• Lower customer acquisition costs • Use sophisticated underwriting techniques • Run low cost operations with service-orientated culture • Cross-sell other products
Contents 02 Our markets 05 Chairman’s statement 09 Chief Executive’s statement 11 Business review 11 Group financial highlights 12 UK Car Insurance 16 UK Car Insurance review 18 International Car Insurance 20 Price Comparison 22 Other Group items 25 Principal risks and uncertainties 27 Corporate Responsibility 32 The Admiral Group Board 34 Directors’ report 37 Corporate Governance 46 Remuneration report 52 Independent auditor’s report to the members of Admiral Group plc 53 Consolidated income statement 54 Consolidated statement of comprehensive income 55 Consolidated statement of financial position 56 Consolidated cash flow statement 57 Consolidated statement of changes in equity 58 Notes to the financial statements 82 Parent Company financial statements 83 Notes to the Parent Company financial statements 85 Consolidated financial summary 86 Directors and advisers Further information
LeLynx, a price comparison website launched in January 2010. L’olivier Assurances, a French car insurer started trading in December 2010.
In this section: 11 Business review 11 Group fi nancial highlights 12 UK Car Insurance 16 UK Car Insurance review 18 International Car Insurance 20 Price Comparison 22 Other Group items 25 Principal risks and uncertainties
How did Mr. Dickens know, nearly 200 years ago, that his words could be used to describe Admiral’s 2011 year? (Or at least the way some pundits would see the year.)
Based on some of the hyperbole you might have heard during the year, what, you may be wondering, happened to Admiral in 2011? When last we left this narrative the company was flying along at great pace; able to leap tall buildings in a single bound. The market was raising rates and Admiral, lagging neatly just a tad behind those rate hikes, was winning loads of new customers. Admiral was starting from a combined ratio of 84% and so 2011 was looking like it would be a giant winner.
Is Admiral broken? Not at all. Our ratios in the UK are still first rate. Simply put, the problem is that we’ve increased our volatility by increasing our profit commissions. So if our combined ratio moves up or down just a couple of points it adds or subtracts tens of millions from our bottom line. This was not the case in years past because we didn’t get as much of the profits. So there’s a penalty to pay for greater profits: greater volatility.
• Our policies are distributed through price comparison websites and direct channels (our own websites and the telephone)
• The proportion of new 2011 claims that were reported and reserved as higher value claims
For both ourselves and the market as a whole, 2011 was a year of two halves.
The contracts in place for Italy, France and the USA include proportional sharing of ancillary profits.
In the current economic environment there has been an increased focus on the management of claims fraud.
Applicants for The 50 Most Engaged Workplaces™ Award are evaluated against one another by a panel of judges incorporating Eight Elements of Employee Engagement™. These core elements include: Communication, Leadership, Culture,
The results of these surveys are taken into account in deciding the winners.
The table below contains some of the key measures from the TCF report.
In 2011, 129 members of Admiral staff volunteered to attend the week-long event and support children in taking part in the activities which they otherwise may not have had the confidence or ability to do.
Neath Port Talbot’s Disability Sport Development Officer and festival organiser Vicky Radmore said, “We’re very grateful for the continued support from Admiral. Without their support we would not be able to accommodate as many young people, let alone provide the diversity of activities.”
7. Keith James, OBE (67) Non-Executive Director Keith was appointed a Non-Executive Director in December 2002. He is Chairman of the Nomination Committee and is also the independent Chairman of Admiral Insurance Company Limited and Inspop.com Limited.
Colin is a Chartered Management Accountant and was formally a member of the Executive Committee of Tesco plc. During his 22 year career at Tesco he held a wide range of positions including UK Finance Director and CEO Tesco Express.
Charitable and political donations During the year the Group donated £178,000 (2010: £168,000) to various local and national charities. The Group has never made political donations. Refer to the Business review for further detail.
Creditor payment policy It is the policy of the Group to pay all purchase invoices by their due date, and appropriate quality measures are in place to monitor and encourage this. At the end of the year outstanding invoices represented 14 days purchases (2010: 16).
Annual General Meeting It is proposed that the next AGM be held at Cardiff City Hall, Cathays Park, Cardiff CF10 3ND on Thursday 26 April 2012 at 2.00pm, notice of which will be sent to shareholders with the Annual Report.
• for the Parent Company financial statements, state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the Parent Company financial statements; and
During the year the Committee reviewed its policy on non-audit services that, amongst other things, requires that the Committee approve all proposals for expenditure with the Group’s auditors of over £30,000. The Group’s auditors, KPMG Audit plc, provide some non-audit services, the majority of which comprise compliance services related to various taxation issues within the Group, and which are not considered by the Committee to compromise their independence as auditors. The level of non-audit fees is reviewed at each Committee meeting and details are included in the Annual Report.
The Risk Committee In recognition of the increased focus on the setting of the Group’s risk strategy and risk appetite, and monitoring of the Group’s risk management systems, particularly in the context of the implementation of Solvency II, the Group announced, in December 2011, its intention, with effect from 1 January 2012, to split the current remit of the Audit Committee into two with the establishment of a Group Risk Committee.
Internal Audit The Internal Audit functions assist management by providing them with timely, independent assurance that the controls established are operating effectively. This includes regular reviews of internal control systems and business processes and identification of control weaknesses and recommendations to management on improvements.
• Reviewing the Committee’s terms of reference and recommending amendments to the Board for approval
Kevin Chidwick 12 12 Henry Engelhardt 12 12 David Stevens 12 12
Non-Executive Directors’ remuneration The Remuneration Committee decides the remuneration of the Chairman after consultation with the Executive Directors. The remuneration of the Non-Executive Directors, including the remuneration of the Committee Chairmen, is decided by the full Board. The Non-Executive Directors do not participate in meetings when Non-Executive Director fees are discussed
Matters on which we are required to report by exception We have nothing to report in respect of the following: Under the Companies Act 2006 we are required to report to you if, in our opinion: And Under the Listing Rules we are required to review: • adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or
Investment and interest income 8 13.7 9.5 Net revenue 870.3 640.8 Insurance claims and claims handling expenses (785.9) (416.7) Insurance claims and claims handling expenses recoverable from reinsurers 422.1 208.2 Net insurance claims (363.8) (208.5)
Share premium account 13.1 13.1 Other reserves 3.2 4.2 Retained earnings 377.3 332.7 Total equity attributable to equity holders of the parent 393.9 350.3 Non-controlling interests 0.5 0.4 Total equity 394.4 350.7
m) Non-current assets held for sale Non-current assets that are expected to be recovered primarily through sale rather than continuing use are classified as held for sale. Immediately before classification as held for sale, the assets are remeasured in accordance with the Group’s accounting policies, and thereafter are measured at the lower of their carrying value and fair value less costs to sell. Impairment losses on initial classification as held for sale and subsequent gains or losses on remeasurement are recognised in the income statement. Gains are not recognised in excess of any cumulative impairment loss.
Revenues from external customers for products and services is consistent with the split of reportable segment revenues as shown above.
There is an asymmetrical allocation of assets and income to the reportable segments, in that the interest earned on cash and cash equivalent assets deployed in the UK Car Insurance, Price Comparison and International Car Insurance segments is not allocated in arriving at segment profits. This is consistent with regular management reporting.
Trade and other receivables – 47.9 – – Cash and cash equivalents 246.7 – – –
SIP charge (note i) 6.0 5.1 DFSS charge (note ii) 12.6 9.9 Total share scheme charges 18.6 15.0
Between 10% and 100% of the maximum awards, a linear relationship exists.