Bell was set up in 1997 – its main target market being drivers with zero or low no claims bonus. www.bell.co.uk
Confused.com is an intelligent, automated car insurance shopper. Customers input their details once, and receive quotes from major car insurance websites. www.confused.com
Adjusted earnings per share3 1 Refer to page x in the financial review.
2 Group turnover includes total premiums, gross other income plus allocated investment return. Total premiums comprise gross motor insurance premiums written by the Group, before co-insurance and reinsurance. 3 2004 EPS adjusted for exceptional tax credit on ESOT share award. Refer to note 20.
We were delighted with the 48.3% Total Return that we achieved for Shareholders during 2005, itself part of an overall 73.9% since flotation. The sustained growth in our share price has resulted in the business being valued at £1.5Bn on 1 March 2006, which compares against £711m when first listed just under 18 months previously.
We consider dividends in two parts: the first element, being the normal dividend, is based on a 45% pay-out ratio. The second special element derives from our principle of returning excess cash to our shareholders, reflecting the strongly cash generative nature of our business model. We only retain in the business sufficient cash to provide both a prudent margin against contingencies, currently set at £25m, and cover for planned investments, this year being £6m for our expansion into Spain and moving our Swansea office into larger modern premises.
We believe passionately that a business succeeds because people enjoy working for it. Enthusiasm is infectious, transmitting from our staff to our customers and to those thinking about coming to work for us. Quality is central to everything that we do: we measure the quality of every department on a monthly basis, and these quality scores
We were, therefore, very proud to have been named Employer of the Year at the National Business Awards, to have won Welsh Company of the Year for the second time, and to have continued our uninterrupted series of being six years running in the Sunday Times list of Top 100 Places to Work in the UK. Being a leading employer of over 1,700 people in South Wales we recognise our wider responsibility to the communities of which we are a part and support a large number of local charities - details of our activity in this area can be found in the report on corporate responsibility.
8 C H I E F E X E C U T I V E ’ S S TAT E M E N T
2005? Not too shabby Our first full year as a publicly quoted Company was, by virtually any measure, a successful one.
Total motor premium written grew to £534m, up 13% from 2004
Experienced continued improvement in loss ratios across all the back years
Named by the Financial Times as the 17th Best Workplace in the UK and one of the Top 100 Workplaces in the EU
Welsh Company of the Year, for the second time in eight years
The number of children at our Staff Children’s Christmas party? …I’m going to put this one at the end – make you work for it! Read on –
2005 was our 13th year of trading. The first seven were in a Lloyd’s of London environment. However, towards the end of 1999 Management teamed up with Barclays Private Equity to buy the business. The result of this transaction was the creation of Admiral Group Ltd (AGL) as the holding Company. In September of 2004 we floated the Company on the London Stock Exchange and created Admiral Group plc.
Key performance information Our total written premium for 2005, before sharing it with our reinsurance partners, was £534m, accounting for 84% of our total turnover. The number of customers we service rose to 1,141,000 from 1,041,000 (+10%). All our growth throughout our history has been organic.
Some key numbers from the accounts which follow: Claims ratio 70%, up from 67% in 2004
Earned expense ratio, excluding regulatory levies, down to 12.3% from 12.5%
Revenue from products and services we do not underwrite totalled £93.4m up from £69.5m (+34%)
The movement in loss ratio from 67% last year to 70% in 2005 is to be expected. The market has not moved much on price in several years and there is a claims inflation factor at work. The change in loss ratio across years is characterised by a less good underlying trend reflecting the paucity of price increases. Without any releases taken into account the loss ratio moved from 75% to 82%.
The bar chart below shows the development of the loss ratios for the back years on an underwriting year basis. The years noted at the bottom of the chart are the underwriting years. The coloured bars represent the reported loss ratios published in the Annual Accounts over the last five years. So, for example, in the 2003
“Our first full year as a publicly quoted Company was, by virtually any measure, a successful one.” Henry Engelhardt 2001 Accounts 2002 Accounts 2003 Accounts 2004 Accounts 2005 Accounts
Accounts the loss ratio for the 2001 underwriting year was 63%, down from 71% in the previous year’s accounts. This year the result for the 2001 year has matured to 54.9%.
The expense ratio, not including regulatory levies, moved downwards by 0.2% from 2004, a reduction of 2%. This reflects our continued efficiency improvements. However, do not expect swingeing cuts in the expense ratio going forward. It is one of our strengths that we use our efficiency to help our underwriting selectivity. Because we are efficient, particularly in generating quotes, we can afford to convert fewer quotes into business. In this way we are helping ensure that we only take the right risks at the right prices. The end result is a better combined ratio. If we concentrated on reducing the expense ratio it may turn out to be a false economy, as it might come at the expense of the loss ratio through reduced selectivity. So, for instance, we could cut the marketing budget and do fewer quotes, but then we’d need to convert more of them to grow our premium income and customer numbers. To convert more quotes we’d have to be less selective. Clearly, the more selective you are the better your loss ratio should be.
In last year’s report I explained our intention to reduce our growth rate in 2005. We achieved our goal! We wound up reducing our growth rate in premium from 27% in 2004 to 13% in 2005. We did this because the best part of the market cycle was behind us and it would not have been beneficial to grow so rapidly into the poorest part of the cycle. We increased prices steadily in the first half of the year to put the brakes on, finishing the half-year 3% above where we’d started. However, the market lagged well behind these increases and our conversion rate suffered. Our choice was either to bring rates down or sacrifice profitable business. We chose the former and made selective rate decreases in the second half. The overall effect was a 1% increase in prices across the year and a year-on-year increase in our customer numbers of 10%.
Ancillary income moved forward, both through the increased number of customers and also through more income per customer. We finished the year with more than £56 of income per customer, not including Confused or Gladiator. We do not anticipate a further step-change in income per customer in 2006, although we’d be pleasantly surprised if it occurred. The splendid result from Confused.com certainly didn’t hurt the ‘other’ income line either.
“Because we are efficient, particularly in generating quotes, we can afford to convert fewer quotes into business. In this way we are helping ensure that we only take the right risks at the right prices.” Henry Engelhardt
characterised by a gentle deterioration; a slow boil. The market result is just getting a bit worse each year, nothing overly dramatic, but….
2004, the most recent year for which data is available, was a decent year for the market. Blimey, actually not too far from an underwriting profit! The official figure for the market combined ratio for 2004 was 101.3% (102.2% for 2003), but this was distorted by a very large release of prior year claims reserves, well beyond the norm for the market. The true year combined ratio was more like 105%, which is much more akin to a borderline break-even result. Typically, seven years on from the previous worst point in the cycle, the market is back to a combined ratio of 120%. So this, seven years on from 1998’s 124% result, is clearly demonstrating the changing nature of the typical cyclical pattern.
There isn’t much to say about market rates in 2005 because they didn’t move very much! We saw this lack of movement via our conversion rate and, as noted earlier, moved our own rates accordingly.
It is not clear to me whether this is a false dawn or a true indication that most insurers are keen to produce a profitable result. It easily could be a situation where a number of traditionally big spenders have just paused, taking time to assess their position and clean their weapons in anticipation of a major assault on the market in 2006.
The loss of large investment returns from the halcyon days of the 90’s also puts more pressure on the insurance result, which in turn should provide more stability to the market.
Our own business is somewhat insulated from this deterioration by two factors. First, our results historically have been far better than the market average and therefore, despite tighter margins, our result is still rather profitable.
At the very end of 2005 we launched Admiral MultiCar. This is a product targeted at households with more than one car. It is, in part, a volume discount product. However, we’ve taken the time and trouble to create something more involved than just that. MultiCar will take the information it gathers from the household and use it in rating all the vehicles. This will allow us to be much more precise in our rating and, in many cases, save deserving customers a lot of money. But there’s more for the customer than just saving money. MultiCar will ease the burden a customer currently has of getting quotes and keeping track of different policies for their different cars, often with different insurers, often with different renewal dates. MultiCar will unite all the renewal dates on the anniversary date of the renewal of the first car. Changes will be easier too: if a customer moves house, he/she need but tell us once and all the cars in the policy will be updated. As you might be able to tell, we’re excited about the prospects of MultiCar.
Once again, a brief explanation of why our results are so good! Our ability to make the internet work goes a long way to explaining our excellent results. This is also a source of confidence in our future. Our 2005 internet results exceeded our forecasts and, in the absolute, are quite stunning. (Except for changing the year from ‘2004’ to ‘2005’ this was exactly what I wrote last year and the year before. It’s not that I’m being lazy, it’s just that it’s still true!) Of the more than 9.7m quotes we did last year 92% started on the internet - that’s almost 9,000,000 quotes on the internet! Around 82% of all our sales came from these internet quotes. I believe that there is still growth to be had in internet distribution, albeit probably less rampant than before. As we are among the leaders in the internet delivery of car insurance we are well placed for continued success through this channel in the coming years. (In 2005 we had around a billion hits to our websites!)
Not to be forgotten are all those who actually stayed or joined more recently! Many thanks to all our staff who made 2005 an excellent year.
Financial review Key financial highlights The Group recorded another significant increase in pre-tax profit in 2005 - a rise of 14% from £104.9m in 2004 to £119.5m. Core profit was also significantly higher - a jump of 21% from £100.6m to £122.1m.
A reconciliation of core profit to figures reported in the income statement is set out later in this section. Since 2000, the Group has returned substantial core profit increases year-on-year, and the compounded annual rate of growth since 2000 is over 44%.
The second key advantage comes from retaining ownership of the entire customer base. This means the Group is able to generate substantial non-insurance income from the customer base.
Group turnover, which comprises total premiums written, gross other income and net investment return (and measures the combined size of the Group’s businesses) also returned significant growth: Total premium written 533,616 470,400 Gross other income 93,405 69,457 Net investment return 11,342 8,135
A new quota share contract with Swiss Reinsurance Company UK Limited (Swiss Re) replaces the Gen Re contract for 2006 only.
For the 2000 to 2002 underwriting years, the Group’s retained share of the motor business was underwritten through the Group’s Syndicate (Syndicate 2004) at Lloyd’s of London. The Group is currently managing the run-off of Syndicate 2004, and the last year of account (2002) remained open at the end of 2005.
The Group is currently pursuing the option of a transfer of the remaining liabilities for the 20002002 underwriting years into AICL under the provisions of Part VII to the Financial Services and Markets Act 2000. Should this project complete successfully, it is estimated that not less than £20m of funds currently maintained in the Syndicate would be released.
Motor insurance quotes rose significantly from 6.2m in 2004 to 9.7m in 2005 (an increase of 56%). This growth has partly come about as a result of the notable increase in volume generated by Confused.com in the year - further analysis of which is set out below. Although selective rate changes have been implemented throughout the year, on average, premium levels at the end of 2005 are around 1% higher than those at the start of the year.
There was an increase in the underwriting result of around £4.4m in the year (£28.0m to £32.4m), although almost £3m of this is due to increased investment return (which in turn primarily resulted from higher levels of invested funds). 2005’s reported loss ratio (excluding claims handling expenses) was 69.8%, up from 67.0% in 2004. Movements in loss ratios are discussed in the Chief Executive’s statement.
The Group’s expense ratio continues to run at competitive levels – 15.1% (including claims handling expenses) in 2005, relatively unchanged from 15.0% in 2004. Excluding regulatory levies, the figures are 12.3% in 2005 and 12.5% in 2004.
Some additional ratios are noted in the Chief Executive’s statement – firstly the ratio of total outgoings to net income at 60% (2004: 58%) and secondly the ratio of core profit to net income at 52% (2004: 57%). Reconciliations to the figures in the accounts are set out at the end of this review.
Profit commission – co-insurance The principal source of profit commission is the long-term co-insurance contract with Great Lakes. £11.2m has been recognised in 2005, compared to £10.7m in 2004 (after adjusting for the £6m noted above).
An additional £0.5m of profit commission relating to earlier underwriting year contracts with Hibernian Re (100% reinsured into Swiss Re) has been recognised in 2005 (£1.9m in 2004). It is expected that further amounts will be recognised when the Group closes the final year of account of Syndicate 2004.
Profit commission – quota share reinsurance The Group earns profit commission from Converium (relating to 2003 and 2004 underwriting years) and Axis Re (on the 2005 year). A total of £3.1m has been recognised during 2005 (2004: £3.1m).
No commission will be earned on the Gen Re contract as this has been commuted. The new 2006 quota share contract with Swiss Re has similar profit commission arrangements to the current deals.
Net other income 74,998 56,916 *Confused.com adjustment: Confused.com earns a proportion of its income from Admiral Group brands and hence an adjustment is made to the gross contribution. This is to reflect the fact that a proportion of Confused.com’s costs are incurred in acquiring insurance business for the Group. The opposite side of the adjustment appears in the costs of acquiring insurance contracts.
There have been no changes to investment strategy, which is set by the Group Investment Committee and approved by the Board of Directors of the relevant entity. The strategy is conservative, with all of the funds invested in either cash or short dated, high quality corporate or government bonds.
Reconciliations and explanations are again provided in order to set out the major differences between the 2004 UK GAAP and IFRS numbers. Refer to note 4.
As reported in the interim statements, the only significant impacts on the income statement are the cessation of goodwill amortisation, the valuation of financial investments at bid as opposed to mid-market price, and the inclusion of dividends in the retained profits of the period in which they were declared as opposed to allocated. The changes have no impact on the Group’s ability to pay dividends.
Employee share schemes The Board continues to take the view that actual or prospective share ownership plays a vital role in staff incentivisation across all levels of employee. To this end, two new share schemes were established in late 2004 - an Inland Revenue approved Share Incentive Plan (the SIP) and the Unapproved Free Share Scheme (UFSS) under which the first awards were made during 2005.
Awards are made twice a year, based on the results of each half-year. The first awards, in respect of the period to 30 June 2005 were made in September 2005, and the second, based on the second half’s results will be made during the first half of 2006.
2. The Unapproved Free Share Scheme (UFSS) This scheme is not Inland Revenue approved, and is open to Group employees of a certain level of seniority plus exceptional performers, again excluding the current Executive Directors of the Group.
Adjusted net insurance claims 97,324 71,920 Net premium revenue 139,454 107,501 Loss ratio 69.8% 67.0%
Outgoings: Net insurance claims 100,526 74,272 Insurance contract expenses 17,909 13,796 Ancillary/Gladiator/Confused expenses 21,792 15,322
Outgoings to income 60% 58% Core profit (from above) to income 52% 57%
Taking each item: D.1.1 – Whilst the Senior Independent Director is always available to meet with individual shareholders on request to ensure the Board is aware of any shareholder concerns that cannot be resolved through the routine mechanisms for investor communications, the feedback from investors through the Company’s programme of investor meetings is that regular meetings with the Senior Independent Director are not considered necessary.
The Admiral Group Board The Group is controlled by its Board of Directors. The Board is responsible for the proper management of the Group as well as setting the Group’s strategic goals and objectives, ensuring the necessary financial and other resources are made available to meet them, and measuring
progress towards achieving them. The Board is ultimately responsible to shareholders for the financial and operational success of the Group.
The Board, which meets at least eight times a year, has a schedule of matters reserved for its approval which include: approval of the annual report and accounts, including the corporate governance statement and remuneration report approval of preliminary announcements of interim and final results approval of the dividend policy, including the declaration of the interim dividend and recommendation of the final dividend setting Group strategy and approving an annual budget and medium-term projections reviewing operational and financial performance approving major acquisitions, divestments and capital expenditure reviewing the Group’s systems of financial control and risk management ensuring that appropriate management and succession plans are in place approving Board, Board Committee and Company Secretarial appointments approving policies relating to Directors’ remuneration and the severance of Directors’ contracts ensuring that a satisfactory dialogue takes place with shareholders commencement of significant new business activities
The Board has delegated the following responsibilities to the Executive Directors: the development and recommendation of strategic plans that reflect the longer-term objectives and priorities established by the Board implementation of the strategies and policies of the Group as determined by the Board day to day monitoring of the operating and financial results against plans and budgets prioritising the allocation of capital, technical and human resources developing and implementing risk management systems
During the year the Board carried out an evaluation of itself and its Committees. The evaluation consisted of detailed questionnaires completed by all Directors and one-to-one discussions between the Chairman and Directors including meetings with the Non-executive Directors without the Executive Directors being present. The results of the evaluation were discussed at a Board meeting in November 2005 and an action plan produced. No major issues were identified.
The performance of the individual Executive Directors is appraised annually by the Chief Executive, to whom they report. The performance of the Chairman is reviewed by the Non-executive Directors, led by the Senior Independent Non-executive (John Sussens), taking into account the views of the Executive Directors. A meeting was held in November 2005 under the Chairmanship of John Sussens to discuss the results of this review. John Sussens also gave individual feedback to the Chairman and was able to confirm that the performance of the Chairman continues to be effective, and that the Chairman continues to demonstrate commitment to his role.
The Chairman, taking into account the views of other Directors, conducts the performance review of the Chief Executive.
Directors and Directors’ independence The Board currently comprises the Chairman, three independent Non-executive Directors, one Non-executive Director who is employed by a significant shareholder and is not, therefore, independent, and one Non-executive Director deemed by the Combined Code not to be independent. There are three Executive Directors.
The independent Directors are of sufficient calibre and number that their views carry significant weight in the Board’s decision making.
The induction is supplemented by visits to the Group’s two locations and meetings with members of the senior management team and their departments. Throughout their period in office the Directors are continually updated on the Group’s business, legal matters concerning their role and duties, the competitive environments in which the Group operates and any other changes affecting the Group and the industry in which it operates.
Re-election Subject to the Company’s Articles of Association, the Companies Act and satisfactory annual performance evaluation, Non-executive Directors are appointed without a maximum period of appointment. Their contracts may, however, be terminated by either party giving one month’s notice, or three months for the Chairman (without compensation).
At the Company’s Annual General Meeting on 18 May 2005 all of the Directors were re-elected by shareholders except for Gillian Wilmot who was appointed on 26 April 2005, between the date of the AGM notice and the AGM. As noted above she will retire and not seek re-election at the forthcoming AGM. In accordance with the Company’s Articles, which provide that a minimum of one third of Directors (or if this is not a whole number, the nearest number not exceeding one third) should resign and offer themselves for re-election at each AGM, Manfred Aldag and Henry Engelhardt will retire by rotation and seek re-election by shareholders at the forthcoming AGM.
The Company Secretary The Company Secretary is responsible for advising the Board through the Chairman on all governance matters. The Directors have access to the advice and services of the Company Secretary. The Company’s Articles of Association and the schedule of matters reserved to the Board for decision provide that appointment and removal of the Company Secretary is a matter for the Board.
The Non-executive Directors receive monthly management accounts and other regular management reports and information, enabling them to scrutinise the Group’s performance against agreed objectives and budgets.
Relations with shareholders The Investor Relations team has effective day-today primary responsibility for managing communications with institutional shareholders through a combination of briefings to analysts and institutional shareholders, both at the interim and year end results. Site visits and individual discussions with the Executive Directors are also arranged throughout the year. 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 Group maintains a corporate website (www.admiralgroup.co.uk) containing a wide range of information of interest to institutional and private investors.
Board Committees The number of full Board meetings and Committee meetings attended by each Director during 2005 is shown below.
The terms of reference of the principal Committees of the Board – Audit, Remuneration and Nomination – are available on the Company’s corporate website. Those terms of reference are reviewed annually.
The Audit Committee Constitution and membership The membership in place at the year-end was, Martin Jackson (Chairman), Keith James, and Gillian Wilmot (appointed 26 April 2005). The Company Secretary or his nominated Deputy acts as Secretary to the Committee.
The Committee consisted entirely of independent Non-executive Directors until Gillian Wilmot’s appointment to the Board of Buy-as-you-view in August 2005. It is required
Scheduled Audit Nominations Remuneration Board Committee Committee Committee meetings meetings meetings meetings
to meet at least three times per annum. There have been four meetings during 2005. As noted above, all members attended all meetings. Gillian Wilmot attended all meetings following her appointment to the Admiral Board on 26 April 2005.
The Board considers that the members of the Committee have the appropriate competence and experience to carry out their duties and further considers that Martin Jackson (Committee Chairman) has the appropriate recent and relevant financial experience as defined in the Combined Code. Ongoing training is provided to all members, and this is intended to cover relevant developments in financial reporting, company law and the various regulatory frameworks. The Terms of Reference of the Audit Committee include all matters suggested by the Code.
Summary of key activities The key activities within the remit of the Committee are as follows: 1) Financial reporting matters The Committee is charged with monitoring the integrity of the Group’s financial statements (including accompanying narrative statements) along with any formal announcements relating to the Group’s financial performance – especially where this is of a price sensitive nature.
During the year the Committee has reviewed and advised the Board on the Group’s interim and annual financial statements, its accounting policies and the control of its financial and business risks, the nature and scope of the work to be performed by the external auditor, and the results of this audit work.
Details of the amounts paid to the external auditor during the year for audit and other services are set out in the notes to the financial statements.
During the year the Committee undertook an audit tender process. The decision to tender for the external audit was driven by a number of factors including governance requirements and the known rotation of the existing audit partner following the 2005 year-end. In addition KPMG had been appointed auditor upon the request of Barclays Private Equity in 1999. This gave the Committee an opportunity for objective reassessment of the incumbent auditor as well as alternative audit firms. The Audit Committee concluded that the incumbent auditor should be recommended to serve another term and that the tender process should be carried out at intervals of no longer than five years.
The Committee has met on one occasion during the last twelve months with all members present at that meeting.
The Committee reviewed the current Board size, structure and composition and confirmed that no changes were required and that the leadership of the organisation was such that the Company could continue to compete effectively in the marketplace in which it operates.
Remuneration Committee The membership in place at the year-end was John Sussens (Chairman), Martin Jackson and Gillian Wilmot (appointed 26 April 2005). The Company Secretary acts as Secretary to the Committee.
The Committee met four times during the year and all members attended the meetings. Gillian Wilmot attended the two meetings that were held after her appointment.
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 control and risk management and the overall assurance provided by the Audit Committee that the systems operate effectively.
The RMC receives reports setting out key performance and risk indicators and considers possible control issues brought to their attention by early warning mechanisms, which are embedded within the operational units and reinforced by risk awareness training. The RMC and the Audit Committee also receive regular reports from Internal Audit, which include
recommendations for improvement in the control and operational environment. The Audit Committee’s role in this area is confined to a high-level review of the arrangements for internal control. The Board’s agenda includes a regular item for consideration of risk and control and receives reports thereon from the RMC and the Audit Committee. The emphasis is on obtaining the relevant degree of assurance and not merely reporting by exception. At its March 2006 meeting, the Board carried out the annual assessment for the 2005 year by considering documentation from the Audit Committee, taking account of events since 31 December 2005.
The Audit Committee’s ability to provide the appropriate assurance to the Board depends on the provision by Internal Audit of periodic and independent confirmation that the controls established by management are operating effectively. The Audit Committee reviews the wider aspects of internal control and risk management, providing a high level challenge to the steps being taken to implement the risk management strategy.
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 weakness and recommendations to management on improvements.
Remuneration report The following report has been approved by the Remuneration Committee (the Committee) and the Board for submission to shareholders.
The Remuneration Committee The Committee is chaired by John Sussens, the Senior Independent Non-executive Director, with the other members being Martin Jackson and Gillian Wilmot. Gillian Wilmot was appointed to the Board and Committee on 26 April 2005. The Chairman and Chief Executive are invited to meetings where the Committee considers it appropriate to obtain their advice on the matters under review.
Policy on Executive Directors’ remuneration The current Executive Directors are all 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.
It is the Committee’s general strategy, with agreement from the Executive Directors, to pay salaries at below median levels, their participation in the success of the Group coming from increases in the value of the shares held by each Executive Director.
Directors’ service contracts The Company entered into new service contracts with the three Executive Directors just prior to the Company’s listing on the London Stock Exchange in September 2004. The notice from the Company required to terminate the Chief Executive’s contract was reduced (with effect from 23 November 2005) from 18 months to 12 months - no compensation was requested or paid for this change.
The remuneration of the Chairman is decided by the Remuneration Committee and that of the Non-executive Directors by the full Board. The Non-executive Directors do not participate in meetings where Non-executive Director fees are discussed.
Henry Engelhardt 12 12 Andrew Probert 6 6 David Stevens 12 12
Directors’ emoluments Remuneration for the year ended 31 December was as follows: Base salary Bonuses Benefits 2005 2004 and fees Total Total
*With effect from August 2004 Alastair Lyons waived 25% of his annual fee. **The 2004 fees for Manfred Aldag included fees due for 2003 of £6,000 paid in 2004.
Directors’ shareholdings Directors’ interests in the ordinary shares of the Company are set out below: This report was approved by the Board of Directors on 3 March 2006 and is signed on its behalf by the Committee Chairman: John Sussens Remuneration Committee Chairman
*Include amounts held by family members and in trusts settled by family members
Corporate responsibility Mission The Admiral Group is committed to dealing fairly and with a high level of integrity with all its stakeholders. This includes its actions and policies towards staff, the local communities in which the business operates and our staff live, and the environment.
Employee wellbeing The Group strives to create the best possible working environment for all its employees. This is consistent with the philosophy that the happier people are, the better they work. If employees enjoy what they do and the environment they do it in, they tend to have higher levels of productivity. The Group has achieved a number of awards in recognition of its working environment, including: The Sunday Times 100 Best Companies to Work for – included in all six years of the publication; ranked 20th overall in the last list published
The Financial Times 100 Best Workplaces in the UK – included in all three years of the publication 100 Best Workplaces in the EU – included in all three years’ lists
The Group takes great pride in achieving these awards, and has a number of staff initiatives to ensure they continue. Employees regularly receive information on the Company’s financial performance, as well as any other information deemed important to them. Every member of staff is invited to and encouraged to attend a Staff General Meeting where a variety of information about the Group is communicated to them. Employees also regularly have the chance to state their views on the Company.
New staff share schemes were established in 2004 to replace the Employee Share Trust Scheme that ceased following the Company’s flotation in September 2004. The Board is strongly of the view that actual or prospective share ownership plays a key role in staff incentivisation. Therefore, two new schemes have been created: The Approved Share Incentive Plan This scheme is intended to replace the previous staff profit share, and is open to all staff.
Disability The Group gives fair consideration to all applicants. The abilities and aptitudes of the applicant will be considered with regard to the
The winner of the Admiral sponsored Champion Child of Courage Award
This initiative is supported by the unique idea of “Henry’s Pot”. The fund started in 1999 and allows staff to apply for a donation or sponsorship toward an organisation of their choice. In 2004, 80 awards were made from this fund to all kinds of different interests, with the number increasing to 113 in 2005.
Wellbeing of Women’s mission is to bring an end to fear and suffering caused by reproductive health problems.
Born Free Foundation and Tusk through elephant.co.uk: The Born Free Foundation is an international wildlife charity which works to reduce animal suffering and to encourage people to treat animals with respect. It is involved in campaigns against cruelty in zoos, and dedicated to aiding conservation of elephants, big cats, wolfs, dolphins, primates and bears.
Henry Engelhardt, (48) 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.
Andrew Probert (53) Finance & IT Director Andrew is responsible for finance, information technology, facilities and commercial negotiations.
He is a founder manager, joining Admiral in 1992, being appointed a Director in 1995.
Director at London & Manchester Group plc from 1992 to 1998, up to the date of its acquisition by Friends’ Provident Life Office.
Martin was appointed a Non-executive Director of IG Holdings plc in April 2005.
Keith James OBE (61) Non-executive Director (A, N) Keith was appointed a Non-executive Director in
Nominations Committee and is also the independent Chairman of Admiral Insurance
Company Limited between 1992 and 2000. Keith was awarded an OBE in 2005 for services to business and the community in Wales.
John Sussens (60) Non-executive Director (R) John was appointed the Senior Independent Nonexecutive Director in August 2004, and is Chairman of the Remuneration Committee. He is also a Nonexecutive Director of Cookson plc, Phoenix IT
Gillian has significant experience in consumerfacing businesses at Marks and Spencer plc,
Director’s report The Directors present their Annual Report and the audited financial statements for the year ended 31 December 2005.
Share capital Other than the holdings of the Directors as disclosed in the remuneration report, so far as the Directors are aware, or have been notified pursuant to section 198 of the Companies Act 1985, the following shareholders have interests in 3% or more of the ordinary share capital of the Company at 28 February 2006: Directors and their interests The present Directors of the Company are shown on the inside cover of this report, whilst Directors’ interests in the share capital of the Company are set out in the remuneration report.
Charitable and political donations During the year the Group donated £108,000 (2004: £75,000) to various local and national charities. The Group has never made political donations. Refer to the corporate responsibility report for further detail.
Creditor payment policy It is the policy of the Group to pay all purchase invoices by their due date, and appropriate quality measures are in place to monitor and encourage this. At the end of the year outstanding invoices represented 30 days purchases (2004: 24).
Company law requires the Directors to prepare Group and Parent Company financial statements for each financial year. Under that law the Directors are required to prepare the Group financial statements in accordance with IFRS as adopted by the EU and have elected to prepare the Parent Company financial statements in accordance with UK Accounting Standards.
for the Parent Company financial statements, state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the Parent Company financial statements; and 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
We have reported separately on the Parent Company financial statements of Admiral Group plc for the year ended 31 December 2005 and on the information in the Directors’ remuneration report that is described as having been audited.
Respective responsibilities of Directors and auditors The Directors’ responsibilities for preparing the Annual Report and the Group financial statements in accordance with applicable law and International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) are set out in the statement of Directors’ responsibilities above.
Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the Group financial statements. It also includes an assessment of the significant to the members of Admiral Group plc
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 Group financial statements 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 Group financial statements.
Opinion In our opinion: the Group financial statements give a true and fair view, in accordance with IFRS as adopted by the EU, of the state of the Group’s affairs as at 31 December 2005 and of its profit for the year then ended; and the Group financial statements have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation
Insurance premium revenue 176,214 151,864 Insurance premium ceded to reinsurers (36,760) (44,363) Net insurance premium revenue 5 139,454 107,501
Earnings per share: Dividends declared (total) 14 49,190 51,996 Dividends declared (per share) 14 19.0p 20.1p
Provisions for other liabilities and charges 23 – – Deferred income tax 25 3,550 4,838 Trade and other payables 24 182,935 164,329 Current tax liabilities 19,556 9,585
Cash flows from financing activities: Repayments of borrowings (10,667) (2,333) Capital element of new finance leases 1,201 447 Repayment of finance lease liabilities (635) (1,957) Payments of transaction expenses – (2,354) Equity dividends paid (49,190) (51,996)
Cash and cash equivalents at 1 January 119,201 94,539 Cash and cash equivalents at end of period 20 150,152 119,201
Refer to notes 1 and 4 for an explanation of the transition from UK GAAP to IFRS.
The consolidated financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU). These are the Group’s first consolidated financial statements under IFRS and IFRS 1 (First Time Adoption) has been applied. The Company has elected to prepare its Parent Company financial statements in accordance with UK GAAP: these are presented later in this report.
An explanation of how the transition to adopted IFRS has affected the financial performance and cash flows of the Company is set out in note 4.
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.
An explanation of the impact of the transition to IFRS is set out in note 4. This includes detailed reconciliations of the following: profit for the year ended 31 December 2004 under previous GAAP to the comparative figures stated in the consolidated income statement above reported under IFRS
Income is allocated to profit commission in the income statement when the right to consideration is achieved, and is capable of reliable measurement.
Revenue from Gladiator Commercial and Confused.com Commission from these activities is credited to income on the sale of the underlying insurance policy having regard to the profile of services provided.
Premium The proportion of premium receivable on in-force policies relating to unexpired risks is reported in insurance contract liabilities and reinsurance assets as the unearned premium provision – gross and reinsurers’ share respectively.
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 an insurance or reinsurance contract where there is material risk transfer between the insured and the insurer.
Goodwill All business combinations are accounted for using the purchase method. Goodwill has been recognised in acquisitions of subsidiaries, and represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired.
The classification and accounting treatment of acquisitions occurring before 1 January 2004 have not been reconsidered in preparing the Group’s opening IFRS balance sheet at 1 January 2004 due to the exemption available in IFRS 1 (First Time Adoption).
Deferred acquisition costs Acquisition costs comprise all direct and indirect costs arising from the conclusion of insurance contracts. Deferred acquisition costs represent the proportion of acquisition costs incurred that corresponds to the unearned premium provision at the balance sheet date. This balance is held as an intangible asset.
All property, plant and equipment is stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method to write off the cost less residual values of the assets over their useful economic lives. These useful economic lives are as follows: Impairment of property, plant and equipment In the case of property, plant 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 net realisable value and the asset’s value in use. Impairment losses are recognised through the income statement.
e) Leased assets The rental costs relating to assets held under operating leases are charged to the income statement on a straight-line basis over the life of the lease.
Motor vehicles 4 years Fixtures, fittings and equipment 4 years Computer equipment 2 to 4 years Improvements to short 4 years leasehold properties
any difference between cost and redemption value being recognised in the income statement over the life of the borrowings on an effective interest basis.
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.
Employee share schemes The Group operates a number of equity settled compensation schemes for its employees. For schemes commencing 1 January 2004 and after, the fair value of the employee services received in exchange for the grant of free shares under the schemes is recognised as an expense, with a corresponding increase in equity.
Current tax Current tax is the expected tax payable on the taxable income for the period, using tax rates in effect at the balance sheet date, and includes any adjustment to tax payable in respect of previous periods.
An explanation of the impact of the transition from UK GAAP to IFRS is set out in the following reconciliations and notes.
A) Reconciliation of equity There is no difference in equity reported on the transition balance sheet (i.e. at 1 January 2004) under IFRS and that under previous (UK) GAAP.
(ii) Retained earnings The following table sets out the reconciling items to retained earnings: Retained earnings under UK GAAP 103,258 Reinstatement of goodwill (see note (i) above) 3,906 Elimination of dividend liability (see note (iii) below) 24,049
(iii) Trade and other payables The adjustments to this balance relate to the elimination of dividends for which liabilities had been recognised under UK GAAP. Under IAS 10 (Events after the balance sheet date) liabilities for dividends are only recognised when the dividends are declared. At the balance sheet date, liabilities had been recognised for dividends declared after the balance sheet date. These liabilities have been eliminated.
Other revenue 69,457 – 69,457 Profit commission 21,673 – 21,673 Investment and interest income 11,884 – 11,884
Profit after tax attributable to equity holders of the Company 86,600 3,906 90,506
Notes on table B: (i) Other operating expenses The adjustment relates solely to the reinstatement of goodwill to the transition date balance. Refer to the reconciliation of equity above.
Group gross premiums written after co-insurance 186,989 165,343 Outwards reinsurance premiums (28,052) (48,606)
All insurance business written during all periods is direct private motor insurance written in the United Kingdom. The Group’s share of the business was underwritten by Admiral Insurance (Gibraltar) Limited (AIGL) and Admiral Insurance Company Limited (AICL). All contracts are shortterm in duration, lasting for 10 or 12 months.
Analysis of other administration and marketing costs: 31 December 31 December
Ancillary sales expenses 13,378 10,682 Confused.com operating expenses 5,162 1,921 Gladiator Commercial operating expenses 3,252 2,719 Special unit-holder bonus – 3,345 Central overheads 791 567
Reconciliation of expenses related to insurance contracts to reported expense ratio: 31 December 31 December
Net insurance premium revenue 139,454 107,501 Reported expense ratio 15.1% 15.0%
Total finance charges 2,162 2,451 13. Taxation 31 December 31 December
UK Corporation tax Current charge at 30% 36,051 31,342 Tax relief in respect of ESOT share provision – (16,985) Under provision relating to prior periods – corporation tax 11 1,571 Current tax charge 36,062 15,928
Tax charge for the period as above 34,774 14,400 14. Dividends
Total dividends 49,190 51,996 *For comparability, the per-share amounts for these two dividends have been re-stated to reflect the share capital in issue at the 2004 year-end.
Both dividends included in the 2004 column were declared and paid before the Company’s flotation in September 2004.
Weighted average number of shares – basic 258,987,515 258,595,400 Unadjusted earnings per share – basic 32.7p 35.0p
Weighted average number of shares – diluted 259,387,515 258,595,400 Unadjusted earnings per share – diluted 32.7p 35.0p 2) Adjusted EPS Profit for the financial year after tax 84,720 90,506 Deduct ESOT tax credit – (16,985) Adjusted profit after tax 84,720 73,521
Improvements Computer Office Furniture Motor Total to short equipment equipment and fittings vehicles leasehold buildings
The net book value of assets held under finance leases is as follows: 31 December 31 December
Carrying amount: 18. Financial assets The Group’s financial assets can be analysed as follows: 31 December 31 December
Fixed income securities: Government bonds 83,071 42,980 Other listed securities 156,071 139,573
The other primary form of credit risk is in respect of amounts due from policyholders. Credit risk arises due to the potential for default on credit card and direct debit payments. The impact of this is mitigated by the large customer base and the low level of the average balance recoverable. This risk is also mitigated by the operation of controls over this area including the automated cancellation procedures for those policies in default, resulting in minimal financial impact.
As the Group holds a significant proportion of its financial investments in the form of fixed income securities, it is also exposed to market risk – primarily the impact on investment return and the carrying value of investments that could result from shifts in interest rates. The Group’s investment funds are managed on short duration strategies that effectively minimise the quantum of any impact that could arise. At 31 December 2005 and the same date in 2004, the average duration of the Group’s investment funds was less than 17 months. The Group does not invest in equity securities.
A) 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.
Insurance risk primarily involves uncertainty over the occurrence, amount and timing of claims arising on insurance contracts issued. The key risk is that the frequency and/or value of the claims arising exceeds expectation and the value of insurance liabilities established.
As well as these proportional arrangements, an excess of loss reinsurance programme is also purchased to protect the Group against very large individual claims and catastrophe losses.
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 historic reported loss ratios enjoyed by the Group.
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.
As re-estimated at 31 December 2005 82,205 101,910 105,748 137,075 –
Net claims provision as originally estimated 55,529 71,071 75,549 98,120 128,631
Provision re-estimated as of: Two years later 42,927 61,167 67,726 – – Three years later 40,706 55,974 – – – Four years later 37,890 – – – –
E) Analysis of net claims reserve releases 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.
F) Reconciliation of movement in net claims reserve 31 December 31 December
G) Reconciliation of movement in net unearned premium provision 31 December 31 December
Net unearned premium provision at end of period 71,333 51,850 20. Cash and cash equivalents 31 December 31 December
Cash at bank and in hand 109,506 88,131 Cash on short term deposit 40,646 31,070
Total trade and other receivables 9,392 16,739 22. Financial liabilities 31 December 31 December
During 2005, the Group renegotiated the terms of its debt with Lloyds TSB and Bank of Scotland. The new facility is a revolving credit arrangement that provides the Group with greater flexibility over use of the funds and also attracts lower interest charges.
During 2005, 1,266,565 new ordinary shares of 0.1p were issued to the trusts administering the Group’s share schemes.
581,565 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.
685,000 were issued to the Admiral Group Employee Benefit Trust for the purposes of the Admiral Group Senior Executive Restricted Share Plan. 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.
Notes *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 against budget. The current maximum award for each half-year amounts to 600,000 shares (or a maximum annual award of £3,000 per employee if smaller). For the 2005 financial year, a maximum of 1,181,565 shares will be awarded under this scheme.
For maximum awards to be made, the Group’s core profit must exceed budget by 11.5 per cent. Employees must remain in employment until the vesting date (three years from the date of award), otherwise the shares will be forfeited.
For an award to vest, the Total Shareholder Return (TSR) of Admiral Group plc shares over the three years 2005 to 2007 must be at least equal to the TSR of the FTSE 350 index, of which the Company is a constituent. If the Company’s TSR does not meet this target, no awards will vest under the 2005 UFSS scheme.
If this initial hurdle is overcome, individual awards are calculated based on the growth in the Company’s earnings per share (EPS) relative to a risk free return (RFR), for which LIBOR has been selected as a benchmark. This performance is measured over the same three-year period.
The range of awards is as follows: if the growth in EPS is less than the RFR, no awards vest
EPS growth is equal to RFR – 10% of maximum award vests to achieve the maximum award, EPS growth has to be approximately 15% per annum compound over the next three year period, assuming RFR remains at about 4.5%
Share Share Capital Retained Total capital premium redemption profit equity account reserve and loss
Retained profit for the period – – – 90,506 90,506 Issues of share capital 251 (247) – – 4 Share issue expenses – (2,354) – – (2,354)
The Group was committed to obligations under operating leases on land and buildings as follows: Operating leases expiring: 31 December 31 December
29. Related party transactions There were no related party transactions occurring during 2005 that require disclosure. Details relating to the remuneration and shareholdings of key management personnel are set out in the remuneration report. Key management personnel are able to obtain discounted motor insurance at the same rates as all other Group staff, typically at a reduction of 20%.
Basis of preparation: The 2004 and 2005 figures below are as stated in the financial statements preceding this financial summary. Only selected lines from the income statement and balance sheet have been included.
Figures for 2001 to 2003 have not been restated under IFRS, although have been reclassified into the formats used in these financial statements.
Capital and reserves 7 Called up share capital 8 260 259 Share premium account 13,145 13,145 Capital redemption reserve 17 17 Profit and loss account 110,269 79,812
Refer to note 1 for details on prior year restatement of balance sheet.
Parent Company accounting policies The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the financial statements: 1. Basis of preparation The Admiral Group plc Company financial statements have been prepared in accordance with applicable accounting standards, under the historical cost convention and in accordance with the provisions of Section 226 of, and Schedule 4 to, the Companies Act 1985.
The 2004 comparative figures have been restated to take account of changes resulting from FRS 21 (Events after the balance sheet date), which require dividends to be recorded as a liability only when the distribution is approved. The adjustment has the effect of reducing creditors due within one year by £24.0m (being the final dividend declared in 2004, but not approved until 2005) and increasing retained earnings by £24.0m.
Issues of share capital 1 – – – 1 Share scheme charges – – – 1,247 1,247 8. Share capital Full details on the Company’s share capital are included in the consolidated financial statements earlier in this report at note 26.
We have audited the Parent Company financial statements of Admiral Group plc for the year ended 31 December 2005, which comprise the Balance Sheet and the related notes. These Parent Company 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.
We have reported separately on the Group financial statements of Admiral Group plc for the year ended 31 December 2005.
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.
We report to you our opinion as to whether the Parent Company financial statements give a true and fair view and whether the Parent Company financial statements and the part of the Directors’ remuneration report to be audited have been properly prepared in accordance with the Companies Act 1985. We also report to you if, in our opinion, the Directors’ report is not consistent with the Parent Company financial statements, if 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 read other information contained in the Annual Report and consider whether it is consistent with the audited Parent Company financial statements. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the Parent Company financial statements. Our responsibilities do not extend to any other information.
Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the Parent Company 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 Parent Company financial statements, and of whether the accounting policies are appropriate to the Company’s circumstances, consistently applied and adequately disclosed.
Notice of Annual General Meeting Notice is hereby given that the Annual General Meeting of Admiral Group plc will be held on Thursday 18 May at 2.00pm at The Celtic Manor Hotel, Coldra Woods, Newport, South Wales, NP18 1HQ.
4. To re-elect Henry Engelhardt (Chief Executive Officer) as a Director of the Company.
5 .To re-elect Manfred Aldag (Non-executive Director and member of the Nomination Committee) as a Director of the Company.
Biographical details of all of the Directors may be found in the Annual Report of the Company on pages 40 to 41.
6. To re-appoint KPMG Audit plc as the auditor of the Company from the conclusion of this meeting until the conclusion of the next general meeting at which accounts are laid and to authorise the Directors to determine their remuneration.
Special Business To consider and, if thought fit, to pass the following resolution which will be proposed as an Ordinary Resolution: 7. That the Directors be generally and unconditionally authorised pursuant to Section 80 of the Companies Act 1985 (the “Act”) to exercise all the powers of the Company to allot relevant securities (within the meaning of that section) up to an aggregate nominal amount of £86,000 provided that this authority shall expire (unless previously renewed, varied or revoked by the Company in general meeting) 15 months after the date of the passing of this resolution, or, if earlier, at the conclusion of the next Annual General Meeting of the Company after the date of the passing of this resolution, but so that this authority shall allow the Company to make before the expiry of this authority offers or agreements which would or might require relevant securities to be allotted after such expiry and notwithstanding such expiry the Directors may allot relevant securities in pursuance of such offers or agreements.
Section 80 of the Companies Act 1985 provides that the Directors of a Company cannot issue new shares in its capital without the approval of its shareholders. Accordingly, the purpose of this resolution is to give the Directors of the Company authority to issue new shares in the capital of the Company up to a maximum amount of £86,000, which is approximately equivalent to 33 per cent of the issued share capital of the Company as at 3 March 2006.
Section 89 of the Companies Act 1985 gives existing shareholders in a Company certain preemption rights with respect to allotments of new shares. A Company can only disapply these rights with the approval of its shareholders. Accordingly the purpose of this resolution is to allow the Directors of the Company to allot ordinary shares in the Company for cash, or to transfer treasury shares for cash, other than to its existing shareholders on a pre-emptive basis up to a maximum amount of £13,000 which is equivalent to 5% of the issued ordinary share capital of the Company as at 3 March 2006 and is in line with the recommended guidelines issued by institutional investor bodies.
b) the minimum price which may be paid for an ordinary share is 0.1p c) the maximum price which may be paid for an ordinary share is an amount equal to 105% of the average of the middle market quotations for an ordinary share as derived from The London Stock Exchange Daily Official List for the five business days immediately preceding the day on which the ordinary share is purchased, exclusive of expenses d) the authority conferred by this resolution shall, unless renewed, expire on the date falling 15 months after the date of the passing of this resolution, or, if earlier, at the conclusion of the next Annual General Meeting of the Company; and
The Directors consider, in certain circumstances, that it may be appropriate and in the best interest of shareholders generally for the Company to purchase its own shares. This resolution gives authority for the Company to purchase up to 13,000,000 Ordinary shares which is approximately equivalent to 5.00% of the issued share capital of the Company as at 3 March 2006. The Directors have no specific plans to exercise any authority granted by this resolution, but will keep the matter under review and will only make purchases where, in the light of prevailing market conditions, they consider it will result in an increase in earnings per ordinary share in the Company.
The Companies (Acquisition of Own Shares)(Treasury Shares) Regulations 2003 (which came into force on 1 December 2003) enable companies to retain any of their own shares they have purchased as treasury shares with a view to their possible re-issue at a later date, rather than cancelling them as the law previously required. The Company will consider holding any of its own shares that it purchases pursuant to this resolution as treasury shares, which will give the Directors flexibility in the management of the capital base of the Company. No dividends will be paid on treasury shares while held in treasury, and no voting rights will attach to them.
• if you hold your shares in certificated form and have your share certificate to hand, online at www.capitaregistrars.com by following the instructions provided; or
• and in each case instructions must be received not less than 48 hours before the time of the meeting. Appointment of a proxy does not preclude a member from attending the meeting and voting in person
For an appointment of proxy returned in hard copy to be valid, it must be completed and deposited (together with any power of attorney or other written authority under which it is signed or a copy of such authority notarially certified or in some other way approved by the Directors) with Capita Registrars, Proxy Department, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, not less than 48 hours before the meeting.
CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so by utilising the procedures described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message (a ‘CREST Proxy Instruction’) must be properly authenticated in accordance with CRESTCo’s specifications and must contain the information required for such instructions, as described in the CREST Manual. The message, regardless of whether it relates to the appointment of a proxy or to an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received by the issuer’s agent (ID RA10) by the latest time(s) for receipt of proxy appointments specified in the notice of meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001. CREST members and, where applicable, their CREST sponsors or voting service providers should note that CRESTCo does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings
In the case of joint holdings, only one holder may sign and the vote of the senior who tenders a vote shall be accepted to the exclusion of the votes of the other joint holders, seniority for this purpose being determined by the order in which the names stand in the Register of members in respect of joint holdings.
Copies of the Executive Directors’ service contracts and the Non-executive Directors’ terms of appointment will be available for inspection at the meeting from 1.45 pm until the conclusion of the meeting.