Governance and Remuneration 16 UK car insurance 21 Price comparison 23 Non-UK car insurance 26 Other Group items 27 Investments & cash 30 Employees and customers 56 Independent auditors report 58 Consolidated income statement 59 Consolidated balance sheet 60 Consolidated statement of recognised income and expenses 61 Consolidated cash flow statement 62 Notes to the financial statements 99 Consolidated financial summary 100 Admiral Group plc parent company financial statements 48 The Admiral Group plc board 50 Directors’ Report 34 Corporate governance 42 Remuneration report
• We are the third largest private car insurer in the UK, insuring 1.6m cars across our four brands. We grew by 15% in 2008
• We sell through direct channels (telephone and internet) and increasingly via comparison websites
• Ancillary contribution per vehicle up to £70.7 from £69.0 *Turnover (a non-GAAP measure) comprises total premiums written and other revenue
• Launched in 2002, Confused.com is the UK’s leading car insurance comparison website • Confused also offers a comparison service for household insurance, along with a range of other insurance and financial products • The UK market experienced fierce competition in 2008 – TV and press spend by the industry increased by approximately 50% • Confused rebuilt and re-launched its website at the end of 2008 and also began a new media campaign • New Spanish comparison website, Rastreator.es to launch in 2009
• We have launched three new direct car insurance businesses over the past three years • Our aim is to build profitable, sustainable businesses, leveraging our knowledge of the UK car insurance market • Pleasing progress to date, though challenges experienced in each new market • Aiming to launch a US car insurer in late 2009 / early 2010 2008 Performance: Volumes • Number of customers increased 57% to 73,700 from 46,900
• Total Group cash and financial investments increased 13% to £555m, investment and interest income steady at £24m
• Investment strategy remains very cautious – no write-offs in our portfolios
Amid all the market turbulence it is pleasing to be able to report another year of sustained growth in turnover, profits, and dividend. Also that in the gloom of widespread job losses Admiral has been able to create 326 new jobs in Wales over the past 12 months, not to mention 290 posts outside the UK. 2008, therefore, marked another year of successfully advancing our strategy, being to grow our share of the UK private motor market and exploit the knowledge, skills and resources attaching to our core business to promote our expansion overseas and our position in price comparison.
The upward trend in pricing that started to emerge a year ago has been sustained during 2008. As Henry Engelhardt discusses more fully in his CEO’s report, we increased our rates by around 4%, generally in line with the market as a whole, whilst claims frequency continued to fall. Our established reserving methodology under which we make a prudent assessment of claims in their early stages engendered further significant releases as these prior year claims aged.
In my statement last year I underlined the rapid growth of competition in car insurance price comparison.
Admiral has been able to create 32� new jobs in Wales over the past 12 months.
With another enormous increase in marketing expenditure in this sector, it was inevitable that the market share held historically by Confused would reduce, albeit that the overall market has continued to expand rapidly, growing by an estimated 60% in 2008. In determining how much to commit ourselves we sought to balance our margin of profitability and defence of our leadership position. Across 2008 as a whole Confused’s turnover held broadly steady, being down 4% on the year, but at a significantly higher marketing cost such that Confused profits fell from £37 million to £26 million. Price comparison now accounts for 38% of the private motor market, up from 24% in 2007, and shows no sign of stopping its growth which is good news both for Confused and for the Admiral brands, for which it represents the principal source of new business. We would, however, anticipate that this sector will remain highly competitive whilst some players continue to be prepared to incur losses to attempt to build share.
With a very prudent investment philosophy, only employing cash deposits or money market funds, it was inevitable that the sharp fall in general interest rates should have had an equivalent impact on our investment income. 100% of our, and our policyholders’, money was, however, secure.
This year our normal dividend amounted to 24.7p per share, and our special to 27.8p per share, bringing to £220m the total we have declared as special dividends since flotation in September 2004, this being in addition to £215m normal dividends over the same period. Total dividends for the year, therefore, amounted to 52.5p per share, a 20% increase on last year, representing a yield of 6.1% based on the closing share price on 27 February 2009.
I would like to take this opportunity to extend the thanks of the Board to everyone who has contributed to another successful year – our staff at home and overseas; our Board, executive and non-executive; our suppliers; and above all our 1.7 million customers, whose satisfaction through great products and great service will provide the basis of our continuing success.
Our strategy is rather simple: continue our profitable growth in the UK and take what we know and do well and do it elsewhere. Henry Engelhardt, CBE
At the end of 2008 the market capitalisation of Admiral Group was almost twice that of General Motors. Funny year 2008!
Freight Train Gaining Speed The aforementioned freight train is our UK direct business. We continue to grow the number of customers we serve, premium income, ancillary revenues and, not surprisingly, our profits. The number of vehicles we insure in the UK grew by 15% in 2008. 15%! The profits increased from £142m to £180m. Other signs of our excellent performance here are: • Premium income increased by 12%, from £617m to £690m; • Combined ratio fell from 83% to 81%; • Ancillary income per vehicle rose from £69 to £71; All of this was achieved in an environment where distribution patterns were changing rapidly and price hikes were hard to come by.
A couple of years ago we revised the existing agreement with Munich Re in favour of an agreement that goes until at least 2014. The new agreement gives us better profit share terms in 20078 -9 and then further improvements in 2010 and beyond. The benefits of these profit share improvements are only just starting to hit the bottom line with releases from the 2007 underwriting year. In addition, in order to give us greater control over our book, Munich Re is in the middle of a multi-year process of stepping back from underwriting 65% (2006) to 40% (2011). For 2008 they took 55% and for 2009 they will take 50%. We have been fortunate to replace this capacity for 2009, 2010 and 2011 with other reinsurers, with arrangements that are shorter in duration and smaller in size, such that we retain a greater proportion of the profits than the Munich Re deal.
Deloitte’s price trackers but I’d be surprised if they pick up on special offers (like Direct Line’s early 2009 offer of 12 months cover for 10 months cost implying a 16.6% price reduction) or any special rates on price comparison sites. A recent review of prices done solely on price comparison sites indicated, for instance, that the best rate offered for a variety of risks actually declined by 1% in January 2009.
Rate increases are being muted by the dominance of price comparison sites, where consumers naturally drift to the lowest price offered. One measure we use to gauge price changes by the market is the percentage times one of our brands comes up first on price comparison sites. This percentage stayed roughly the same throughout 2008. Meanwhile, during the year we moved our rates up, on average, 4%. This leads me to think that the market moved its rates up about 4% as well.
However, I don’t think this modest price move means the results for the market will be poor. In my opinion, subdued claims inflation, led by reduced accident frequency, will result in this year being no worse for the market than 2007. I think 2008 will again be marked by large reserve releases by the market as a whole.
It’s not yet clear how rates will trend in 2009. There are competing factors that influence the potential of rate increases and rate decreases. On the ‘rates moving up’ side, there is the decline in interest rates and therefore investment income. With firms earning less investment income there is added pressure to produce a better underwriting result. In addition, lower petrol prices might spur more driving, which would result in more accidents, which in turn should lead to price increases. Already the winter has been more severe than many recent winters, with a corresponding rise in frequency. All of these factors weigh in favour of rate increases.
On the ‘rates stable or moving down’ side there is lack of intense pain in the industry. It does not appear that the industry as a whole is suffering a lot; combined ratios plus profits from ancillary products, after releases for 2007 (latest data available) indicate the market makes a reasonable return on capital. Economic pain is always the greatest catalyst for price increases and if that pain does not exist then insurers generally do not increase rates. In addition, the further growth of price comparison sites means more and more consumers will get the industry’s lowest rate, pinning the industry to rate increases only as dictated by the slowest mover for any individual risk. Lastly, the recession might result in people driving less and, despite the difficult winter, this would have a beneficial effect on frequency, which might lead to insurers deciding to hold the line on, or even decrease, rates.
• TV and press advertising by price comparison sites as a percentage of all car insurance TV and press advertising rose from 35% in 2007 to 52% in 2008.
It’s not just add water and stir We are in the process of sowing the seeds of our future growth and success with the development of our businesses outside the UK. In 10 years time I expect these seeds to be a forest of profit growth for the Group. However, the non-UK operations should not be expected to make any noticeable return for a few years. Building profitable, growing, sustainable direct operations takes time. Balumba, in Spain, has only just completed its second full year of trading, AdmiralDirekt in Germany is less than two years old and ConTe in Italy only launched at the very end of May 2008. The development of these businesses outside the UK will take not only time, but also money. Not a lot of money, but money nonetheless.
In Italy we were successful in launching ConTe on schedule and within budget at the end of May. However, as we’d seen Balumba and, to some extent, AdmiralDirekt.de, grow their respective volumes quickly to the detriment of their loss ratios, in Italy we put rates up from the outset to protect the loss ratio. The result was our writing just 3,660 policies in the year with annualised premium income of €1.4m. However, the 2008 loss ratio at the end of 2008 was 87%! But the loss ratio on such a small premium income is subject to dramatic change with even a single claim. As the year ended we were recalibrating rates to stimulate sales.
The business in the US will start small, one or two states to begin with and, if successful, expand to other interesting states. The company, which has yet to be named, will be based in Richmond, Va. and should launch either in the final quarter of 2009 or first quarter of 2010. Our strategic plan has always shown five markets to expand into. With the US coming on-stream that would leave only the French market left on the list and we are beginning to investigate this market.
We are also looking to expand the international presence of our Confused business. The first launch outside the UK will again be Spain, with an operation called Rastreator (a made up word, but close to ‘rastreador’, which means tracker). The growth of internet distribution for car insurance makes this market interesting for price comparison. This business should go live sometime in the first half of 2009.
6 Launched ConTe in Italy 7 Still debt- free 8 Record dividend of 52.5p per share for the year 9 Robust return on capital of 57%
Henry Engelhardt Chief Executive Officer 3�th best company to Work for in the UK 200�
• We sell, administer and underwrite private car insurance in the UK through four brands – Admiral, Bell, Diamond and elephant.co.uk
The strategy for our core car insurance business is relatively straightforward. We aim to manage our existing client base and future growth in order to maximise profitability over the medium to long term. At the same time, we endeavour to give excellent service to our customers, whilst providing a positive environment for our staff to work and develop in.
UK car insurance KPIs: 1) Vehicles insured and growth rate: 2) Reported combined ratio: Business review 1 � B U s I n E s s R E V I E W
• Loss ratio advantage arises from strong pricing and claims handling operations
uk VehiclesLoss ratio Expense ratio £100.0m £80.0m £60.0m £40.0m £20.0m £0.0m
UK car insurance result 121.1 142.2 179.9 * 1 Turnover (a non-GAAP measure) comprises total premiums written and other revenue * 2 Total premiums written (non-GAAP) includes premium underwritten by co-insurers key performance indicators
• Strong track record of introducing and growing nonunderwriting income streams
For the 2008 year, Admiral underwrote 27.5% of the UK premium, up from 22.5% in 2007. 55% of the UK total is underwritten by the Munich Re Group (specifically Great Lakes Reinsurance (UK) Plc) through a co-insurance agreement, and 17.5% was reinsured to Swiss Re and Partner Re.
The nature of the co-insurance arrangement is such that 55% of all motor premium and claims for the 2008 year accrues directly to Great Lakes and does not appear in the Group’s income statement. Similarly, Great Lakes reimburses the Group for its proportional share of expenses incurred in acquiring and administering the motor business.
The underwriting arrangements for 2009 have changed compared to 2008: Admiral will continue to retain a net 27.5%, with Munich Re stepping down to 50% and the remaining 22.5% split between three reinsurers – Swiss Re (10.0%), Hannover Re (6.25%) and New Re (6.25%).
On the Group’s own underwriting, we continue to reserve initially on a conservative basis, above actuarial projections of ultimate outcomes. This results in a significant margin being held in claims reserves to allow for any unforeseen adverse development in open claims. This creates a position whereby Admiral expects to be able to consistently make well above industry average reserve releases.
In addition to these releases, there is a significant amount of revenue not yet recognised arising from profit commissions earned on the premiums that Admiral does not underwrite itself. Proportionally these balances have become much more significant at the end of 2008 and consequently we now consider it more appropriate to consider these two parts together when we determine the quantum of reserve releases. We seek to achieve a consistent level of overall prudence.
The new quota share contracts which came into effect in January 2009 (with Hannover Re and New Re) include even more favourable terms for Admiral.
Ancillary income A large number of income streams combine to form what is known as ‘ancillary’ income. Most are products or services that complement the core car insurance product (including a number of insurance products that are not underwritten by Admiral). A portion of the total is discretionary.
There are a number of factors which could affect the business’ future results and prospects and the main ones are set out below. This is not intended to be a comprehensive list of all risks and uncertainties and the business will always be impacted by its competitors and other factors.
The business may be affected by difficult economic conditions There is a risk that the recession in the UK could adversely affect the UK car insurance business in a number of ways: a) Ancillary income – an element of this income stream is discretionary, and whilst it could be argued that protection products are more important in difficult economic conditions, consumers could choose to reduce the level of non-mandatory products, which would impact the Group’s ancillary income b) Claims – there is a risk of increased fraudulent claims, which would affect the Group’s underwriting results and also profit commission income
The business faces regulatory risk The business is subject to a range of regulatory supervision and should any of it change significantly, this could materially affect the Group’s operations and the products offered.
• Confused.com is an insurance and financial services comparison website • 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 via commissions paid by the product provider on the sale of an insurance policy or financial product • We are the UK’s leading car insurance comparison website measured by sales generated.
The Group also plans to capitalise on our experience in the UK by establishing new price comparison operations overseas.
Competition in UK price comparison intensified further during 2008, evidenced by substantial increases in media spends by the major players. The market also saw a number of new entrants.
As an insurance intermediary, Confused is regulated by the UK FSA and is required to comply with all relevant rules, including those on solvency capital.
Confused tries always to act in the best interests of its users. Price and benefit comparison in motor and home insurance have made what was a very time consuming process substantially easier for consumers, and in general the new industry has contributed to better decisions being made by consumers.
Counterparty and other financial risks are discussed in the notes to the accounts.
We expect our new car insurance operations to be relatively small, and loss making in their early years (how long will depend on the market), until the new business is established and scale is achieved. Use of proportional reinsurance across the three markets (65% of risks and expenses are underwritten by Munich Re) helps reduce the financial impact in the early years
The Group Board has also identified the US and France as further key markets in which it plans to launch. Current expectation is for a launch in the US sometime in late 2009 or early 2010, and in France some time after that.
Objective 1) Establish new, direct car insurance businesses in our five selected countries outside the UK (Spain, Germany, Italy, USA and France)
2) Develop each new operation into a profitable, sustainable business 3) Ensure financial impact on Group is minimised
• 65% reinsurance support secured for all three existing businesses • Average pre-launch costs < £1m • The Group takes a ‘slow and steady’ approach to expansion and aims to build sustainable businesses before pushing for significant growth
Note - Pre-launch costs excluded 2 � B U s I n E s s R E V I E W
Such strong reinsurance support is especially valuable in start up operations, as Munich Re also shares the (post-launch) expenses incurred. The contracts are long-term in nature and are designed to run for eight years. The reinsurer does have the option for an early exit, typically after four years, but not before.
The contracts contain profit commission clauses that allow Admiral to participate in the profitability of the business written by Munich Re, when that business reaches profitability on a cumulative basis.
The non-UK operations remain a relatively small part of the overall Group result, with total premium accounting for less than 4% of the Group’s total. Net insurance premium revenue (net earned premium) amounted to just under £8m.
The reported loss ratio for 2008 improved to 117%, from 141% in 2007. The overall loss for the period totalled £1.2m (up from a loss of £0.7m in 2007).
Entering new markets The Group is starting new businesses from scratch in relatively unfamiliar markets. There is a risk that one of more of these will take longer than planned to become profitable, or even that one or more will not become profitable.
The Group’s approach to expansion is a ‘slow and steady’ one, aiming to establish profitable and sustainable businesses before taking on significant amounts of business. This means that the financial impact of start-up operations is not excessive. Reinsurance support also helps in this regard.
Established in 1998 and based in Swansea, Gladiator is a commercial vehicle insurance broker offering van insurance and associated products, typically to small businesses. Distribution is via telephone and internet (including price comparison websites).
Interest income declined in 2008 compared to 2007 largely due to significant falls in the UK base interest rate in the last quarter of the year.
Expansion costs relate to pre-launch expenses incurred in the development of the international businesses.
The Group generated total investment and interest income of £24.4m in 2008, similar to the £24.6m returned in 2007 despite an increase in the value of invested funds and cash in 2008 over 2007. The significant fall in interest rates in the UK and Europe towards the end of 2008 explains this anomaly. The average rate of return on the Group’s invested sterling funds in 2008 was around 5.1%, compared to 5.6% in 2007.
The nature of the investments means that returns are closely linked to central bank target interest rates. The significant cuts in these to date (along with expectation of further cuts) will mean that the Group’s investment and interest income is expected to be materially lower in 2009.
Underwriting only a minority of the insurance generated means that the Group has less of its cash tied up to support claims reserves than traditional insurers. Cash generated from nonunderwriting activities tends to match profits recognised.
Net cash declined in both 2007 and 2008, though this is offset by large flows into financial investments. All years show net increases in combined cash and financial investments.
The main items contributing to the significant operating cash inflow are as follows:
The taxation charge reported in the income statement is £57.6m, which equates to 28.4% of profit before tax.
At Group level, capital is managed in conjunction with dividend policy. As noted above, the policy is to make distributions after taking into account capital that is required to be held for regulatory purposes, for expansion activities and also holding a further prudent buffer for unseen events. This policy gives the Directors flexibility in managing the capital requirements of the Group.
The Group’s capital continues to be all in equity form, with no debt.
The interests of Directors and Officers and their connected persons in the issued share capital of the company are given in the Remuneration Report.
Detailed analysis of the financial risks faced by the Group is set out in the notes to the accounts, starting at page 62.
The Financial Times 50 Best Workplaces in the UK – we have been included in all five years of the publication.
I am proud to be associated with Admiral 91% 91% 94%
The survey results are analysed by department and each manager is expected to share the survey results with their team, explore issues and concerns, and then make recommendations to address them.
The Group’s Compliance department has completed a Treating Customers Fairly Management Information pack pulling together specific measures that demonstrate that we are consistently treating our customers fairly. A detailed report is produced each month together with a summary providing details of measures that have been graded red. The report is discussed at the The Risk Management Committee (RMC - see Corporate Governance section of this report) and process or behavioural changes agreed where appropriate.
% Customer who would renew following a claim 90% 93% 93%
There are over 150 individual TCF measures, each of which is benchmarked to allow the RMC to take an overall view as to whether customers are being treated fairly. This has been in place since July 2008 and the average red grades amounted to 0.51%. 91% of the measures throughout the period achieved a green grade.
Each quarter the Central Complaints Department produce a report analysing the complaints received and causes. The report provides a summary of the root causes of the complaints and actions taken to reduce the risk of complaints due to specific procedures or staff behaviour.
Admiral has adopted a charitable giving policy, which supports the local communities in which its employees live and work. During 2008, 211 local organisations were helped with a total donation of £42,791.
The Group Company Secretary is responsible for the Group’s approach to its impact upon the environment.
• Measuring, monitoring and reporting on the key aspects of the Group’s environmental performance and regularly reviewing progress to reduce the amount of resources consumed per employee.
CO2 (tonnes)** 4,033 1.71 tonnes per employee 1.06 tonnes per employee
The Combined Code on Corporate Governance This report explains key features of the Group's governance structure, how it applies the principles set out in the revised Combined Code on Corporate Governance (the 'Code'), and the extent to which the Company has complied with the provisions of the Code.
The Admiral Group Board The Board is the principal decision making forum for the Group providing leadership either directly or through its Committees of Directors and delegated authority. It is responsible to shareholders for setting and achieving the Group’s strategic objectives and for its financial and operational performance. The Board has adopted a formal schedule of matters specifically reserved to it including corporate strategy, approval of budgets and financial results, policies in relation to risk management, health and safety and environmental matters, new Board appointments, proposals for dividend payments, and the approval of major transactions. This schedule is reviewed on an annual basis and was last reviewed on 17 December 2008.
The roles of the Chairman and Chief Executive The Board has approved a statement of the 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 the running of the business, carrying out the agreed strategy adopted 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 in December 2008.
Details of the Chairman's other commitments are included in the Chairman's biography. The Chairman does perform a number of other Non-executive roles outside the Group but the Board is satisfied that these are not such as to interfere with the performance of his duties within the Group.
The Directors are given access to independent professional advice at the Group's expense, should they deem it necessary, to carry out their responsibilities.
This induction is supplemented by visits to the Group's head office in Cardiff and meetings with members of the senior management team and their departments. Throughout their period in office the directors are regularly updated on the Group's business; legal matters concerning their role and duties; the competitive environments in which the Group operates; and any other significant changes affecting the Group and the industry of which it is a part.
Relations with shareholders The Investor Relations team has day-to-day primary responsibility for managing communications with institutional shareholders through a combination of briefings to analysts and institutional shareholders, both at the half-year and full year results. Site visits and individual discussions with the Executive Directors are also arranged throughout the year with individual shareholders. Regular dialogue with shareholders helps to ensure that the Company's strategy is understood and that any issues are addressed in a constructive way.
The membership at the year-end was Martin Jackson (Chairman), Keith James, and Margaret Johnson. The Company Secretary acts as Secretary to the Committee. Appointments to the Committee 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 Committee meets at least three times per year and has an agenda linked to events in the Company’s financial calendar.
· Effectiveness of the Group’s system of internal control including within its overseas operations
· Reports from the external auditors on their proposed audit scope, fees, audit, and auditor independence
The Committee reviewed its policy on non-audit services that, amongst other things, requires that the Committee approve all proposals for expenditure with the Group’s auditors of over £30,000 on non-audit services. The policy was last reviewed on 19 November 2008. The Group’s auditors, KPMG Audit plc, provide some non-audit services, the majority of which comprise compliance services related to various taxation issues within the Group, and which are not considered by the Committee to compromise their independence as auditors. The level of nonaudit fees is reviewed twice a year by the Committee and details are included in the Report and Accounts.
The Committee has a policy that provision of external audit services be tendered every five years. This was last carried out in 2006 when the decision was made to retain the services of the incumbent external auditors. At the same time the external audit partner was rotated
The Nominations 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 leads the process for making appointments to the Board or where the appointee is likely to become a Board member. The Committee ensures there is a formal, rigorous and transparent procedure for the appointment of new Directors to the Board through a full evaluation of the skills, knowledge and experience of Directors. The Committee also ensures
plans are in place for orderly succession for appointments to the Board, and reviews the plans for other senior management positions. Responsibility for making senior management appointments rests with the Chief Executive.
· Reviewed the Group’s overall remuneration policy and strategy · Recommended for approval individual remuneration packages for Executive Directors, and 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 it to make judgments on the levels of remuneration for the Directors and to review the remuneration of the Group’s senior Executives.
There are several key elements to the risk management environment throughout the Group. These include the setting of risk management policy at Board level, enforcement of that policy by the Chief Executive, delivery of the policy by the RMC via the Group’s systems of internal 2008 Financial highlights
control and risk management, and the overall assurance provided by the Audit Committee that the systems operate effectively.
Internal Audit The Internal Audit function assists management by providing them with timely, independent assurance that the controls established are operating effectively. This includes regular reviews of internal control systems and business processes, including compliance systems and procedures, and identification of control weaknesses and recommendations to management on improvements.
Scope of report The remuneration report summarises the Group’s remuneration policy and particularly its application with respect to the Directors. The report also describes how the Group applies the principles of good corporate governance in relation to Directors’ remuneration in accordance with the Combined Code and Directors Remuneration Report Regulations 2002.02.
Remuneration Committee 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 and Margaret Johnson. The Chairman and Chief Executive are invited to meetings where the Committee considers it appropriate to obtain their advice on the matters under review. During the year ended 31 December 2008, the Committee met on five separate occasions. Its remit includes recommending the remuneration of the Chairman, the Executive Directors, and the Company Secretary; review of the remuneration of senior management; and review of the awards made under the performance related incentive schemes.
Remuneration policy The Group is committed to the primary objective of maximizing shareholder value over time. The Committee reviews the framework and remuneration packages of the Executive Directors and the most senior managers. The main principles underlying the remuneration policy are: · Competitive – The Group aims to pay below-median salaries but with attractive performance related incentives, which provide individuals with the potential for competitive total reward packages for superior performance.
· Transparent – All aspects of the remuneration structure are clear to employees and openly communicated.
The Group operates the following benefits: · Death in Service scheme, paying three times salary available to all employees following completion of their probationary period.
· Permanent Health Insurance policy covering approximately 120 management level staff.
· Private Medical Cover made available to the same staff that are eligible for the Permanent Health Insurance policy.
· 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.
· Discretionary Free Share Scheme (DFSS). Awards under the DFSS are distributed on a wider basis than most plans of this type. The Committee believes that as the DFSS develops, and awards begin to vest in 2008, it will have the effect of reducing staff attrition and strengthening further the alignment of the interests of staff and shareholders.
Of the Group’s current Executive Directors, only Kevin Chidwick (Finance Director) participates in this scheme, as Henry Engelhardt and David Stevens have declined to be included.
For staff below Group Board level the Committee have agreed a change to the award criteria such that from 2009 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, except that they have to remain employed by the Group for the three-year vesting period. The change was made in order to assist the group to attract high calibre staff by providing more certainty over the outcome of vesting awards.
The Committee is conscious of the maximum allowable awards under both share schemes and controls are in place to ensure that neither scheme is issued shares in excess of 5% of the Group's issued share capital over the 10 year period from 1 January 2005. The Directors have proposed for approval by shareholders at the AGM on 28 April 2009 that henceforth the 10% total be applied across both schemes with flexibility to the Board as to what percentage should be applied to each particular scheme.
Executive Directors are allowed, although none currently do, to accept appointments as Nonexecutive Directors of companies with prior approval of the Chairman. Approval will only be given where the appointment does not present a conflict of interest with the Group’s activities and the wider exposure gained will be beneficial to the development of the individual. Where fees are payable in respect of such appointments these will be retained by the Company.
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 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 of below-median 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 in September 2008. Henry Engelhardt was awarded a rise of 4.9% taking his salary to £320,000 and David Stevens awarded a rise of 20% taking his salary to £320,000.
Kevin Chidwick received an award of 48,667 DFSS shares on 29 April 2008 with a value at the date of the award of £393,229. 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.
The Company has entered into letters of appointment with its Non-executive Directors. Summary details of terms and notice periods are included below.
keith James 3 years commencing 1 December 2006, terminable by either party giving one months’ written notice.
Margaret Johnson 3 years commencing 4 September 2006, terminable by either party giving one months’ written notice.
John Sussens 3 years commencing 1 December 2006, terminable by either party giving one months’ written notice.
The fee structure for Non-executive Directors was reviewed at the end of 2008 and commencing 1 January 2009 is as follows: £
Non-executive Directors are not entitled to bonus payments or pension arrangements, nor do they participate in the Group’s long term incentive plans.
The Committee determines the Chairman’s remuneration. The fee paid to Alastair Lyons in respect of his appointment as Chairman of the Board in 2008 was £120,000, of which 25% was waived. The Chairman’s fee was reviewed in February 2009 and increased to £150,000 from 1 January 2009 with no fee waiver in place.
The Directors consider this to be the most appropriate index against which the Company should be compared.
Directors’ remuneration - Audited Remuneration for the year ended 31 December 2008 was as follows: Base salary and fees
This report was approved by the Board of Directors on 27 February 2009 and is signed on its behalf by the Committee Chairman: John Sussens Remuneration Committee Chairman 2008 Financial highlights
Alastair was appointed Chairman of the Company in July 2000. He is also Non-executive Chairman of Legal Marketing Services, In Retirement Services, and Cardsave, and Deputy Chairman of Bovis Homes.
Lucy joined the board as a Non-executive Director in September 2006. She is the management columnist on the Financial Times and author of various books. In 20 years on the FT she has been oil correspondent, a Lex columnist and Brussels correspondent.
Margaret joined the Group's Audit and Remuneration Committees on appointment to the Board.
He is a solicitor and was the Chairman of Eversheds LLP from June 1995 to April 2004. He was a Non-executive Director of Bank of Wales plc between 1988 and 2001 and AXA Insurance Company Limited between 1992 and 2000. Keith was awarded an OBE in 2005 for services to business and the community in Wales.
He has substantial experience in direct response financial services in the United Kingdom, United States and France. He has an MBA from Insead.
He was the Group Finance Director of Friends Provident plc between 2001 and 2003 and Friends’ Provident Life Office between 1999 and 2001. Prior to that he was the Group Finance Director at London & Manchester Group plc from 1992 to 1998, up to the date of its acquisition by Friends’ Provident Life Office. Martin is also a Non-executive Director of IG Holdings plc, Homeserve Membership Limited and Rothesay Life Limited
John was appointed the Senior Independent Non-executive Director in August 2004, and is Chairman of the Remuneration Committee. He is also a Nonexecutive Director of Cookson plc and Anglo & Overseas Trust plc.
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 declared and paid dividends of £128.5m during 2008 (2007: £116.0m) – refer to note 14 for further details.
The Directors are proposing a final dividend of £70.0m (26.5p per share), payable on 27 May 2009.
Charitable and political donations During the year the Group donated £106,000 (2007: £87,000) to various local and national charities. The Group has never made political donations. Refer to the Business review for further detail.
At 31 December 2008, the company's issued share capital comprised a single class of shares referred to as ordinary shares. Details of the share capital and shares issued during the year can be found in note 25.
On a show of hands at a general meeting of the company every holder of shares present in person and entitled to vote shall have one vote and 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
� 0 D I R E c t O R s ’ R E P O R t
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 is 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 Resinsurance (UK) Plc. Details relating to this agreement are contained in the Business review.
A further special resolution passed at that meeting granted authority to the directors to allot equity securities in the Company for cash, without regard to the pre-emption provisions of the Companies Act 1985. This authority also expires on the date of the annual general meeting to be held on 28 April 2009 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 meeting, to submit themselves for re-election.
Power of the Directors The directors are responsible for managing the business of the Company and may exercise all powers of the Company subject to the provisions of relevant statutes, to any directions given by special resolution and to the Company’s Memorandum and Articles. The Articles for example, contain specific provisions and restrictions concerning the Company’s power to borrow money. Powers relating to the issuing of new shares are also included in the Articles and such authorities are renewed by shareholders at the annual general meeting each year.
are required to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and applicable law and have elected to prepare the Parent Company financial statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice).
· For the Group financial statements, state whether they have been prepared in accordance with IFRS as adopted by the EU
· Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Parent Company will continue in business
Under applicable law and regulations, the Directors are also responsible for preparing a Directors’ report, Directors’ remuneration report and Corporate governance statement that comply with that law and those regulations. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
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
Disclosure of information to auditors The Directors who held office at the date of approval of this Directors’ report confirm that, so far as they are each aware, there is no relevant audit information of which the Company’s auditor is unaware; and each Director has taken all the steps that he ought to have taken as a Director to make himself aware of any relevant audit information and to establish that the Company’s auditor is aware of that information.
We have audited the group and parent company financial statements (the ''financial statements'') of Admiral Group plc for the year ended 31 December 2008 which comprise the Group Income Statement, the Parent Company Profit and Loss Account, the Group and Parent Company Balance Sheets, the Group Cash Flow Statement, the Group Statement of Recognised Income and Expenses and the related notes. These financial statements have been prepared under the accounting policies set out therein. We have also audited the information in the Directors' Remuneration Report that is described as having been audited.
This report is made solely to the company's members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Our responsibility is to audit the financial statements and the part of the Directors' Remuneration Report to be audited in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).
In addition we report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors' remuneration and other transactions is not disclosed.
We review whether the Corporate Governance Statement reflects the Company's compliance with the nine provisions of the 2006 Combined Code specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We are not required to consider whether the Board's statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the Group's corporate governance procedures or its risk and control procedures.
An audit includes examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements and the part of the Directors' Remuneration Report to be audited. It also includes an assessment of the significant estimates and judgments made by the Directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Group's and Company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements and the part of the Directors' Remuneration Report to be audited are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements and the part of the Directors' Remuneration Report to be audited.
· the information given in the Directors' Report is consistent with the financial statements.
KPMG Audit Plc Chartered Accountants Registered Auditor Cardiff 2008 Financial highlights
Profit after tax attributable to equity holders of the Company 144,938 127,416
These financial statements were approved by the Board of Directors on 27 February 2009 and were signed on its behalf by: Kevin Chidwick Director 2008 Financial highlights
Loss on disposal of property, plant and equipment and software 30 6
Change in trade and other receivables, including from policyholders (36,466) (14,772)
Change in trade and other payables, including tax and social security 30,704 25,506
Cash flows from operating activities, before movements in investments 251,633 213,167
Cash flows from financing activities: Capital element of new finance leases 490 457
Cash and cash equivalents at end of period 21 144,286 155,773 2008 Financial highlights
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.
Adoption of new and revised standards The Group has applied all adopted IFRS and interpretations endorsed by the EU at 31 December 2008, including all amendments to extant standards that are not effective until later accounting periods, except for those listed below: · Amendments to IAS 1 Presentation of Financial Statements: A Revised Presentation
· Amendment to IFRS 2 Share –Based Payment: Vesting Conditions and Cancellations
Amendment to IFRS 2 Share –Based Payment: Vesting Conditions and Cancellations is effective for periods beginning on or after 1 January 2009. On adoption, it will not have a material impact on the Group’s financial statements.
Amendment to IAS 23 Borrowing Costs is also effective for periods beginning on or after 1 January 2009. It is not applicable during the current accounting period, and on adoption will not have a material impact on the Group’s financial statements.
· Amendment to IAS 39 Financial Instruments: Recognition and Measurement: Eligible Hedged Items
· Amendment to IAS 39 Reclassification of Financial Assets: Effective Date and Transition
It is not anticipated that any of the standards, interpretations or amendments above will have a material impact on the Group’s financial statements in future periods.
The following IFRS have been adopted and applied by the Group for the first time in these financial statements: · IFRS 8 Operating Segments
· IFRIC 14 IAS 19 The Limit of a Defined Benefit Asset, Minimum Funding Requirements and their Interaction
· Amendments to IAS 39 and IFRS 7 Reclassification of Financial Instruments
Amendments to IAS 39 and IFRS 7 address reclassification of financial assets. The Group has not reclassified any financial assets so that standard is also not applicable.
The accounting policies set out in note 3 to the financial statements have, unless otherwise stated, been applied consistently to all periods presented in these Group financial statements.
The preparation of financial statements in conformity with adopted IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimate is reviewed if this revision affects only that year, or in the year of the revision and future years if the revision affects both current and future years.
The key area where these techniques are used relates to the ultimate cost of reported claims. A secondary area relates to the emergence of claims that occurred prior to the balance sheet date, but had not been reported at that date.
The claims provisions are subject to independent review by the Group’s actuarial advisors. For further detail on objectives, policies and procedures for managing insurance risk, refer to note 19 of the financial statements.
Future changes in claims reserves also impact profit commission income, as the recognition of this income is dependent on the loss ratio booked in the financial statements, and cash receivable is dependent on actuarial projections of ultimate loss ratios.
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.
b) Foreign currency translation Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in thousands of pounds sterling, which is the Group’s presentation currency.
Translation differences on non-monetary items, such as equities held at fair value through profit or loss, are reported as part of the fair value gain or loss. Translation differences on non-monetary items are included in the fair value reserve in equity.
Co-insurance: The Group has entered into certain coinsurance 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 co-insurers reimburse the Group for the same proportionate share of the costs of acquiring the business.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash generating units (CGU’s) according to business segment and is reviewed annually for impairment.
The value in use calculations use cash flow projections based on financial budgets approved by management covering a three year period. Cash flows beyond this period are considered, but not included in the calculation. The discount rate applied to the cashflow projections in the value in use calculations is 9.2%, based on the Group’s weighted average cost of capital.
All property, plant and equipment is stated at cost less accumulated depreciation. Depreciation is calculated using the straightline method to write off the cost less residual values of the assets over their useful economic lives. These useful economic lives are as follows: � � f I n A n c I A L s tAt E M E n t s
Initial recognition Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss (FVTPL), loans and receivables or held to maturity investments. The Group has not held any derivative instruments in the years ending 31 December 2008 and 31 December 2007.
The Group’s deposits with credit institutions are classified as held to maturity investments which is consistent with the intention for which they were purchased.
j) Employee benefits Pensions: The Group contributes to a number of defined contribution personal pension plans for its employees. The contributions payable to these schemes are charged in the accounting period to which they relate.
k) Taxation Income tax on the profit or loss for the periods presented comprises current and deferred tax.
Current tax related to items recognised directly in equity is recognised in equity and not in the income statement.
Grants relating to income are shown as a deduction in the reported expense.
The Group has adopted IFRS 8 Operating Segments in advance of its effective date. IFRS 8 adopts a strict management approach to segment reporting and requires that operating segments be identified on the same basis as financial information is reported internally to the chief operating decision maker for the purposes of allocating resources between segments and assessing their performance.
IAS 14, the previously effective standard on segment reporting, was similar, in that identification of segments started with internal financial reporting to key management personnel. However its main focus was on components of the business with similar risks and generating similar returns which could potentially be very different to the management approach.
The Group’s Directors consider that the adoption of IFRS 8 does not lead to a material change in the identification of the Group’s segments as the business segments reported to the Group’s Board of Directors have clearly defined lines of risk and reward. The Board of Directors is considered to be the chief operating decision maker for the Group.
Other The other segment includes the Gladiator broking operation in addition to certain central expenses, overseas development expenses, share scheme costs, finance charges and interest. None of these are reportable segments based on their immateriality.
Taxes are not allocated across the segments and are included for the purposes of reconciliation to the Income Statement.
Segment income, results and other information An analysis of the Group’s revenue and results for the year ended 31 December 2008, by reportable segment are shown below. The accounting policies of the reportable segments are consistent with those presented in note 3 for the Group.
� 0 f I n A n c I A L s tAt E M E n t s
Segment profit / (loss) before tax 142,192 36,726 (659) 3,839 182,098
Information about geographical locations All material revenues from external customers, and net assets attributed to a foreign country are shown within the Non–UK car insurance reportable segment shown above.
Restated revenue and results for the corresponding reportable segments for the year ended 31 December 2007 are shown below.
Unallocated assets and liabilities consist of deferred and current corporation tax balances. These assets and liabilities are not regularly reviewed by the Board of Directors in the reportable segment format.
The restated segment assets and liabilities at 31 December 2007 are as follows.
Refer to the Business review for further detail on the sources of revenue.
The £19,726,000 (2007: £13,314,000) administration and marketing costs allocated to insurance contracts is principally made up of salary costs.
Reconciliation of expenses related to insurance contracts to reported Group expense ratio: 31 December 31 December
Included in profit, before co-insurance arrangements are the following: Social security charges 7,678 6,231
Operating lease rentals: Auditor’s remuneration: - Fees payable for the audit of the Company’s annual - Fees payable for the audit of the Company’s subsidiary - Fees payable for other services 160 85
Analysis of fees paid to the auditor for other services: Tax services 160 85
� 8 f I n A n c I A L s tAt E M E n t s
Tax charge for the period as above 57,580 54,682 2008 Financial highlights
A final dividend of 26.5p per share has been proposed in respect of the 2008 financial year. Refer to the Chairman’s statement and Business review for further detail.
The difference between the basic and diluted number of shares at the end of 2008 (being 366,667) relates to awards committed, but not yet issued under the Group’s share schemes.
The net book value of assets held under finance leases is as follows: Computer equipment 1,561 2,149 2008 Financial highlights
The Group has a policy of primarily investing in AAA-rated money market liquidity funds, which in turn invest in a mixture of very short dated fixed and variable rate securities, such as cash deposits, certificates of deposits, floating rate notes and other commercial paper.
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 experience). Returns are likely to closely track the 7 day 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.
Credit risk The Group defines credit risk as the risk of loss if another party fails to perform its obligations or fails to perform them in a timely fashion. The key areas of exposure to credit risk for the Group result through its reinsurance programme, investments and bank deposits and to a lesser extent, policyholder receivables.
There are no specific concentrations of credit risk with respect to investment counterparties due to the structure of the liquidity funds which invest in a wide range of very short duration, high quality securities. Cash balances and deposits are placed only with credit institutions with a financial strength rating of A or above.
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.
In practice, the Group’s Directors expect actual cashflows to be consistent with this maturity profile except for amounts owed to co-insurers and reinsurers. Of the total amounts owed to co-insurers and reinsurers of £147.9m (2007: £134.7m), £77.5m (2007: £62.9m) is held under funds withheld arrangements and therefore not expected to be settled within 12 months.
The Board of Directors is responsible for the management of insurance risk, although as mentioned in note 18, it has delegated the task of supervising risk management to the Risk Management Committee.
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: 8 � f I n A n c I A L s tAt E M E n t s
Provision re-estimated as of: As re-estimated at 31 December 2008 113,136 138,171 178,679 223,688 -
Provision re-estimated as of: As re-estimated at 31 December 2008 77,331 102,911 135,825 154,751 -
F) Reconciliation of movement in net claims provision: Net claims provision at start of period 166,521 154,711
G) Reconciliation of movement in net unearned premium provision: Net unearned premium provision at start of period 64,871 65,025
Analysis of accruals and deferred income: Premium receivable in advance of policy inception 45,567 38,477
Total accruals and deferred income as above 82,924 74,523 2008 Financial highlights
Deferred tax liability / (asset) at end of period 10,327 (1,629)
Deferred tax on unremitted overseas income has been provided to the extent it is likely to reverse in the foreseeable future.
The difference between the total movement in the deferred tax balance above and the amount charged to income relates to deferred tax on share scheme charges that has been credited directly to equity.
Authorised: Issued, called up and fully paid: During 2008 1,820,384 (2007: 1,534,827) new ordinary shares of 0.1p were issued to the trusts administering the Group’s share schemes.
589,384 (2007: 570,827) of these were issued to the Admiral Group Share Incentive Plan Trust for the purposes of this share scheme. These shares are entitled to receive dividends.
1,231,000 (2007: 964,000) 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.
Staff share schemes: Analysis of share scheme costs (per income statement): SIP charge (note i) 2,484 1,268
The awards are made with reference to the Group’s performance against prior year profit before tax. Employees must remain in employment for the holding period (three years from the date of award) otherwise the shares are forfeited.
Number of free share awards committed at 31 December 2008: Awards outstanding *
During the year ended 31 December 2008, awards under the SIP H105 scheme and the DFSS 2005 scheme vested. The total number of awards vesting for each scheme is as follows.
Deferred tax credit on share scheme charges - - - - 1,186 1,186
Deferred tax credit on share scheme charges - - - - 250 250
The capital redemption reserve arose in 2002 on the redemption of shares previously in issue at below par.
In addition, the Group had contracted to spend the following on property, plant and equipment at the end of each period: Expenditure contracted to 898 489 28. Group subsidiary companies The Parent Company’s principal subsidiaries (all of which are 100% directly owned) are as follows: Subsidiary Country of incorporation Class of shares held Principal activity
Consolidated financial summary Basis of preparation: The figures below are as stated in the financial statements preceding this financial summary and issued previously. Only selected lines from the income statement and balance sheet have been included.
The adoption of these standards has not had a material impact on either the current year or comparative figures as Company does not have any direct employees.
The Company has not adopted in advance amendments to FRS 26 relating to reclassification of financial assets and eligible hedged items which are in effect for accounting periods beginning on or after 1 July 2008 and 1 January 2009 respectively.
Deferred tax asset - 6 6. Other creditors – due within one year