Diamond targeted at Women and Bell targeted at drivers with low no claims bonus.
Sunday Times 100 Best Companies to Work For We made it on to the list for the first time at 32nd.
The Group’s share of pre-tax profit increased by 43% to £405.4 million. Earnings per share and return on equity both increased by 49% to 117.2 pence and 55% respectively. The Group’s solvency ratio remains very strong at 205%.
In our Price Comparison (PC) businesses, Confused.com in the UK continues to face a competitive and challenging market, whilst it implements its new Drivers Win strategy; this is offset by encouraging growth in Compare.com in the US and record profits at Rastreator and LeLynx, with all PC businesses delivering an improved customer experience. Our joint venture Preminen PC business continues to explore new opportunities and has recently established operations in Mexico and is soon to be in Turkey.
Insurance launched Our second car insurance brand in Spain and household insurance in the UK under the Admiral brand.
“ The first reason Admiral has been, and remains, good news for customers is that we operate at a lower cost”
Ogden discount rate Regular readers of our results will be very familiar with the Ogden topic and I won’t repeat the full detail here. A year ago we estimated that the change in rate which came into effect in March 2017 would cost the Group around £150 million after tax and reinsurance. Most of the impact has now been reflected in the income statement and we still consider the £150 million a valid estimate.
“ It was pleasing to deliver a record profit with lots of positives from around the Group”
Chief Financial Officer’s review 14 Admiral Group plc · Annual Report and Accounts 2017
The Group has maintained its track record of strong growth in 2017 with turnover up 15% to £2.96 billion (2016: £2.58 billion) and net revenue 11% higher at £1.1 billion (2016: £1.0 billion). Customer numbers increased 11% to 5.73 million (2016: 5.15 million). The Group’s statutory profit before tax was £403.5 million (2016: £278.4 million) whilst its share of pre-tax profit was £405.4 million (2016: £284.3 million).
UK Household Insurance – reinsurance The Group’s Household business is supported by long-term proportional reinsurance arrangements with Munich Re and Swiss Re covering 70% of the risk. In addition, the Group has non-proportional reinsurance to cover the risk of catastrophes stemming from weather events.
However, 2017 was a year with catastrophic losses across the US, with a number of hurricanes hitting the southern coasts. In particular, Hurricane Harvey impacted our Texas customers, but Elephant was able to deliver excellent service to our customers in need. While hurricane claims did impact our loss ratio, by approximately 5 points, Elephant was still able to deliver overall loss ratio improvements on the back of better risk selection and rate increases that were in line with the market.
Lots of new exciting projects are in the pipeline to make our vision a reality!
Despite a challenging market where the average premium continued to fall (around 3% year-onyear ) and price comparison growth was low, we have increased our customer base to 500,000 (+20% year-on-year) and have maintained a strong focus on profitability, reaching a profit for the fourth year in a row. The main drivers of this are: a better customer journey sustained by a stronger brand; a more mature portfolio; and improvement in the expense ratio.
In this highly competitive context we continued to grow market share due to customer journey improvements in the price comparison channel, combined with strong growth in direct-tosite digital sales, particularly for the Qualitas Auto brand. Technical results developed well, with especially positive evolution for the 2016 underwriting year.
During 2017 the management team at Elephant has been strengthened and a number of important operational improvements have been made. Although success is not certain, the Board remains confident in the prospects of the business and continues to support Elephant in the achievement of its goals. The impairment charge has no impact on the Group’s profit for the period or capital position. Further information is set out on page 146.
We believe our proven capability to organically set up successful PCWs for a reasonable investment with clean exits where needed (Italy and China), allows us to increase our total addressable market substantially and allows us to keep growing in the future while the UK faces a more competitive market.
As for operational results, LeLynx had a positive year in 2017, with both revenue and profit growing. The business has gone from strength to strength; the team has grown while the market dynamics have become more complex although more promising. During 2017 we also made operational changes that will support future growth. Finally, LeLynx ranked 11th in the Great Place to Work in France in its first year of participation!
Admiral operates four price comparison businesses; in the UK (Confused.com), in Spain (Rastreator), France (LeLynx) and the US (Compare.com). Admiral Group owns 75% of Rastreator and 71% of Compare.com.
However, a more competitive market might benefit the car insurance business through lower acquisition costs.
Current Appointments: Chief Investment Officer of Equistone Partners Europe (formerly Barclays Private Equity, ‘BPE’)
25 years ago, I was… …working for Scottish Life (a life insurer and asset manager, now part of Royal London) as Assistant General Manager Finance.
Board Committees The Board has delegated authority to a number of permanent Committees to deal with matters in accordance with written Terms of Reference. The principal Committees of the Board are: Audit, Remuneration, Group Risk and Nomination and Governance. Subject to the exceptions listed above, all comply fully with the requirements of the Code.
Summary of key activities during 2017 The agendas for the meetings taking place during the year are agreed by the Committee Chairman and detail the matters to be discussed and considered at each meeting. The agendas are updated regularly to allow for new items to be included.
Group continues to maintain a regulatory capital add-on to cover risks not captured within the standard formula. The Committee has also reviewed the Group’s proposed dividend level, capital plan and capital buffer in line with the capital policy. The Group continues to make use of Undertaking Specific Parameters (USPs) and the Volatility Adjustment (VA) across a number of its entities, where appropriate.
and Brexit as part of the Group’s enhanced project governance framework
The results of the stress tests form part of the process to set the Group’s capital risk appetite, which ensures that a buffer on top of the Group’s regulatory capital requirement is held to protect its capital position against shocks and stresses. Refer to the Strategic report for information on sensitivities to the reported 2017 solvency ratio position.
Annette Court Chairman of the Nomination and Governance Committee 60 Admiral Group plc · Annual Report and Accounts 2017
A Statement to Shareholders from the Chairman of the Remuneration Committee
• Remuneration Committee discretion to adjust DFSS outcome: Committee discretion to adjust the formulaic vesting outcome to ensure the final outcome is a fair and true reflection of underlying business performance62 Admiral Group plc · Annual Report and Accounts 2017
The table below provides a breakdown of the gender of Company Directors and employees at the end of the financial year: Male Female
Under Provision C.1.3 of the 2016 UK Corporate Governance Code, the Board is required to report on whether the business is a going concern. In considering this requirement, the Directors have taken into account the following: • The Group’s projections for the next 12 months and beyond, in particular the profit forecasts, regulatory capital surpluses and levels and sources of liquidity
It is proposed that the next AGM be held at City Hall, Cardiff on Thursday 26 April 2018 at 2.00pm, notice of which will be sent to shareholders with the Annual Report.
The main change in component scoping since 2016 is to subject the group’s two underwriting divisions in Italy to full scope audits. Whilst these divisions are not considered significant to the group as a whole in 2017, they do represent a significant portion of the group’s European underwriting activity and therefore we have determined that treating them in this way is the most appropriate approach.
We reviewed the reports from management’s external expert actuary and involved our own Deloitte actuarial experts to support our challenge of management’s key assumptions. We benchmarked assumptions relating to the severity and frequency of large bodily injury claims against available industry data and to peers where possible and appropriate. We also completed procedures to specifically assess the competence and objectivity of management’s expert in their role.
An overview of the scope of our audit The financially significant components of the group which were identified in our audit planning are the UK branches of Admiral Insurance (Gibraltar) Limited, Admiral Insurance Company Limited, EUI Limited and Inspop.com Limited, and the Admiral Group plc parent entity itself. In 2016, we also identified five significant reporting components. Each of these components was subjected to a full-scope audit for group reporting purposes, completed to individual component materiality levels which ranged from £1.1m to £12.4m (2016: £660,000 to £11.8m), dependent upon the relative significance of each individual component.
Net (decrease) / increase in cash and cash equivalents (0.4) 36.1
Deferred tax charge in relation to movement in fair value reserve – – (0.5) – – (0.5) – (0.5)
Share scheme credit – – – – 37.9 37.9 – 37.9
IFRS 15 was issued during 2014, with clarifications to the standard endorsed on 31 October 2017, and will be effective for Admiral on 1 January 2018. The standard introduces a simple, five step principles-based model to be applied to the accounting of all contracts with customers. Revenue from insurance contracts and financial instruments is outside the scope of IFRS 15.
During 2017, the Group performed an assessment of the impact of the standard on its revenue streams, quantifying this impact on its results, financial position and cash-flows. The primary area of focus of this work was the other revenue generated by a portfolio of products that supplement the core car and household insurance policies and revenue generated by the Group’s price comparison businesses, where the new standard could potentially result in a delay in revenue recognition. Management’s assessment, based on the work performed, is that the implementation of the standard is not expected to have a material impact on the Group’s financial statements, with the majority of material revenue classes not being impacted.
In applying the Group’s accounting policies as described in the notes to the financial statements, management has primarily applied judgement in the following area: • Classification of the Group’s contracts with reinsurers as reinsurance contracts: A contract is required to transfer significant insurance risk in order to be classified as such. Management reviews all terms and conditions of each such contract, and if necessary obtains the opinion of an independent expert at the negotiation stage in order to be able to make this judgement. All reinsurance contracts (both excess of loss and quota share contracts) held by the Group have been assessed and it has been concluded that all contracts transfer significant insurance risk and have therefore been classified and accounted for as reinsurance contracts within these financial statements.
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.
Other Revenue and profit commission 277.2 12.6 129.2 16.7 (20.8) 414.9
The total of Price Comparison revenues from transactions with other reportable segments is £19.8 million (2016: £20.8 million) which has been eliminated on consolidation. There are no other transactions between reportable segments.
As noted above, the Group shares a significant amount of the motor insurance business generated with external underwriters. As well as these proportional arrangements, an excess of loss reinsurance programme is also purchased to protect the Group against very large individual claims and catastrophe losses.
The Group mitigates these risks by ensuring that it has a diverse range of financially secure reinsurance partners, including a long-term relationship with Munich Re and a number of other high profile reinsurers.
– Releases on commuted quota share reinsurance contracts 40.9 70.6 88.8 17.1 73.8
Included within releases on commuted quota share contracts are accruals for additional reserves arising from the commutation of 2015 year UK motor quota share contracts. Any future positive developments of this loss ratio would lead to the reversal of the amounts accrued. Refer to the business review earlier in this report for further detail.
Eligible employees qualified for awards under the SIP based upon the performance of the Group in each half-year period. The maximum award for each year is £3,600 per employee. The awards are made with reference to the Group’s performance against prior year profit before tax. Employees must remain in employment for the holding period (three years from the date of award) otherwise the shares are forfeited.
Movement in fair value reserve – – – (4.1) – (4.1)
The deferred tax asset at 31 December 2017 has been calculated based on the rate at which each timing difference is most likely to reverse.
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%.
Effective Tax Rate Effective tax rate is defined as the approximate tax rate derived from dividing the Group’s profit before tax by the tax charge going through the income statement. It is a measure historically presented by the Group and enables users to see how the tax cost incurred by the Group compares over time and to current corporation tax rates.