Strong underwriting profi ts and high ancillary revenues help us consistently achieve over 50% return on capital. In 2009 ROCE was 54%.
Highlights 04 Chairman’s statement 06 Chief Executive’s statement 10 Business review 32 Governance 51 Financial statements base declined from 55,400 to 50,300. However, we are now in a position to grow the customer base again and, in fact, the base grew by 6% in the last three months of the year. As you can see by the expense ratio (63%), we are staffed up for a bigger business. The goal for 2010 is to grow effi ciently into this expense base without sacrifi cing the loss ratio.
The ongoing PC distribution shift and expected increases in premiums across the market is likely to provide a favourable environment in 2010. Another potential source of growth is our ability to innovate and stay at the forefront of distribution changes, maintaining our strong track record e.g. multi-brand strategy, fi rst internet only brand, fi rst car insurance price comparison website... We will let you know when we think we’ve got a new winning innovation!
2) It makes good risk selection a more powerful differentiator, a purer determinant of relative loss ratio performance.
Expenses management, and without many of the complexities you may fi nd in a large fi nancial services company – the typical model of our competitors. Further, we’re based in South Wales, which as well as being a beautiful place to be based, with world class employees, is also much less expensive than many other parts of the UK.
Nova Scotia and Bangalore India. • Five year compounded growth at 14%, accelerating in 2009 to 17% • Our ability to grow arises from effective marketing, focused distribution, targeted pricing and innovative products
In 2010, Admiral will continue to underwrite 27.5% of the total, the remaining 72.5% being split 45.0% Great Lakes, Swiss Re 7.5%, Hannover Re and New Re 10.0% each.
ConTe ConTe has grown in size signifi cantly in the second half of 2009, moving from 3,300 customers at December 2008, to 15,000 at the end of June 2009 and up to 35,500 at the end of the year. Written premium in 2009 was £11.1 million.
Gladiator Established in 1998 and based in Swansea, Gladiator is a commercial vehicle insurance broker offering van insurance and associated products, typically to small businesses. Distribution is via telephone and internet (including price comparison websites).
Gladiator has continued to grow its customer base – by 10% to 93,400 in 2009, but signifi cant increases in competition in the market (resulting from growth in price comparison distribution and increased media spend) have led to notable pressure on margins.
The Directors are confi dent that the key strengths of the business which contribute to the outperformance (targeted pricing and claims handling on the loss ratio side; lower cost infrastructure, effi cient acquisition costs and cost control on the expense ratio side) are sustainable.
The Group has launched seven new operations outside the UK in the past four years. There is a risk that one or more of the new operations does not become a sustainable long-term business.
Admiral has enjoyed a long-term relationship with one of the world’s strongest reinsurers, Munich Re, which has supported Admiral since 2000. The Group also has a strong relationship with other major reinsurers, including Hannover Re and Swiss Re.
The scores have improved in all areas with signifi cant improvements in how employees feel about their pay and benefi ts compared to similar positions in other companies. The score representing how employees feel about Admiral’s charitable giving also improved signifi cantly.
CO2 (tonnes)* 3,497 1.06 tonnes 4,285 1.14 tonnes per employee per employee
The Group assesses the potential costs associated with a number of disaster scenarios such as a major storm in the South East, major fl ood on the East Coast, and a complete fl ooding of the Thames in the London area. Reinsurance cover is purchased to provide signifi cant protection in the event of catastrophes of this nature.
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Highlights 04 Chairman’s statement 06 Chief Executive’s statement 10 Business review 32 Governance 32 The Admiral Group Board 34 Directors’ report 37 Corporate governance 44 Remuneration report 49 Independent auditor’s report to the members of Admiral Group plc 51 Financial statements or trusteeships held, together with any companies in which they hold more than 1% of the issued share capital are also disclosed. These confl ict of interest procedures have operated effectively throughout 2009.
The Board considers that the members of the Committee have the appropriate competence and experience to carry out their duties and further considers that Martin Jackson (Committee Chairman) has the appropriate recent and relevant fi nancial experience having held the position of Group Finance Director of Friends Provident Plc between 2001 and 2003 and being a fellow of the Institute of Chartered Accountants, which imposes requirements for Continuing Professional Development. The Committee is kept up to date with changes to Accounting Standards and relevant developments in fi nancial reporting, company law, and the various regulatory frameworks through presentations from the Group’s external auditors, Head of Finance, and Company Secretary. In addition members are provided with information on seminars and conferences provided by external bodies. The Terms of Reference of the Audit Committee include all the matters suggested by the Code.
Confl icts of Interest In compliance with the requirements of the Companies Act 2006 regarding Directors’ duties in relation to confl icts of interest, the Group’s Articles of Association were amended at the 2009 Annual General Meeting to allow the Board to authorise potential confl icts of interest that may arise and to impose such limits as it thinks fi t. Following the aforementioned amendment the Company has put in place updated procedures in place to deal with confl icts of interest. These procedures include each Board member completing, annually, a confl ict 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 confl ict with the interests of the Company. Any current directorships that they, or their connected persons hold, any advisory roles
The Board confi rms that there were no signifi cant issues arising during the year under review.
Scope of report The remuneration report summarises the Group’s remuneration policy and particularly its application with respect to the Directors. The report also describes how the Group applies the principles of good corporate governance in relation to Directors’ remuneration in accordance with the Combined Code and Directors’ Remuneration Report Regulations 2002.
Kevin Chidwick received an award of 45,009 DFSS shares on 13 April 2009 with a value at the date of the award of £400,000. The awards represent the maximum number of shares that could vest after a three-year period and are subject to the performance criteria described above.
Total Shareholder Return (TSR) The following graph sets out a comparison of Total Shareholder Return for Admiral Group plc shares with that of the FTSE 100 Index, of which the Company is a constituent. The graph measures the period from 1 January 2005 up to 31 December 2009. TSR is defi ned as the percentage change over the period, assuming reinvestment of income.
Opinion on fi nancial statements In our opinion: • the fi nancial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2009 and of the Group’s profi t for the year then ended
• the information given in the Directors’ report for the fi nancial year for which the fi nancial statements are prepared is consistent with the fi nancial statements
Adoption of new and revised standards The Group has applied all adopted IFRS and interpretations endorsed by the EU at 31 December 2009, including all amendments to extant standards that are not effective until later accounting periods, except for those listed below: • IFRIC 12 Service concession arrangements • IFRIC 15 Agreements for the construction of real estate • IFRIC 16 Hedges of a net investment of a foreign operation • IFRIC 17 Distribution of non-cash assets to owners • IFRIC 18 Transfer of assets from customers • Amendments to IAS 32 Classifi cation of rights issues
(iii) All resulting exchange differences are recognised as a separate component of equity
The gross amount of expenses, before recoveries from co-insurers and reinsurers is £265.0 million (2008: £211.2 million). This amount can be reconciled to the total expenses and share scheme charges above of £140.0 million (2008: £105.7 million) as follows: 31 December 31 December £m £m
Factors affecting the tax charge are: 31 December 31 December £m £m
Profi t for the fi nancial year after taxation (£000s) 156.9 144.9
Goodwill relates to the acquisition of Group subsidiary EUI Limited (formerly Admiral Insurance Services Limited) in November 1999. It is allocated solely to the UK Car Insurance segment. As described in the accounting policies, the amortisation of this asset ceased on transition to IFRS on 1 January 2004. All annual impairment reviews since the transition date have indicated that the estimated recoverable value of the asset is greater than the carrying amount and therefore no impairment losses have been recognised.
The Group has a policy of primarily investing in AAA-rated money market liquidity funds, which in turn invest in a mixture of very short dated fi xed and variable rate securities, such as cash deposits, certifi cates of deposits, fl oating rate notes and other commercial paper.
The Group’s credit risk exposure to assets with external ratings is as follows: 31 December 31 December
• Use of sophisticated and innovative methods to check for fraudulent claims
The impact is stated net of reinsurance and includes the change in net insurance claims along with the associated profi t commission movements that result from changes in loss ratios. The fi gures are stated net of tax at the current rate.
Issued, called up and fully paid: 266,477,291 ordinary shares of 0.1p 0.3 –
The amendments to the disclosure requirements of FRS 29 mirror those of the international standard IFRS 7, the requirements of which are met in note 17 to the Group fi nancial statements. The disclosures focus on investments held at fair value through profi t or loss, which are not held in the Parent Company.
Highlights 01 Financial highlights 2009 02 Admiral Group in 2009 04 Chairman’s statement 06 Chief Executive’s statement 10 Business review 32 Governance 51 Financial statements