The history of the Admiral Group is one of growth, profi tability and innovation. Admiral launched in 1993 with just one brand, zero customers and 57 members of staff.
The Group also has operations in Spain, Italy, France and the USA, and in total insures 3.70 million customers.
COMPANIES TO WORK FOR AWARD: Chief Executive’s Statement: pages 10 to 11
Financial Statements 68 Independent Auditor’s Report 70 Consolidated Income Statement 71 Consolidated Statement of Comprehensive Income 72 Consolidated Statement of Financial Position 73 Consolidated Cash Flow Statement 74 Consolidated Statement of Changes in Equity 75 Notes to the Financial Statements 99 Parent Company Financial Statements 100 Notes to the Parent Company Financial Statements 102 Consolidated Financial Summary
Other Information 103 Glossary 104 Directors And Advisers 105 Further Information
Admiral’s Chief Financial Offi cer, Kevin Chidwick, outlines the 2013 Group and divisional results – UK Car Insurance, International Car Insurance, Price Comparison and Other Group Items.
A good year for Admiral Henry Engelhardt, CEO, gives his perspective on 2013.
A focus on customer service, employee satisfaction, risk aversion, profi t and returning dividends to shareholders.
“ 2013 was a good year for the Group with further increases in profit, customer numbers and dividends. Our UK Car Insurance business remains the main source of profits but pleasing contributions have also been made by our Price Comparison businesses in the UK, Spain and France.” Kevin Chidwick, Chief Financial Officer
Earnings per share up 10% at 104.6 pence (2012: 95.1 pence)
International Car Insurance turnover up 15% to £188 million with customers up 18% to 515,300 (2012: £163 million and 436,000 customers)
2013 was a busy year for Admiral Group. A few of the key moments are highlighted below: Read more on Admiral Group’s Corporate Responsibility (CR) strategy: www.admiralgroup.co.uk/ culture/csr/
Underwriting Arrangements Sharing risk with reinsurance partners is a key part of Admiral’s business model. Extensions to agreements mean that Admiral will be able to operate its capital-effi cient model to at least the end of 2016. For more information, see page 23.
The Customer, The Customer, The Customer Constantly innovating to meet customer needs, in 2013 Admiral launched a Price Comparison business in the USA, comparenow.com and two law fi rms in the UK, Admiral Law and BDE Law. For more information, see pages 25 and 31.
Happy Birthday Admiral Group In January 2013, Admiral celebrated its 20th birthday, in May, ConTe turned fi ve and December marked the fi rst birthday for Admiral’s new UK Household Insurance operation.
A GREAT Place to Work! In surveys voted for by members of staff, Admiral was placed: > 2nd in the Sunday Times 25 Best Big Companies to Work For in 2014 > 2nd Best Large Workplace in the UK and 2nd Best Multinational Workplace in Europe by the Great Place to Work Institute, and received the award “Trust Champion” as one of the few companies to have appeared in the list every year since it began
Our Business I am frequently asked what it is that makes Admiral different. What is it that has made it possible for this business to grow in 10 years from a private company with a 3% share of the UK private car insurance market and making pre-tax profi ts of £57 million in 2003 to a member of the FTSE-100, one of the largest in the UK private car market, and with profi ts of £370 million today?
My answer is that there is no one thing that if you lifted it out of Admiral and put it into a competitor would immediately transform that company’s fortunes. Rather, there are a set of attributes that together make Admiral what it is, a combination that would be very hard to replicate as you would need each and every element to come together to the right degree and in the right way. To pick out the top 10: > Management: the combination of the enormous experience and proven track record in this sector of our founding executives with the capability of those of our senior managers who have successfully developed their careers inside the business > Our Culture: many companies document their culture at length – the best way to understand Admiral’s culture is to spend a day in one of our offi ces to appreciate the depth of staff engagement with a business of which they all own a part; the vibrancy of the working environment; the commitment to the customer; and the engrained desire to deliver a quality output and continuously improve that quality > Our Employees: we believe that if people enjoy what they do, they do a better job – in 2013 Admiral was voted the 2nd Best Large Workplace in the UK and the 2nd Best Multinational Workplace in the Great Place to Work Institute awards; Admiral has been in the Sunday Times 100 Best Companies to Work For in the UK every year the list has been compiled > Focus: Admiral has spent 20 years refi ning how best to provide the service people look for from their car insurer, and the last 13 years developing Price Comparison, in particular for car insurance. It is only with the advent of Admiral Household Insurance in the last year that we have dedicated any material effort outside private motor insurance and price comparison > Pricing: data analysis lies at the heart of our pricing algorithms. With three million customers and substantial amounts of data our experienced pricing team is excellently placed to derive competitive advantage in the UK, and to inject that experience into our new businesses overseas as they build the scale from which one can derive meaningful analysis > Claims Management: our experience, culture, and focus all combine to deliver a claims result that speaks for itself with market-leading loss ratios, sustained reserve releases and high levels of profi t commission earned under our reinsurance arrangements, as well as consistent positive feedback from customers on the claims service they receive
Admiral has achieved so much in its fi rst 20 years, here are a few highlights from over the years: Admiral launches in Cardiff with just one brand, zero insured vehicles and 57 members of staff.
05Annual Report and Accounts 2013 Admiral Group plc > Controlled Test and Learn: everything that Admiral is now has been built from the ground up, taking measured steps to test how well we understand the challenge ahead and the effectiveness of our solutions, and then to learn from that experience and from the experience of those who have tried other strategies. That is how the Admiral team has set about building private motor businesses in fi ve countries, Price Comparison businesses in four, and now a Household Insurance business in the UK. While slower than growth by acquisition, it is much lower risk and enables one to construct, in all respects, the platform one wants for the future > Low Cost: the results speak for themselves – an expense ratio in our established UK business of 15%, almost half the market average. Cost consciousness has to be engrained to be effective, a core part of the way in which we do things. It is everyone’s responsibility, not just that of the Finance team > Low Capital Employed: probably because everyone at Admiral is, or becomes, a shareholder, we regard our shareholders’ money as our own, seeking to use it as effi ciently as we can. Hence our model based on reinsurance relationships underpinned by strong underwriting results, with Admiral itself only providing the capital backing for a minority of its business. Hence our commitment to give back to shareholders whatever surplus we do not need to support our current business. The result in 2013 – a 58% return on equity and a 95% pay-out ratio giving rise to a 8% dividend yield > Low Risk: Admiral has always sought to protect its downside characterised by our reinsurance model; an approach to claims reserving that is prudent in the early stages and releases only when justifi ed by experience; an organic growth strategy; a test and learn approach of taking measured steps before investing further; sticking to what we understand well; and a conservative approach to investment management
It is the sum of these elements that gives me confi dence in Admiral’s sustained competitive success across the insurance cycle. In 2013, as in 2012, the cycle was not at the right point to justify growth. Market rates fell again last year, probably by around 13%. It made no sense to chase the market down, particularly for a player such as Admiral that has a signifi cant combined ratio advantage over the market as a whole and can, therefore, afford to raise rates less quickly than the market when the cycle turns up. Our strategy in the UK was to hold our book at its existing level, recognising that this would result in a fall in UK Car Insurance turnover. At the same time, our claims results were excellent, supporting signifi cant reserve releases from prior years.
We continued to apply our test and learn approach to our young businesses, particularly those overseas. For example, in Europe, Admiral Seguros in Spain launched its second brand, Qualitas Auto, to broaden its market appeal. In the USA, our auto insurer, Elephant Auto, grew its vehicle base by 34%, and we started test-marketing comparenow.com, bringing the successful European model of insurance price comparison to the USA. We will progressively increase our investment in this business as justifi ed by the performance of its marketing. Price comparison businesses typically turn profi table much earlier than insurance businesses as they have lower fi xed overheads. LeLynx, our French Price Comparison business returned a profi t in 2013, its third full year of operation, and Rastreator has been profi table since 2011, its second full year.
We have also been encouraged by our launch of Household Insurance in the UK and the potential this demonstrates. Admiral’s overall result is, and will for some time remain, inevitably dominated by our UK Car Insurance business and, therefore, by the UK private motor insurance cycle. And it is equally inevitable in a cyclical industry that there will be periods when profi t growth is more muted, derived from a balance between lower prices and consequently lower volume growth and the positive development of prior years’ claims.
2013 was the year for an external review of our Board and committee effectiveness, following two successive years of internal review. Overall, the review found that the Board had continued to work very effectively in relation to most of the required dimensions and that good progress had been achieved in many of the areas identifi ed for action in the last independent review at the end of 2010, in particular in the areas of succession planning and risk management on which I commented at the time. With a new Chair of Risk and a newly appointed Director of Risk, the review recognised the extent of change that would take place within risk governance and the role of the Group Risk Committee in exercising effective oversight during this process. It also focused on the sustained need for effective succession planning to look well ahead of the time Directors need or plan to step down. It recognised that there are practical challenges of a larger Board resulting from the policy of providing a reasonably long period of overlap to maintain the continuity of Board process and the strength of personal interaction which underlies the effectiveness of the Board as a team. In addition to our Directors we also have three senior managers as permanent contributors to our Board process as part of their personal development.
Thank You May I start by thanking our customers both for their business and for all the feedback we get from them as to how we can improve what we do. Then our shareholders for their continued support and the time many of them take to understand our business and its drivers. Above all, may I thank our people – our staff, our management team, and our Board – for everything they do to build such a successful, and sustainably different, business.
In the UK, Admiral’s brand family includes some of the most recognised car insurance providers and a leading price comparison website. The Group exports the knowledge and experience gained from its UK businesses overseas, driving the development of its international businesses.
Growing car insurance businesses in Spain, Italy, the USA and France
Confused.com, one of the UK’s leading price comparison websites, profi table operations in Spain and France and a new business in the USA
The Group currently employs 7,000 people worldwide and is one of the largest employers in South Wales.
With a history of innovation, Admiral Group is one of the UK’s largest car insurance providers with an 11% market share across four brands: Admiral, Bell, Diamond and elephant.co.uk.
In 2013, the Group also established two new law fi rms, Admiral Law and BDE Law.
Staff: Location offi ces: Set up in 2006, Balumba was Admiral Group’s fi rst business in continental Europe and sells car insurance direct to customers in the Spanish market.
Rastreator is the Group’s Spanish Price Comparison website, offering comparison services since 2009.
Staff: 153 (in Admiral Solutions and Admiral Technologies); Location offi ces: Since 2001, Admiral Group has used an outsourced contact centre in Bangalore to provide additional support for its UK-based teams.
Launched in 2010, L’olivier Assurances is the Group’s direct car insurer based in France.
Why the baked potato? Because the year was solid, but not fl ashy. We made more money than ever before, we grew customer numbers a little bit, we launched one new overseas business (comparenow.com), but there was no growth surge, there were no claims shocks; we just went about our business.
Some people might say that our results are dependent on “Other revenue” and that this income is under regulatory threat. It’s true, we do make good money from “Other revenue”, but so does the rest of the UK market. If you took away all “Other revenue” tomorrow it might surprise you to know
In the short term, it’s about reserve releases from the UK business
In the long term, it’s about our non-UK businesses, Household Insurance and the future leaders of this organisation
Medium term profi tability will be greatly infl uenced by the eventual turn in the UK cycle and what we can do with it. We’ve made it clear that we don’t think the current declining price environment is the optimal time to grow the business. It becomes an optimal time when competitors start putting their rates up. We too will put our rates up, just as we’ve taken our rates down in the current, declining price, part of the cycle. But in both instances, our move is/will be more gradual than the competition. Very simply, this means that we don’t grow when rates are falling but we should grow when rates are rising.
All of that sounds quite good for the short and medium terms, but what really gets me excited about this business is its long term future. Behind that statement is the secret of the baked potato. Did you know that potatoes have more potassium than bananas? They are very low in saturated fats (although I must admit, I like mine with butter or sour cream and I suspect that can’t be good. Did anyone mention salt?) and they are a good source of vitamin C, vitamin B6 and magnesium. The point is, you don’t look at a baked potato and think nutrients. Just as you might not look at Admiral’s 2013 results and see the progress made by our non-UK operations and UK Household. But for both Admiral and the potato, they are there.
It’s not just the businesses we’ve set up in Spain, Italy, France, the USA and UK Household that give me confi dence, it’s the people we’ve got running them. They, along with a number of others, are the future.
But to create success stories akin to Admiral in the UK takes time and that’s why these businesses come under the heading of long term. Each market is unique, with its own characteristics and idiosyncrasies and each must be approached as a local business; there is no cookie-cutter mould to success. Saying that, there are many techniques we successfully apply in the UK that can be shared across geographies and we are working to ensure best practice around the Group.
Our share scheme is an important part of our culture. We want every member of staff to feel like they own a bit of the Company, so we give them a bit of the Company to own. In the core share scheme every member of staff gets the same number of shares, because every job at Admiral is important.
THE GROUP’S BUSINESS MODEL, OBJECTIVES AND STRATEGY Described by Henry Engelhardt, Admiral Group CEO
Stay ahead of the competition which leads to the ability to price for profi t and/or growth. There are fi ve elements in order to sustain competitive advantage: Be a great company to work for so staff want to come to work every day and naturally give that little bit extra which makes all the difference to consumers
Maintaining fi nancial discipline, even if it results in slower growth
Part of Admiral’s strategy is to share risk and reward where possible. This means we have a number of partners who are supporting us in the hope that we provide them with good returns. This does mean that Admiral’s absolute profi ts are somewhat lower than the Group actually generates at the 100% level, but it also means that Admiral does not need to put up all the capital with which to run its business. The result is a superior return on capital for Admiral shareholders and fi nancial support if things were to go wrong. We call it the “Sleep Easy” model.
THE GROUP EMPLOYS SEVERAL INITIATIVES TO MEASURE THE QUALITY OF ITS CUSTOMER SERVICE: Customer-focused measures programme
Customer Services, New Business and Renewals call answer rates*1 n/a 92% >90%
Notes *1 2012 data is unavailable due to changes in reporting as described above. Customer
“ If People Like What They Do, They’ll Do It Better.” 88% of staff are happy at Admiral, according to the 2013 anonymous Staff Survey.
THE GROUP’S CULTURE RESTS UPON FOUR PILLARS: Communication – open, transparent and two way
Equality – everyone is equal, regardless of seniority or length of service
Reward and recognition – all staff receive performance-related pay and across the Group regular award ceremonies celebrate achievements
All staff are awarded shares to ensure interests are aligned with those of shareholders. For more information about the employee share schemes, refer to page 90.
We continue to invest in our overseas car insurance operations in Spain, Italy, USA and France and have seen strong growth in turnover and customer numbers, even if the businesses have not yet reached break-even. That’s to be expected though, given their age.
We’re also pleased with the progress of our two newest businesses – the UK Household Insurance operation and brand new USA Price Comparison business, comparenow.com. More details on those operations will come through as they grow.
We remain committed to delivering shareholder returns whilst remaining prudently fi nanced with a strong, liquid balance sheet. Our return on equity remains very high at 58%, testament to the strength and success of Admiral’s business model.
> UK Car Insurance profi t increased by 6% to £393.9 million (2012: £372.8 million)
> International car insurance losses totalled £22.1 million (2012: £24.5 million)
> Price Comparison profi t increased by 13% to £20.4 million (2012: £18.0 million)
> Other Group Items, including the employee share schemes, amounted to a cost of £22.0 million (2012: £21.7 million)
Total dividends paid and proposed for the fi nancial year amount to 99.5 pence per share (£272 million), an increase of 10% on the previous year (2012: 90.6 pence; £245 million). This is equal to 95% of earnings per share. The fi nal dividend proposed is 50.6 pence per share (11% higher than the fi nal 2012 dividend of 45.5 pence).
The payment date is 30 May 2014, the ex-dividend date is 30 April and the record date is 2 May.
A focus on lower premium, lower risk business, alongside a growing contribution to the total from renewal customers, contributed to a reduction in UK turnover of 12% to £1,698.9 million (2012: £1,936.2 million).
> Group expense ratio 19.9% (2012: 17.7%) (a slight increase in the UK ratio due to lower average premiums and an improved but high international ratio)
The only notable change in asset allocation during 2013 was a higher proportion invested in money market funds and short-dated debt securities and a move away from cash deposits compared to 2012.
Investment and interest income in 2013 was £14.3 million, down 10% on 2012 (£15.9 million). The reduction was due to the rate of return being slightly lower at 0.7% than in 2012 (0.9%).
The Group continues to generate substantial amounts of cash, and its capital-efficient business model enables the distribution of the majority of post-tax profits as dividends.
Operating cash flow, before transfers to investments 779.1 742.0 616.8 Transfers to financial investments (493.9) (441.9) (295.3) Operating cash flow 285.2 300.1 321.5 Tax and interest payments (95.3) (79.7) (88.5) Investing cash flows (capital expenditure) (13.2) (10.9) (10.1) Financing cash flows (largely dividends) (197.8) (214.8) (250.3)
The main items contributing to the significant operating cash inflow are as follows: £m 2012 £m £m
Profit after tax 221.3 258.4 286.9 Change in net insurance liabilities 244.3 200.0 186.2 Net change in trade receivables and liabilities 203.7 163.0 22.3 Non-cash income statement items 32.0 34.4 38.1 Tax and net interest expense 77.8 86.2 83.3 Operating cash flow, before transfers to investments 779.1 742.0 616.8
The key features to note are: > Total cash plus investments increased by £267 million or 15% (2012: £435 million; 31%), the lower rate of growth resulted from lower growth in the UK business; somewhat offset by higher growth internationally > The net change in actual cash balances was small, as funds were transferred into investments
The majority of the Group’s capital requirement is derived from its European insurance operations, Admiral Insurance (Gibraltar) Limited (AIGL) and Admiral Insurance Company Limited (AICL). The minimum capital requirements and surplus position at the end of 2013 for those companies, along with the overall Group position were as follows: AIGL £m
Surplus over minimum requirement 93 46 333 Total regulatory capital requirement 283
Surplus over regulatory capital requirement*1 170 *1 Before accounting for the 2013 final dividend of £139.6 million.
The Directors note that during 2013 further guidance was issued on implementing the Solvency II regulatory regime in the EU. In September 2013 guidelines were issued for the preparatory phase leading to full introduction, assuming an effective date of 1 January 2016. Solvency II aims to provide an EU-wide set of capital requirement and risk management standards. Key themes include risk based capital, market consistent balance sheets and Own Risk and Solvency Assessments (ORSA). As previously noted, the Directors do not believe, based on guidance issued to date, that there will be a material change in the level of the Group’s capital surplus under the new regime. The Group continues, and remains on track with its Solvency II implementation plan to ensure compliance with the full requirements and preparatory guidelines.
UK Car Insurance Strategy The strategy for Admiral’s UK business is unchanged and remains simple: > The Group aims to grow profi tably its share of the UK private motor insurance market whilst maintaining a capital-effi cient structure > At the same time, Admiral endeavours always to give excellent service to customers, whilst providing a positive environment in which staff can work and develop
A GREAT Place to Work! > 88% of staff are happy at Admiral, according to the 2013 anonymous Staff Survey (2012: 91%)
UK Car Insurance Review David Stevens, CBE Chief Operating Offi cer A little over a decade ago, the UK’s fi rst car insurance price comparison site, Confused.com, was launched. The repercussions for the car insurance industry as a whole have been profound – disturbing the established order as dramatically as the “direct” revolution initiated by Direct Line 15 years earlier.
However, that “merciless price transparency” has had the less fortunate side effect of exacerbating the cyclicality of the market. The energetic shopping of the UK customer and the dominance of price comparison as a method of distribution mean that uncompetitive insurers not only write little or no new business, but also see their existing customers desert them en masse. Deviation from collective behaviour on prices means extreme feast or famine, depending on the direction of deviation. This encourages the homogeneity in pricing moves and the herd-like shifts, upwards or downwards, that characterise cyclical markets.
Admiral tries to mitigate the effects of this heightened cyclicality, both for its customers and its investors. In the great infl ation of 2010–11 our increases lagged the market and we declined to participate in others’ large scale withdrawal from higher risk segments. As a result, we grew by nearly 60% in the two years – and quite rightly. It’s now clear that the business written at the time was very profi table. Conversely, as prices have fallen, we’ve lagged the market and reduced our share of new business volumes, particularly in the higher premium segments, currently (temporarily?) attractive to some of our competitors.
Meanwhile, our investors benefi t from our conservative approach to reserving. This means that profi ts earned are, to a large extent, not recognised immediately, but rather spread over a number of subsequent years. A large proportion of car insurance claims costs relate to bigger bodily injury claims whose fi nal cost can be impossible to predict accurately in the year they occur – so delaying recognition until there is a high degree of certainty makes sense. This is particularly appropriate for a company like Admiral which pays out the majority of profi ts as dividends. This policy means that attractive profi ts earned in cyclically profi table times are only fully refl ected in subsequent years – typically during cyclically less profi table times.
This conservative policy means that reserve releases have been a long term feature of Admiral’s results. This year our releases account for 14% of profi ts and equate to 13% of premium earned. Bizarrely, some commentators discount the value of reserve releases as somehow generating lower quality profi ts. I say “bizarrely” for two reasons. First, to my mind, underwriting profi ts derived from releases on older, more developed, more predictable years cannot be lower quality than underwriting profi ts reported on current, undeveloped, years. Second, in Admiral’s case, profi ts from reserve releases can’t be considered “one-off” – we have released reserves every year since our fl otation in 2004, at an average of 12% of premium earned.
The market’s marked cyclicality, with its yo-yo pricing, makes for more of a white knuckle ride for investors in car insurance than in most sectors. Happily, for Admiral, relatively reduced profi t volatility is both a welcome side effect of our justifi ed caution in only recognising underwriting profi ts with some delay and an equally welcome outcome of our consciously counter-cyclical growth strategy.
Net insurance claims (335.5) (355.1) (251.3) Net insurance expenses (46.7) (50.0) (52.1)
Arrangements for 2013 to 2016 In early 2014 the Group was pleased to announce extensions to its arrangements such that capacity is fully placed until the end of 2016. The underwriting splits can be summarised as follows: Great Lakes (Munich Re) 40.00% 40.00% 40.00% 40.00%
The proportion underwritten by Great Lakes (a UK subsidiary of Munich Re) is on a co-insurance basis, such that 40% of all motor premium and claims for the 2013 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.
At 31 December 2013, all material UK quota share reinsurance contracts for underwriting years up to and including 2010 have been commuted. For the 2011 year, of the original 32.5% of the business that was reinsured, contracts covering 27.5% of the business have been commuted. All reinsurance for the 2012 and 2013 years remain in effect.
Co-insurance and reinsurance arrangements expose Admiral to two key risks: > The risk of reduced availability of co-insurance and reinsurance arrangements > Credit risk of significant counterparties through default of a reinsurer
Details of the potential impact and mitigating factors the Group has in place are available on page 34.
UK Car Insurance Financial Performance As noted in the Group’s interim 2013 results, after significant rate increases in 2010 and 2011, the UK Car Insurance market is now in its second year of being more price competitive. Admiral’s UK business has maintained a stable vehicle count and has focused on margin rather than seeking to grow market share.
Other Revenue Admiral generates Other revenue from a portfolio of insurance products that complement the core car insurance product, and also fees generated over the life of the policy.
The most material contributors to net Other revenue are: > Profit earned from motor policy upgrade products underwritten by Admiral, including breakdown, car hire and personal injury covers > Profit from other insurance products, not underwritten by Admiral > Vehicle Commission (see page 25) > Fees – administration fees and referral income (see page 25) > Instalment income – interest charged to customers paying for cover in instalments Other revenue (net of costs and including contribution from additional products underwritten by Admiral) decreased by 16% to £172.8 million (2012: £204.8 million). This was equivalent to £67 per vehicle (gross of costs) – down from £79 at the end of 2012.
True economic changes > Reduction in income earned from personal injury referral fees (£4)
Loss ratio excluding reserve releases from original net share and commuted reinsurance 80.1% 81.2%
Claims Reserving Admiral’s reserving policy (both within the claims function and in the financial statements) is initially to reserve conservatively, above internal and independent projections of ultimate loss ratios. This is designed to create a margin held in reserves to allow for unforeseen adverse development in open claims and typically results in Admiral making above industry average reserve releases. Admiral’s booked claims reserves continue to include a significant margin above projected best estimates of ultimate claims costs.
The earned motor expense ratio increased to 15.0% from 13.6% due to the reduction in average written premium. The reduction in average written premiums was also the main reason the written basis expense ratio increased to 14.5% from 13.0%.
Total profit from car insurance underwriting of £121.8 million and profit commission of £99.3 million increased significantly, by 32% to £221.1 million from £168.0 million in 2012.
In 2013 Admiral recognised profit commission revenue of £99.3 million (2012: £108.4 million) and reserve releases from business that was originally ceded under quota share reinsurance contracts that have since been commuted of £40.9 million (2012: £1.3 million). Total income from both of the above therefore increased by 28% to £140.2 million (2012: £109.7 million) due to improvements in prior year claims costs and the earning of the 2012 underwriting year. Note 5c to the financial statements analyses profit commission income by underwriting year.
UK Car Insurance Other revenue – Analysis of Contribution £m 2012 £m £m
Net other revenue 204.8 204.8 172.8 Other revenue per vehicle*2 £84 £79 £67 *1 Included in underwriting profit in income statement but re-allocated to Other revenue for purpose of KPIs. *2 Other revenue (before internal costs) divided by average active vehicles, rolling 12 month basis.
Motor Legal Expenses Insurance (MLEI) and Vehicle Commission As reported in the 2012 Annual Report, with effect from 1 April 2012, Admiral no longer earns Other revenue from the sale of MLEI. In addition, the Group began charging its panel of co- and reinsurers a vehicle commission. Admiral’s car insurance policies continue to include MLEI as an integral feature and there has been no impact on customers in the level of cover or cost of policies as a result of this change. The overall net economic impact of these two changes is not significant although there are differences in the timing of revenue recognition.
During 2013 the intra-group element of vehicle commission totalling £18.4 million was eliminated (from the insurance expenses and Other revenue lines in the income statement). This reduced Other revenue per vehicle by approximately £6 during 2013. There is no profit impact of the elimination as profit is reallocated from Other revenue to Underwriting. Further details are provided in note 4b.
Referral Fees As reported in the 2012 Annual Report, personal injury referral fees were banned with effect from 1 April 2013. The ban reduced Admiral’s Other revenue per vehicle by £4 per vehicle during 2013. Admiral expects this reduction in revenue will be offset by reductions in claims costs.
Admiral notes that in December 2013 the UK Competition Commission released its provisional findings on its review of the Car Insurance market. Admiral welcomes action aimed at curbing the compensation culture that currently exists in the UK motor insurance market. A potential outcome of the review is regulatory change resulting in a reduction or elimination of credit hire referral fees and a reduction in associated claims costs. Admiral expects any such reduction in revenue from credit hire referral fees would be offset by reductions in claims costs. In 2013, Admiral earned £14 million in credit hire referral fees.
Additional Products Underwritten by Admiral There are a number of products which are core to providing car insurance to customers (including personal injury insurance, breakdown cover and car hire cover). During the second half of 2012 Admiral began to underwrite the majority of these within the Group (they were previously underwritten by external insurers). The advantages of doing this include improved products for customers and increased control and flexibility with regards to their features and terms.
Contribution from these products underwritten by Admiral during 2013 was £12.3 million and this is included in underwriting profit in the income statement, but reallocated to Other revenue for the purpose of management key performance indicators.
Regulatory Environment The UK Car Insurance business operates predominantly under the regulation of the UK Financial Conduct Authority (FCA) and Prudential Regulatory Authority (PRA), and through a Gibraltar-based insurance company, under the Financial Services Commission (FSC) in that territory.
The FCA and PRA regulate the Group’s UK registered subsidiaries including EUI Limited (an insurance intermediary) and Admiral Insurance Company Limited (AICL; an insurer), whilst the FSC regulates Admiral Insurance (Gibraltar) Limited (AIGL; also an insurer).
International Car Insurance Business The Group has four direct car insurance businesses operating outside the UK: > Admiral Seguros (Seville, Spain): the most mature of the Group’s international businesses, having traded since October 2006. The business trades via two brands – Balumba and Qualitas Auto > ConTe (Rome, Italy): launched in May 2008, ConTe is the largest of the non-UK insurers within the Group > Elephant Auto (Richmond, Virginia, USA): launched in October 2009 and provides car insurance in four US states (Virginia, Maryland, Illinois and Texas) with a market size greater than the UK
Admiral initially identifi ed fi ve markets into which expansion was desirable (based on, among other things, the size of the market and the nature of distribution and regulation), and having sold its German insurer AdmiralDirekt in 2011, the Group has an active presence in the remaining four.
A GREAT Place to Work! > Admiral Group won 2nd Best
Profi t Focus > The Group is investing to build four profi table, growing and sustainable insurance businesses. Although they remain loss making, as should be expected at this stage in their development.
> Total losses from international insurance businesses in 2013 were £22.1 million, 6% of Group profi t before tax
Spain – Cristina Nestares CEO, Admiral Seguros The Spanish market has enjoyed over 10 years of profi tability, and 2013 was probably no different. The market combined ratio in 2012 (including ancillaries) was 97%, (up 1 percentage point on 2011), refl ecting loss ratios remaining relatively fl at and expense ratios increasing a little with a fall in average premiums. That said, the effects of the challenging economic backdrop are being felt: gross written premium (GWP) shrank 6%, and media spend is falling with competitors paying more attention to retention rather than attracting new business. Pricing remains highly competitive; premiums have now fallen 19% since 2008.
After fi ve consecutive years of growth, 2013 was a year of consolidation for ConTe. Turnover grew £4 million and the number of customers grew by 14,000. The main driver of this consolidation was the aforementioned reduction of prices, and therefore margins, in the market. But the timing of this was good for ConTe, as the organisation was able to step back, review processes, implement better IT, give more training to staff and generally improve the quality of the operation. However, if prices in the market continue to decline it implies limited growth for ConTe in 2014. Patience, is once again, a key word.
In terms of pricing and claims infl ation, the USA car insurance market is much less volatile than the UK. The nature of USA car insurance claims are two thirds car repairs and only one third bodily injury, the opposite of the UK market. As at March 2014, overall market numbers are not yet available for 2013, but claims infl ation remains very benign and premium infl ation has followed suit. So overall profi tability for the market remains relatively stable with a combined ratio, including investment income, in the high 90%’s.
Elephant Auto gained good momentum in 2013. Elephant Auto trades in four states: Virginia, Maryland, Illinois and Texas. Combined, there are some 34 million vehicles, about 25% more than the entire UK market, in just these four states. Elephant’s customer numbers grew by 34% and in Texas this fi gure was 41%. This growth was achieved at what, for the USA market, was a reasonable cost. However, that cost is still high relative to other markets Admiral trades in. The USA market presents a huge challenge to the Group, but it is also a huge potential prize. Clearly creating a valuable franchise in the USA will take, yes, you may have guessed it: patience.
L’olivier Assurances, our French operation, had a busy year of growth in 2013. We no longer know all our customers by fi rst name. But 2014 promises to be even busier, as we in-source operations and build an IT system with which to service our customers. For these reasons we don’t expect much growth in France in 2014 but we are building a platform from which we can expand in the future. The Hamon Law, passed by the Senate, should go into effect later in 2014 and this will remove many of the physical barriers consumers currently face when trying to change car insurers. However, we do not think this law will lead to revolution and a huge shift in distribution but, rather, evolution and the beginning of a continual change in consumer behaviour.
Net other income 8.0 8.9 5.8 Other revenue and charges (0.4) — — International Car Insurance result (9.5) (24.5) (22.1)
Vehicles insured at period end 104,300 265,800 13,450 52,450 436,000 *1 Turnover includes total premium written and income generated by the sale of additional products and services and fees. In 2012 £3.7 million of turnover from Admiral Direkt is included to bring the total to £162.9 million.
International Car Insurance Co-insurance and Reinsurance As noted earlier, Admiral makes significant use of proportional risk sharing agreements, where insurers outside the Group underwrite a majority of the risk generated, either through co-insurance or quota share reinsurance contracts.
For the 2013 year Admiral retained 35% (Italy), 30% (France and Spain) and 33% (USA) of the underwriting risk respectively.
The arrangements for 2014 will remain the same, other than in Italy, where Munich Re will retain 40% of the risk, down from 65% in 2013, and Swiss Re will reinsure the remaining 25%.
All contracts are subject to certain caps on the reinsurers’ exposures and all contracts have profit commission terms that allow Admiral to receive a proportion of the profit earned on the underwriting once the business reaches cumulative profitability. The contracts include proportional sharing of Other revenue.
Admiral Seguros (Spain) was launched in 2006 and is the oldest of Admiral’s international operations. During the first half of the year, Admiral Seguros launched a second brand (Qualitas Auto) to complement its original Balumba brand. The business insured 136,500 customers at the end of 2013, 30% more than a year earlier.
Admiral’s youngest and smallest international insurance business is L’olivier Assurances, launched in 2010 in France. L’olivier insured 28,600 vehicles at the end of 2013, up over 125% on a year earlier. L’olivier was initially established with a different start-up model to Admiral’s other operations, with certain functions outsourced to keep expenses low in the initial phases of development. During 2014 L’olivier will bring a number of these functions in-house, therefore, management focus on vehicle count growth is expected to be lower.
In the USA, Admiral operates in four states (Virginia, Maryland, Illinois and Texas) through its Elephant Auto business, which launched in 2009. At the end of 2013, Elephant Auto insured over 70,000 vehicles, up around 34% year-on-year. Elephant Auto’s expense ratio is currently high as the business is spending signifi cant amounts on advertising to develop the Elephant Auto brand and grow the portfolio. Elephant Auto’s written combined ratio*1 improved from 175% in 2012 to 152% in 2013 primarily resulting from an improved expense ratio due to vehicle count growth. *1 European combined ratio is calculated on the earned basis, and Elephant Auto combined ratio is calculated on the written basis due to market claims patterns. Both combined ratios are calculated on 100% of underwritten premium (including co- and reinsurer’s share) and include the results from the sale of additional products and services and fees.
Regulatory Environment Admiral’s European insurance operations are subject to the same regulation as the UK Car Insurance business, details of which are summarised on page 25.
The Group’s USA insurer, Elephant Insurance Company is regulated by the Virginia State Corporation Commission’s Bureau of Insurance. The Company is required to maintain capital at levels prescribed by the regulator, and holds a surplus above these requirements at all times.
UK – Martin Coriat CEO, Confused.com The UK car insurance price comparison market is one of the, if not the most, mature in Europe, with around 65% of new business sales in the market originating via price comparison. Even though there was a constant stream of rate reductions for car insurance in 2013, which typically will be a brake on consumer shopping, price comparison as a whole actually grew by nearly 10% in the year.
The UK market is characterised by four main players, of which Confused.com is one, and another four or fi ve minor players. There is great competition within this market, as evidenced by the high levels of advertising spend.
During the year the price comparison sector has come under incremental scrutiny from the Financial Conduct Authority (FCA). There is currently a review taking place to examine the true customer benefi t of price comparison. The results of this review are expected later this year.
International Price Comparison > At the end of 2013, the Group had three Price Comparison businesses operating outside the UK: – In Spain, Rastreator (launched in March 2009) offers comparison on motor, home, motorcycle and life insurance
– LeLynx in France (launched January 2010) offers comparison on a similar range of products
The Customer, The Customer, The Customer > Quote volumes: Confused.com, 13.6 million (2012: 13.2 million); Rastreator, LeLynx and comparenow.com combined, 5.1 million (2012: 4.3 million)
> During 2013, Confused.com implemented a revised framework for the monitoring and reporting of conduct issues with a view to improving customer experience
Spain – Elena Betes CEO, Rastreator Four and a half years after Rastreator’s launch, it is now the leading price comparison website in Spain, with brand recognition of 74%. Price comparison continues to grow in Spain but the rate of growth slowed in 2013 compared to previous years because of lower advertising spend.
Many more customers now shop for car insurance, largely down to the infl uence of price comparison, than ever before. This is particularly heartening considering there are not large price increases in the market, nor are there large volumes of cars being bought or sold, both of which are typical shopping triggers.
Rastreator is profi table due to the growth in the core business and is now beginning to leverage the good experience consumers have had on the site by extending its search services beyond insurance.
Price Comparison Financial Performance Non-GAAP Format Income Statement £m 2012 £m £m
*1 Excludes pre-launch costs. Figures include results of Chiarezza.it, which was sold in April 2012. The disposal did not have material impact on the income statement.
Revenue from non-car insurance comparison sources increased in actual terms, and now represents nearly one quarter of total revenue. Confused.com’s operating margin improved to 25% (2012: 22%).
Price Comparison Financial Performance continued International Price Comparison Following the sale of the Italian Price Comparison operation (Chiarezza.it) during H1 2012 and the launch in Q1 2013 of a new operation in the USA, Admiral now operates three Price Comparison businesses outside the UK: in Spain (Rastreator), France (LeLynx) and the USA (comparenow.com).
The combined revenue from the European operations in 2013 increased by 20% to £25.0 million, with 19% more quotes provided. Both Rastreator and LeLynx have strong positions and brands in their respective markets. The combined result for Rastreator and LeLynx was a profi t of £2.4 million (2012: £0.2 million loss) refl ecting increased quote volumes and improved conversion rates. Admiral Group owns 75% of Rastreator, whilst the remaining 25% is owned by Mapfre.
In March 2013, Admiral launched a new Price Comparison operation in the USA (based in Virginia), trading as comparenow.com. During the year the operation has incurred staff and IT costs and some initial marketing expenses totalling £3.7 million. Admiral Group owns 67.8% of comparenow.com, White Mountains Insurance Group Ltd owns 21.1% and Mapfre USA owns 11.1%.
The combined result for International Price Comparison was therefore a loss of £1.3 million – the profi t from Rastreator and LeLynx offset by investment in comparenow.com.
Regulatory Environment Confused.com is regulated by the Financial Conduct Authority (FCA) as an insurance intermediary and is subject to all relevant intermediation rules, including those on solvency capital.
The European operations are all structured as branches of UK companies, with the UK insurance intermediary permission passported into Europe. comparenow.com is a regulated insurance agency in Virginia, USA.
UK Household Insurance UK Household Insurance was launched in December 2012 under the Admiral brand. The product is underwritten within the Group and in common with other businesses it is supported by proportional reinsurance covering 70% of the risk (shared between Munich Re, 40% and Swiss Re, 30%). In addition the Group has purchased excess of loss reinsurance to mitigate the impact of catastrophe event claims. At the end of the first 12 months of trading, Admiral Household total loss before tax was £0.1 million.
UK Commercial Vehicle The Group operates a Commercial Vehicle insurance broker (Gladiator) offering Van Insurance and associated products, typically to small businesses. Distribution is via telephone and internet (including price comparison websites).
Share Scheme Charges These costs relate to the Group’s two share schemes, further detail on which is set out in the notes to the financial statements. The increase in the charge relates to a higher number of shares awarded in 2013 compared to 2012 is largely due to a higher share price at the end of 2013 compared to 2012. (£13.10 v £11.60) resulting from increased headcount across the Group.
A potential need to raise additional capital to support underwriting. This could be in the form of equity or debt.
Admiral also has relationships with a number of other reinsurers, including Amlin Re, Hannover Re, Mapfre Re, New Re, Swiss Re and XL Re.
In the UK, co-insurance and reinsurance arrangements have been agreed until at least the end of 2016, reflecting confidence in the Admiral UK Car Insurance business. The long term agreement with Munich Re (covering 40% of the UK Car Insurance business) will remain in place until at least the end of 2018.
Admiral earns Other revenue from a portfolio of products and other sources.
The Group is exposed to the risk that claims costs on business written and earned in the future is higher than expected.
There are a number of aspects which contribute to Admiral’s strong UK underwriting results, including: > Experienced and focused senior management and teams in key business areas including pricing and claims management > Highly data-driven and analytical approach to business decisions, particularly pricing > Continuous appraisal of and investment in staff, systems and processes
Admiral typically maintains a significant combined ratio advantage over the UK market.
Admiral continues to develop and support the overseas operations. During 2012 Admiral also launched a home insurance product.
Admiral’s approach to expansion remains conservative. Overseas insurance businesses have executed cautious launch strategies and are all backed by proportional reinsurance support which provides substantial mitigation against start-up losses in the early years.
One or more counterparties suffer a significant event leading to a credit default.
IT Development Risk – failure to invest in appropriate technology to support the Group’s future business development, mitigated by regular review of the effectiveness of the Group’s IT capability by executive management and the Board.
Regulatory Risk – failure to comply with regulatory requirements and/or changes, mitigated by regular review of the Group’s compliance with current and proposed requirements and interaction with regulators by executive management and the Board.
This year, in line with corporate governance best practice, the Group undertook an external Board evaluation facilitated by an independent external consultant. This process confi rmed that the Board and its Committees continue to operate effectively and that each Director demonstrates the required commitment to the role and makes a valuable contribution to Board decision making. The results of the evaluation and the areas for development identifi ed by it are set out at pages 42 and 43.
However, we also believe that good governance should be proportionate and that individual responsibility and accountability should not be lost within a multi-layered committee structure that distances senior management from the day to day reality of operational activity.
Read more about our gender diversity within the Company: page 15
> To read about Board activity in 2013 turn to page 40 > The Board will undergo compositional changes in 2014 read more on page 39 > To find the Directors’ Remuneration Report turn to page 54
Membership at 31 December 2013: > Colin Holmes (Chairman) > Annette Court > Margaret Johnson
Membership at 31 December 2013: > Martin Jackson (Chairman) > Annette Court > David Stevens > John Sussens
Chief Executive Manager of Munich Re, responsible for UK and Ireland
In her 20 years at the Financial Times Lucy has been an oil correspondent, a Lex columnist and Brussels correspondent. Lucy has authored various books.
David is a founder Director of Admiral and was recruited in 1991 to set up the Admiral business. Prior to joining Admiral David worked at McKinsey & Co, in the Financial Interest Group, and Cadbury Schweppes in the UK and the USA. David has an MBA from INSEAD and he was awarded a CBE in 2010 for service to business and the community in Wales.
3Henry Engelhardt, CBE (56) Chief Executive Officer, appointed in October 1999
Henry is a founder Director of Admiral and was recruited by the Brockbank Group in 1991 to set up the Admiral business. Prior to joining Admiral, Henry was the original Marketing and Sales Manager for Churchill Insurance. Henry has an MBA from INSEAD, a BA from the University of Michigan and was awarded an honorary CBE in 2008 for services to business in Wales.
Kevin is responsible for finance, compliance and investments, as well as the subsidiary Elephant Auto. Kevin joined Admiral in 2005, becoming Chief Financial Officer in September 2006. Prior to Admiral Kevin worked in UK financial services for over 25 years and he held a number of senior roles in other insurance organisations, including being the Finance Director of Engage Mutual Assurance and Cigna UK. Kevin is a Fellow of the Chartered Institute of Certified Accountants and has an MBA from London Business School.
Non-Executive Director and Chairman of the Audit Committee of IG Group Holdings plc
7 Margaret Johnson, OBE (55) Non-Executive Director, appointed in September 2006
Margaret has worked for the international advertising agency Leagas Delaney for the past 15 years. Margaret was awarded an OBE in 2013 in recognition of her services to the creative industries and her voluntary work for charities.
Roger has significant international consulting experience having been with McKinsey and Co. from 1972 until his retirement as Director Emeritus in 2006. Roger holds an MBA from INSEAD. Roger has authored several books and currently writes for an Italian daily newspaper.
Meeting (AGM). *3 Following receipt of regulatory approval, Jean Park was appointed to the Board with effect from
The Board met on seven occasions in 2013 with five of these meetings being held over two days.
The Chairman seeks to visit each of the Group’s overseas operations every year and Non-Executive Directors are invited to join either him or the Chief Executive on one or more of their overseas visits each year. In addition, the Non-Executive Directors and the Chairman met during the year without the Executive Directors being present. In order to increase their understanding of the operation of the Group below Board level, the Non-Executive Directors and the Chairman also attended two dinners with members of the Group’s senior management team without the Executive Directors being present.
Meetings and Attendance Directors are expected to attend all meetings of the Board and the Committees on which they serve and to devote sufficient time to the Group to perform their duties. Where Directors are unable to attend meetings they receive papers for that meeting giving them the opportunity to raise any issues with the Chairman in advance of the meeting. The number of scheduled Board meetings and Committee meetings of which they are a member attended by each Director during 2013 is provided in the adjacent table.
Agendas and papers are circulated to the Board in a timely manner in preparation for Board and Committee meetings. The Board agenda is carefully structured by the Chairman in consultation with the Company Secretary and Chief Executive. These papers are supplemented by information specifically requested by the Directors from time to time. All Board and Committee meetings during the year were held in an open atmosphere conducive to robust and constructive challenge and debate. All Directors have, therefore, been able to bring independent judgement to bear on issues such as strategy, risk management, performance, and resources. Additional meetings are called when required and there is contact between meetings, where necessary, to progress the Group’s business.
The evaluation process was led by Karen Walls, an independent external consultant with experience of evaluating and making recommendations to improve Board effectiveness of a number of FTSE 100 companies. Karen has no connection with the Group. The objectives of the evaluation were to build on the improvements made since the last evaluation, thereby improving both the collective contribution of the Board as a whole and also the behaviour, competence and effectiveness of each individual Director.
Karen, in consultation with the Chairman and supported by the Company Secretary compiled and circulated a comprehensive questionnaire for completion by all Directors and Board attendees, the aim of which was to evaluate the performance and effectiveness of the Board and its Committees.
Board meetings > Directors were also invited to indicate where specific improvements could be made to improve the effectiveness of the Board
During the year and in order to provide regular feedback as to the effectiveness of each Board meeting, the Board continued with the process of Directors providing feedback, via the completion of an online questionnaire, on such pertinent topics as the efficacy of the presentation of discussion topics; whether time available for the meeting was used effectively; and what areas could be improved upon.
The Board currently comprises thirteen Directors, the Chairman (who was independent on appointment), three Executive Directors, eight independent Non-Executive Directors, and one Non-Executive Director, Manfred Aldag, who is employed by a significant shareholder and is not, therefore, considered independent. There is no requirement that the significant shareholder has representation on the Board and, accordingly, Mr Aldag’s appointment is subject to the same appointment and removal process as the other Board Directors. As can be seen from the Directors’ biographies on pages 38 to 39, the Directors have a broad range of skills and experience and can bring independent judgement to bear on issues of strategy, performance, resources and standards of conduct which are integral to the success of the Group.
Director Date of Appointment Length of service as at 31 December 2013
Board Balance and Independence continued Although Colin Holmes holds, with Alastair Lyons, a cross-directorship in Bovis Homes Group plc, the Board has determined that Colin Holmes remains independent in character and judgement and that his holding of a cross-directorship does not affect his ability to present an objective, rigorous and constructive challenge to the assumptions and viewpoints presented by management and the Board.
Independent Non-Executive Directors are currently appointed for fixed periods of three years, subject to election by shareholders. The initial three-year period may be extended for two further three-year periods subject to re-election by shareholders. Their letters of appointment may be inspected at the Company’s registered office or can be obtained on request from the Company Secretary.
He is also responsible for leading the Board’s discussion on the Chairman’s performance and the appointment of a new Chairman, as and when appropriate.
“ The Company attaches considerable importance to communications with shareholders and engages with them regularly.”
office during the year to meet with the Executive Directors and senior management in order to get a better understanding of how the Group operates and how it intends to achieve its strategic and operational objectives. Senior Executives from the Group’s overseas businesses also visit the UK in order to present to, and meet with, analysts and investors. Site visits and individual discussions with the Executive Directors are also arranged throughout the year with individual shareholders.
Conflicts of Interest In compliance with the requirements of the Companies Act 2006 regarding Directors’ duties in relation to conflicts of interest, the Group’s Articles of Association allow the Board to authorise potential conflicts of interest that may arise and to impose such limits as it thinks fit. The Company has put in place procedures to deal with conflicts of interest. These procedures include each Board member completing, annually, a conflict of interest questionnaire that sets out any situation in which they, or their connected persons have, or could have, a direct or indirect interest that could conflict with the interests of the Company. Any current directorships that they, or their connected persons hold, any advisory roles or trusteeships held, together with any companies in which they hold more than 1% of the issued share capital are also disclosed. These procedures were reviewed by the Board in December 2013 and it was concluded that they continued to operate effectively.
All committees are chaired by an Independent Director, except the Nomination Committee which is chaired by the Chairman of the Board, and comprise a majority of Independent Directors. Appointments to the committees are made on the recommendation of the Nomination Committee and are for a period of up to three years, which may be extended for two further three-year periods, provided the Director remains independent. The committees are constituted with written Terms of Reference that are reviewed annually to ensure that they remain appropriate and reflect any changes in good practice and governance. These Terms of Reference are available on request from the Company Secretary and can also be found on the Company’s website: www.admiralgroup.co.uk. Directors are fully informed of all Committee matters by the committee Chairmen reporting on the proceedings of their committee at the subsequent Board meeting. Copies of committee minutes are also distributed to the Board. Committees are authorised to obtain outside legal or other independent professional advice if they consider it necessary. The Chairman of each committee attends the AGM to respond to any shareholder questions that might be raised on the committee’s activities.
The Group maintains a corporate website (www.admiralgroup.co.uk) containing a wide range of information of interest to institutional and private investors. The major shareholders of the Company are listed on page 65
The Committee studied a number of key control issues, highlighted through a range of different sources including the risk register, internal audit and the Committee’s previous work. In each case the Committee found the responses and action plans from management appropriate to the issues raised. With the scale of the Group’s international activities increasing, the Committee also took the opportunity to more formally document the relationship between the Group Head of Internal Audit and the international subsidiaries.
The Audit Committee’s Primary Responsibilities are to: > Monitor the integrity of the Group’s fi nancial statements and any formal announcement relating to the Group’s fi nancial performance, reviewing any signifi cant fi nancial reporting judgements which they contain > Keep under review the effectiveness of the Company’s internal fi nancial controls, internal control and risk management systems > Review the Group’s procedures for handling allegations from whistleblowers and for detecting fraud > Monitor and assess the role and effectiveness of the Group’s internal audit functions in the context of the Group’s overall internal control and risk management systems > Consider and make recommendations to the Board, to be put to shareholders for their approval at the AGM, in relation to the appointment, reappointment and removal of the Group’s external auditor > Review the external auditor’s independence and objectivity and the effectiveness of the audit process > Review the policy on the engagement of the external auditor to provide non-audit services, considering the relevant regulatory guidance regarding the provision of non-audit services by the external auditor
The Board considers that the members of the Committee have the appropriate competence and experience necessary to contribute meaningfully to the Committee’s deliberations and further considers that Colin Holmes (Committee Chair), as a Chartered Management Accountant, has appropriate recent and relevant financial experience having previously been the UK Finance Director for Tesco plc.
Significant Issues Considered by the Committee After discussion with both management and the external auditor, the Audit Committee determined that the key risks of misstatement of the Group’s financial statements related to: insurance liabilities; profit commissions; and both co-insurance and reinsurance contracts.
Insurance Liabilities The Audit Committee considered the provision for claims outstanding comprising provisions for the estimated cost of setting all claims incurred but unpaid as at the balance sheet date, whether reported or not. The Board has approved a Reserving Policy that sets out the methodology by which management sets reserves in the financial statements that are sufficient, to a high degree of likelihood, to cover any liabilities that can be reasonably assumed to arise from business earned up to the valuation date. The approach is to ensure that an appropriate margin is provided above actuarial best estimates to allow for uncertainty and volatility.
The Audit Committee held separate meetings with the Group’s external actuaries at which there was challenge and debate of the methodology used and best estimates developed by the external actuaries and recommended for adoption by management and the Group’s internal actuary. At these meetings management provided further information on the reserving levels proposed and were challenged by the Committee as to their adequacy and level of inherent prudency.
Whilst acknowledging that the setting of reserves to cover future claims is a complex and judgemental area and having had the opportunity at the separate meetings referred to above to consider and question the recommended best estimates, the Committee is satisfied that an appropriate process has been followed and that there has been scrutiny, challenge and debate to give confidence that the reserving levels set provide an appropriate margin above best estimates and allowed for a level of prudency.
The Audit Committee also received an update from the auditor regarding the procedures it had used to test management’s methodology in setting best estimates and considered the auditor’s assertion that it had challenged the reserving approach taken by management and was satisfied with management’s assumptions and that the Group’s approach to setting reserves was in compliance with current accounting standards.
Misstatements Aside from the intra-group trading issue noted above, no misstatements were reported by the auditor to the Committee and no material amounts remain unadjusted. The Committee confirms that it is satisfied that the auditor has fulfilled its responsibilities with diligence and professional scepticism.
Non-Audit Fees During the year the Committee reviewed its policy on non-audit services that sets out the procedure for approval, by the Committee, of expenditure with the Group’s auditor of over £30,000, including the process where it is necessary for approval of such work to be given outside of the normal Committee meeting timetable. Such circumstances will require the approval of the Audit Committee Chair who will consider and approve such fees on behalf of the Committee and will ensure that auditor independence and objectivity are not compromised. Such approval of fees in excess of £30,000 will then be notified by the Committee Chair to the next Committee meeting following approval. The Group’s auditor, KPMG Audit plc, provides some non-audit services, the majority of which comprise compliance and advisory services related to various taxation issues within the Group, and which are not considered by the Committee to compromise its independence and objectivity as auditor. This decision is typically based on the merit of using KPMG’s existing knowledge of the Group’s business; its particular expertise in relation to the advice sought on each relevant transaction and the consequent value added and inherent saving of fees. The level of non-audit fees is reviewed at each Committee meeting and details are included in the Annual Report.
In line with the recent findings of the UK Competition Commission and the Guidance for Audit Committees issued by the FRC, it is the Committee’s intention to put the audit services contract out to tender at the end of the five-year rotation of the current audit engagement partner. Therefore, the audit for the year ending 31 December 2016 will be put out to tender in 2015. The Committee continues to monitor the changes proposed by the European Union and UK Competition Commission in respect of auditor services and re-tendering which remains a work in progress.
Internal Audit The Group Head of Internal Audit attends all Audit Committee meetings and provides a range of presentations and papers to the Committee, through which the Committee monitors the effectiveness of the Group’s internal controls. The Committee reviewed and approved the Group Internal Audit Terms of Reference which set out the role; objectives; reporting lines and accountability; authority; independence; and objectivity of the internal audit function. The role and competence of each internal audit function across the Group was also assessed and considered by the Committee. It was agreed that the Group Head of Internal Audit would have increased responsibility to ensure the quality of the internal audit activities in the Group’s overseas locations.
Committee Effectiveness Review As part of the Committee’s detailed annual review of its performance and processes, each Committee member completed a comprehensive online questionnaire designed to provide objective assessment of the Committee’s performance, including its effectiveness in monitoring internal and external audit. The Committee discussed the results of the review and it was concluded that the Committee and the audit process were effective; that the Committee had full access to all the information it required; that the Committee had appropriate Terms of Reference; and that it was adequately discharging its responsibilities.
The Committee Chairman reports formally to the Board on its proceedings after each meeting on all matters within its duties and responsibilities, as set out in previously circulated minutes to the Board. The Committee Chairman also reports on the activities of the Committee in a formal written report that is submitted to and discussed by the Board every six months.
During the Year the Committee Reviewed the Following: > Reviewed the Group’s risk appetite and profile of material risks > Considered the adequacy of risk mitigation measures and contingency plans > Reviewed the Group’s risk strategy in the context of the Group’s agreed strategic objectives > Monitored the Group’s progress towards implementation of Solvency II and plans for compliance with the EIOPA interim guidelines > Recommended to the Board approval of the Group Individual Capital Assessment > Approved the design and reviewed the results of the stress and scenario testing programme > Reviewed in-depth analysis of a number of the Group’s most significant risk areas, including insurance risk in the UK Car Insurance operation > Monitored key risk indicators within the overall risk management framework > Reviewed management information on conduct risk and complaints within the Group. From January 2014 the Committee Chairman provides a quarterly written report to the Group Board on conduct risk and complaints > Reviewed its own Terms of Reference > Approved a number of new/revised key risk management policies > Received internal presentations on a number of key risk areas including reinsurance, investment strategy and IT
> Reviewed its own effectiveness and sought to identify potential improvements that could be made to the Committee’s oversight of risk management in the Group
The Board is of the view that there is an ongoing process for identifying, evaluating and managing the Group’s internal controls; that it has been in place for the year ended 31 December 2013; and that, up to the date of approval of the Annual Report and Accounts, it is regularly reviewed by the Board and accords with the internal control guidance for Directors provided in the Code.
The GRC, UK RMC and other UK and overseas committees receive reports setting out key performance and risk indicators and consider possible control issues brought to their attention by early warning mechanisms that are embedded within the operational units. They, together with the Audit Committee, also receive regular reports from the relevant internal audit functions, which include recommendations for improvement of the control and operational environment. Twice a year the Chairman of the Group Risk Committee provides a comprehensive written report to the Board on the Group’s risk appetite, risk strategy and risk management policy with focus on a consideration of the principal assessed exposures and the effectiveness of the mitigation strategies adopted. In addition, the Board receives reports from the Chairman of the Audit Committee as to its activities, together with copies of the minutes of the UK RMC and the GRC and Audit Committees.
The Audit Committee’s ability to provide the appropriate assurance to the Board depends on the provision of periodic and independent confirmation, primarily by internal audit, that the controls established by management are operating effectively and where appropriate provides a high-level challenge to the steps being taken by the GRC to implement the risk management strategy. The internal audit functions undertake regular reviews of internal control systems and business processes, identifying control weaknesses and making recommendations to management on improvements where necessary.
In March 2014 the Board carried out the annual review of the effectiveness of the Group’s system of internal controls for the 2013 year, also taking account of events since 31 December 2013, by considering documentation from the Audit Committee including the Internal Audit Annual Report prepared by the Group’s Head of Internal Audit.
During 2013, as part of the Board’s commitment to review the size of the Board and the balance of its composition and having regard to the length of service of some of the existing Board members, the Board decided to initiate a search for a Non-Executive Director. The Group has in place a policy of recruiting well ahead of impending retirements in order to ensure continuity of knowledge and Board dynamics. The Nomination Committee led this process and assessed the balance of skills, knowledge, independence, diversity and experience on the Board. The Committee developed an appropriate specifi cation for this role identifying the need for the successful candidate to have both risk management experience and insurance experience.
Following this process, the Committee identifi ed Jean Park, who has extensive knowledge of risk governance and risk management frameworks and was, until June 2013, Group Chief Risk Offi cer (CRO) for Phoenix Group, the UK’s largest specialist closed life and pension fund consolidator. A member of the Institute of Chartered Accountants of Scotland, she has previously been Head of Compliance and Audit for Scottish Widows and Risk Management Director of the Insurance and Investment Division for Lloyds TSB. Jean is currently
Dear Shareholder, As part of the Committee’s remit to review regularly the composition and experience of the Board to ensure that the range of skills, breadth of the experience and diversity are fully considered, the Committee undertook a thorough review of the Group’s succession planning requirements given a number of Directors were coming to the end of their nine-year terms in the next few years, and that Independent Non-Executive Directors would normally be regarded as having lost their independence after nine years.
It was agreed that given this degree of Board change, the Committee should develop a clear structured succession plan that would ensure appropriate action was taken well ahead of the dates on which individuals would be retiring in order to achieve their replacement, if appropriate, with individuals of the appropriate skills, experience and fi t to the Board.
Each Committee member met separately with Jean and agreed that, given the increasing focus on the governance of the Group’s risk management framework, Jean would bring invaluable risk experience to the Board. The Board approved the Committee’s recommendation and following regulatory approval Jean was formally appointed to the Board with effect from 17 January 2014.
The Board, at its meeting in January 2013, considered the Group’s current succession plan which considered the senior roles within the Group and identified whether there was emergency short term cover in place in the event that an individual left the organisation, and whether there was a permanent replacement available within the organisation, or whether the position would need to be filled externally. It also identified where there were individuals who, with further experience and guidance, would be capable of moving into particular senior management roles.
The Group remains strongly supportive of the principle of boardroom diversity, of which gender is an important, but not the only, aspect. What is important is diversity of thought, experience and approach and each new appointment must complement what already exists at the Board table. Accordingly, appointments will always be made on merit against objective criteria, including diversity, and not just to achieve an externally prescribed number. Given women already constitute over 25% of our plc Board, the Group has already met the target set for 2015 by Lord Davies in his report, Women on Boards. The Group remains committed to providing equal opportunities, eliminating discrimination, and encouraging diversity amongst its workforce both in the UK and overseas. A breakdown of the gender of Company Directors and senior employees at the end of the financial year together with details of the Group’s Equality, Diversity and Dignity at Work Policy are set out in the Strategic Report at page 15.
This Report covers the reporting period from 1 January 2013 to 31 December 2013 and provides details of the activities of the Committee and Remuneration Policy of the Company.
In August 2013, the UK Government Department of Business Innovation & Skills (BIS) published regulations setting out what companies must disclose in the directors’ remuneration report with the aim of improving transparency and promoting best practice. The Report is therefore divided into three sections: > Remuneration Committee Chairman statement > Directors’ Remuneration Policy, which details Admiral’s remuneration policies and links to Group strategy, as well as projected pay outcomes under various performance scenarios > Annual Report on Remuneration, which focuses on the remuneration arrangements and outcomes for the year under review, and how the Committee intends to implement the Remuneration Policy in 2014 2013 has been another strong year for the Group despite a challenging external environment. The Group increased profi ts in the year by 7% to £370 million with a return on capital employed of 58% which supported total dividends for the fi nancial year of 99.5 pence per share, representing a distribution of 95% of our earnings. The Group’s strategy remains to continue to maximise our position in the UK while taking what we know and do well, which is internet and telephone delivery of car insurance and price comparison, to our overseas insurance and price comparison businesses.
Two of the three Executive Directors are founding Directors and receive remuneration that comprises salary and modest benefi ts only. The Committee continues to hold the view that this is appropriate, as their signifi cant shareholdings provide a suffi cient alignment of their interest with those of other shareholders. In order to provide full transparency of pay arrangements for our Executive Directors, this Report includes single fi gure and comparative data for our CFO as well as for our CEO, as the pay arrangements for the CFO are more refl ective of those for (non-founder) Executives.
Free Share Incentive Plan (SIP) awards > Reviewing the Company’s performance against the performance conditions applicable to the DFSS and SIP awards and where appropriate authorising the vesting of awards > Reviewing and authorising the grant of awards under both DFSS and SIP plans > Reviewing the Committee’s Terms of Reference and recommending amendments to the Board for approval > Reviewing new requirements for remuneration disclosure under BIS and responding accordingly > Reviewing the effi ciency of DFSS awards for overseas businesses
Compliance Statement This Remuneration Report has been prepared according to the requirements of the Companies Act 2006 (the Act), Regulation 11 and Schedule 8 of the Large and Medium–Sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 and other relevant requirements of the FCA Listing Rules. In addition, the Board has applied the principles of good corporate governance set out in the UK Corporate Governance Code (the Code), and has considered the guidelines issued by its leading shareholders and bodies such as the Association of British Insurers and the National Association of Pension Funds.
This section of the report sets out the policy for Executive Directors which shareholders are asked to approve at the 2014 Annual General Meeting (AGM). The Committee intends that this policy will formally come into effect from the date of the 2014 AGM.
Remuneration paid to Executive Directors in 2013 and remuneration arrangements proposed for 2014 are set out in the Annual Report on Remuneration.
The Committee reviews the framework and remuneration packages of the Executive Directors and the most senior managers and recognises the need to ensure that the Remuneration Policy is firmly linked to the Group’s strategy, including its risk management approach. In setting the policy and making remuneration decisions, the Committee takes into account pay and conditions elsewhere in the Group.
The main principles underlying the Remuneration Policy are: > Competitive – the Group aims to combine salaries with attractive performancerelated incentives, which provide the potential for competitive total reward packages for the achievement of superior performance. Base salaries reflect the role, job size and responsibility together with individual performance and effectiveness. Prevailing market and economic conditions and developments in governance are also considered, as are general salary levels throughout the organisation. In considering total remuneration for the Executive Directors, the Committee takes into account remuneration in companies of a similar size in the financial services sector > Performance linked – a significant part of the Executive Directors’ (excluding the founding Directors) and senior managers’ reward remains shareholder aligned given that it is determined by the Group’s earnings growth v LIBOR (see following Remuneration policy table)
Salary levels/increases take account of: > Scope and responsibility of the position > Individual performance and effectiveness, and experience of the individual in the role > Average increase awarded across the Group
The Group operates a Personal Pension Plan, a Defined Contribution scheme.
The Group matches employee contributions up to a maximum of 6% of base salary subject to an overall maximum employer contribution of £9,000. Salary is the only element of remuneration that is pensionable.
Includes (but not limited to): > Death in service scheme > Private medical cover > Permanent health insurance > Relocation, at the Committee’s discretion All benefits are non-pensionable.
Awards are generally made as a specific number of shares, and vest after three years subject to Group performance and continued employment.
Awards vest by reference to growth in the Group’s EPS in excess of a risk free return, defined as average three-month LIBOR, over a three-year period.
DFSS Bonus To further align incentive structures with shareholder interests through the delivery of dividend equivalents
The Committee retains discretion to make non-significant changes to the policy without reverting to shareholders.
Performance targets are set to be stretching and achievable, taking into account the Company’s strategic priorities and the economic environment in which the Company operates. Targets are set, taking into account a range of reference points including the Group’s strategic plan and broker forecasts for both Admiral and its insurance peers. The Committee believes that the performance targets set are very stretching and that the maximum outcomes are only available for truly outstanding performance.
Approximately 1,800 employees from across the Group, as well as the CFO, participate in the DFSS. The Committee recommends for approval by the Board awards to all participants under the DFSS. For the CFO, all share awards are subject to the performance condition detailed in the policy table. For below-Board employees, awards are split: 50% of the award is subject to the same performance condition, and the other 50% has no performance conditions attached other than the requirement that the recipient remains an employee of the Group at the date of vesting. Award sizes vary by organisational level. All holders of DFSS awards receive the DFSS bonus.
Death, injury or disability, redundancy, retirement or any other reasons the Committee may determine n/a Not payable after the event.
John Sussens 4 months 8 days 1 December 2013 One month
Additional fees are payable for acting as Senior Independent Director or as Chairman or member of Board Committees as appropriate.
The current Group Chairman, as with the founding Directors, holds a significant shareholding in the Group and this is reflected in the size of his fee, which is materially below that of chairmen of organisations of similar size and complexity.
Pension £9,000 annual contribution for CFO; no contribution for CEO or COO
Internal Appointments Remuneration for new Executive Directors appointed by way of internal promotion will similarly be determined in line with the policy for external appointees, as detailed above. Where an individual has contractual commitments made prior to their promotion to the Board, the Company will continue to honour these arrangements. Incentive opportunities for below Board employees are typically no higher than for Executive Directors, but measures may vary if necessary.
Considerations of Conditions Elsewhere in the Group The Committee considers the pay and employment conditions elsewhere in the Group when determining remuneration for Executive Directors. Whilst the Committee does not currently consult specifically with employees on the Executive Remuneration Policy, it consults with and receives updates on employee pay arrangements from the Group’s Head of People Services and takes this into consideration when reviewing Executive remuneration.
Considerations of Shareholder Views When determining remuneration, the Committee takes into account best practice guidelines issued by institutional shareholder bodies. The Committee is open to feedback from shareholders on Remuneration Policy and will continue to monitor trends and developments in corporate governance and market practice to ensure the structure of the Executive remuneration remains appropriate.
Further detail on the votes received on the 2013 Directors’ Remuneration Report is provided in the Annual Report on Remuneration.
This section of the report provides details of how Admiral’s Remuneration Policy was implemented in 2013 and the remuneration arrangements proposed for 2014.
At the end of 2013 the Committee consisted of Martin Jackson, Margaret Johnson, and Roger Abravanel under the Chairmanship of John Sussens, the Senior Independent Director. The Committee met six times during the year.
Adviser to the Committee During the year, in order to enable the Committee to reach informed decisions on Executive remuneration, advice on market data and trends was obtained from independent consultants, Kepler Associates. Kepler reports directly to the Committee Chairman and is a signatory to the Code of Conduct for Remuneration Consultants (which can be found at www.remunerationconsultantsgroup.com). Kepler does not provide any other services to the Group. The fees paid to Kepler in respect of work carried out in 2013 (based on time and materials) totalled £13,950, excluding expenses and VAT.
In addition, the Committee received advice on the structure of the Group’s share schemes from PricewaterhouseCoopers LLP (PwC). The fees paid to PwC totalled £5,100, excluding expenses and VAT. The Company Secretary also circulates market survey results as appropriate.
Total Single Figure of Remuneration for Executive Directors (audited) The table below sets out the total single figure remuneration received by each Executive Director for the year to 31 December 2013 and the prior year.
Executive Director 1. Base salary 2. Benefits 3. Pension 4. SIP 5. DFSS 6. DFSS bonus 7. Relocation Total remuneration
7. Kevin Chidwick was paid £165,000 (2012: £260,000) to reimburse him for expenses incurred in relation to his being based in the USA after taking on CEO responsibility for the Group’s US Insurer Elephant Auto.
DFSS Bonus in Respect of 2013 The Group paid a bonus to all holders of DFSS shares in 2013, which was equivalent to the dividend payable on all outstanding DFSS shares awarded but not yet vested. The Committee continues to feel that having a Group-wide bonus equivalent to the dividend flow received by investors further aligns the incentive structure with shareholders.
CFO: 52,250 shares on October 2013 with a value at the date of award of £631,703 (based on share price of £12.09)
Kevin Chidwick will continue to participate in the Group Personal Pension Plan, where employee contributions are matched up to a maximum 6% of base salary with maximum employer contribution of £9,000. As in previous years, Henry Engelhardt and David Stevens have declined to be included in the plan for 2014. Kevin Chidwick will continue to participate in the DFSS bonus scheme in 2014. All Executive Directors will continue to receive benefits in line with the policy.
Percentage Change in CEO Remuneration The table below shows the percentage change in CEO remuneration from 2012 compared to the average percentage change in remuneration for all other employees. The analysis is based on a consistent set of employees, i.e. the same individuals appear in the 2012 and 2013 populations. As the CEO does not participate in the DFSS bonus scheme, to provide a meaningful comparison, we have also included data for the CFO.
Historical TSR Performance Growth in the value of a hypothetical £100 holding over the five years to 31 December 2013.
CEO single figure of remuneration £328,027 £343,106 £358,199 £373,759 £387,546 DFSS vesting outcome (% of maximum) n/a n/a n/a n/a n/a
Total Shareholdings of Directors (audited) Executive Directors have agreed to (acquire and) retain a beneficial shareholding equal to at least 100% of base salary, which can be built up over a period of five years from the date of appointment.
There have been no changes to Directors’ shareholdings since 31 December 2013.
Chief Financial Officers’ Interests in Shares Under the DFSS and SIP (audited)
The closing price of Admiral shares on 31 December 2013 was £13.10 per share. Performance conditions for DFSS awards made in 2011 and 2012 are the same as those for awards made in 2013, as detailed on page 61.
Employee Policies Detailed information on the Group’s employment practices is set out in the Strategic Report and on the corporate website. The Group purchases appropriate liability insurance for all staff and Directors.
Going Concern The Directors consider that the Group has adequate financial resources to continue operating for the foreseeable future and that it is therefore appropriate to adopt the going concern basis in preparing the financial statements. In considering the appropriateness of this assumption, the Board has reviewed the Group’s projections for the next twelve months and beyond, including cash flow forecasts and regulatory capital surpluses.
Share Capital, AGM and Related Matters continued Additional Information for Shareholders Where not provided previously in this Directors’ Report, the following provides the additional information required for shareholders as a result of the implementation of the Takeovers Directive into UK law.
There are no restrictions on the transfer of ordinary shares in the Company other than: > Certain restrictions may from time to time be imposed by laws and regulations (for example, insider trading laws) > Pursuant to the Listing Rules of the FCA whereby certain employees of the Company require the approval of the Company to deal in the Company’s securities The Company has not purchased any of its own shares during the period.
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 Reinsurance (UK) plc. Details relating to this agreement are contained in the Strategic Report.
Power to Issue Shares At the last Annual General Meeting, held on 25 April 2013, authority was given to the Directors to allot unissued relevant securities in the Company up to a maximum of £89,535 equivalent to one third of the issued share capital as at 18 March 2013. This authority expires on the date of the Annual General Meeting to be held on 9 April 2014 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.
Annual General Meeting (AGM) It is proposed that the next AGM be held at Cardiff City Hall, Cathays Park, Cardiff CF10 3ND on Wednesday 9 April 2014 at 2.00pm, notice of which will be sent to shareholders with the Annual Report.
Reporting, Accountability and Audit UK Corporate Governance Code Admiral is subject to the UK Corporate Governance Code, published by the Financial Reporting Council and available on their website, www.frc.org.uk. The edition of the Code published in September 2012 applied throughout our financial year ending 31 December 2013, but the Financial Conduct Authority has yet to change the Listing Rules and therefore requires that certain compliance statements are made in relation to the predecessor edition of the Code, issued in June 2010. The Company’s Annual Report and Accounts, taken as a whole, addresses the requirements of both editions of the Code.
During the year to 31 December 2013, the Company has in all respects complied with the provisions of both editions of the Code.
The Directors confirm that the Annual Report and financial statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s performance, business model and strategy.
Reporting, Accountability and Audit continued Directors’ Responsibilities The Directors are responsible for preparing the Annual Report and the Group and parent company financial statements, in accordance with applicable law and regulations.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Parent company and of their profit or loss for that period.
In preparing each of the Group and parent company financial statements, the Directors are required to: > Select suitable accounting policies and then apply them consistently > Make judgements and estimates that are reasonable and prudent > For the Group financial statements, state whether they have been prepared in accordance with IFRS as adopted by the EU > 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 > 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 The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
Our Response – Our audit procedures included, among others, testing the controls over the underwriting process and performing substantive analysis over the trends in claims frequency and size. We assessed the level of reserves held for incurred claims through evaluating the competence, capability and objectivity of the Group’s external actuary, assessing the actuarial methodologies employed, including the use of paid and incurred chain ladders and the average cost per claim method, challenging key judgements made by management, for example the extent to which improvements in claims trends are taken into account in reserve projections, and benchmarking key assumptions against KPMG sourced market data.
One of the most significant uncertainties relates to the reserve held for large bodily injury claims and actual and potential Periodic Payment Order (PPO) settlements. In respect of these amounts, we investigated the process for identifying and assessing the required reserve for large claims and for updating this reserve as more information becomes available, investigated the process for assessing cases that have the potential to be settled as PPOs and benchmarked the key assumptions made in calculating large bodily injury claims reserves, including mortality (in the case of PPO cases) and discount rates applied.
In respect of the margin held above the actuarial best estimate, we assessed the rationale for this margin including consideration of the level of prudence within the margin, the consistency with which the underlying judgements have been applied in relation to the current year and prior periods, the existence of any management bias and the adequacy of the disclosure in the financial statements.
The Risk – The group has in place a number of proportional risk sharing agreements, where insurers outside the Group underwrite a majority of the risk generated, either through co-insurance or quota share reinsurance contracts. For reinsurance contracts, there is judgement involved in the assessment of whether risk has been transferred, which impacts on the appropriate accounting. For co-insurance contracts, the accounting is driven by the fact that the Group does not retain the underlying risks and rewards of the business underwritten. The outcome of these judgements affect the recognition and timing of revenue along with profit recognition and disclosure of income and expenses associated with these risk sharing agreements.
Profit Commission Refer to pages 46 to 49 (Audit Committee statement), note 5 (accounting policy and financial disclosures).
The Risk – The recognition of profit commission income from co-insurers and quota share reinsurers is initially in line with the loss ratios booked in the financial statements and will vary with movements in the loss ratios, potentially introducing volatility into the reported profits. The recognition of this income is therefore subject to the same level of estimation as the claims liability noted above until, in the case of the quota share reinsurance, the relevant contracts are commuted, at which point no further profit commission is recognised. In addition, different contractual arrangements are in place with the Group’s co-insurance and reinsurance partners and there is a risk that the differences in arrangements are not appropriately accounted for, resulting in significant misstatement.
Our Response – Our audit procedures included, among others and in addition to our procedures over insurance liabilities noted above, forming an expectation of the profit commission income based on loss ratios applied and contractual terms of each arrangement, comparing this to actual profit commission income recognised and corroborating any changes to the profit commission arrangements during the year. We have also considered the adequacy of the Group’s disclosures about the arrangements in place.
Audits for Group reporting purposes were performed by the Group audit team at the key reporting components in the UK and Italy. These audits covered 97% of total Group net revenue; 99% of Group profit before taxation; and 97% of total Group assets. The segment disclosures in note 4b set out the individual significance of specific countries.
In particular, we are required to report to you if: > We have identified material inconsistencies between the knowledge we acquired during our audit and the Directors’ statement that they consider that the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s performance, business model and strategy > The section of the annual report describing the work of the Group Audit and Risk Committee does not appropriately address matters communicated by us to the Audit and Risk Committee
Scope and Responsibilities As explained more fully in the Directors’ Responsibilities Statement set out on page 67, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate. This report is made solely to the Company’s members as a body and is subject to important explanations and disclaimers regarding our responsibilities, published on our website at www.kpmg.com/uk/auditscopeukco2013a, which are incorporated into this report as if set out in full and should be read to provide an understanding of the purpose of this report, the work we have undertaken and the basis of our opinions.
Salim Tharani (Senior Statutory Auditor) for and on behalf of KPMG Audit plc, Statutory Auditor Chartered Accountants 3 Assembly Square Britannia Quay Cardiff CF10 4AX
Insurance claims and claims handling expenses recoverable from reinsurers 523.7 524.6
Total equity attributable to equity holders of the parent 515.8 457.1
These financial statements were approved by the Board of Directors on 4 March 2014 and were signed on its behalf by: Kevin Chidwick Director Admiral Group plc Company Number: 03849958
Cash flows from operating activities, before movements in investments 616.8 742.0
Cash and cash equivalents at end of period 6 187.9 216.6
Profit for the period — — — 258.4 258.4 — 258.4
Total transactions with equity-holders — — — (192.7) (192.7) 3.3 (189.4)
Profit for the period — — — 287.0 287.0 (0.1) 286.9
Total comprehensive income for the period — — (0.9) 287.0 286.1 (0.5) 285.6
Deferred tax credit on share scheme credit — — — 2.1 2.1 — 2.1
Changes in ownership interests without a change in control — — — 0.3 0.3 (0.3) —
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). The Company has elected to prepare its parent company financial statements in accordance with UK Generally Accepted Accounting Practice (GAAP).
> IFRS 13 Fair Value Measurement IFRS 13 establishes a single framework for measuring fair value and making disclosures about fair value measurements. IFRS 13 replaces and expands the disclosure requirements about fair value measurements in other IFRSs, including IFRS 7. In accordance with the transitional provisions of IFRS 13, the Group and the Company have applied the new fair value measurement guidance prospectively and has not provided any comparative information for new disclosures. Notwithstanding the above, the change had no significant impact on the measurements of the Group’s and the Company’s assets and liabilities.
There are a number of standards, amendments to standards and interpretations that were issued by 31 December 2013 but have either yet to be endorsed by the EU, or were endorsed shortly after the year end. The following IFRSs have been issued but have not been applied by the Group in these financial statements. Their adoption is not expected to have a material effect on the financial statements unless otherwise indicated: > IFRS 10 Consolidated Financial Statements and IAS 27 (2011) Separate Financial Statements > IFRS 11 Joint Arrangements and Amendments to IAS 28 (2008)
Investments in Associates and Joint Ventures > IFRS 12 Disclosure of Interests in Other Entities > Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities > Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)
Phase I of IFRS 9 “Financial Instruments” was issued in November 2009 and has subsequently been updated and amended. The standard has not yet been endorsed for use in the EU and the effective date is to be confirmed. The standard introduces changes to the classification and measurement of financial assets, removes the restriction on electing to measure certain financial liabilities at fair value through the income statement from initial recognition and requires changes to the presentation of gains and losses relating to fair value changes.
The Group is currently assessing the impact of the above new pronouncements on its results, financial position and cash flows.
Estimation Techniques Used in Calculation of Claims Provisions and Profit Commission Estimation techniques are used in the calculation of the provisions for claims outstanding, which represent a projection of the ultimate cost of settling claims that have occurred prior to the balance sheet date and remain unsettled at the balance sheet date.
The Group’s independent actuarial advisors project best estimate claims reserves using a variety of recognised actuarial techniques. The Group’s reserving policy requires management to reserve within a range of potential outcomes above the projected best estimate outcome, to allow for unforeseen adverse claims development.
3. Re-presentation of Comparative Information Comparative amounts within the Consolidated Income Statement relating to expenses have been re-presented. Net expenses of £235.2 million reported in the prior period, have been analysed into gross operating expenses and share scheme charges and operating expenses and share scheme charges recoverable from co- and reinsurers. There is no impact on reported net expenses or profit before tax in the period.
4. Group Consolidation and Operating Segments 4a. Accounting Policies (i) Group Consolidation The Consolidated financial statements comprise the results and balances of the Company and its subsidiaries (together referred to as the Group) for the year ended 31 December 2013 and comparative figures for the year ended 31 December 2012. The financial statements of the Company’s subsidiaries are consolidated in the Group financial statements. The Company controls 100% of the voting share capital of all its principal subsidiaries, except Rastreator.com Limited, Inspop USA LLC, Admiral Law Limited, BDE Law Limited and the indirect holding in comparenow.com Insurance Agency LLC.
The parent company financial statements present information about the Company as a separate entity and not about its Group. In accordance with International Accounting Standard (IAS) 24, transactions or balances between Group companies that have been eliminated on consolidation are not reported as related party transactions in the Consolidated financial statements.
(ii) Foreign Currency Translation Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The Consolidated financial statements are presented in millions of pounds sterling, which is the Group’s presentation currency.
The financial statements of foreign operations whose functional currency is not pounds sterling are translated into the Group presentation currency (sterling) as follows: > Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; > Income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the date of the transaction); and > All resulting exchange differences are recognised in other comprehensive income and in a separate component of equity except to the extent that the translation differences are attributable to non-controlling interests
Other The “Other” segment is designed to be comprised of all other operating segments that do not meet the threshold requirements for individual reporting. It includes UK household insurance, the Group’s commercial van insurance broker, Gladiator, and commercial van insurance.
4. Group Consolidation and Operating Segments continued 4b. Segment Reporting continued Other continued Taxes are not allocated across the segments and, as with the corporate activities, are included in the reconciliation to the Consolidated Income Statement and Consolidated Statement of Financial Position.
Net insurance premium revenue 425.1 54.1 — 3.8 — 483.0 Other revenue and profit commission 293.4 6.6 112.7 14.4 — 427.1 Investment and interest income 12.4 — — — — 12.4
Revenue and results for the corresponding reportable segments for the year ended 31 December 2012 are shown below.
Other revenue and profit commission 342.7 10.8 103.5 12.5 — 469.5
Within the UK Car Insurance segment, transactions between the Group’s intermediary and the Group’s insurance companies relating to vehicle commission totalling £18.4 million have been eliminated (from the insurance expenses and Other revenue lines in the income statement) on the basis that the non-elimination would have materially distorted the presentation of key performance indicators. The equivalent amounts in the prior period have not been eliminated as there is no resulting material distortion of key performance indicators.
Segment Assets and Liabilities The identifiable segment assets and liabilities at 31 December 2013 are as follows.
4. Group Consolidation and Operating Segments continued 4b. Segment Reporting continued Segment Assets and Liabilities continued The segment assets and liabilities at 31 December 2012 are as follows.
Claims Claims and claims handling expenses are charged as incurred, based on the estimated direct and indirect costs of settling all liabilities arising on events occurring up to the balance sheet date.
Underwriting year: Total profit commission 99.3 108.4 5d. Reinsurance Assets and Insurance Contract Liabilities (i) Objectives, Policies and Procedures for the Management of Insurance Risk The Group is involved in issuing motor insurance contracts that transfer risk from policyholders to the Group and its underwriting partners.
5. Premium, Claims and Profit Commissions continued 5d. Reinsurance Assets and Insurance Contract Liabilities continued (i) Objectives, Policies and Procedures for the Management of Insurance Risk continued Reserving Policies and Controls Reserving risk is mitigated through a series of processes and controls. The key processes are as follows: > Regular management and internal actuarial review of individual and aggregate case claim reserves, including regular reporting of management information and exception reporting of significant movements > Regular management and internal actuarial review of large claims, including claims settled or potentially settled by PPOs for which the uncertainty is increased by factors such as the lifetime of the claimant and movements in the indexation for the cost of future care of the claimant > Bi-annual external actuarial review of best estimate claims reserves using a variety of recognised actuarial techniques, including reviews of the potential ranges around best estimates > Use of a Reserving policy which informs management’s reserving decisions for the purposes of the Group’s financial statements. As described in note 2, critical accounting judgements and estimates, the policy determines that reserves should be set within a pre-determined range above best estimate assumptions to allow for unforeseen adverse claims development
Co-insurance and Reinsurance As noted in the Strategic Report, the Group shares a significant amount of the motor insurance business generated with external underwriters. In 2013, 40% of the UK risk was shared under a co-insurance contract, under which the primary risk is borne by the co-insurer. A further 35% of the UK risk was ceded under quota share reinsurance contracts. Co-insurance and reinsurance contracts are also used in the International Car Insurance businesses. Further detail can be found in the Strategic Report on page 28.
UK net claims incurred (excluding claims handling costs) (132.4) (184.1) (323.6) (339.5) (233.6)
Net releases on Admiral net share 31.3 23.1 7.8 16.3 53.3 Releases on commuted quota share reinsurance contracts*1 — 0.4 2.5 1.3 40.9
(ii) Financial Assets – Investments and Receivables Initial Recognition Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables or held to maturity investments.
Impairment of Financial Assets The Group assesses at each balance sheet date whether any financial assets or groups of financial assets held at amortised cost, are impaired. Financial assets are impaired where there is evidence that one or more events occurring after the initial recognition of the asset, may lead to a reduction in the estimated future cash flows arising from the asset.
Derecognition of Financial Assets A financial asset is derecognised when the rights to receive cash flows from that asset have expired, or when the Group transfers the asset and all the attaching substantial risks and rewards relating to the asset, to a third party.
Cash and Cash Equivalents Cash and cash equivalents includes cash in hand, deposits held at call with banks, and other short term deposits with original maturities of three months or less. All cash and cash equivalents are measured at amortised cost.
6. Investments continued 6c. Financial Assets and Liabilities The Group’s financial instruments can be analysed as follows: £m £m
The measurement of investments at the end of the period, for investments held at fair value and short term debt securities held at fair value is based on active quoted market values (level 1).
Objectives, Policies and Procedures For Managing Financial Assets and Liabilities The Group’s activities expose it primarily to financial risks of credit risk, interest rate risk, liquidity risk and foreign exchange risk. The Board of Directors has delegated the task of supervising risk management and internal control to the Group Risk Committee. There is also an Investment Committee that makes recommendations to the Board on the Group’s investment strategy.
There were no significant financial assets that were past due at the close of either 2013 or 2012.
6. Investments continued 6c. Financial Assets and Liabilities continued Objectives, Policies And Procedures For Managing Financial Assets and Liabilities continued Interest Rate Risk The Group considers interest rate risk to be the risk that unfavourable movements in interest rates could adversely impact on the capital values of financial assets and liabilities. This relates primarily to investments held at fair value.
Other Group holdings include funds placed into two segregated mandates. The guidelines of the investments retain the credit quality of the money market liquidity funds. As the duration of the securities is short there is no material interest rate risk relating to these investments.
Liquidity Risk Liquidity risk is defined as the risk that the Group does not have sufficient, available, financial resources to enable it to meet its obligations as they fall due, or can only secure them at excessive cost.
A breakdown of the Group’s financial liabilities – trade and other payables is shown in note 10. In terms of the maturity profile of these liabilities, all amounts will mature within three to six months of the balance sheet date. (Refer to the maturity profile at the start of this note for further detail.)
The maturity profile for financial assets is included at the start of this note. The Group’s Directors believe that the cash flows arising from these assets will be consistent with this profile.
Foreign Exchange Risks Foreign exchange risks arise from unfavourable movements in foreign exchange rates that could adversely impact the valuation of overseas assets.
7. Other Revenue 7a. Accounting Policy (i) Contribution from Additional Products and Fees and Other Revenue Contribution from additional products and fees and other revenue includes revenue earned on the sale of products supplementing the core motor insurance policy, administration and other charges paid by the policyholder, referral fees, revenue from policies paid by instalments and vehicle commission charges paid by co- and reinsurers. Revenue is credited to the income statement over the period matching the Group’s obligations to provide services. Where the Group has no remaining contractual obligations, the revenue is recognised immediately. An allowance is made for expected cancellations where the customer may be entitled to a refund of amounts charged.
Employee Share Schemes The Group operates a number of equity and cash settled compensation schemes for its employees. The fair value of the employee services received in exchange for the grant of free shares under the equity settled schemes is recognised as an expense, with a corresponding increase in equity. For cash settled schemes, the fair value of services received are also recognised as an expense, with a corresponding increase in liability.
8. Expenses continued 8b. Operating Expenses and Share Scheme Charges continued
The £53.0 million (2012: £26.8 million) administration and marketing costs allocated to insurance contracts is principally made up of salary costs.
Depreciation charge: Amortisation charge: Operating lease rentals: Auditor’s remuneration (including VAT): – Fees payable for the audit of the Company’s annual accounts — — — —
Support staff 1,420 1,231 8e. Directors’ Remuneration (i) Directors’ Remuneration £m £m
Retirement benefits are accruing to the following number of Directors under: Money purchase schemes 1 1
The fair value of shares awarded is either the share price at the date of award, or is estimated at the latest share price available when drawing up the financial statements for awards not yet made (and later adjusted to reflect the actual share price on the award date). Awards under the SIP are entitled to receive dividends, and, hence, no adjustment has been made to this fair value.
The amount of award that actually vests is 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 three-year period the award applies to. For the 2013 and 2012 schemes, 50% of the shares awarded at the start of the three year vesting period are subject to these performance conditions.
Total awards committed 9,484,409 *1 Being the maximum number of awards expected to be made before accounting for expected staff attrition.
The principal temporary differences arise from depreciation of property and equipment and share scheme charges. The resulting deferred tax is charged or credited in the income statement, except in relation to share scheme charges where the amount of tax benefit credited to the income statement is limited to an equivalent credit calculated on the accounting charge. Any excess is recognised directly in equity.
(Over) provision relating to prior periods – deferred tax (0.6) (0.6)
Corporation tax thereon at effective UK corporation tax rate of 23.25% (2012: 24.5%) 86.1 84.4
Balance brought forward at 1 January 2012 (3.6) (1.5) (2.6) (2.6) (10.3) Tax treatment of share scheme charges through income or expense 1.3 — — — 1.3
Tax treatment of share scheme charges through reserves (1.5) — — — (1.5)
Balance carried forward at 31 December 2012 (3.8) (1.9) (5.7) (3.8) (15.2) Tax treatment of share scheme charges through income or expense 1.8 — — — 1.8
Balance carried forward at 31 December 2013 (4.1) (3.3) (7.8) (1.8) (17.0)
The UK corporation tax rate reduced from 24% to 23% on 1 April 2013. The average effective rate of tax for 2013 is 23.25% (2012: 24.5%). It will fall to 21% in April 2014, and to 20% in April 2015. Deferred tax has therefore been calculated at 20% where the temporary difference is expected to reverse after this date.
(ii) Impairment of Property and Equipment In the case of property and equipment, carrying values are reviewed at each balance sheet date to determine whether there are any indications of impairment. If any such indications exist, the asset’s recoverable amount is estimated and compared to the carrying value. The carrying value is the higher of the fair value of the asset, less costs to sell and the asset’s value in use. Impairment losses are recognised through the income statement.
(iv) Intangible Assets Goodwill All business combinations are accounted for using the 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.
Impairment of Goodwill The annual impairment review involves comparing the carrying amount to the estimated recoverable amount (by allocating the goodwill to CGUs) and recognising an impairment loss if the recoverable amount is lower. Impairment losses are recognised through the income statement and are not subsequently reversed.
Deferred Acquisition Costs Acquisition costs comprise all direct and indirect costs arising from the conclusion of insurance contracts. Deferred acquisition costs represent the proportion of acquisition costs incurred that correspond to the unearned premiums provision at the balance sheet date. This balance is held as an intangible asset. It is amortised over the term of the contract as premium is earned.
Software Purchased software is recognised as an intangible asset and amortised over its expected useful life (generally the licence term). The carrying value is reviewed every six months for evidence of impairment, with the value being written down if any impairment exists. Impairment may be reversed if conditions subsequently improve.
The net book value of assets held under finance leases is as follows: £m £m
Total trade and other receivables 77.5 55.3 10e. Trade and Other Payables £m £m
Of amounts owed to co-insurers and reinsurers, £629.3 million (2012: £609.6 million) is held under funds withheld arrangements.
In 2014, the Group will enter into new operating lease commitments for premises in Newport and Cardiff which are currently under construction. The annual charge for these leases totals £3.4 million and both lease terms exceed five years.
(ii) Dividends Dividends are recorded in the period in which they are declared and paid.
August 2012 (45.1 pence per share, paid October 2012) — 121.3
March 2013 (45.5 pence per share, paid June 2013) 123.1 —
The dividends declared in March represent the final dividends paid in respect of the 2011 and 2012 financial years. The dividends declared in August are interim distributions in respect of 2012 and 2013.
The difference between the basic and diluted number of shares at the end of 2013 (being 502,105; 2012: 688,707) relates to awards committed, but not yet issued under the Group’s share schemes. Refer to note 8 for further detail.
11. Share Capital continued 11e. Objectives, Policies and Procedures for Managing Capital The Group manages its capital to ensure that all entities within the Group are able to continue as going concerns and also to ensure that regulated entities comfortably meet regulatory requirements. Excess capital above these levels within subsidiaries is paid up to the Group holding company in the form of dividends on a regular basis.
11f. Group Subsidiary Companies The parent company’s subsidiaries are as follows: Subsidiary
Bell Direct Limited England and Wales Ordinary 100 Dormant comparenow.com Insurance Agency LLC United States of America Ordinary 67.79 (Indirect)
11g. Related Party Transactions Details relating to the remuneration and shareholdings of key management personnel are set out in the Directors’ Remuneration Report. Key management personnel are able to obtain discounted motor insurance at the same rates as all other Group staff, typically at a reduction of 15%.
12. Reconciliations The following tables reconcile significant key performance indicators and non-GAAP measures included in the Strategic Report to items included in the financial statements.
12b. Reconciliation of Claims Incurred to Reported Group Loss Ratio, Excluding Releases on Commuted Reinsurance
Add back reserve releases on commuted reinsurance 40.9 40.9 1.3 1.3
The parent company audit fee is not disclosed in these accounts as it is disclosed in the Consolidated financial statements for Admiral Group plc, which precede them at note 8c.
3. Taxation The charge for taxation is based on the profit for the year and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes.
4. Employee Share Schemes The Group operates a number of share schemes for its employees. For equity settled schemes commencing 1 January 2004 and after, the fair value of the employee services received in exchange for the grant of free shares under the schemes is recognised as an expense in the parent company’s subsidiaries, with a corresponding increase in equity in the parent company.
Turnover A non-GAAP measure, turnover is the sum of “total premiums written” and “Other revenue”.
Corporate Website The Group’s corporate website is at www.admiralgroup.co.uk. A range of information about the Admiral Group is presented, including the Group’s history; fi nancial reports and press releases; corporate responsibility and governance.
Financial Calendar Final 2013 Dividend 30 April 2014 – Ex dividend date 2 May 2014 – Record date 30 May 2014 – Payment date
The interim results will be available on the corporate website from 13 August 2014.
UK Car Insurance: Admiral www.admiral.com elephant.co.uk www.elephant.co.uk Diamond www.diamond.co.uk Bell www.bell.co.uk