Annual Report 2004 13531 Admiral AR a/w 5/4/05 9:59 am Page 1
In conclusion, I am very confident in Admiral’s ability to pass the test of clarity of strategy, quality of management, and adequacy of resources to continue consistently to create value for all our shareholders.
Some key numbers from the accounts which follow: • loss ratio 67% up from 52% in 2003
The movement in loss ratio from 52% last year to 67% in 2004 is to be expected. The 52% represented a year with a large percentage of releases from previous years. It is the reflection of the quality of those back year results which has been a catalyst to our explosive growth in 2004. It made sense to accelerate growth on the back of fantastic results. But such growth meant we had to sacrifice some margin. However, the 2004 loss ratio of 67% leaves plenty of margin and on a much larger base. This is a superb result and only pales when compared to 2003! The change in loss ratio across years is characterised by a slightly less good underlying trend, proportionally less substantial back-year releases and the aforementioned growth, in excess of 25%. Without any releases taken into account the loss ratio move was modest, from
Source: 1985 to 1997 Merrill Lynch Research analysis of DTI returns; 1998 to 2003 EMB analysis of Thesys data on FSA returns; 2004 & 2005 Deloitte 13531 Admiral AR a/w 5/4/05 9:59 am Page 10
A Brief Explanation of Why Our Results Are So Good! Some explanation of our excellent numbers lies with our ability to make the internet work. This is also a source of confidence in our future. Our 2004 internet results exceeded our forecasts and, in the absolute, are quite stunning. (Except for changing the year from 2003 to 2004 this was exactly what I wrote last year. It’s not that I’m being lazy, it’s just that it’s still true!) Of the more than 6.2m quotes we did last year 82% started on the internet. Around 71% of all our sales came from these internet quotes. I believe that there is still growth to be had in internet distribution, albeit probably less rampant than before. As we are among the leaders in the internet delivery of car insurance we are well placed for continued success through this channel in the coming years. (In 2004 we had some 1 billion hits to our websites!)
Group cash holdings earn interest at just below the UK base interest rate.
Dividends The directors have established a dividend policy based on the principle of returning excess cash to shareholders. In accordance with this principle they would expect to make a normal distribution of at least 45% of post-tax profits, and to review regularly the Group's available cash to determine whether it is appropriate for the Company to pay a further special dividend.
International Financial Reporting Standards (IFRS) From 1 January 2005, EU regulations require companies listed on regulated markets in the EU to prepare their consolidated accounts under IFRS. The Admiral Group consolidated accounts for 2005 will, therefore be prepared under IFRS, as opposed to UK GAAP. 2004 comparative information must also be restated.
Two new schemes have been put in place under which awards will be made with effect from the 2005 financial year. The maximum annual award under these schemes will be no more than 1% of the issued share capital.
• ensuring that appropriate management and succession plans are in place
Details of the Chairman's professional commitments are included in the Chairman's biography. The Chairman does perform a number of other nonexecutive roles outside of the Group but the Board is satisfied that these are not such as to interfere with the performance of the Chairman's duties within the Group.
Professional development On appointment, directors take part in a comprehensive induction programme where they receive financial and operational information about the Group, details concerning their responsibilities and duties, as well as an introduction to the Group’s governance and control environment.
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 experience as defined in the Combined Code.
The Committee is authorised to investigate any activity within its terms of reference and to seek any information it requires from employees in order to discharge its duties. This includes full access to all records of the Group – including relevant external reports.
Committee members (both independent Martin Jackson (Chairman) non-executive directors) Keith James
The Audit Committee’s ability to provide the appropriate assurance to the Board depends on the provision by Internal Audit of periodic and independent confirmation that the controls established by management are operating effectively. The Audit Committee reviews the wider aspects of internal control and risk management, providing a high level challenge to the steps being taken to implement the Risk Management Strategy.
One of the Committee’s principal responsibilities is to ensure that the Risk Management Strategy approved by the Board is implemented throughout the Group. The Committee is expected to: • assess the nature and extent of the risks facing the Group and determine an appropriate risk appetite in respect of these
The regulatory environment As a provider of financial services, the Group (through its trading subsidiaries) is subject to a significant amount of regulation from a range of bodies. The Group is therefore exposed to a level of regulatory risk. Adherence to these regulations is the ultimate responsibility of the Boards of each regulated subsidiary and also the Approved Persons sponsored by that Company.
This report was approved by the Board of directors on 18 March 2005 and is signed on its behalf by the Committee Chairman.
New schemes have been established to replace the ESOT, under which awards will be made in 2005. The Board feels strongly that this type of compensation is the most effective way to align the interests of Group employees with those of shareholders.
Ysgol Hendre Deaf Blind Centre received a donation from Henry's Pot 13531 Admiral AR a/w 5/4/05 9:59 am Page 34
Profit commission – insurance business 9 3,069 1,178 Allocated investment return transferred from the non-technical account 8,135 4,881
Commission from broking activities is credited to the profit and loss account on the sale of the underlying insurance policy.
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Admiral Syndicate Management Limited England and Wales Ordinary Lloyd’s managing agency
16. Debtors arising out of direct insurance operations 17. Other creditors including taxation and social security
Special Business To consider and, if thought fit, to pass the following resolution which will be proposed as an Ordinary Resolution: 13. That the directors be generally and unconditionally authorised pursuant to Section 80 of the Companies Act 1985 (the “Act”) to exercise all the powers of the Company to allot relevant securities (within the meaning of that section) up to an aggregate nominal amount of £86,200 provided that this authority shall expire (unless previously renewed, varied or revoked by the company in General Meeting) 15 months after the date of the passing of this resolution, or, if earlier, at the conclusion of the next Annual General Meeting of the Company after the date of the passing of this resolution, but so that this authority shall allow the Company to make before the expiry of this authority offers or agreements which would or might require relevant securities to be allotted after such expiry and notwithstanding such expiry the directors may allot relevant securities in pursuance of such offers or agreements.
REGISTERED OFFICE Capital Tower Greyfriars Road Cardiff CF10 3AZ Registered No. 3849958
• in the case of CREST members, by utilising the CREST electronic proxy appointment service in accordance with the procedures set out below and in each case instructions must be received not less than 48 hours before the time of the meeting. Appointment of a proxy does not preclude a member from attending the meeting and voting in person.