in 1991 to set up the Admiral business.
Henry was awarded an honorary CBE in April 2008 for services to business in Wales.
3. Kevin Chidwick, (48) Chief Financial Officer Kevin is responsible for finance, compliance and investments, as well as the subsidiary Elephant Auto. He joined Admiral in 2005, becoming Finance Director in September 2006.
Prior to Admiral, Kevin has been in UK financial services for over 25 years. He has held a number of senior roles in other insurance organisations including, most recently, Finance Director of Engage Mutual Assurance and Cigna UK.
He joined Admiral in 1991 from McKinsey & Co. where he worked in the Financial Interest Group, London office. Prior to working for McKinsey & Co, he worked for Cadbury Schweppes in the United Kingdom and the United States.
Admiral Group plc Annual Report 2011 33 5. Manfred Aldag, (61) Non-Executive Director Manfred was appointed a Non-Executive Director of the Company in 2003. He graduated from University of Essen and has a degree in Economics/Business Management (Diplom-Kaufmann).
6. Martin Jackson, (63) Non-Executive Director u Martin was appointed Non-Executive Director and Chairman of the Audit Committee in August 2004. Martin stood down as Chairman of the Audit Committee with effect from 1 January 2012 and became Chairman of the newly formed Risk Committee from that date.
8. Margaret Johnson, (53) Non-Executive Director Margaret was appointed Non-Executive Director of the Company in September 2006. She is currently Group CEO of the international advertising agency Leagas Delaney and has been with that Company for the past 14 years.
Lucy also joined the Nomination Committee on appointment to the Board.
12. Roger Abravanel, (65) Non-Executive Director Roger was appointed a Non-Executive Director with effect from 6 March 2012. He has significant international consulting experience having been with McKinsey and Co. from 1972 until his retirement as Director Emeritus in 2006.
Roger is also a member of the Board of the Italian Institute of Technology and is Chairman of the INSEAD Advisory Group in Italy.
13. Annette Court, (49) Non-Executive Director Annette was appointed a Non-Executive Director (subject to FSA approval) and will join the Audit and Risk Committees on appointment to the Board. She has extensive insurance experience having been a former Chief Executive Officer of RBS Insurance with its Direct Line and Churchill direct brands, and a member of the RBS Group Executive Management Committee. Between 2007 and 2010 Annette was Chief Executive Officer for Europe General Insurance for Zurich Financial Services and a member of the Group Executive Committee. Annette has previously served as a member on the Board of the Association of British Insurers (ABI).
The Directors present their Annual Report and the audited financial statements for the year ended 31 December 2011.
The information that fulfils the requirements of the Business review, as required by Section 417 of the Companies Act 2006, and which should be treated as forming part of this report by reference are included in the following sections of the annual report: • Chairman’s statement. • Chief Executive’s statement. • Business review.
The Directors have declared a final dividend of £99 million, 36.5 pence per share), payable on 1 June 2012.
Directors and their interests The present Directors of the Company are shown on pages 32 - 33 of this report, whilst Directors’ interests in the share capital of the Company are set out in the Remuneration report on pages 50 - 51.
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 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 Business review.
Power to issue shares At the last annual general meeting, held on 6 May 2011, authority was given to the Directors to allot unissued relevant securities in the Company up to a maximum of £88,721, equivalent to one third of the issued share capital as at 30 March 2011. This authority expires on the date of the annual general meeting to be held on 26 April 2012 and the Directors will seek to renew this authority for the following year.
Appointments of Directors The Company’s Articles of Association (“the Articles”) give the Directors power to appoint and replace Directors. Under the terms of reference of the Nomination Committee, any appointment must be recommended by the Nomination Committee for approval by the Board of Directors. The Articles also require Directors to retire and submit themselves for election at the first annual general meeting following appointment and all Directors who held office at the time of the two preceding annual general meetings, to submit themselves for re-election.
However, in accordance with the requirement under the UK Corporate Governance Code for annual election of Directors, all Directors, apart from Keith James, will submit themselves for re-election at the Group’s Annual General Meeting on 26 April 2012. Keith James, having served for 9 years as a Non-Executive Director, will be retiring from the Board at the forthcoming AGM and will not be submitting himself for re-election by shareholders.
In preparing each of the Group and Parent Company financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently
• for the Group financial statements, state whether they have been prepared in accordance with IFRS as adopted by the EU
Responsibility statement The Directors confirm that to the best of their knowledge: • The financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities and financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and
• The Group’s capital structure • Results and financial reporting • The maintenance and review of the system of internal control and risk management • The Group’s overall risk appetite • Changes to the structure, size and composition of the Board, including new appointments • Succession plans for the Board and senior management • Annual review of its own performance and that of its Board Committees • Key business policies in relation to health and safety and environmental matters • Dividend policy and proposals for dividend payments • Major acquisitions, disposals, and other transactions outside delegated limits • Review of the Group’s overall corporate governance arrangements
The Board met on eight occasions in 2011 with five of these meetings being held over two days. Two of the meetings were unscheduled Board meetings that were called at short notice. The Board also held a strategy day and visited its operations in Spain and the United States. The Chairman visits each of the Group’s overseas operations every year and Non-Executive Directors are invited to join either him or the Chief Executive on one or more of their overseas visits each year. In addition, the NonExecutive Directors and the Chairman met during the year without the Executive Directors being present. In order to increase their understanding of the operation of the Group below Board level, the Non-Executive Directors and the Chairman also attended a dinner with members of the Group’s senior management team without the Executive Directors being present.
The overall results of the evaluation were considered by the Chairman and the principal recommendations presented by him for review and discussion by the Board in February 2012. The evaluation concluded that good progress had been achieved in most of the areas identified for action in the last Board evaluation and that the Board and its Committees has continued to work very effectively in relation to most dimensions. Improvements have been seen in many of the areas of focus identified in the evaluation undertaken in 2010. These included the recruitment of two new Non-Executive Directors in response to forthcoming Non-Executive Director rotation as Directors reach their maximum term; and increased Board focus on the importance of effective succession planning and identifying talented individuals across the Group who have senior management potential.
• Whilst progress had been made in shifting the balance of Board consideration towards the strategic and away from the operational it was acknowledged that more time could be made available for in depth discussions on strategic issues and developments
Directors are expected to attend all meetings of the Board and the Committees on which they serve and to devote sufficient time to the Group to perform their duties. The number of scheduled Board meetings and Committee meetings of which they are a member attended by each Director during 2011 is provided in the table below.
The roles of the Chairman and Chief Executive The Board has approved a statement that sets out the clear division of responsibilities between the Chairman and the Chief Executive. The Chairman is primarily responsible for the leadership and workings of the Board, setting its agenda, and monitoring its effectiveness. The Chairman is not involved in the day-to-day management of the business. Save for matters reserved for decision by the Board, the Chief Executive, with the support of the other Executive Directors, is responsible for proposing the strategy to be adopted by the Group; the running of the business in accordance with the strategy agreed by the Board; and implementing specific Board decisions relating to the operation of the Group. The statement of division of responsibilities and matters reserved for decision by the Board were reviewed and approved in December 2011.
Board balance and independence The Board currently comprises thirteen Directors, the Chairman (who was independent on appointment), three Executive Directors, eight 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.
Although Colin Holmes holds, with Alastair Lyons, a cross-directorship in Bovis Homes Group PLC, the Board has determined that Colin Holmes remains independent in character and judgement and that his holding of a cross-directorship does not affect his ability to present an objective, rigorous and constructive challenge to the assumptions and viewpoints presented by management and the Board nor will it affect his time commitment to the role.
The Board considers eight of the Non-Executive Directors to be independent and is not aware of any relationships or circumstances which are likely to affect, or could appear to affect, the judgement of any of them. It is the view of the Board that the independent Non-Executive Directors are of sufficient calibre and number that their views carry significant weight in the Board’s decision making, and that they are free from any relationship or circumstance that could affect, or appear to affect, their independent judgement.
The Chairman performs a number of other NonExecutive roles outside the Group and details of these are included in the Chairman’s biography. The Board continues to be satisfied that these other commitments are not such as to interfere with the performance of his duties within the Group and will not impact on his ability to allocate sufficient time to discharge effectively his responsibilities to the Group.
John Sussens has been appointed as the Senior Independent Non-Executive Director. He is available to shareholders if they have concerns that contact through the normal channels of Chairman, Chief Executive, or Group 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, when appropriate.
In accordance with the requirement under the Code for annual election of Directors, all Directors, except Keith James, will be submitting themselves for re-election by shareholders at the forthcoming AGM. The Board is satisfied that all the Directors that are seeking election or re-election by shareholders are properly qualified for their appointment or reappointment by virtue of their skills and experience and their contribution to the Board and its Committees.
Professional development On appointment, Directors take part in a comprehensive induction programme where they receive financial and operational information about the Group; details concerning their responsibilities and duties; as well as an introduction to the Group’s governance, regulatory and control environment.
All shareholders are invited to attend the Company’s Annual General Meeting (AGM). The Chairmen of the Audit, Remuneration, Nomination and Risk Committees attends the AGM along with the other Directors and are available to answer shareholders’ questions on the activities of the Committees they chair. Shareholders are also invited to ask questions during the meeting and have an opportunity to meet with Directors after the formal business of the meeting has been concluded. Details of proxy voting by shareholders, including votes withheld, are made available on request and are placed on the Company’s website following the meeting.
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, and Nomination – all comply fully with the requirements of the Code. In December 2011 the Group announced its intention, with effect from 1 January 2012, to split the current remit of the Audit Committee into two with the establishment of a Group Risk Committee. The constitution and membership of the Risk Committee is set out below.
All Committees are chaired by an independent Director and exclusively comprise, or, in the case of the Nomination Committee (where the Chairman of the Board is a member) have a majority of, independent Directors. Appointments to the Committees are made on the recommendation of the Nomination Committee and are for a period of up to three years, which may be extended for two further three year periods, provided the Director remains independent. The Committees are constituted with written terms of reference that are reviewed annually to ensure that they remain appropriate and reflect any changes in good practice and governance. These terms of reference are available on request from the Company Secretary and can also be found on the Company’s website: www.admiralgroup.co.uk. Directors are fully informed of all Committee matters by the Committee Chairmen reporting on the proceedings of their Committee at the subsequent Board meeting. Copies of Committee minutes are also distributed to the Board. Committees are authorised to obtain outside legal or other independent professional advice if they consider it necessary. The Chairman of each Committee attends the Annual General Meeting to respond to any shareholder questions that might be raised on the Committee’s activities.
The Audit Committee Constitution and membership The membership at the end of the year was Martin Jackson (Chairman), Keith James, Margaret Johnson and Colin Holmes. In December 2011 the Group announced that, with effect from 1 January 2012, Colin Holmes would succeed Martin Jackson as Chair of the Audit Committee, with Martin becoming Chair of the newly constituted Group Risk Committee. Colin Holmes was appointed as a Non-Executive Director of the Company on 3rd December 2010 and joined the Audit Committee with effect from that date. Following this change the members of the Company’s Audit Committee are Colin Holmes, Martin Jackson, Keith James, Margaret Johnson and Annette Court (appointment subject to FSA approval).
The Company Secretary acts as Secretary to the Committee. The Committee meets at least three times per year and has an agenda linked to events in the Company’s financial calendar.
The Board considers that the members of the Committee have the appropriate competence and experience to carry out their duties and further considers that Colin Holmes (Committee Chairman), as a Chartered Management Accountant, has the appropriate recent and relevant financial experience having previously been the UK Finance Director for Tesco plc, and until 2010 a member of its Group Executive Committee.
Other individuals such as the Chief Financial Officer, Chief Operating Officer, Chief Executive, Chairman of the Board, the heads of Risk, Compliance, and Internal Audit and representatives of different parts of the Group may be invited to attend all or part of any meeting as and when appropriate. The external auditors are invited to attend meetings of the Committee on a regular basis.
Summary of key activities during 2011 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
The Committee undertakes an annual review to assess the independence and objectivity of the external auditors and the effectiveness of the audit process, taking into consideration relevant professional and regulatory requirements. Following this review the Committee concluded that the auditor, KPMG remained independent and was fit for purpose. It was agreed that a decision on whether to re-tender external audit should be reviewed at least every five years and, if deemed appropriate, a tender for external audit services would be carried out. In view of the high quality of service received by the Group; the fresh perspective provided by rotation of the audit engagement partner during the year and the continued competitiveness of their audit fee, the Committee
In 2011, the Committee approved the annual compliance review plan and received copies of the resulting reports. The Head of Compliance provided the Committee with quarterly Compliance Reports summarising activities. In addition, the Head of Risk provided the Committee with quarterly Risk Reports covering changes in key risk scores and providing details on any significant risk events. From 1 January 2012, the Group Risk Committee took over responsibility for review of the compliance activities and risk reports.
With effect from 1 January 2012, Martin Jackson moved from Audit Committee Chairman to Chairman of the Risk Committee, whose other members are Senior Independent Director, John Sussens, Executive Director, David Stevens and Non-Executive Director Annette Court (appointed subject to FSA approval).
The duties and responsibilities of the Risk Committee are set out in Terms of Reference that were approved by the Board in December 2011. The responsibilities of the Committee include: • Setting the standard for the Group’s risk framework, which includes the Risk Management Committees that are established within each of the Group’s operational entities; • Monitoring the Group’s prudential risk exposure, which includes ensuring that the Group’s capital resources and liquidity profile are appropriate to its needs whilst meeting minimum regulatory requirements; • Ensuring the adequacy and effectiveness of the Group’s systems and controls for the prevention of financial crime; • Monitoring the adequacy and effectiveness of the Group’s Compliance functions; and
The Nomination Committee The membership at the year-end was Keith James (Chairman), Lucy Kellaway, and Alastair Lyons. The Company Secretary acts as Secretary to the Committee. The Committee invites the Chief Executive to attend meetings when it deems appropriate. The Committee met on three occasions during 2011.
During 2011, as part of the Board’s commitment to review the size of the Board and the balance of its composition and having regard to the length of service of some of the existing Board members, the Board decided to initiate a search for two additional Non-Executive Directors. 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 appropriate specifications for these roles identifying the need for the successful candidates to have between them both insurance and overseas business experience. The Committee used external consultants to advise on the identification and suitability of potential candidates. All candidates were interviewed by members of the Committee. Following this process the Committee unanimously recommended to the Board that Roger Abravanel, having the required overseas business experience, should be appointed to the Board. Annette Court was separately identified by the Committee as a strong candidate given her extensive insurance business experience. All members of the Committee interviewed her and recommended to the Board that she should be appointed to the Board.
The Board approved the Committee’s recommendation and Roger Abravanel was formally appointed to the Board on 6 March 2012. The appointment of Annette Court is subject to FSA approval.
The process of identifying and managing talent across the Group was discussed in detail by the Board at its meeting in February 2012. A presentation by the Executive team identifying key individuals within the organisation who could, with appropriate training and development, succeed, at the appropriate time, to senior management positions was considered.
The Committee is mindful of the recommendations made by Lord Davies in his report: Women on Boards. The Chairman announced in August 2011 that the Group strongly supports 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.
The Group already has strong female representation in both management and at Board level. 42% of our senior managers are women, and on our Executive Committees women comprise 30% of that for the UK and 42% for our International operations. In addition, of the total employees in the UK, 48% are women. The proportion that women constitute of our plc Board is currently 23%, however, following the retirement of Keith James as a Non-Executive Director in April 2012, the Group will already have met the 25% target set for 2015 by Lord Davies. The Group remains committed to providing equal opportunities, eliminating discrimination and encouraging diversity amongst its workforce both in the UK and overseas.
Remuneration Committee The membership at the year-end was John Sussens (Chairman), Martin Jackson, Margaret Johnson and Colin Holmes. The Company Secretary acts as Secretary to the Committee. The Committee invites the Chief Executive and Chairman to attend meetings where it deems appropriate.
• Recommended for approval individual remuneration packages for Executive Directors, and the Company Secretary
• Reviewed the rules and performance measures of the Group share schemes and recommended for approval the grant, award, allocation or issue of shares under such schemes.
A separate Remuneration report is included within the Report and Accounts.
During the year the Committee purchased consultancy services from Kepler Associates. In addition, the Company Secretary circulates market survey results as appropriate to enable the Committee to make judgments on the levels of remuneration appropriate for the Directors and to review the remuneration of the Group’s senior Executives. PricewaterhouseCoopers (PwC) also provided advice on the structure of the Group’s share plans during the year.
Internal control and risk management The Board is ultimately responsible for the Group’s system of internal control and, through the Audit Committee, has reviewed the effectiveness of these systems. The systems of internal control over business, operational, financial, and compliance risks are designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss.
The Board is of the view that there is an ongoing process for identifying, evaluating and managing the Group’s internal controls; that it has been in place for the year ended 31 December 2011; and that, up to the date of approval of the annual report and accounts, it is regularly reviewed by the Board and accords with the internal control guidance for Directors provided in the Code.
A key element of the control system is that the Board meets regularly with a formal schedule of matters reserved to it for decision and has put in place an organisational structure with clearly defined lines of responsibility. In order to ensure these responsibilities are properly discharged, the Board has delegated the task of executive supervision of risk management and internal control to the Group Risk Committee, which was established on 1 January 2012. The work of the Group Risk Committee is supported by the UK Risk Management Committee (RMC) and appropriate management Committees for the Group’s other UK and overseas entities.
There are several key elements to the risk management environment throughout the Group. These include the setting of risk management strategy and policy by the Risk Committee; enforcement of that policy by the Chief Executive; delivery of the policy by the RMC and the Group’s other UK and overseas entities by the application of the Group’s systems of internal control and risk management; and the overall assurance provided by the Audit Committee that the systems operate effectively. The Board recognises that the day-to-day responsibility for implementing these policies must lie with the Senior Management whose operational decisions must take into account risk and how this can be controlled effectively. The Risk Committee will report on its activities to the Audit Committee as part of the overall assurance provided by the Audit Committee that the systems operate effectively.
Internal Audit uses the risk registers to plan and inform their programme of audits around the most significant risks to the Group to ensure that the described controls are in place and are operating effectively.
Going concern The financial statements have been prepared on a going concern basis. In considering the appropriateness of this assumption, the Board has reviewed the Group’s projections for the next twelve months, including cash flow forecasts and regulatory capital surpluses. The Group has no debt.
Scope of Report This Remuneration report has been prepared according to the requirements of the Companies Act 2006 (the Act), the Listing Rules of the UK Listing Authority and under Regulation 11 of and Schedule 8 to the Large and Medium Sized Companies and Groups (Accounts and Reports) Regulations 2008 (the Regulations). In addition, the Board has applied the principles of good corporate governance set out in the UK Corporate Governance Code (the ‘Governance Code’), and has considered the guidelines issued by its leading shareholders and bodies such as the Association of British Insurers and the National Association of Pension Funds. The purpose of this report is to set out the Group’s remuneration policy and particularly its application with respect to the Directors.
Remuneration Committee The Board sets the Group’s remuneration policy and, through the authority delegated to it by the Board, the Committee is responsible for making recommendations to the Board on the structure and implementation of the remuneration policy across the Group with consideration to the prevailing economic climate within the economies in which the Group operates. Its remit includes recommending the remuneration of the Chairman, the Executive Directors and the Company Secretary; reviewing the remuneration of senior management; and reviewing the composition of and awards made under the performance-related incentive schemes.
The Committee presents a summary of its principal activities to shareholders through this Remuneration report, and the Committee Chairman attends the AGM to answer questions from shareholders on the activities of the Committee and its remuneration policies.
Composition The Committee is appointed by the Board and comprises only Non-Executive Directors. The Committee is chaired by John Sussens, the Senior Independent Non-Executive Director, with the other members being Martin Jackson, Margaret Johnson and Colin Holmes. The Chairman and Chief Executive are invited to meetings where the Committee considers it appropriate to obtain their advice on Group strategy and performance and Senior Executive pay strategy.
• Reviewing and authorizing the grant of awards under both DFSS and SIP plans
Remuneration Policy The Group is committed to the primary objective of maximizing shareholder value over time whilst at the same time ensuring that there is a strong link between performance and reward. This is reflected in the Group’s stated remuneration policy of paying competitive, performance linked and shareholder aligned remuneration packages comprising basic salaries coupled with participation in performancebased share schemes to generate competitive total reward packages for superior performance. The Board is satisfied that the adoption of this policy continues to meet the objectives of attracting and retaining Executives of the highest quality across the Group.
The Committee reviews the framework and remuneration packages of the Executive Directors and the most senior managers and recognises the need to ensure that the remuneration policy is firmly linked to the Group’s strategy including its risk management philosophy and given this approach, the main principles underlying the remuneration policy are: • Competitive – The Group aims to combine salaries with attractive performance-related incentives, which provide individuals with the potential for competitive total reward packages for superior performance. Accordingly, 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
The Group operates the following benefits: • Death in Service scheme, which provides cover of three times salary to all UK employees following completion of their probationary period
• Group Personal Pension Plan, matching employee contributions up to a maximum 6% of base salary with maximum employer contribution of £9,000. This is available to all employees following completion of their probationary period. (Kevin Chidwick is included in the plan and is subject to the maximum employer contribution limit of £9,000. Henry Engelhardt and David Stevens have declined to be included in the plan)
• Approved Free Share Incentive Plan (SIP). The SIP is available to all UK staff (Henry Engelhardt and David Stevens have declined to be included in the plan). The maximum annual award under the SIP is £3,000 per employee. Shares awarded under the SIP are forfeited if the employee leaves within three years of the award. Awards are made twice a year, based on the results of each half-year. Overseas staff receive an award under the Discretionary Free Share Scheme equivalent to the SIP award made to UK employees
Of the Group’s current Executive Directors, only Kevin Chidwick (Chief Financial Officer) participates in this scheme, as Henry Engelhardt and David Stevens have declined to be included.
The performance criterion to determine how many shares vest under the DFSS is the growth in earnings per share (EPS) in excess of a risk free return, defined as average 3-month LIBOR, over a threeyear period. The Committee feels that this is a good indicator of long-term shareholder return with which to align staff incentivisation. The Committee recommends for approval by the Board awards to the Chief Financial Officer and other employees under the DFSS.
The Committee reviewed the performance targets contained within the DFSS scheme and agreed that the criteria based on earnings per share measured against LIBOR continued to represent a challenging and appropriate target.
For the Chief Financial Officer, all share awards are subject to the above performance criteria.
For staff below Group Board level awards will be split. 50% of the award will be subject to the above performance criteria. The other 50% will have no performance criteria attaching other than the requirement that the recipient is an employee of the Group at the date of vesting. The change was made in order to assist the group to attract and retain high calibre staff by providing more certainty over the outcome of vesting awards.
The Committee aims to ensure that the overall remuneration of the Chief Financial Officer, Kevin Chidwick, is a fair reflection of his role and responsibilities, and is designed to reward achieving increases in shareholder value.
There are three main elements to the Chief Financial Officer’s remuneration package: 1) Basic annual salary With effect from 1 October 2011 Kevin Chidwick’s base salary was increased broadly in line with UK inflation by 5% to £420,000. The Committee considered that the increase in Kevin Chidwick’s base salary was justified given his performance during the year as CEO of Confused.com, the Group’s price comparison business, the effective manner in which he has maintained his responsibilities as Chief Financial Officer and his contribution to the Group in a wider context across a number of areas.
2) Awards under the DFSS Kevin Chidwick received an award of 50,000 DFSS shares on 15 April 2011 with a value at the date of the award of £809,500. The awards represent the maximum number of shares that could vest after a three-year period and are subject to the performance criteria described above.
3) DFSS bonus Consistent with other holders of unvested DFSS awards, Kevin Chidwick received a bonus calculated to be equivalent to dividends that would have been payable during the year on DFSS shares awarded but not vested. In 2011 these bonuses totalled £106,000 (2010: £80,000).
There is no provision in the Executive Directors’ contracts for compensation to be payable on early termination of their contract over and above the notice period element.
Executive Directors’ remuneration Two of the three Executive Directors (Henry Engelhardt and David Stevens) are founding Directors. They and the Committee continue to hold the view that the significant shareholdings held by them, as set out below, provide a sufficient alignment of their interest in the performance of the Group with the interests of other shareholders.
In light of this, their remuneration packages consist only of a modest base salary (compared to market rates as assessed by the Committee) and benefits such as private medical cover, permanent health insurance and death in service cover. The Group does not contribute to any pension arrangements on behalf of these Executive Directors, and they have not participated, nor is it intended that they participate, in any Group share schemes. Their remuneration was reviewed during the year. Henry Engelhardt was awarded a rise of 4.3% taking his salary to £365,000 with effect from 1 July 2011. David Stevens was awarded a rise of 4.5% to £345,000 with effect from 1 September 2011.
The Company has entered into letters of appointment with its Non-Executive Directors. Summary details of terms and notice periods are included below.
The fee structure for Non-Executive Directors was reviewed in 2011. It was agreed that given the increased time commitment and preparation involved of having an additional Board meeting in 2012 the base fee should be increased by £5,000 to the figure as set out below: Base fee 50,000 Plus: Member of Audit Committee 12,000 Member of Risk Committee 12,000 Senior Independent Director 5,000 Chair of Audit Committee 20,000 Chair of Risk Committee 20,000 Chair of Nomination Committee 5,000 Chair of Remuneration Committee 5,000
Non-Executive Directors do not have service contracts but each has a letter of appointment. The letters of appointment all require a period of one month’s notice should the Non-Executive Director wish to resign. These letters of appointment are available for inspection at the Company’s registered office during normal business hours and at the Annual General Meeting.
Total Shareholder Return (TSR) The following graph sets out a comparison of Total Shareholder Return for Admiral Group plc shares with that of the FTSE 100 Index, of which the Company is a constituent. The graph measures the period from 1 January 2007 up to 31 December 2011. TSR is defined as the percentage change over the period, assuming reinvestment of income.
Executive Directors Kevin Chidwick* 72,870 50,067 Henry Engelhardt** 39,313,565 40,490,720 David Stevens 10,534,450 10,234,000 Chairman and Non-Executive Directors Alastair Lyons 492,152 562,152 Manfred Aldag 1,919 – Colin Holmes 40,000 – Martin Jackson – – Keith James 46,150 44,500 Margaret Johnson – – Lucy Kellaway – – John Sussens 60,000 8,000
In this section: 53 Consolidated income statement 54 Consolidated statement of comprehensive income 55 Consolidated statement of fi nancial position 56 Consolidated cash fl ow statement 57 Consolidated statement of changes in equity 58 Notes to the fi nancial statements 82 Parent Company fi nancial statements 83 Notes to the Parent Company fi nancial statements
• 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
Under the Listing Rules we are required to review: • the Directors’ statement, set out on page 45, in relation to going concern; • the part of the Corporate Governance Statement on pages 37-45 relating to the company’s compliance with the nine provisions of the UK Corporate Governance Code specified for our review and
Salim Tharani (Senior Statutory Auditor) for and on behalf of KPMG Audit Plc, Statutory Auditor Chartered Accountants 3 Assembly Square Britannia Quay Cardiff Bay Cardiff CF10 4AX
Profit for the period 221.3 193.6 Other comprehensive income Exchange differences on translation of foreign operations (1.0) (0.8) Other comprehensive income for the period, net of income tax (1.0) (0.8) Total comprehensive income for the period 220.3 192.8
Cash and cash equivalents 17, 20 224.6 246.7 Assets held for sale – 1.5 Total assets 2,614.9 1,766.7
Profit after tax 221.3 193.6 Adjustments for non-cash items: – Amortisation of software 3.3 2.7 – Change in unrealised gains on investments (1.9) (1.3) – Other gains and losses 0.9 0.9 – Share scheme charge 24 23.6 18.5 Change in gross insurance contract liabilities 527.1 273.7 Change in reinsurance assets (282.8) (144.0) Change in trade and other receivables, including from policyholders (88.4) (152.9) Change in trade and other payables, including tax and social security 292.1 254.3 Taxation expense 77.8 71.9 Cash flows from operating activities, before movements in investments 779.1 522.0 Net cash flow into investments (493.9) (240.8) Cash flows from operating activities, net of movements in investments 285.2 281.2 Taxation payments (95.3) (69.5) Net cash flow from operating activities 189.9 211.7
Cash flows from financing activities: Capital element of new finance leases 1.0 0.4 Repayment of finance lease liabilities (0.3) (0.6) Equity dividends paid 13 (198.8) (164.7) Net cash used in financing activities (198.1) (164.9)
Profit for the period – – – 193.8 (0.2) 193.6 Other comprehensive income Currency translation differences – – (0.8) – – (0.8) Total comprehensive income for the period – – (0.8) 193.8 (0.2) 192.8 Transactions with equity-holders
Share scheme credit – – – 18.5 – 18.5 Deferred tax charge on share scheme credit – – – 3.3 – 3.3 Total transactions with equity-holders – – – (142.9) – (142.9)
Profit for the period – – – 221.2 0.1 221.3 Other comprehensive income Currency translation differences – – (1.0) – – (1.0) Total comprehensive income for the period – – (1.0) 221.2 0.1 220.3 Transactions with equity-holders
Notes to the financial statements continued 1. General information and basis of preparation General information Admiral Group plc is a Company incorporated in England and Wales. Its registered office is at Capital Tower, Greyfriars Road, Cardiff CF10 3AZ and its shares are listed on the London Stock Exchange.
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 2011 and comparative figures for the year ended 31 December 2010. 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. The Parent Company financial statements present information about the Company as a separate entity and not about its Group. In accordance with International Accounting Standard (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.
IFRS 7, and IAS 32 • IFRIC interpretation 20: Stripping costs in the production phase of a surface mine
In addition, none of the standards or interpretations adopted for the first time in the year have had a material impact on the consolidated financial results or position of the Group for the year ended 31 December 2011.
Further information regarding the company’s business activities, together with the factors likely to affect its future development, performance and position, is set out in the Business review on pages 11-26. Further information regarding the financial position of the company, its cash flows, liquidity position and borrowing facilities are described in the Business review on pages 11-26. In addition note 17 to the financial statements includes the company’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments; and its exposures to credit risk and liquidity risk.
Estimation techniques used in calculation of claims provisions: Estimation techniques are used in the calculation of the provisions for claims outstanding, which represent a projection of the ultimate cost of settling claims that have occurred prior to the balance sheet date and remain unsettled at the balance sheet date.
3. Significant accounting policies a) Revenue recognition Premiums, ancillary income and profit commission: 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 on deferred revenue are recognised within policyholder receivables.
Revenue earned on the sale of ancillary products and revenue from policies paid by instalments 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 ancillary amounts charged.
Under some of the co-insurance and reinsurance contracts under which motor premiums are shared or ceded, profit commission may be earned on a particular year of account, which is usually subject to performance criteria such as loss ratios and expense ratios. The commission is dependent on the ultimate outcome of any year, with revenue being recognised when loss and expense ratios used in the preparation of the financial statements, move below an agreed threshold.
Co-insurance: The Group has entered into certain co-insurance contracts under which insurance risks are shared on a proportional basis, with the co-insurer taking a specific percentage of premium written and being responsible for the same proportion of each claim. As the contractual liability is several and not joint, neither the premiums nor claims relating to the co-insurance are included in the income statement. Under the terms of these agreements the coinsurers reimburse the Group for the same proportionate share of the costs of acquiring and administering the business.
Reinsurance assets: Contracts entered into by the Group with reinsurers under which the Group is compensated for losses on the insurance contracts issued by the Group are classified as reinsurance contracts. A contract is only accounted for as a reinsurance contract where there is significant insurance risk transfer between the insured and the insurer.
(iii) All resulting exchange differences are recognised in other comprehensive income and in a separate component of equity.
Impairment of goodwill: The annual impairment review involves comparing the carrying amount to the estimated recoverable amount (by allocating the goodwill to CGU’s) and recognising an impairment loss if the recoverable amount is lower. Impairment losses are recognised through the income statement and are not subsequently reversed.
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.
i) Share capital Shares are classified as equity when there is no obligation to transfer cash or other assets.
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 cashflows arising from the asset.
Admiral Group plc Annual Report 2011 63 4. Operating segments The Group has 4 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.
Price Comparison The segment relates to the Group’s price comparison websites Confused in the UK, Rastreator in Spain, LeLynx in France and Chiarezza in Italy. Each of the Price Comparison businesses are operating in individual geographical segments but are grouped into one reporting segment as LeLynx, Chairezza and Rastreator do not individually meet the threshold requirements in IFRS 8.
Other The ‘other’ segment is designed to be comprised of all other operating segments that do not meet the threshold requirements for individual reporting. Currently there is only one such segment, the Gladiator commercial van insurance broking operation, and so it is the results and balances of this operation comprises the ‘other’ segment.
Interest income 2.9 Consolidated profit before tax 299.1 Taxation expense (77.8) Consolidated profit after tax 221.3 Other segment items: *Turnover is a non-GAAP measure and consists of total premiums written (including co-insurers share) and other revenue.
Revenue and results for the corresponding reportable segments for the year ended 31 December 2010 are shown below.
Net insurance premium revenue 269.4 18.7 – – – 288.1 Other revenue and profit commission 249.0 6.7 75.7 11.8 – 343.2 Investment and interest income 8.3 0.1 – – – 8.4
The segment assets and liabilities at 31 December 2010 are as follows.
Total motor insurance premiums before co-insurance 1,841.3 1,308.6 Group gross premiums written after co-insurance 1,128.4 738.5 Outwards reinsurance premiums (622.0) (380.0) Net insurance premiums written 506.4 358.5 Change in gross unearned premium provision (168.7) (163.9) Change in reinsurers’ share of unearned premium provision 108.1 93.5 Net insurance premium revenue 445.8 288.1
Ancillary revenue 223.3 174.6 Price comparison revenue 90.4 75.7 Other revenue 35.3 25.9 Total other revenue 349.0 276.2
Total profit commission 61.8 67.0 8. Investment and interest income 31 December 2011 £m 31 December £m
Net investment return 10.8 8.4 Interest receivable 2.9 1.1 Total investment and interest income 13.7 9.5
Acquisition of insurance contracts 36.2 – 36.2 20.9 – 20.9 Administration and other marketing costs 26.7 125.9 152.6 28.0 102.9 130.9
Ancillary sales expenses 33.8 26.9 Price comparison operating expenses 79.9 63.6 Other expenses 12.2 12.4
The £26.7m (2010: £28.0m) administration and marketing costs allocated to insurance contracts is principally made up of salary costs.
Gross expenses 369.9 333.2 Co-insurer share of expenses (77.9) (99.5) Expenses, net of co-insurer share 292.0 233.7 Adjustment for deferral of acquisition costs (11.0) (7.9) Expenses, net of co-insurer share (earned basis) 281.0 225.8 Reinsurer share of expenses (earned basis) (73.6) (59.0) Total expenses and share scheme charges 207.4 166.8
10. Staff costs and other expenses Included in gross expenses, before co-insurance arrangements, are the following: 31 December £m 31 December £m
Current tax: Corporation tax on profits for the year 80.3 87.4 Over provision relating to prior periods (3.2) (0.7) Current tax charge 77.1 86.7
Deferred tax: Current period deferred taxation movement (0.8) (15.3) Under provision relating to prior periods – deferred tax 1.5 0.5 Total tax charge per income statement 77.8 71.9
Profit before tax 299.1 265.5 Corporation tax thereon at effective UK corporation tax rate of 26.5% (2010: 28%) 79.3 74.3 Expenses and provisions not deductible for tax purposes 0.1 (0.1) Difference in tax rates 0.5 0.2 Adjustments relating to prior periods (1.7) (0.1) Other differences (0.4) (2.4) Total tax charge for the period as above 77.8 71.9 13. Dividends Dividends were declared and paid as follows.
March 2010 (29.8p per share, paid April 2010) – 78.3 September 2010 (32.6p per share, paid October 2010) – 86.4 March 2011 (35.5p per share, paid May 2011) 94.5 – August 2011 (39.1p per share, paid October 2011) 104.3 – Total dividends 198.8 164.7
Profit for the financial year after taxation (£m) 221.2 193.6 Weighted average number of shares – basic 269,903,301 267,827,176 Unadjusted earnings per share – basic 81.9p 72.3p Weighted average number of shares – diluted 270,782,526 268,221,829 Unadjusted earnings per share – diluted 81.7p 72.2p
The difference between the basic and diluted number of shares at the end of 2011 (being 879,225; 2010: 394,653) relates to awards committed, but not yet issued under the Group’s share schemes. Refer to note 24 for further detail.
Cost: Transferred to ‘assets classified as held for sale’ (0.5) (1.2) (0.4) (0.2) (2.3)
Net book amount: Net book amount: Cost: Depreciation: Disposals – – – – –
The net book value of assets held under finance leases is as follows: 2011 £m £m
The maturity profile of financial assets and liabilities at 31 December 2010 was as follows: On demand £m
To mitigate the risk arising from exposure to reinsurers (in the form of reinsurance recoveries and profit commissions), the Group only conducts business with companies of specified financial strength ratings. In addition, most reinsurance contracts are operated on a funds withheld basis, which substantially reduces credit risk.
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 2011 or 2010.
Financial institutions – Money market funds AAA 862.1 363.6 Financial institutions – Credit institutions AA 178.2 252.6 Financial institutions – Credit institutions A 98.0 47.0 Financial institutions – Credit institutions BBB 20.8 –
The funds are not permitted to have an average maturity greater than 60 days and hence are not subject to large movements in yield and value resulting from changes in market interest rates (as longer duration fixed income portfolios can experience). Returns are likely to closely track the LIBID benchmark and hence while the Group’s investment return will vary according to market interest rates, the capital value of these investment funds will not be impacted by rate movements. The interest rate risk arising is therefore considered to be minimal.
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.
A breakdown of the Group’s financial liabilities – trade and other payables is shown in note 21. In terms of the maturity profile of these liabilities, all amounts will mature within 3 – 6 months of the balance sheet date except for a minority of finance lease liabilities which will expire after 12 months. (Refer to note 22 and the maturity profile at the start of this note for further detail.)
Foreign exchange risks: Foreign exchange risks arise from unfavourable movements in foreign exchange rates that could adversely impact the valuation of overseas assets.
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 prudent buffer against unforeseen events. This policy gives the Directors flexibility in managing the Group’s capital.
18. Reinsurance assets and insurance contract liabilities a) 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.
A number of the key elements of these policies and procedures are detailed below: i) Co-insurance and reinsurance: As noted in the Business review, the Group cedes a significant amount of the motor insurance business generated to external underwriters. In 2011, 40% of the UK risk was shared under a co-insurance contract, under which the primary risk is borne by the co-insurer. A further 32.5% of the UK risk was ceded under quota share reinsurance contracts.
The Directors believe that there is a strong link between the increase in depth of data that the Group has been able to collate over time and the lower than average historic reported loss ratios enjoyed by the Group.
Admiral Group plc Annual Report 201174 iii) Effective claims management: The Group adopts various claims management strategies designed to ensure that claims are paid at an appropriate level and to minimise the expenses associated with claims management. These include: • An effective, computerised workflow system (which along with the appropriate level of resources employed helps reduce the scope for error and avoids significant backlogs); • Use of an outbound telephone team to contact third parties aiming to minimise the potential claims costs and to ensure that more third parties utilise the Group approved repairers; • Use of sophisticated and innovative methods to check for fraudulent claims.
Concentration of insurance risk: The Directors do not believe there are significant concentrations of insurance risk. This is because, although the Group only writes one line of insurance business, the risks are spread across a large number of people and a wide regional base.
Admiral Group plc Annual Report 2011 75 d) Analysis of UK claims incurred: The following tables illustrate the development of net UK Car Insurance claims incurred for the past 5 financial periods, including the impact of re-estimation of claims provisions at the end of each financial year. The first table shows actual net claims incurred, and the second shows the development of UK loss ratios. Figures are shown net of reinsurance and are on an underwriting year basis.
Underwriting year (UK only): e) Analysis of net claims provision releases (UK business only): The following table analyses the impact of movements in prior year claims provisions, in terms of their net value, and their impact on the reported loss ratio. This data is presented on an underwriting year basis.
Underwriting year: Release as % of UK net premium revenue 21.0% 23.5% 15.7% 8.7% 2.5%
Net unearned premium provision at start of period 180.6 110.6 Written in the period 506.4 358.5 Earned in the period (440.0) (288.5) Net unearned premium provision at end of period 247.0 180.6 19. Trade and other receivables 2011 £m £m
Trade receivables 51.1 47.9 Prepayments and accrued income 1.0 – Total trade and other receivables 52.1 47.9 20. Cash and cash equivalents 2011 £m £m
Cash at bank and in hand 224.6 246.7 Total cash and cash equivalents 224.6 246.7
Cash and cash equivalents includes cash in hand, deposits held at call with banks, and other short-term deposits with original maturities of 3 months or less.
Premium receivable in advance of policy inception 110.1 82.3 Accrued expenses 55.8 46.2 Deferred income 25.4 15.4 Total accruals and deferred income as above 191.3 143.9
Admiral Group plc Annual Report 2011 77 22. Obligations under finance leases Analysis of finance lease liabilities: At 31 December 2011 At 31 December 2010
Less than one year 0.9 – 0.9 – – – Between one and five years – – – 0.2 – 0.2 More than five years – – – – – –
Tax treatment of share scheme charges (3.6) (6.9) Capital allowances (1.5) (1.3) Other differences (5.2) (4.2) Deferred tax (asset) at end of period (10.3) (12.4)
The UK corporation tax rate reduced from 28% to 26% on 1 April 2011. It is expected to fall to 25% on 1 April 2012. Deferred tax has therefore been calculated at 25% where the temporary difference is expected to reverse after this date.
Admiral Group plc Annual Report 201178 24. Share capital 2011 £m £m
During 2011 2,217,350 (2010: 2,094,434) new ordinary shares of 0.1p were issued to the trusts administering the Group’s share schemes.
1,500,000 (2010: 1,500,000) were issued to the Admiral Group Employee Benefit Trust for the purposes of the Discretionary Free Share Scheme. The Trustees have waived the right to dividend payments, other than to the extent of 0.001p per share, unless and to the extent otherwise directed by the Company from time to time.
The share scheme charges reported above are net of the co-insurance share and therefore differ from the gross charge reported in note 10 (2011: £23.6m, 2010: £18.5m) and the gross credit to reserves reported in the consolidated statement of changes in equity.
(i) The Approved Share Incentive Plan (the SIP): Eligible employees qualify 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.
(ii) The Discretionary Free Share Scheme (the DFSS): Under the DFSS, details of which are contained in the Remuneration policy section of the Remuneration report, individuals receive an award of free shares at no charge. Staff must remain in employment until the vesting date in order to receive shares. The maximum number of shares that can vest relating to the 2011 scheme is 1,791,234 (2010 scheme: 1,662,303).
Number of free share awards committed at 31 December 2011: Awards outstanding
SIP H208 scheme 477,432 April 2012 SIP H109 scheme 396,200 September 2012 SIP H209 scheme 377,641 March 2013 SIP H110 scheme 352,100 August 2013 SIP H210 scheme 346,590 March 2014 SIP H111 scheme 489,060 September 2014 DFSS 2009 scheme 1st award 1,313,865 April 2012 DFSS 2009 scheme 2nd award 127,020 August 2012 DFSS 2010 scheme 1st award 1,542,453 April 2013 DFSS 2010 scheme 2nd award 120,951 August 2013 DFSS 2011 scheme 1st award 1,634,032 April 2014 DFSS 2011 scheme 2nd award 157,202 September 2014 Total awards committed 7,334,546 *1 – being the maximum number of awards expected to be made before accounting for expected staff attrition.
During the year ended 31 December 2011, awards under the SIP H207 and H108 schemes and the DFSS 2008 scheme vested. The total number of awards vesting for each scheme is as follows.
Admiral Group plc Annual Report 201180 25. Financial commitments The Group was committed to total minimum obligations under operating leases on land and buildings as follows: Operating leases expiring: £m £m
In addition, the Group had contracted to spend the following on property and equipment at the end of each period: £m £m
Admiral Group plc Annual Report 2011 81 27. Related party transactions a) Mapfre: In 2011, the Group participated in transactions with Mapfre S.A. during the normal course of its International Car Insurance and Price Comparison operations. Mapfre is a related party of Admiral Group due to its 25% minority interest in Group subsidiary Rastreator.com Limited. Details of the total transactions with Mapfre and balances outstanding as at 31 December are given in the table below.
Total transactions 0.7 0.3 Balances outstanding at 31 December 0.1 –
b) Other: Details relating to the remuneration and shareholdings of key management personnel are set out in the Remuneration report (audited section). 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%.
Fixed assets – investments Shares in group undertakings 5 142.5 125.0 Other investments 35.0 10.0 Current assets Cash at bank and in hand 54.7 101.4
Net current (liabilities)/assets (9.1) 11.0 Total assets less current liabilities 168.4 146.0
These financial statements were approved by the Board of Directors on 6 March 2012 and were signed on its behalf by: Kevin Chidwick Director: Admiral Group plc
Refer to note 27 of the Consolidated financial statements for disclosure of related party transactions.
Admiral Group plc Annual Report 201184 5. Shares in Group undertakings £m
A full list of the Company’s subsidiaries is disclosed in note 26 of the Group financial statements.
Trade payables and other liabilities 0.1 0.2 Deferred income tax – – Corporation tax payable 49.3 41.9 Amounts owed to subsidiaries 14.4 48.3 7. Reconciliation of movements in shareholders’ funds Company figures
Issues of share capital – – – – Share scheme charges – – 18.5 18.5
Issues of share capital – – – – Share scheme charges – – 23.6 23.6 8. Share capital Full details of the Company’s share capital are included in the consolidated financial statements above.
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