TIDMADM
14 August 2019
2019 Interim Results Highlights
30 June 2019 30 June 2018 % change
Group's share of profit before
tax(*1) GBP220 million GBP212 million +4%
Group statutory profit before
tax GBP218 million GBP211 million +4%
Earnings per share 63.0 pence 61.6 pence +2%
Interim dividend 63.0p/per share 60.0p/per share +5%
Return on equity(*1) 47% 54% -13%
Group turnover(*1) GBP1.76 billion GBP1.66 billion +6%
Group net revenue GBP0.65 billion GBP0.60 billion +8%
Group customers(*1) 6.74 million 6.23 million +8%
UK Insurance customers(*1) 5.32 million 5.07 million +5%
International Car Insurance
customers(*1) 1.36 million 1.12 million +21%
Group's share of Comparison
profit(*1) GBP7.4 million GBP3.5 million +111%
Statutory Comparison profit GBP5.4 million GBP2.6 million +108%
Solvency ratio (post dividend) 190% 196%
(*1Alternative Performance Measures -- refer to the end of the report
for definition and explanation.)
Around 10,000 staff receive free shares worth up to GBP1,800 under the
employee share scheme based on the interim 2019 results.
Comment from David Stevens, Group Chief Executive Officer
If it's a can't-put-down, read-in-one-go page-turner that you're after,
then I'm afraid our half-year results don't fit the bill. Frankly, they
are a bit dull. Turnover up mid-single digits, profit up low-single
digits. Hardly "hold the front page".
However, for dedicated aficionados who look behind the headlines,
there's some reward for reading on. Profit growth, even if modest, is
more exciting considering the GBP33 million Ogden headwind. Low growth
in UK Motor policy count reflects a consciously reduced competitiveness,
as we price rationally in the face of any rising claims costs across the
market as a whole.
And potentially lost amidst the worthy tome that is the UK, there's the
racier continental novella that is the European insurance business which
has delivered another profitable half year whilst adding a record
209,000 customers over the last year (and 125,000 over the last six
months alone).
Plus, there's a chapter devoted to Admiral's emerging Loans business --
not the fully finished article, but an encouraging debut from a young
talent.
Dividend
The Board has declared an interim dividend of 63.0 pence, representing a
normal dividend of 41.8 pence per share and a special dividend of 21.2
pence per share. The dividend will be paid on 4 October 2019. The
ex-dividend date is 5 September 2019 and the record date is 6 September
2019.
Management presentation
Analysts and investors will be able to access the Admiral Group
management presentation which commences at 9.00 BST on Wednesday 14
August 2019 by registering at the following link
https://www.globenewswire.com/Tracker?data=jJjqJCDcZUb4LAuWLRcXU3SxCU0Ip6Hd1NhozF9kubRj1USCUA2ba4ToHuGDlgK2sAkk3cE8ZqkFARfcPcJ10Fmkw4m28pZMI9EEM7gcUSNV7NxRAPGu8QjN3hZ-eJjKHZLd0yQISFwbD14Hm95vbwhedLjjXhzDBGSQTrgyz_Ob7GgoRArz5U10SYTOn1W8X0jq1l5yEo48TJYJxMeRv4gAVNAdwYG19I2YamAhLMOqoCST30lOpD852PLqSC3XwfWbADybcSq0aX5e5xueyw==
https://pres.admiralgroup.co.uk/admiral036/vip_connect. A copy of the
presentation slides will be available at
https://www.globenewswire.com/Tracker?data=W8dNvGliJiNsfq3muI4_yXz-hl_YpYiBjYrABmaCEn6aiW7Y766a7FEg0DYAiZBdY0pbHyWGU_ozvX_03ltyFcMxFq9HZPP45wGFOq32L6M=
www.admiralgroup.co.uk
H1 2019 Group overview
30 June 30 June 30 June 31 Dec
GBPm 2017 2018 2019 2018
------------------------------------- ------- ------- ------- -------
Turnover (GBPbn)(*1) 1.45 1.66 1.76 3.28
-------------------------------------
Underwriting profit(*1) 88.9 93.4 96.0 211.2
Profit commission 30.0 29.6 36.1 93.2
Net other revenue and expenses(*1) 80.1 93.3 92.3 183.1
Operating profit 199.0 216.3 224.4 487.5
Group statutory profit before
tax 193.4 210.7 218.2 476.2
Group's share of profit before
tax 194.5 211.7 220.2 479.3
-------------------------------------
Analysis of profit:
UK Insurance 225.8 247.0 254.7 555.6
International Insurance (10.1) (0.6) (2.7) (1.1)
Comparison 3.1 3.5 7.4 8.8
Admiral Loans (1.6) (6.4) (4.3) (11.8)
Other (22.7) (31.8) (34.9) (72.2)
Group's share of profit before
tax(*1) 194.5 211.7 220.2 479.3
-------------------------------------
Key metrics
Group loss ratio(*1*2) 68.0% 65.2% 69.1% 67.3%
Group expense ratio(*1*2) 22.0% 22.2% 23.2% 22.9%
Group combined ratio(*1) 90.0% 87.4% 92.3% 90.2%
Customer numbers (million)
(*1) 5.46 6.23 6.74 6.51
Earnings per share 57.3 p 61.6 p 63.0 p 137.1 p
Dividends 56.0 p 60.0 p 63.0 p 126.0 p
Return on Equity(*1) 55% 54% 47% 56%
Solvency ratio(*1) 214% 196% 190% 194%
-------------------------------------
(*1 Alternative Performance Measures -- refer to the end of the report
for definition and explanation.)
(*2 See notes 13b and 13c for a reconciliation of reported loss and
expense ratios to the financial statements.)
Key highlights for the Group results in H1 2019 include:
-- Continued growth with turnover up 6% to GBP1.76 billion (H1 2018: GBP1.66
billion) and customer numbers 8% higher at 6.74 million (30 June 2018:
6.23 million)
-- Group share of pre-tax profits of GBP220.2 million (H1 2018: GBP211.7
million) and statutory profit before tax of GBP218.2 million (H1 2018:
GBP210.7 million) both growing by 4%
-- UK Insurance recorded modest growth in turnover to GBP1.34 billion (H1
2018: GBP1.32 billion) with customer numbers reaching 5.32 million (30
June 2018: 5.07 million)
-- Significant underlying profit growth (before Ogden rate impact) of
GBP41.0 million in UK Insurance, primarily attributable to favourable
development in prior year loss ratios for UK Motor. Profit growth
including the Ogden rate impact is GBP7.7 million
-- The adverse impact of the recent announcement of the new Ogden rate of
minus 0.25% on the H1 2019 result is GBP33.3 million. Refer to the UK
Motor Insurance section below for further detail
-- UK Household result improved in H1 2019 to a profit of GBP4.2 million (H1
2018: loss of GBP1.9 million) with more benign weather experience
compared to the prior period
-- Losses in International Insurance businesses totalled GBP2.7 million
(GBP0.6 million loss in H1 2018), with continued profit in the European
operations offset by higher claims costs in the US
-- Combined International insurance turnover grew strongly by 23% to
GBP319.5 million (H1 2018: GBP260.1 million) and customer numbers by 21%
to 1.36 million (30 June 2018: 1.12 million)
-- The Comparison result improved by GBP3.9 million to GBP7.4 million, with
notably higher profits from Confused.com of GBP8.7 million (H1 2018:
GBP5.8 million) in addition to growth in European profits and lower
losses from compare.com.
Earnings per share
Earnings per share is 2% higher than in H1 2018 at 63.0 pence (H1 2018:
61.6 pence), broadly consistent with the growth in pre-tax profit. The
adverse Ogden impact reduced earnings per share by 10.0 pence.
Dividends and solvency
The Group's dividend policy is to pay 65% of post-tax profits as a
normal dividend and to pay a further special dividend comprising
earnings not required to be held in the Group for solvency or buffers.
The Board has declared a total interim dividend of 63.0 pence per share
(approximately GBP180 million), split as follows:
-- 41.8 pence per share normal dividend, based on the dividend policy of
distributing 65% of post-tax profits; plus
-- A special dividend of 21.2 pence per share
The total 2019 interim dividend is 5% ahead of the 2018 interim dividend
(60.0 pence per share), with a pay-out ratio of 100% of Earnings per
share. The 100% payout is higher than usual and is a result of the
Group's strong capital position at 30 June 2019. The payment date is 4
October 2019, ex-dividend date 5 September 2019 and record date 6
September 2019.
The Group maintained a strong solvency ratio at 190% (post-dividend),
which has reduced from 194% at 31 December 2018. Both Own Funds and the
SCR increased in the period, with the SCR increase reflecting the
one-off change in treatment resulting from the implementation of IFRS
16, the new leases accounting standard, and an increase in the capital
requirement for the Loans business.
The Group's results are presented in the following sections:
-- UK Insurance -- including UK Motor (Car and Van), Household and Travel
-- International Car Insurance -- including L'olivier (France), Admiral
Seguros (Spain), ConTe (Italy), and Elephant (US)
-- Comparison -- including Confused.com (UK), LeLynx (France), Rastreator
(Spain), compare.com (US), and Preminen (new markets)
UK Insurance
30 June 30 June 30 June 31 Dec
GBPm 2017 2018 2019 2018
-------------------------------- ------- ------- ------- -------
Turnover(*1) 1,144.1 1,319.1 1,338.8 2,575.7
--------------------------------
Total premiums written(*1) 1,022.6 1,167.1 1,186.0 2,269.8
--------------------------------
Net insurance premium revenue 241.0 254.6 264.7 523.9
--------------------------------
Underwriting profit(*1) 105.7 101.6 106.7 227.7
--------------------------------
Profit commission and other
income 120.1 145.4 148.0 327.9
--------------------------------
UK Insurance profit before
tax 225.8 247.0 254.7 555.6
--------------------------------
(*1 Alternative Performance Measures -- refer to the end of this report
for definition and explanation)
Split of UK Insurance profit before tax
30 June 30 June 30 June 31 Dec
GBPm 2017 2018 2019 2018
----------------------
Motor 224.2 249.5 251.7 561.7
Household 1.6 (1.9) 4.2 (3.0)
Travel -- (0.6) (1.2) (3.1)
----------------------
UK Insurance profit 225.8 247.0 254.7 555.6
----------------------
Key performance indicators
30 June 30 June 30 June 31 Dec
GBPm 2017 2018 2019 2018
-------------------------------
Vehicles insured at period
end 3.79m 4.26m 4.33m 4.32m
Households insured at period
end 0.55m 0.78m 0.92m 0.87m
Travel Insurance customers -- 0.03m 0.07m 0.05m
-------------------------------
Total UK Insurance customers 4.34m 5.07m 5.32m 5.24m
-------------------------------
Highlights for the UK insurance business for H1 2019 include:
-- Modest growth in Motor resulting from Admiral's premium rates moving up
ahead of the wider market (recent indicators point to evidence of market
rates rising)
-- Continued strong growth in Household, with customers 18% higher than one
year ago at 0.92 million (30 June 2018: 0.78 million)
-- An increase in UK Motor profit to GBP251.7 million, including an adverse
impact of GBP33.3 million arising from the change in the Ogden rate to
minus 0.25% (0% best estimate assumption at 31 December 2018), with
significant favourable development in prior year loss ratios
-- Household profit of GBP4.2 million (H1 2018: GBP1.9 million loss), with
lesser impact of weather events compared to H1 2018 and positive
development on prior year claims.
UK Motor Insurance
30 June 30 June 30 June 31 Dec
GBPm 2017 2018 2019 2018
----------------------------------- ------- ------- ------- -------
Turnover(*1) 1,095.7 1,247.2 1,255.2 2,423.1
-----------------------------------
Total premiums written(*1) 978.9 1,102.3 1,110.1 2,132.1
-----------------------------------
Net insurance premium revenue 214.7 221.1 225.4 452.5
Investment income 15.8 15.8 15.9 32.2
Net insurance claims (100.9) (104.1) (106.2) (189.2)
Net insurance expenses (30.1) (33.9) (36.1) (72.0)
-----------------------------------
Underwriting profit(*1*2) 99.5 98.9 99.0 223.5
Profit commission 28.8 30.8 35.0 95.0
-----------------------------------
Underwriting profit and profit
commission 128.3 129.7 134.0 318.5
Net other revenue(*3) 95.9 119.8 117.7 243.2
-----------------------------------
UK Motor Insurance profit before
tax 224.2 249.5 251.7 561.7
-----------------------------------
(*1 Alternative Performance Measures -- refer to the end of this report
for definition and explanation.)
*2 Underwriting profit excludes contribution from underwritten
ancillaries (included in net other revenue)
(*3 Net other revenue includes instalment income and contribution from
underwritten ancillaries and is analysed later in the report.)
Key performance indicators
30 June 30 June 30 June 31 Dec
2017 2018 2019 2018
Reported Motor loss
ratio(*1,*2) 66.6% 60.3% 67.8% 63.5%
Reported Motor expense
ratio(*1,*3) 16.5% 17.9% 18.7% 18.4%
Reported Motor combined ratio 83.1% 78.2% 86.5% 81.9%
-------------------------------
Written basis Motor expense
ratio 15.8% 17.1% 17.5% 17.5%
-------------------------------
Reported loss ratio before
releases 87.5% 85.9% 90.0% 88.1%
-------------------------------
Claims reserve releases --
original net share(*1,*4) GBP44.9m GBP56.5m GBP50.0m GBP111.4m
Claims reserve releases --
commuted reinsurance(*1,*5) GBP47.4m GBP35.2m GBP52.8m GBP109.6m
Total claims reserve releases GBP92.3m GBP91.7m GBP102.8m GBP221.0m
-------------------------------
Vehicles insured at period
end 3.79m 4.26m 4.33m 4.32m
-------------------------------
Other Revenue per vehicle GBP61 GBP67 GBP66 GBP67
-------------------------------
(*1 Alternative Performance Measures -- refer to the end of this report
for definition and explanation)
(*2 Motor loss ratio adjusted to exclude impact of reserve releases on
commuted reinsurance contracts.)
(Reconciliation in note 13b.)
(*3 Motor expense ratio is calculated by including claims handling
expenses that are reported within claims costs in the income statement.
Reconciliation in note 13c.)
(*4 Original net share shows reserve releases on the proportion of the
account that Admiral wrote on a net basis at the start of the
underwriting year in question.)
(*5 Commuted reinsurance shows releases on the proportion of the account
that was originally ceded under quota share reinsurance contracts but
has since been commuted and hence reported through underwriting profit
and not profit commission.)
UK Motor profit was broadly flat for the first six months of 2019 at
GBP251.7 million (H1 2018: GBP249.5 million). Whilst the reported
combined ratio rose to 86.5% (H1 2018: 78.2%), this was offset by a
higher level of claims reserve releases from commuted reinsurance and
profit commission. Net other revenue was also broadly consistent with
the prior period, though includes a number of offsetting movements.
Highlights for the period were as follows:
-- Net insurance premium revenue was just under 2% higher than H1 2018 at
GBP225.4 million (H1 2018: GBP221.1 million), mainly resulting from the
larger portfolio
-- Investment income was GBP15.9 million, in line with H1 2018
-- The reported combined ratio increased to 86.5% (H1 2018: 78.2%), with
movements as follows:
Reported Motor combined ratio
Expense Combined
Loss ratio ratio ratio
H1 2018 60.3% 17.9% 78.2%
Change in current period loss ratio +2.2% -- +2.2%
Change in claims reserve release
-- original net share -1.5% -- -1.5%
Change in expense ratio -- +0.8% +0.8%
---------------------------------------
H1 2019 (excluding Ogden change) +61.0% 18.7% 79.7%
Impact of Ogden change (0% to minus
0.25%) +6.8% -- +6.8%
---------------------------------------
H1 2019 (including Ogden change) 67.8% 18.7% 86.5%
---------------------------------------
-- The Ogden discount rate changed to minus 0.25% (best estimate assumption
of 0% at 31 December 2018) reducing the UK Motor profit by GBP33.3
million, and increasing the reported combined ratio by almost 7% points
-- Excluding the impact of the Ogden rate change, the underlying current
period loss ratio was just over 2% points higher than H1 2018. Whilst
large bodily injury experience improved in H1 2019 compared to 2018 (full
year), Admiral continued to experience claims inflation at a similar
overall level to the market. The Group continues to reflect a cautious
approach in setting reserves early in their development
-- Reserve releases on original net share of reserves of GBP50.0 million (H1
2018: GBP56.5 million), equating to 22% of premium (H1 2018: 26%).
Excluding the impact of the Ogden change, releases would have been 1.5%
points higher than H1 2018 (27% of premium; GBP61.0 million) following
favourable development of prior year claims
-- The written basis expense ratio is consistent with 2018, at 17.5%. There
are a number of underlying factors that influence the net reported
expense ratio, including the split of expenses between acquisition and
non-acquisition and the impact of reinsurance expense commissions. The
increase in the period relates to higher non-acquisition cost, including
higher levies which is partially offset by a lower acquisition cost.
-- As noted above, both claims reserve releases from commuted reinsurance
and profit commission were higher in H1 2019 than H1 2018, as follows:
Reserve releases
-- commuted Profit
GBPm reinsurance commission Total
H1 2018 35.2 30.8 66.0
Change in underlying commuted
releases -0.3 -- -0.3
Change in loss on commutation +27.0 -- +27.0
Change in underlying profit
commission -- +13.1 +13.1
---------------------------------------
H1 2019 (excluding Ogden change) 61.9 43.9 105.8
Impact of Ogden change (0% to minus
0.25%) -9.1 -8.9 -18.0
---------------------------------------
H1 2019 (including Ogden change) 52.8 35.0 87.8
---------------------------------------
-- Releases on reserves originally reinsured but since commuted higher at
GBP52.8 million (v GBP35.2 million in H1 2018). Excluding the impact of
the Ogden change, the variance is larger (GBP61.9 million, increased by
GBP26.7 million), primarily as a result of a lower negative impact of
commutation (H1 2019: GBP4.9 million, H1 2018: GBP31.9 million)
-- Underlying profit commission (excluding the Ogden impact) was also higher
at GBP43.9 million (H1 2018: GBP30.8 million)
-- Both releases from commuted reinsurance and profit commission are
discussed in more detail in the Co- and reinsurance section below
-- Other revenue (including ancillary products underwritten by Admiral) and
instalment income remained relatively flat (GBP117.7 million v GBP119.8
million in H1 2018).
There is some evidence that Motor market rates have increased modestly
in the latter part of H1 2019, with pressure from claims inflation
likely being a driver. Over the last 12 months, Admiral has increased
its rates ahead of the market, prioritising margin over growth. Turnover
increased marginally to GBP1.26 billion (H1 2018: GBP1.25 billion)
whilst net revenue rose 2% to GBP436.1 million (H1 2018: GBP425.9
million). The number of vehicles insured increased by 2% to 4.33 million
(30 June 2018: 4.26 million).
Claims and reserves
Notable claims trends for the market in the first half of 2019 include
slightly higher overall frequency, a flattening out in injury claims
frequency and continuing elevated levels of damage claims costs
primarily as a result of advances in technology. Admiral experienced
similar overall claims inflation to the market. Large bodily injury
claims experience (in terms of frequency and total cost) for Admiral was
more favourable in H1 2019 than in 2018.
The Group continues to reserve conservatively, setting claims reserves
in the financial statements significantly above actuarial best estimates
to create a margin held to allow for unforeseen adverse development.
As noted above, the Group experienced continued positive development of
claims costs on previous accident years and this led to another
significant release of reserves in the financial statements in the
period (GBP50.0 million on Admiral's original net share net of the
adverse impact of Ogden, H1 2018: GBP56.5 million). The margin held in
reserves remains prudent and at a consistent level to 31 December 2018.
Change in UK discount rate ('Ogden')
Following the recent announcement by the UK Government, the Ogden
discount rate which is used in setting personal injury compensation, was
changed to minus 0.25% from the existing minus 0.75% rate that had been
in place since February 2017. The change came into effect on 5 August
2019 and the minus 0.25% rate is likely to remain in place for the next
five years.
The minus 0.25% rate is 25 basis points lower than the assumed rate of
0% that was used in setting best estimate claims reserves at 31 December
2018.
The total impact of the new Ogden rate on profit is expected to be
approximately GBP50-60 million. The current period impact on profit is
GBP33.3 million and is shown through higher claims incurred and lower
profit commission. The remaining amount is expected to flow through in
future periods through recognition of unearned premium and lower profit
commission.
Co- and reinsurance, commutations and profit commission
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. The Group's net retained share of that business is 22%. These
arrangements include profit commission terms which allow Admiral to
retain a significant portion of the profit generated. The proportional
co- and reinsurance arrangements in place for the motor business are the
same as those reported in the 2018 Annual Report and will continue into
2020.
Admiral tends to commute its UK Car Insurance quota share reinsurance
contracts for an underwriting year 24 months from inception, assuming
there is sufficient confidence in the profitability of the business
covered by the reinsurance contract.
As at 30 June 2019, all UK car quota share reinsurance contracts for
underwriting years up to and including 2016 have been commuted, along
with the majority of contracts for the 2017 underwriting year, meaning
Admiral assumes a higher net risk for these years than had the
reinsurance been left in place. The 2016 contracts and the remainder of
the 2015 contracts were commuted during H1 2018. The majority of the
contracts relating to the 2017 underwriting year were commuted in H1
2019.
In H1 2019 profit commission of GBP35.0 million was recognised,
increased from GBP30.8 million in the prior period. If reserve releases
from business that was originally ceded under quota share reinsurance
contracts that have since been commuted are added to profit commission,
the total for H1 2019 is GBP87.8 million compared to GBP66.0 million in
H1 2018, an increase of 33%. This increase is due to positive
development on prior underwriting years and a reduced loss on
commutation.
Note 5 to the financial statements analyses profit commission income and
reserve releases by underwriting year.
Other Revenue and Instalment Income
UK Motor Insurance Other Revenue -- analysis of contribution:
30 30 30
June June June 31 Dec
GBPm 2017 2018 2019 2018
--------------------------------------------------- ------ ------ ------ ------
Contribution from additional products & fees 93.4 105.6 102.4 206.5
Contribution from additional products underwritten
by Admiral(*1) 6.8 5.9 7.9 13.6
Instalment income 22.5 37.5 42.0 81.4
Other revenue 122.7 149.0 152.3 301.5
Internal costs (26.8) (29.2) (34.6) (58.3)
Net other revenue 95.9 119.8 117.7 243.2
Other revenue per vehicle(*2) GBP61 GBP67 GBP66 GBP67
--------------------------------------------------- ------ ------ ------ ------
Other revenue per vehicle net of internal costs GBP52 GBP57 GBP56 GBP57
(*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.
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 continue to be:
-- Profit earned from motor policy upgrade products underwritten by Admiral,
including breakdown, car hire and personal injury covers
-- Revenue from other insurance products, not underwritten by Admiral
-- Fees such as administration and cancellation fees
-- Interest charged to customers paying for cover in instalments
Overall contribution (Other Revenue net of costs plus instalment income)
decreased marginally to
GBP117.7 million (H1 2018: GBP119.8 million). Whilst there were a number
of smaller offsetting changes within the total, the main reason for the
slight decrease is reduced optional ancillary contribution, partly
reflecting more transactions completing digitally and changes to the
customer journey. This was offset slightly by increased instalment
income primarily arising from growth in the underlying vehicle book.
Other revenue was equivalent to GBP66 per vehicle (gross of costs; H1
2018: GBP67) and Net Other revenue (after deducting costs) per vehicle
was GBP56 (H1 2018: GBP57).
UK Household Insurance
GBPm 30 June 2017 30 June 2018 30 June 2019 31 Dec 2018
--------------------- ------------ ------------ ------------ -----------
Turnover(*1) 48.3 68.3 80.0 146.0
Total premiums
written(*1) 43.7 61.3 72.2 131.1
Net insurance premium
revenue 11.0 14.7 18.1 31.2
Underwriting
result(1*2) (0.6) (2.9) 0.6 (6.3)
Profit commission and
other income 2.2 1.0 3.6 3.3
--------------------- ------------ ------------ ------------ -----------
UK Household
insurance
profit/(loss) 1.6 (1.9) 4.2 (3.0)
(*1 Alternative Performance Measures -- refer to the end of this report
for definition and explanation *2 Underwriting loss excluding
contribution from underwritten ancillaries)
Key performance indicators
30 June 2017 30 June 2018 30 June 2019 31 Dec 2018
--------------------- ------------ ------------ ------------ -----------
Reported household
loss ratio(*1) 68.7% 87.6% 66.8% 92.3%
Reported household
expense ratio(*1) 36.8% 32.1% 30.1% 28.1%
Reported household
combined ratio(*1) 105.5% 119.7% 96.9% 120.4%
Impact of extreme
weather and
subsidence(*1) -- 25.3% -- 19.1%
Households insured at
period end 548,200 778,100 920,900 856,800
--------------------- ------------ ------------ ------------ -----------
(*1 Alternative Performance Measures -- refer to the end of this report
for definition and explanation)
Admiral's Household business continued to grow strongly, increasing the
number of homes insured by 18% to 920,900 (30 June 2018: 778,100), with
a similar increase in turnover to GBP80.0 million (H1 2018: GBP68.3
million). New business market volumes continued to increase with more
customers shopping around and switching insurer, particularly through
the growing comparison channel. Admiral saw an increasing share of new
business volumes through comparison as well as direct and via cross sell
to existing Admiral customers with the Group's MultiCover product
offering.
The first half of 2019 experienced better weather than the previous
period, resulting in a profit of GBP4.2 million (H1 2018: GBP1.9 million
loss). Claims inflation continues albeit with milder weather and
subsidence at more normal levels compared to the same period in 2018.
This resulted in a better reported loss ratio of 66.8% (H1 2018: 87.6%)
which was also positively impacted by favourable emerging experience on
the 2018 accident year. Admiral's expense ratio also continued to
improve (30.1%, down from 32.1%) and similar to the motor business,
significantly outperforms the market expense ratio of around 45%.
International Car Insurance
30 June 30 June 30 June 31 Dec
GBPm 2017 2018 2019 2018
-------------------------------- ------- ------- ------- -------
Turnover(*1) 221.9 260.1 319.5 538.7
--------------------------------
Total premiums written(*1) 197.2 234.0 288.0 484.3
--------------------------------
Net insurance premium revenue 58.2 66.2 80.6 141.7
--------------------------------
Investment income 0.2 0.6 0.9 1.3
--------------------------------
Net insurance claims (47.3) (49.7) (66.0) (104.0)
--------------------------------
Net insurance expenses (28.1) (25.3) (26.7) (55.8)
--------------------------------
Underwriting result(*1) (17.0) (8.2) (11.2) (16.8)
--------------------------------
Net other income 6.9 7.6 8.5 15.7
--------------------------------
International Car Insurance
result (10.1) (0.6) (2.7) (1.1)
--------------------------------
Key performance indicators
30 June 30 June 30 June 31 Dec
2017 2018 2019 2018
Loss ratio(*2) 77.6% 77.8% 75.5% 76.0%
Expense ratio(*2) 45.4% 39.4% 38.4% 40.0%
-------------------------------
Combined ratio(*3) 123.0% 117.2% 113.9% 116.0%
-------------------------------
Combined ratio, net of Other
revenue(*4) 111.2% 105.8% 103.3% 105.0%
-------------------------------
Vehicles insured at period
end 0.96m 1.12m 1.36m 1.22m
-------------------------------
(*1 Alternative Performance Measures -- refer to the end of this report
for definition and explanation)
(*2 Loss ratios and expense ratios adjusted to remove the impact of
reinsurer caps)
(*3 Combined ratio is calculated on Admiral's net share of premiums and
excludes Other Revenue. It excludes the impact of reinsurer caps.
Including the impact of reinsurer caps the reported combined ratio would
be H1 2019: 115%; H1 2018: 113%; H1 2017: 130%.)
(*4 Combined ratio, net of Other Revenue is calculated on Admiral's net
share of premiums and includes Other Revenue. Including the impact of
reinsurer caps the reported combined ratio, net of Other Revenue would
be H1 2019: 104%; H1 2018: 102%; H1 2017: 118%.)
Geographical analysis(*1)
30 June 2019 Spain Italy France US Total
----------------------------- ----- ----- ------ ----- -----
Vehicles insured at period
end 0.28m 0.66m 0.20m 0.22m 1.36m
-----------------------------
Turnover (GBPm) 40.2 105.2 51.4 122.7 319.5
-----------------------------
30 June 2018 Spain Italy France US Total
-----------------------------
Vehicles insured at period
end 0.23m 0.54m 0.15m 0.20m 1.12m
-----------------------------
Turnover (GBPm) 33.8 86.8 39.1 100.4 260.1
-----------------------------
31 Dec 2018 Spain Italy France US Total
-----------------------------
Vehicles insured at period
end 0.25m 0.59m 0.17m 0.21m 1.22m
-----------------------------
Turnover (GBPm) 67.6 176.8 80.5 213.8 538.7
-----------------------------
(*1 Alternative Performance Measures -- refer to the end of this report
for definition and explanation)
International Insurance financial performance
Admiral's international insurance businesses continued to grow strongly,
with customer numbers 21% higher than a year earlier. Turnover grew by
23% to GBP319.5 million (H1 2018: GBP260.1 million).
The combined ratio, net of other revenue improved to 103.3% (H1 2018:
105.8%). Higher net insurance premium revenue together with continued
improvement in the European operations' prior year claims costs was
offset by higher current year claims costs in Elephant. H1 2018 also
benefitted from a favourable impact of reinsurer caps. This resulted in
a higher loss of GBP2.7 million for the first six months of 2019 (H1
2018: loss of GBP0.6 million).
The expense ratio improved to 38.4% (H1 2018: 39.4%) as all businesses
grew and continued to pursue operational efficiencies.
The European insurance operations in Spain, Italy and France insured
1.13m vehicles at 30 June 2019 -- 23% higher than a year earlier (30
June 2018: 0.92m). Turnover was up 23% at GBP196.8 million (H1 2018:
GBP159.7 million). The consolidated result of the businesses was a
profit of GBP3.5 million (H1 2018: profit of GBP2.5 million) driven by
continued profitability in Italy. The combined ratio net of other
revenue (excluding the impact of reinsurer caps) improved materially to
93% from 99% due to the improved claims experience and expense ratio.
Admiral Seguros (Spain) focused on sustainable growth and increased
retention in a competitive market during the first six months of 2019,
together with improvements in the customer journey and digital
capabilities. The business grew by 18% to 274,600 customers over the
past year (30 June 2018: 233,300).
The Group's largest international operation, ConTe in Italy, increased
vehicles insured by 22% to 656,000 (30 June 2018: 539,600). The company
also invested in media spend with the launch of a new TV advertising
campaign which has contributed to brand awareness and subsequent growth.
L'olivier - assurance auto (France) continued to pursue growth and
exceeded the 200,000 vehicle mark, growing by 34% to 203,800 at 30 June
2019. L'olivier also focused on brand development and improving customer
experience through digital improvements during the period. The company
also launched a niche household insurance brand, Homebrella, starting
with modest volume in line with the Admiral test and learn approach.
In the US, Admiral underwrites motor insurance in six states (Virginia,
Maryland, Illinois, Texas, Indiana and Tennessee) through its Elephant
Auto business, which increased vehicles insured by 11% to 221,900 at 30
June 2019. Turnover was up 22% to GBP122.7 million (H1 2018: GBP100.4
million). Elephant had a higher loss of GBP6.2 million (from GBP3.1
million in H1 2018) due to deterioration in loss ratio in H1 as a result
of higher claims inflation. Elephant has increased rates materially in
response.
Elephant continues to focus on cost control and improving customer
service through the digital channel, which has contributed to continued
improvement in the expense ratio. Overall, the combined ratio net of
other revenue increased slightly to 116% (115% in H1 2018).
Comparison
30 June 30 June 30 June 31 Dec
GBPm 2017 2018 2019 2018
---------------------------------- ------- ------- ------- -------
Revenue
Car insurance comparison 55.2 57.0 59.0 110.1
Other 17.3 19.6 24.4 40.9
----------------------------------
Total Revenue 72.5 76.6 83.4 151.0
Expenses (70.1) (74.0) (78.0) (144.4)
----------------------------------
Profit before tax 2.4 2.6 5.4 6.6
----------------------------------
Confused.com profit 4.5 5.8 8.7 14.3
International comparison result (2.1) (3.2) (3.3) (7.7)
----------------------------------
Statutory profit before tax 2.4 2.6 5.4 6.6
Confused.com profit 4.5 5.8 8.7 14.3
International comparison result (1.4) (2.3) (1.3) (5.5)
----------------------------------
Group's share of profit before
tax(*1) 3.1 3.5 7.4 8.8
(*1 Alternative Performance Measure -- refer to the end of this report
for definition and explanation)
Whilst the UK comparison market remained competitive in the first half
of 2019, Confused.com performed very strongly, with turnover increasing
by 14% to GBP54.2 million (H1 2018: GBP47.7 million) as a result of
growth in market share in both motor and household insurance.
Confused.com continued to improve the customer and product proposition,
and also saw increases in brand awareness and media effectiveness.
Profit increased to GBP8.7 million (H1 2018: GBP5.8 million). The
business also continued to invest in technology to support current
projects and future growth opportunities.
Admiral operates several comparison businesses outside the UK including
Rastreator (Spain), LeLynx (France), and compare.com (US). In addition,
the 2019 comparison result includes Preminen, the Group's newest
comparison operation, which was previously included in business
development costs in 'Other Group items'. The Group owns 75% of
Rastreator, with the remaining 25% owned by Mapfre. The Group owns
59.25% of compare.com, with the remaining 40.75% owned by minority
interests. The Group owns 50% of Preminen, with the other 50% owned by
Mapfre.
Admiral announced in April 2019 the proposed acquisition of Acierto, a
digital insurance broker in Spain, by Rastreator in partnership with
Oakley Capital. The joint venture is still subject to approval by the EU
antitrust authorities, and hence the acquisition and subsequent
accounting for the joint operation will be completed after approval.
Combined revenue for the European operations in the first half of 2019
increased by 9% to GBP25.0 million (H1 2018: GBP23.0 million). The
Group's share of the combined result for Rastreator and LeLynx was a
profit of GBP2.1 million (H1 2018: GBP0.9 million). The result shows an
improvement in both businesses whilst they continued to invest in a more
diversified product range in the context of a competitive market
environment.
During the first half of 2019 in the US, Admiral's share of
compare.com's loss reduced to GBP2.8 million before tax (H1 2018: GBP3.2
million), partly as a result of Admiral's reduced shareholding (from 71%
to 59.25%) with the total result being broadly flat. compare.com
continued to experience challenging market conditions and the business
subsequently downsized to a smaller team and more agile approach to
adapt to these market conditions.
A non-cash impairment charge of GBP25.7 million was recognised in the
first half of 2019 by the parent company in respect of its investment in
compare.com. This followed the regular review of the carrying values of
subsidiary companies and a review of the long-term strategy of
compare.com, and reflects an impairment to the current net asset value
of the business to reflect the considerable uncertainty over the timing
and level of future profitability of the business. The impairment charge
is recognised in the income statement of the parent company and has no
impact on the Group's consolidated profit for the period or the Group's
current regulatory capital position.
Preminen continues to explore the potential of comparison in new markets
overseas, in partnership with Mapfre. Current operations include
Rastreator.mx in Mexico, Tamoniki.com in Turkey, and GoSahi.com in
India.
The combined result for International Comparison was therefore a loss of
GBP1.3 million (H1 2018: loss GBP2.3 million) -- driven by an
improvement in the performance of the European comparison businesses.
Other Group Items
30 June 30 June 30 June 31 Dec
GBPm 2017 2018 2019 2018
--------------------------------- ------- ------- ------- ------
Share scheme charges (16.9) (21.6) (26.2) (49.0)
Admiral Loans loss before
tax (1.6) (6.4) (4.3) (11.8)
Other interest and investment
income 7.3 1.1 2.7 2.9
Business development costs (4.3) (2.0) (0.4) (4.3)
Other central overheads (3.2) (3.7) (5.5) (10.5)
Finance charges (5.6) (5.6) (5.5) (11.3)
Group's share of other group
items (24.3) (38.2) (39.2) (84.0)
--------------------------------- ------- ------- ------- ------
Share scheme charges relate to the Group's two employee share schemes
(refer to note 9 in the financial statements). The increase in the
charge is driven by an improvement in the vesting assumptions for
variable awards in general due to strong financial performance and
shareholder return, and a higher share price period on period.
Other interest and investment income in H1 2017 included a GBP5.4
million realised gain from the sale of investments held by the Group
which was not repeated in H1 2018 or H1 2019. The increase in income in
H1 2019 compared to H1 2018 relates to a lower level of unrealised
losses on forward contracts in H1 2019.
Business development costs include costs associated with potential new
ventures. The costs associated with Preminen have been included within
the Comparison segment above for the first time in 2019, explaining the
decrease in business development costs in the period.
Other central costs consist of Group-related expenses, and include the
cost of a number of significant Group projects, such as the development
of the internal model, the Brexit restructure and IFRS17. The increase
in the period is due to a higher adverse impact of foreign exchange
movements.
Finance charges of GBP5.5 million (H1 2018: GBP5.6 million) primarily
relate to interest on the GBP200 million subordinated notes issued in
July 2014 (refer to note 7 to the financial statements).
Admiral Loans
30 June 30 June
GBPm 30 June 2017 2018 2019 31 Dec 2018
---------------------- ------------ ------- ------- -----------
Total interest income 0.2 5.1 13.3 15.0
Interest expense(*1) (0.1) (1.2) (4.1) (4.3)
Net interest income 0.1 3.9 9.2 10.7
Other fee income -- -- 0.9 0.4
Total income 0.1 3.9 10.1 11.1
Expenses (1.7) (10.3) (14.4) (22.9)
Admiral Loans Result (1.6) (6.4) (4.3) (11.8)
*1 Includes GBP1.2 million intra-group interest expense (H1 2018: GBP0.3
million)
Background
Admiral Loans launched in 2017, and currently distributes unsecured
personal loans and car finance products through the comparison channel
and also direct to consumers via the Admiral website.
The Group employs a prudent test and learn approach regarding growth in
customers and loan advances, consistent with other new business
launches. Initial results are encouraging, and the business has grown
significantly since launch, with loan balances increasing to GBP421
million in the first half of 2019 (H1 2018: GBP214m, H2 2018: GBP300
million). The Group continues to expect the business to make losses in
its early phase as a result of the upfront accounting for acquisition
costs as opposed to interest income earned on loans which is spread over
the life of the loans. Admiral continues to be encouraged by the
performance of the business and the credit quality of the loans
portfolio.
Admiral Loans is currently funded through a combination of internal
funding and further external funding. The external portion funds
approximately 60% of the current loans balance through the
securitisation of certain loans via transfer to a special purpose entity
("SPE") which remains under the control of the Group. The securitisation
and subsequent issue of notes does not result in a significant transfer
of risk from the Group.
Result
Admiral Loans recorded a pre-tax loss of GBP4.3 million in the first
half of 2019 (decreased from GBP6.4 million in H1 2018). The lower loss
predominantly reflects the increased interest income in the period,
offset to an extent by increased provisions against the loan book due to
its growing size.
Capital structure and financial position
Admiral's capital-efficient and profitable model led to a return on
equity of 47% (H1 2018: 54%) with the reduction in the ratio due to the
impact of the Ogden change. A continuing key feature of the business
model is the extensive use of co- and reinsurance across the Group. The
Group's co-insurance and quota share reinsurance arrangements for the UK
Car insurance business are in place until at least the end of 2020. The
Group's net retained share of that business is 22%. Munich Re will
underwrite 40% of the business (through co-insurance and reinsurance
arrangements) until at least the end of 2020.
Similar long-term arrangements are in place in the Group's International
Insurance operations and UK Household and Van Insurance business.
The Group continues to manage its capital to ensure that all entities
within the Group are able to continue as going concerns and that
regulated entities comfortably meet regulatory capital requirements.
Surplus capital within subsidiaries is paid up to the Group holding
company in the form of dividends.
The Group continues to develop its partial internal model to form the
basis of calculation of its capital requirement in the future, although
does not expect to submit the application during 2019 and possibly not
in 2020. In the interim period before submission, the Group will
continue to use the current standard formula plus capital add-on basis
to calculate its regulatory capital requirement.
The estimated (and unaudited) Solvency II position for the Group at the
date of this report was as follows:
Group capital position (estimated and unaudited)
GBPbn
-------------------------------------------------- ------
Eligible Own Funds (pre 2019 interim dividend) 1.34
2019 interim dividend (0.18)
--------------------------------------------------
Eligible Own Funds (post 2019 interim dividend) 1.16
Solvency II capital requirement(*1) 0.61
--------------------------------------------------
Surplus over regulatory capital requirement 0.55
--------------------------------------------------
Solvency ratio (post dividend) 190%
--------------------------------------------------
(*1 Solvency capital requirement includes updated capital add-on which
remains subject to regulatory approval.)
The Group maintained a strong solvency ratio at 190% (post-dividend),
which has reduced from 194% at 2018 year end (H1 2018: 196%). Whilst the
surplus over the regulatory capital requirement has increased since 31
December 2018, increases in both Own Funds and SCR of a similar order
result in a modest reduction in solvency ratio. The increase in Own
Funds is the result of the strong generation of economic profit, in
particular due to favourable movements of ultimate outcomes on prior
underwriting years. The SCR increase is primarily due to the
implementation of the new leasing standard, IFRS 16 as well as an
increase in the capital requirement for the loans business.
The Group's capital includes GBP200 million ten year dated subordinated
bonds. The rate of interest is fixed at 5.5% and the bonds mature in
July 2024. The bonds qualify as tier two capital under the Solvency II
regulatory regime.
Estimated sensitivities to the current Group solvency ratio are
presented in the table below. These sensitivities cover the two most
material risk types, insurance risk and market risk, and within these
risks cover the most significant elements of the risk profile. Aside
from the catastrophe events, estimated sensitivities have not been
calibrated to individual return periods.
Solvency ratio sensitivities
30 June 2019 30 June 2018
------------------------------------------- ------------ ------------
UK Motor -- incurred loss ratio +5% -22% -27%
UK Motor -- 1 in 200 catastrophe event -1% -2%
UK Household -- 1 in 200 catastrophe event -2% -2%
Interest rate -- yield curve down 50 bps -8% -12%
Credit spreads widen 100 bps -8% -5%
Currency -- 25% movement in euro and US
dollar -4% -3%
ASHE -- long term inflation assumption up
0.5% -7% -10%
Investments and cash
Admiral's investment strategy was unchanged in H1 2019 and the Group
continued to invest in the same asset classes as previous years.
The main focus of the Group's strategy is capital preservation, with
additional priorities including low volatility of returns and high
levels of liquidity. All objectives continue to be met. The Group's
Investment Committee performs regular reviews of the strategy to ensure
it remains appropriate.
Cash and investments analysis
30 June 30 June 30 June 31 Dec
GBPm 2017 2018 2019 2018
----------------------------------- ------- --------- --------- ---------
Fixed income and debt securities 1,496.4 1,542.5 1,827.6 1,568.6
Money market funds and other
fair value
instruments 968.8 1,203.8 1,029.3 1,301.1
Cash deposits 130.0 130.0 88.7 100.0
Cash 348.6 309.5 461.4 376.8
-----------------------------------
Total 2,943.8 3,185.8 3,407.0 3,346.5
-----------------------------------
Total investment return in the first half of 2019 was GBP18.3 million
(H1 2018: GBP17.2 million), which includes unrealised losses of GBP4.9
million (H1 2018: GBP1.4 million). The underlying rate of return,
excluding unrealised losses, on the Group's cash and investments was
1.4% (H1 2018: 1.3%). Some rebalancing has taken place across some items
to maximise portfolio outcomes in line with the investment strategy.
The Group continues to generate significant amounts of cash and its
capital-efficient business model enables the distribution of the
majority of post-tax profits as dividends.
Taxation
The tax charge reported on a statutory basis is GBP37.0 million (H1
2018: GBP34.8 million), which equates to 16.9% (H1 2018: 16.5%) of
profit before tax.
UK Exit from the European Union ('Brexit')
Admiral adopted a prudent approach to Brexit and has set up new entities
in Europe under which the European operations have traded since 1
January 2019. All of the Group's European insurance business is now
underwritten by a regulated entity in Spain, Admiral Europe Compania
Seguros (AECS). The Group's European comparison businesses Rasterator
and LeLynx have successfully been merged into comparison companies
established in Spain (Comparaseguros Corredia de Seguros) and France
(LeLynx SAS) respectively.
Brexit continues to bring risks, particularly the possibility of a 'no
deal' Brexit, to the Group including:
-- The potential for market volatility, and the potential for the
uncertainty or the emerging terms of exit to trigger or exacerbate less
favourable economic conditions in the UK and other countries in which
Admiral operates (though it is worth noting that car insurance has tended
to be resilient to economic downturns; and Admiral Loans has adopted a
cautious approach to volumes and credit quality in advance of Brexit)As
part of the Own Risk and Solvency Assessment ("ORSA") process, the Group
has performed a stress testing exercise for its Brexit assessment of the
impact of a recession through 2019 on the UK insurance business,
including the increase in claims costs following a spike in inflation.
This includes negative movement in interest rates, currency, investment
yields, inflation, unemployment and GDP, which could be experienced under
a 'hard' Brexit scenario (i.e. no deal outcome). Given the results of the
stress testing the Group is comfortable that it is able to manage the
potential outcomes of such scenarios should they occur.Also as part of
the ORSA process, a specific economic stress test scenario which captures
the potential outcomes from a 'no deal' Brexit has been applied to the
Admiral Loans business in order to assess the potential impact. The
stress results in an increase in the loss provision that would be
required as a result of the deterioration in economic environment. As for
the UK insurance business, the Group is comfortable that it is able to
manage the potential outcomes based on the results of the stress test and
relevant management actions.
-- Potential changes to the rules relating to the free movement of people
between the UK and the remaining EU member states. The Group has followed
external advice on planning for the small number of EU citizens working
within the UK and UK citizens working in the EU, for the Group;
--
-- Potential for impact on the import of car parts with potential impact on
claims costs. A working group is in place to manage and review this risk,
with commercial negotiations ongoing to mitigate risks arising from a "no
deal" Brexit;
At present, the Group does not foresee a material adverse impact on
day-to-day operations (including customers or staff). The Group
recognises the potential economic disruption that may arise from a 'no
deal' Brexit. Whilst the Group is comfortable that it is able to manage
potential outcomes following the review of the stress testing noted
above, it recognises the uncertainties that exist in relation to Brexit
and the potential for adverse impacts to the Group's capital position
and future dividend payments. Sensitivities to the Group's regulatory
solvency ratio are presented earlier in this report, including a number
of specific market risk sensitivities. The cost of the restructuring
activity has not been material to the Group.
Principal Risks and Uncertainties
Admiral has performed a robust assessment of the principal risks facing
Admiral, including those which would threaten its business model, future
performance, liquidity and solvency. The result of this assessment is
that the principal risks and uncertainties are consistent with those
reported in the Group's 2018 Annual Report and Accounts, pages 52-57.
Disclaimer on forward-looking statements
Certain statements made in this announcement are forward-looking
statements. Such statements are based on current expectations and
assumptions and are subject to a number of known and unknown risks and
uncertainties that may cause actual events or results to differ
materially from any expected future events or results expressed or
implied in these forward-looking statements.
Persons receiving this announcement should not place undue reliance on
forward-looking statements. Unless otherwise required by applicable law,
regulation or accounting standard, the Group does not undertake to
update or revise any forward-looking statements, whether as a result of
new information, future developments or otherwise.
Condensed consolidated income statement (unaudited)
6 months ended Year ended
30 June 30 June 31 December
2019 2018 2018
Note GBPm GBPm GBPm
-------
Insurance premium revenue 1,080.4 1,002.6 2,079.6
Insurance premium ceded to reinsurers (731.2) (678.9) (1,407.8)
Net insurance premium revenue 5 349.2 323.7 671.8
Other revenue 8 233.1 223.4 449.2
Profit commission 5 36.1 29.6 93.2
Interest income 13.3 5.1 15.0
Interest expense 6 (2.9) (0.9) (3.6)
Net interest income from loans 10.4 4.2 11.4
Investment return 6 18.3 17.2 36.0
Net revenue 647.1 598.1 1,261.6
Insurance claims and claims handling expenses (788.3) (717.5) (1,513.8)
Insurance claims and claims handling expenses
recoverable from reinsurers 588.3 537.3 1,163.7
Net insurance claims (200.0) (180.2) (350.1)
Operating expenses and share scheme charges 9 (437.9) (429.1) (842.8)
Operating expenses and share scheme charge
recoverable from co- and reinsurers 9 215.2 227.5 418.8
Net operating expenses and share scheme
charges (222.7) (201.6) (424.0)
Total expenses (422.7) (381.8) (774.1)
Operating profit 224.4 216.3 487.5
Finance costs 6 (7.5) (5.6) (11.3)
Finance costs recoverable from co- and
reinsurers 6 1.3 - -
Net finance costs (6.2) (5.6) (11.3)
Profit before tax 218.2 210.7 476.2
Taxation expense 10 (37.0) (34.8) (85.7)
Profit after tax 181.2 175.9 390.5
Profit after tax attributable to:
Equity holders of the parent 183.2 177.2 395.1
Non-controlling interest (NCI) (2.0) (1.3) (4.6)
181.2 175.9 390.5
Earnings per share
Basic 12 63.0p 61.6p 137.1p
Diluted 12 62.9p 61.5p 136.8p
Dividends declared and paid (total) 12 188.0 163.3 332.7
Dividends declared and paid (per share) 12 66.0p 58.0p 118.0p
-----------
Condensed consolidated statement of comprehensive income (unaudited)
6 months ended Year ended
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
-------
Profit for the period 181.2 175.9 390.5
Other comprehensive income
Items that are or may be reclassified
to profit or loss
Movements in fair value reserve 29.6 (15.1) (24.0)
Deferred tax charge in relation to
movement in fair value reserve (1.4) 0.4 0.7
Exchange differences on translation
of foreign operations (0.7) (0.8) 2.2
Movement in hedging reserve (1.3) -- (0.3)
Other comprehensive income for the
period, net of income tax 26.2 (15.5) (21.4)
Total comprehensive income for the
period 207.4 160.4 369.1
Total comprehensive income for the
period attributable to:
Equity holder of the parent 209.5 161.8 373.7
Non-controlling interests (2.1) (1.4) (4.6)
207.4 160.4 369.1
Condensed consolidated statement of financial position (unaudited)
As at
30 June 30 June 31 December
2019 2018 2018
Note GBPm GBPm GBPm
------- -----------
ASSETS
Property and equipment 11 163.0 28.1 28.1
Intangible assets 11 158.9 162.8 162.0
Deferred income tax 10 5.3 4.4 0.2
Reinsurance assets 5 1,885.9 1,608.5 1,883.5
Insurance and other receivables 7 1,192.4 1,124.8 1,082.0
Loans and advances to customers 7 420.8 214.2 300.2
Financial investments 7 2,945.6 2,876.3 2,969.7
Cash and cash equivalents 7 461.4 309.5 376.8
Total assets 7,233.3 6,328.6 6802.5
EQUITY
Share capital 12 0.3 0.3 0.3
Share premium account 13.1 13.1 13.1
Other reserves 57.7 37.0 31.4
Retained earnings 740.0 620.0 713.5
Total equity attributable to equity
holders of the parent 811.1 670.4 758.3
Non-controlling interests 11.5 8.3 12.8
Total equity 822.6 678.7 771.1
LIABILITIES
Insurance contracts 5 3,929.1 3,543.5 3,736.4
Subordinated and other financial
liabilities 7 484.5 404.0 444.2
Trade and other payables 7,11 1,811.1 1,664.0 1,801.5
Lease liabilities 7 143.0 -- --
Current tax liabilities 10 43.0 38.4 49.3
Total liabilities 6,410.7 5,649.9 6,031.4
Total equity and total liabilities 7,233.3 6,328.6 6,802.5
Condensed consolidated cash flow statement (unaudited)
6 months ended Year ended
30 June 30 June 31 December
2019 2018 2018
Note GBPm GBPm GBPm
-------
Profit after tax 181.2 175.9 390.5
Adjustments for non-cash items
-- Depreciation 11 12.3 6.1 12.0
-- Amortisation of software 11 8.2 7.5 15.5
-- Movement in provision for loans and advances to
customers 7 6.0 4.0 8.9
-- Share scheme charges 9 26.5 21.9 49.8
-- Loans: interest income receivable (13.3) (5.1) (15.0)
-- Loans: interest income received 11.6 4.2 13.6
-- Investment return 6 (18.3) (17.2) (36.0)
-- Finance costs, including interest expenses on f
unding
for loans 6 9.1 6.5 14.9
-- Taxation expense 10 37.0 34.8 85.7
Change in gross insurance contract liabilities 192.7 229.6 422.5
Change in reinsurance assets (2.4) 29.1 (245.9)
Change in insurance and other receivables (112.1) (188.1) (145.0)
Change in loans and advances to customers (126.6) (152.0) (242.9)
Change in trade and other payables, including
tax and social security 9.6 22.4 159.9
Cash flows from operating activities,
before movements in investments 221.5 179.6 488.5
Purchases of financials instruments (905.9) (538.2) (1,830.2)
Proceeds on disposal/ maturity of financial
instruments 985.2 358.7 1,573.4
Interest and investment income received 8.6 4.0 8.0
Cash flows from operating activities,
net of movements in investments 309.4 4.1 239.7
Taxation payments (47.4) (21.0) (55.6)
Net cash flow from operating activities 262.0 (16.9) 184.1
Cash flows from investing activities:
Purchases of property, equipment and software (13.5) (11.0) (23.9)
Net cash used in investing activities (13.5) (11.0) (23.9)
Cash flows from financing activities:
Non-controlling interest capital contribution 1.6 -- 19.3
Proceeds on issue of loan backed securities 85.1 -- 168.3
(Repayment)/proceeds from other financial
liabilities (46.5) 180.0 51.9
Finance costs paid, including interest
expense paid on funding for loans (10.4) (6.1) (14.1)
Principal elements of lease payments (5.5) -- --
Equity dividends paid 12 (188.0) (163.3) (332.7)
Net cash used in financing activities (163.7) 10.6 (107.3)
Net increase / (decrease) in cash and
cash equivalents 84.8 (17.3) 52.9
Cash and cash equivalents at 1 January 376.8 326.8 326.8
Effects of changes in foreign exchange
rates (0.2) -- (2.9)
Cash and cash equivalents at end of period 7 461.4 309.5 376.8
Condensed consolidated statement of changes in equity (unaudited)
For the half year ended 30 June 2019
Attributable to the owners of the Company
Share Fair Foreign Retained
Share premium value Hedging exchange profit Non-controlling Total
Capital account reserve reserve reserve and loss Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------- -------- -------- --------- --------- -------
At 1 January 2018 0.3 13.1 36.4 -- 16.0 580.3 646.1 9.7 655.8
Profit/(loss) for the
period -- -- -- -- -- 177.2 177.2 (1.3) 175.9
Other comprehensive
income
Movements in fair value
reserve -- -- (15.1) -- -- -- (15.1) -- (15.1)
Deferred tax charge
in relation to movement
in fair value reserve -- -- 0.4 -- -- -- 0.4 -- 0.4
Currency translation
differences -- -- -- -- (0.7) -- (0.7) (0.1) (0.8)
Total comprehensive
income for the period -- -- (14.7) -- (0.7) 177.2 161.8 (1.4) 160.4
Transactions with equity
holders
Dividends -- -- -- -- -- (163.3) (163.3) -- (163.3)
Share scheme credit -- -- -- -- -- 24.9 24.9 -- 24.9
Deferred tax credit
on share scheme credit -- -- -- -- -- 0.9 0.9 -- 0.9
Contributions by NCIs -- -- -- -- -- -- -- -- --
Total transactions
with equity holders -- -- -- -- -- (137.5) (137.5) -- (137.5)
As at 30 June 2018 0.3 13.1 21.7 -- 15.3 620.0 670.4 8.3 678.7
At 1 January 2018 0.3 13.1 36.4 -- 16.0 580.3 646.1 9.7 655.8
Initial application
of IFRS 9 -- -- 0.4 -- -- (0.4) -- -- --
Adjusted balance at
1 January 2018 0.3 13.1 36.8 -- 16.0 579.9 646.1 9.7 655.8
Profit/(loss) for the
period -- -- -- -- -- 395.1 395.1 (4.6) 390.5
Other comprehensive
income
Movements in fair value
reserve -- -- (24.0) -- -- -- (24.0) -- (24.0)
Deferred tax charge
in relation to movement
in fair value reserve -- -- 0.7 -- -- -- 0.7 -- 0.7
Movement in hedging
reserve -- -- -- (0.3) -- -- (0.3) -- (0.3)
Currency translation
differences -- -- -- -- 2.2 -- 2.2 -- 2.2
Total comprehensive
income for the period -- -- (23.3) (0.3) 2.2 395.1 373.7 (4.6) 369.1
Transactions with equity
holders
Dividends -- -- -- -- -- (332.7) (332.7) (0.4) (333.1)
Share scheme credit -- -- -- -- -- 56.7 56.7 -- 56.7
Deferred tax credit
on share scheme credit -- -- -- -- -- 3.3 3.3 -- 3.3
Contributions by NCIs -- -- -- -- -- 11.2 11.2 8.1 19.3
Total transaction with
equity holders -- -- -- -- -- (261.5) (261.5) 7.7 (253.8)
As at 31 December 2018 0.3 13.1 13.5 (0.3) 18.2 713.5 758.3 12.8 771.1
Condensed consolidated statement of changes in equity (unaudited)
(continued)
For the half year ended 30 June 2019
Attributable to the owners of the Company
Share Fair Foreign Retained
Share premium value Hedging exchange profit Non-controlling Total
Capital account reserve reserve reserve and loss Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------- -------- -------- --------- --------- -------
At 1 January 2019 0.3 13.1 13.5 (0.3) 18.2 713.5 758.3 12.8 771.1
Profit/(loss) for
the period -- -- -- -- -- 183.2 183.2 (2.0) 181.2
Other comprehensive
income
Movements in fair
value reserve -- -- 29.6 -- -- -- 29.6 -- 29.6
Deferred tax charge
in relation to movement
in fair value reserve -- -- (1.4) -- -- -- (1.4) -- (1.4)
Movement in hedging
reserve -- -- -- (1.3) -- -- (1.3) -- (1.3)
Currency translation
differences -- -- -- -- (0.6) -- (0.6) (0.1) (0.7)
Total comprehensive
income for the period -- -- 28.2 (1.3) (0.6) 183.2 209.5 (2.1) 207.4
Transactions with
equity holders
Dividends -- -- -- -- -- (188.0) (188.0) -- (188.0)
Share scheme credit -- -- -- -- -- 28.0 28.0 -- 28.0
Deferred tax credit
on share scheme credit -- -- -- -- -- 2.5 2.5 -- 2.5
Contributions by
NCIs -- -- -- -- -- -- -- 2.2 2.2
Changes in ownership
interests without
a change in control -- -- -- -- -- 0.8 0.8 (1.4) (0.6)
Total transactions
with equity holders -- -- -- -- -- (156.7) (156.7) 0.8 (155.9)
As at 30 June 2019 0.3 13.1 41.7 (1.6) 17.6 740.0 811.1 11.5 822.6
Notes to the financial statements (unaudited)
1. General information
Admiral Group plc (the "Company") is a company incorporated in the
United Kingdom and registered and domiciled in England and Wales. Its
registered office is at T Admiral, David Street, Cardiff, CF10 2EH and
its shares are listed on the London Stock Exchange.
The condensed interim financial statements comprise the results and
balances of the Company and its subsidiaries (the Group) for the
six-month period ended 30 June 2019 and the comparative periods for the
six-months ended 30 June 2018 and the year ended 31 December 2018. This
condensed set of financial statements has been prepared in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU, and should
be read in conjunction with the Group's last annual consolidated
financial statements as at and for the year ended 31 December 2018
("last annual financial statements"). They do not include all of the
information required for a complete set of IFRS financial statements.
However, selected explanatory notes are included to explain events and
transactions that are significant to an understanding of the changes in
the Group's financial position and performance since the last annual
financial statements.
As required by the FCA's Disclosure and Transparency Rules, the
condensed set of financial statements has been prepared applying the
accounting policies and presentation that were applied in the
preparation of the Company's published consolidated financial statements
for the year ended 31 December 2018, except where new accounting
standards apply as noted below.
The financial statements of the Company's subsidiaries are consolidated
in the Group financial statements. In accordance with IAS 24,
transactions or balances between Group companies that have been
eliminated on consolidation are not reported as related party
transactions.
The comparative figures for the financial year ended 31 December 2018
are not the Company's statutory accounts for that financial year. Those
accounts have been reported on by the Company's auditors and delivered
to the registrar of companies. The report of the auditors was:
1. unqualified;
2. did not include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report; and
3. did not contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
The accounts have been prepared on a going concern basis. In considering
the appropriateness of this assumption, the Board have reviewed the
Group's projections for the next twelve months and beyond. Further
information is given in note 2 below.
2. Basis of preparation
The condensed set of interim financial statements have been prepared
applying the accounting policies and presentation that were applied in
the preparation of the Company's published consolidated financial
statements for the year ended 31 December 2018, other than for the
adoption of IFRS 16 as outlined below.
A number of other IFRS and interpretations have been endorsed by the EU
in the period to 30 June 2019 and although they have been adopted by the
Group, none of them has had a material impact on the Group's financial
statements.
The Group's assessment of the impact of standards that have yet to be
adopted remains consistent with
that reported on page 129 of the Group's 2018 Annual Report.
The accounts have been prepared on a going concern basis. 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;
-- The risks included on the Group's risk register that could impact on the
Group's financial
performance, levels of liquidity and solvency over the next 12 months;
and
-- The risks on the Group's risk register that could be a threat to the
Group's business model and
capital adequacy.
The Group's business activities, together with the factors likely to
affect its future development,
performance and position are set out in the Strategic Report in the 2018
Annual Report. An update to
the Group's principal risks and uncertainties since the 2018 year end is
included in the review preceding these financial statements. In addition,
the Governance Report in the 2018 Annual Report includes the Directors'
statement on the viability of the Group over a three year period.
Following consideration of the above, the Directors have reasonable
expectation that the Group has adequate resources to continue in
operation for the foreseeable future, a period not less than 12 months
from the date of this report, and that it is therefore appropriate to
adopt the going concern basis in preparing the financial statements.
The accounting policies set out in the notes to the financial statements
have, unless otherwise stated, been applied consistently to all periods
presented in these Group financial statements.
The financial statements are prepared on the historical cost basis,
except for the revaluation of financial assets classified as fair value
through profit or loss or fair value through other comprehensive income.
The Group and Company financial statements are presented in pounds
sterling, rounded to the nearest GBP0.1 million.
Subsidiaries are entities controlled by the Group. The Group controls an
entity when it is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those
returns through its power over the entity. In assessing control, the
Group takes into consideration potential voting rights that are
currently exercisable. The acquisition date is the date on which control
is transferred to the acquirer. The financial statements of subsidiaries
are included in the consolidated financial statements from the date that
control commences until the date that control ceases. Losses applicable
to the non-controlling interests in a subsidiary are allocated to the
non-controlling interests even if doing so causes the non-controlling
interests to have a deficit balance.
The preparation of financial statements requires management to make
judgements, estimates and assumptions that affect the application of
policies and reported amounts of assets and liabilities, income and
expenses. The estimates and associated assumptions are based on
historical experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis
of making the judgements about carrying values of assets and liabilities
that are not readily apparent from other sources.
The estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the period in
which the estimate is reviewed if this revision affects only that period,
or in the period of the revision and future periods if the revision
affects both current and future periods. To the extent that a change in
an accounting estimate gives rise to changes in assets and liabilities,
it is recognised by adjusting the carrying amount of the related asset
or liability in the period of the change.
Adoption of new accounting standards: IFRS 16
During the year the Group has adopted IFRS 16 Leases with a date of
initial application of 1 January 2019.
IFRS 16 introduced a single, on-balance sheet accounting model for
lessees. As a result, the Group, as a lessee, has recognised
right-of-use assets representing its rights to use the underlying assets
and lease liabilities representing its obligations to make lease
payments.
As permitted by the transitional provisions of IFRS 16 the Group has
elected to use the modified retrospective approach, and as such has not
restated prior year comparatives (which are presented, as previously
reported, under IAS 17 and related interpretations).
The adjustments arising from transition are recognised in the opening
balance sheet on 1 January 2019, and are set out below along with
details of the changes in accounting policies relating to IFRS 16 as
applied in the period.
a) Definition of a lease and practical expedients applied
Previously, the Group determined at contract inception whether an
arrangement was or contained a lease under IFRIC 4 Determining Whether
an Arrangement contains a Lease. The Group now assesses whether a
contract is or contains a lease based on the new definition of a lease,
which under IFRS 16 is where a contract conveys a right to control the
use of an identified asset for a period of time in exchange for
consideration.
The Group has also used the following practical expedients permitted by
the standard:
-- the use of a single discount rate to a portfolio of leases with
reasonably similar characteristics;
-- the use of hindsight in determining the lease term where the contract
contains options to extend or terminate the lease;
-- the exclusion of initial direct costs for the measurement of the
right-of-use asset at the date of initial application.
b) Impact of transition
On adoption of IFRS 16, the Group recognised additional right-of-use
assets, and additional lease liabilities in relation to leases which
were previously classified as 'operating leases' under IAS 17 Leases.
The liabilities were measured at the present value of the remaining
lease payments, discounted using the Group's incremental borrowing rate
as of 1 January 2019. The weighted average incremental borrowing rate
(discount rate) applied is 2.4%.
A reconciliation of the Group's lease liabilities to the operating lease
commitment at 31 December 2018 as disclosed in the Group's consolidated
financial statements is shown below.
2019
GBPm
------------------------------------------------------- ------------
Operating lease commitments disclosed as at
31 December 2018 185.9
Impact of extension options exercised before
the date of initial application*(1) 12.7
Impact of changes in relation to IFRS 16 treatment(*1) (24.0)
Adjusted operating lease commitments under IFRS
16 174.6
Impact of discount at the date of initial application (25.4)
Lease liability recognised at 1 January 2019 149.2
Current 10.5
Non-current 138.7
------------
*(1) Following a review of lease extension options and variable lease
payments during the IFRS 16 transition process, the operating lease
commitments disclosed as at 31 December 2018 have been amended to
reflect the impact of a different treatment of inflation and VAT within
lease agreements, and lease extensions that had occurred before the
transition date but were not previously disclosed.
The associated right-of-use assets have been measured retrospectively,
at an amount equal to the lease liability, adjusted by the amount of any
prepaid or accrued payments relating to that lease recognised in the
statement of financial position as at 31 December 2018. There were no
onerous lease contracts that would have required an adjustment to the
right-of-use asset at the date of initial application.
All right-of-use assets relate to property leases held by the Group.
The following adjustment was recognised on the date of initial
application:
1 January 2019
GBPm
-------------------------------------------------- --------------------
ROU Lease Assets 136.7
Trade and other payables- invoice accrual 1.1
Trade and other payables- rent free accrual 11.4
Lease Liability (149.2)
-------------------------------------------------- --------------------
c) Accounting Policies
The Group leases various properties, with rental contracts typically for
fixed periods of 5 to 25 years although these may have extension
options. Lease terms are negotiated on an individual basis and contain a
wide range of different terms and conditions. The lease agreements do
not impose any covenants, but leased assets may not be used as security
for borrowing purposes.
Under IAS 17, all Group leases were classified as operating leases.
Operating lease payments, including the effects of any lease incentives,
were recognised in the income statement on a straight-line basis over
the lease term.
From 1 January 2019, for each lease a right-of-use asset and
corresponding lease liability are recognised at the date at which the
leased asset becomes available for use by the Group.
The lease liability is initially measured at the present value of
remaining lease payments, which include the following:
-- fixed payments (including in-substance fixed payments), less any lease
incentives receivable
-- variable lease payment that are based on an index or a rate
-- payments of penalties for terminating the lease, if the lease term
reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in
the lease. If that rate cannot be determined, the Group's incremental
borrowing rate is used, being the rate that the Group would have to pay
to borrow the funds necessary to obtain an asset of a similar value in a
similar economic environment, with similar terms and conditions.
Generally, the Group uses its incremental borrowing rate as the discount
rate.
Subsequently, lease payments are allocated to the lease liability, split
between repayments of principle and interest. A finance cost is charged
to the profit and loss so as to produce a constant period rate of
interest on the remaining balance of the lease liability.
The right-of-use asset is measured at cost, which comprises the
following:
-- the amount of the initial measurement of lease liability
-- any lease payments made at or before the commencement date less any lease
incentives received
-- any initial direct costs, and
-- restoration costs.
The right-of-use asset is subsequently depreciated over the shorter of
the lease term and the asset's useful life on a straight-line basis.
The Group does not have any significant leases which qualify for the
short term leases or leases of low-value assets exemptions.
3. Critical accounting judgements and estimates
The Group's 2018 Annual Report provides full details of significant
judgements and estimates used in the application of the Group's
accounting policies. There have been no additional critical judgements
or estimates applied in the period. Note 5 provides further information
as to the changes in the estimates with respect to the calculation of
insurance reserves.
4. Operating segments
The Group has four reportable segments; UK Insurance, International Car
Insurance, Comparison and Other, as set out on page 132 of the Group's
2018 Annual Report.
Segment income, results and other information
An analysis of the Group's revenue and results for the period ended 30
June 2019, by reportable segment, is shown below. The accounting
policies of the reportable segments are consistent with those presented
in the notes to the 2018 Group financial statements.
Half-year ended 30 June 2019
International
UK Insurance Insurance Comparison Other Eliminations(*2) Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------- ---------- ------ ---------------- -------
Turnover(*1) 1,338.8 319.5 83.4 14.5 (9.7) 1,746.5
Net insurance premium revenue 264.7 84.5 - - - 349.2
Other revenue and profit
commission 184.1 10.1 83.4 10.5 (8.5) 279.6
Investment return 15.9 0.9 - - (1.2) 15.6
Net revenue 464.7 95.5 83.4 10.5 (9.7) 644.4
Net insurance claims (130.1) (69.9) - - - (200.0)
Expenses(*3) (79.7) (28.3) (78.0) (14.3) 9.7 (190.6)
Segment profit/(loss) before
tax 254.9 (2.7) 5.4 (3.8) - 253.8
Other central revenue and expenses, including
share scheme charges (32.8)
Investment and interest income 2.7
Finance costs(*3) (5.5)
Consolidated profit before
tax 218.2
Taxation expense (37.0)
Consolidated profit after
tax 181.2
*1 Turnover is an Alternative Performance Measure and consists of total
premiums written (including co-insurers' share) and Other Revenue. Refer
to the glossary and note 13 for further information.
(*2 Eliminations are in respect of the intra-group trading between the
Group's comparison and UK and International insurance entities and
intra-group interest.)
*3 GBP0.7m of IFRS 16 interest expense (being the Group's net share of
IFRS 16 interest expense) included within Finance Costs in the Income
Statement has been reallocated to individual segments within expenses,
in line with management segmental reporting.
Revenue and results for the corresponding reportable segments for the
period ended 30 June 2018 are shown below.
Half-year ended 30 June 2018
International
UK Insurance Car Insurance Comparison Other Eliminations(*2) Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ----------- ------ ---------------- -------
Turnover(*1) 1,319.1 260.1 76.6 6.2 (10.5) 1,651.5
Net insurance premium revenue 254.6 69.1 -- -- -- 323.7
Other revenue and profit
commission 176.7 9.0 76.6 5.1 (10.2) 257.2
Investment return 15.8 0.6 -- -- (0.3) 16.1
Net revenue 447.1 78.7 76.6 5.1 (10.5) 597.0
Net insurance claims (129.0) (51.2) -- -- -- (180.2)
Expenses (70.5) (28.1) (74.0) (13.1) 10.5 (175.2)
Segment profit/(loss) before
tax 247.6 (0.6) 2.6 (8.0) -- 241.6
Other central revenue and expenses, including
share scheme charges (26.4)
Investment and interest income 1.1
Finance costs (5.6)
Consolidated profit before
tax 210.7
Taxation expense (34.8)
Consolidated profit after
tax 175.9
*1 Turnover is an Alternative Performance Measure and consists of total
premiums written (including co-insurers' share) and Other Revenue. Refer
to the glossary and note 13 for further information.
(*2 Eliminations are in respect of the intra-group trading between the
Group's comparison and UK and International insurance entities and
intra-group interest.)
Revenue and results for the corresponding reportable segments for the
year ended 31 December 2018 are shown below.
Year ended 31 December 2018
International
UK Insurance Car Insurance Comparison Other Eliminations(*2) Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ----------- ------ ---------------- -------
Turnover(*1) 2,575.7 538.7 151.0 17.5 (19.3) 3,263.6
Net insurance premium revenue 523.9 147.9 -- -- -- 671.8
Other revenue and profit
commission 389.5 18.6 151.0 13.3 (18.6) 553.8
Investment return 32.3 1.3 -- -- (0.7) 32.9
Net revenue 945.7 167.8 151.0 13.3 (19.3) 1,258.5
Net insurance claims (242.5) (107.6) -- -- -- (350.1)
Expenses (146.5) (61.3) (144.4) (26.9) 19.3 (359.8)
Segment profit/(loss) before
tax 556.7 (1.1) 6.6 (13.6) -- 548.6
Other central revenue and expenses, including
share scheme charges (64.2)
Investment and interest income 3.1
Finance costs (11.3)
Consolidated profit before
tax 476.2
Taxation expense (85.7)
Consolidated profit after
tax 390.5
*1 Turnover is an Alternative Performance Measure and consists of total
premiums written (including co-insurers' share) and Other Revenue. Refer
to the glossary and note 13 for further information.
(*2 Eliminations are in respect of the intra-group trading between the
Group's comparison and UK and International insurance entities and
intra-group interest.)
Segment revenues
The UK and International Car Insurance reportable segments derive all
insurance premium income from external policyholders. Revenue within
these segments is not derived from an individual policyholder that
represents 10% or more of the Group's total revenue.
The total of Comparison revenues from transactions with other reportable
segments is GBP9.7 million (H1 2018: GBP10.5 million, FY 2018: GBP19.3
million) which has been eliminated on consolidation, along with GBP1.2
million of intra-group interest charges (H1 2018: GBP0.3 million, FY
2018: GBP0.7 million). There are no other transactions between
reportable segments.
Revenues from external customers for products and services is consistent
with the split of reportable segment revenues as shown above.
Information about geographical locations
All material revenues from external customers, and net assets attributed
to a foreign country relating to car insurance are shown within the
International Car Insurance reportable segment shown above. The revenue
and results of the four International Comparison businesses; Rastreator,
LeLynx, compare.com and Preminen are not yet material enough to be
presented as a separate segment.
5. Premium, Claims and Profit Commissions
5a. Net insurance premium revenue
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
---------------------------------------- ------------- -------------
Total insurance premiums written before
co-insurance(*1) 1,474.0 1,401.1 2,754.1
Group gross premiums written after
co-insurance 1,161.1 1,085.7 2,166.7
Outwards reinsurance premiums (784.5) (733.4) (1,464.3)
Net insurance premiums written 376.6 352.3 702.4
Change in gross unearned premium
provision (80.7) (83.1) (87.1)
Change in reinsurers' share of unearned
premium provision 53.3 54.5 56.5
Net insurance premium revenue 349.2 323.7 671.8
(*1 Alternative Performance Measures -- refer to the end of the report
for definition and explanation, and to note 13a for reconciliation to
group gross premiums written)
The Group's share of its insurance business was underwritten by Admiral
Insurance (Gibraltar) Limited, Admiral Insurance Company Limited,
Admiral Europe Compania Seguros, and Elephant Insurance Company. All
contracts are short-term in duration, lasting for 12 months or less.
5b. Profit commission
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
------------- ----------- ---------------
Underwriting year (UK car only)
2014 & prior 3.8 13.8 61.1
2015 10.1 5.9 11.0
2016 9.7 11.1 22.9
2017 11.4 -- --
2018 -- -- --
2019 -- -- --
Total UK motor profit commission 35.0 30.8 95.0
Total UK household profit
commission 1.1 (1.2) (1.8)
Total profit commission 36.1 29.6 93.2
5c. Reinsurance assets and insurance contract liabilities
(i) Analysis of recognised amounts:
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
Gross
Claims outstanding(*1) 2,851.5 2,556.1 2,740.5
Unearned premium provision 1,077.6 987.4 995.9
Total gross insurance liabilities 3,929.1 3,543.5 3,736.4
Recoverable from reinsurers
Claims outstanding 1,168.9 950.0 1,220.1
Unearned premium provision 717.0 658.5 663.4
Total reinsurers share of insurance
liabilities 1,885.9 1,608.5 1,883.5
Net
Claims outstanding(*2) 1,682.6 1,606.1 1,520.4
Unearned premium provision 360.6 328.9 332.5
Total insurance liabilities - net 2,043.2 1,935.0 1,852.9
*1 Gross claims outstanding at 30 June 2019 is presented before the
deduction of salvage and subrogation recoveries totaling GBP63.3 million
(30 June 2018: GBP50.9 million, 31 December 2018: GBP56.4 million).
*2 Admiral typically commutes quota share reinsurance contracts in its
UK Car Insurance business 24-36 months following the start of the
underwriting year. After commutation, claims outstanding from these
contracts are included in Admiral's net claims outstanding balance.
Refer to note (ii) below.
(ii) Analysis of gross and net claims reserve releases:
The following table analyses the impact of movements in prior year
claims provisions on a gross and net basis. This data is presented on an
underwriting year basis.
30 June 30 June 31 December
2019 2018 2018
Gross GBPm GBPm GBPm
Underwriting year (UK Motor Insurance):
2014 & prior 12.1 38.4 123.6
2015 20.5 35.8 50.9
2016 19.0 42.1 70.6
2017 63.6 24.0 25.4
2018 24.2 -- --
Total gross release (UK Motor Insurance) 139.4 140.3 270.5
Total gross release (UK Household
Insurance) 9.0 4.1 4.6
Total gross release (International
Car Insurance) 23.6 16.3 35.2
Total Gross Release 172.0 160.7 310.3
30 June 30 June 31 December
2019 2018 2018
Net GBPm GBPm GBPm
----------- -----------
Underwriting year (UK Motor Insurance):
2014 & prior 12.1 38.4 123.4
2015 20.5 27.3 42.5
2016 19.0 18.6 47.1
2017 43.6 7.5 8.0
2018 7.6 -- --
Total net release (UK Motor Insurance) 102.8 91.8 221.0
Total net release (UK Household Insurance) 2.7 1.2 1.4
Total net release (International Car
Insurance) 9.0 6.0 13.5
Total net release 114.5 99.0 235.9
Analysis of net releases on UK Motor
Insurance
-- Net releases on Admiral net share (motor) 50.0 56.6 111.4
-- Releases on commuted quote share reinsurance
contracts 52.8 35.2 109.6
Total net releases as above 102.8 91.8 221.0
Releases on the share of reserves originally reinsured but since
commuted are analysed by underwriting year as follows:
30 June 30 June 31 December
2019 2018 2018
Net GBPm GBPm GBPm
----------- -----------
Underwriting year:
2014 & prior 6.1 21.7 70.6
2015 11.9 12.4 21.3
2016 11.1 1.1 17.7
2017 23.7 -- --
Total releases on commuted quota share
reinsurance contracts 52.8 35.2 109.6
--------------------------------------- ----------- ----------- -----------
The table below shows the development of UK Car Insurance loss ratios
for the past five financial periods, presented on an underwriting year
basis.
31 December 30 June
----------------------
UK Car Insurance loss
ratio development 2015 2016 2017 2018 2019
Underwriting year (UK
Car only)
2015 87% 87% 83% 77% 75%
2016 -- 88% 84% 77% 76%
2017 -- -- 87% 83% 78%
2018 -- -- -- 92% 88%
2019 -- -- -- -- 95%
(iii) Reconciliation of movement in claims provision
30 June 2019
Gross Reinsurance Net
GBPm GBPm GBPm
----------- -------
Claims provision at start of period 2,740.5 (1,220.1) 1,520.4
Claims incurred (excluding releases) 928.3 (623.9) 304.4
Reserve releases (172.0) 57.5 (114.5)
Movement in claims provision due to
commutation -- 257.1 257.1
Claims paid and other movements (645.3) 360.5 (284.8)
Claims provision at end of period 2,851.5 (1,168.9) 1,682.6
30 June 2018
Gross Reinsurance Net
GBPm GBPm GBPm
----------- -------
Claims provision at start of period 2,403.2 (1,028.8) 1,374.4
Claims incurred (excluding releases) 858.7 (585.5) 273.2
Reserve releases (160.7) 61.7 (99.0)
Movement in claims provision due to
commutation -- 310.4 310.4
Claims paid and other movements (545.1) 292.2 (252.9)
Claims provision at end of period 2,556.1 (950.0) 1,606.1
31 December 2018
Gross Reinsurance Net
GBPm GBPm GBPm
----------- -------
Claims provision at start of period 2,403.2 (1,028.8) 1,374.4
Claims incurred (excluding releases) 1,786.2 (1,212.0) 574.2
Reserve releases (310.3) 74.4 (235.9)
Movement in claims provision due to
commutation -- 310.4 310.4
Claims paid and other movements (1,138.6) 635.9 (502.7)
Claims provision at end of period 2,740.5 (1,220.1) 1,520.4
(iv) Reconciliation of movement in net unearned premium
provision
30 June 2019
Gross Reinsurance Net
GBPm GBPm GBPm
----------- -------
Unearned premium provision at start
of period 995.9 (663.4) 332.5
Written in the period 1,161.1 (784.5) 376.6
Earned in the period (1,079.4) 730.9 (348.5)
Unearned premium provision at end of
period 1,077.6 (717.0) 360.6
30 June 2018
Gross Reinsurance Net
GBPm GBPm GBPm
----------- -------
Unearned premium provision at start
of period 910.7 (608.8) 301.9
Written in the period 1,085.7 (733.4) 352.3
Earned in the period (1,009.0) 683.7 (325.3)
Unearned premium provision at end of
period 987.4 (658.5) 328.9
31 December 2018
Gross Reinsurance Net
GBPm GBPm GBPm
----------- -------
Unearned premium provision at start
of period 910.7 (608.8) 301.9
Written in the period 2,166.7 (1,464.3) 702.4
Earned in the period (2,081.5) 1,409.7 (671.8)
Unearned premium provision at end of
period 995.9 (663.4) 332.5
6. Investments
6a. Investment return
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
------- ------- -----------
Investment return
On assets classified as Fair Value Through
Profit and Loss (FVTPL) 4.3 1.8 6.3
On debt securities classified as Fair
Value through Other Comprehensive Income
(FVOCI)(*3) 14.9 13.0 23.8
On deposits with credit institutions(*1) 0.9 1.3 3.0
On government gilt assets(*1) 2.1 2.0 4.1
Net unrealised losses
Unrealised losses on forward contracts (0.4) (1.4) (2.3)
Notional accrual for reinsurers share
of investment return (4.5) -- --
Interest receivable on cash and cash
equivalents(*1) 1.0 0.5 1.1
Total investment and interest income(*2) 18.3 17.2 36.0
*1 -- Interest received during the period was GBP8.6 million (30 June
2018: GBP4.0 million, 31 December 2018: GBP8.0 million)
*2 -- Total investment return excludes GBP1.2 million of intra-group
interest (30 June 2018: GBP0.3 million, 31 December 2018: GBP0.7
million)
(*3 - Realised gains/losses on sales of debt securities classified as
FVOCI are immaterial)
6b. Finance costs
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
------- ------- -----------
Interest payable on subordinated loan
notes 5.5 5.6 11.3
Interest payable on Lease Liabilities 2.0 -- --
Interest recoverable from co and re-insurers (1.3) -- --
Total finance costs(*1) 6.2 5.6 11.3
*1 - Interest paid during the year to date was GBP7.3 million (30 June
2018: GBP5.5 million, 31 December 2018: GBP11.0 million)
Finance costs include interest payable on the GBP200 million (30 June
2018: GBP200 million, 31 December 2018: GBP200 million) subordinated
notes and other financial liabilities.
Interest payable on lease liabilities represents the unwinding of the
discount on lease liabilities under IFRS 16, and does not result in a
cash payment. Further detail on the transition to IFRS 16 is included in
note 2.
6c. Interest expense
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
------- ------- -----------
Interest payable on Loan backed securities 2.6 -- 1.7
Interest payable on revolving credit
facility 0.3 0.9 1.9
Total finance costs(*1) 2.9 0.9 3.6
*1 Interest paid in total during the year to date was GBP3.1 million (30
June 2018: GBP0.6 million, 31 December 2018: GBP3.1 million)
Interest expense represents the interest payable on funding for the
Admiral loans business, in the form of a credit facility of GBP200
million, of which GBP25.0 million (H1 2018: GBP200 million; FY 2018:
GBP71.5 million) was drawn down at 30 June 2019 and loan backed
securities issued by an SPE with funding up to GBP400 million, of which
GBP253.4 million (H1 2018: GBPnil; FY 2018: GBP168.3 million) was drawn
down at 30 June 2019.
7. Financial assets and Financial Liabilities
7a. Financial assets and liabilities
The Group's financial instruments can be analysed as follows:
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
Financial investments mandatorily measured
at Fair Value through Profit and Loss
Money market and other similar funds 1,029.3 1,200.4 1,301.1
Derivative financial instruments -- 0.9 --
1,029.3 1,201.3 1,301.1
Financial investments classified as Fair Value
through Other Comprehensive Income
Debt securities 1,645.1 1,371.6 1,389.9
Government gilts 174.8 170.9 170.9
Equity investments 7.7 2.5 7.8
1,827.6 1,545.0 1,568.6
Financial assets measured at amortised cost
Deposits with credit institutions 88.7 130.0 100.0
Total financial investments 2,945.6 2,876.3 2,969.7
Other financial assets measured at amortised
cost
Insurances receivables 930.9 865.6 842.3
Trade and other receivables 261.5 259.2 239.7
Insurance and other receivables 1,192.4 1,124.8 1,082.0
Loans and advances to customers 420.8 214.2 300.2
Cash and cash equivalents 461.4 309.5 376.8
Total financial assets 5,020.2 4,524.8 4,728.7
Financial liabilities
Subordinated notes 204.1 204.0 204.1
Loan backed securities 253.4 -- 168.3
Other borrowings 25.0 200.0 71.8
Derivative financial instruments 2.0 -- --
Subordinated and other financial liabilities 484.5 404.0 444.2
Trade and other payables 1,811.1 1,664.0 1,801.5
Lease liabilities 143.0 -- --
Total financial liabilities 2,438.6 2,068.0 2,245.7
(* Lease liabilities of GBP149.2m were recognised on transition on 1
January 2019. The movement to the balance presented of GBP143.0m
reflects cash payments in the period offset by the lease interest
expense recognised in the Income Statement.)
All investments held at fair value at the end of the period are invested
in AAA-rated or AA-rated money market liquidity funds.
The measurement of investments at the end of the period, for the
majority investments held at fair value, is based on active quoted
market values (level one). Equity investments held at fair value are
measured at level three of the fair value hierarchy. No further
information is provided due to the immateriality of the balance at 30
June 2019.
Deposits are held with well rated institutions; as such the approximate
fair value is the book value of the investment as impairment of the
capital is not expected. There is no quoted market for these holdings
and as such a level two valuation is used. The book value of deposits is
GBP83.0 million (H1 2018: GBP130.0 million; FY 2018: GBP100.0 million).
The amortised cost carrying amount of receivables is a reasonable
approximation of fair value.
The fair value of subordinated notes (level one valuation) at 30 June
2019 is GBP219.8 million (H1 2018:
GBP219.3 million, FY 2018: GBP211.3 million).
7b. Cash and cash equivalents
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
Cash at bank and in hand* 461.4 308.9 376.0
Short-term deposits -- 0.6 0.8
Total cash and cash equivalents 461.4 309.5 376.8
(* GBP4.4m of cash is ring-fenced via a bank guarantee. See note 11d for
further details.)
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.
7c. Insurance and other receivables
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
Insurance receivables(*1) 930.9 865.6 842.3
Trade receivables 245.3 246.9 227.0
Prepayments and accrued income 16.2 12.3 12.7
Total insurance and other receivables 1,192.4 1,124.8 1,082.0
*1 -- Insurance receivables at 30 June 2019 include GBP63.3 million in
respect of salvage and subrogation recoveries (H1 2018: GBP50.9 million,
FY 2018: GBP59.3 million).
7d. Loans and advances to customers
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
Loans and advances to customers -- gross carrying
amount 437.0 219.5 310.4
Loans and advances to customers -- provision (16.2) (5.3) (10.2)
Total loans and advances to customers 420.8 214.2 300.2
*1 -- Loans and advances to customers at 30 June 2019 include GBP34.1
million in respect of secured car finance loans (H1 2018: GBP6.6 million,
FY 2018: GBP16.7 million).
Loans and advances relate to the Admiral Loans business. The table
below shows the gross carrying value of loans in stages 1 -- 3 and the
corresponding credit loss allowance. There have been no significant
changes to the expected credit loss methodology since the 2018 Annual
Report.
30 June 30 June 31 December
2019 2018 2018
Gross carrying amount Expected credit loss allowance Other loss allowance Carrying amount Carrying amount Carrying amount
GBPm GBPm GBPm GBPm GBPm GBPm
Stage
1 420.3 (5.3) (0.5) 414.5 206.1 292.2
Stage
2 7.2 (1.6) -- 5.6 6.6 7.5
Stage
3 9.5 (8.8) -- 0.7 1.5 0.5
Total 437.0 (15.7) (0.5) 420.8 214.2 300.2
An expense of GBP6.0 million has been recognized in the Income Statement
in relation to the movement in the credit loss allowance (H1 2018:
GBP4.1 million; FY 2018: GBP9.0 million).
8. Other Revenue
8a. Disaggregation of revenue
In the following tables, other revenue is disaggregated by major
products/service lines and timing of revenue recognition. The total
revenue disclosed in the table of GBP269.2 million (HY 2018: GBP253.0
million, FY 2018: GBP542.4 million) represents total other revenue and
profit commission and is disaggregated into the segments included in
note 4.
Half-year ended 30 June 2019
International
UK Insurance Car Insurance Comparison Other Total
GBPm GBPm GBPm GBPm GBPm
-------------- ----------- ----- -----
Major products/service line
Comparison(*1) -- -- 73.7 -- 73.7
Instalment income 42.7 1.5 -- -- 44.2
Fee and commission revenue 83.8 8.7 -- 0.9 93.4
Revenue from law firms 15.6 -- -- -- 15.6
Other 5.9 -- -- 0.3 6.2
Total other revenue 148.0 10.2 73.7 1.2 233.1
Profit commission 36.1 -- -- -- 36.1
Total other revenue and profit
commission 184.1 10.2 73.7 1.2 269.2
Timing of revenue recognition
Point in time 120.0 8.7 73.7 1.2 203.6
Over time 17.0 -- -- -- 17.0
Revenue outside the scope of IFRS
15 47.1 1.5 -- -- 48.6
184.1 10.2 73.7 1.2 269.2
Half-year ended 30 June 2018
International
UK Insurance Car Insurance Comparison Other Total
GBPm GBPm GBPm GBPm GBPm
-------------- ----------- ----- -----
Major products/ service line
Comparison(*1) -- -- 66.1 -- 66.1
Instalment income 38.1 1.3 -- -- 39.4
Fee and commission revenue 88.3 7.7 -- -- 96.0
Revenue from law firms 15.8 -- -- -- 15.8
Other 5.0 -- -- 1.1 6.1
Total other revenue 147.2 9.0 66.1 1.1 223.4
Profit commission 29.6 -- -- -- 29.6
Total other revenue and profit
commission 176.8 9.0 66.1 1.1 253.0
Timing of revenue recognition
Point in time 122.7 7.7 66.1 1.1 197.6
Over time 17.2 -- -- -- 17.2
Revenue outside the scope of IFRS
15 36.9 1.3 -- -- 38.2
176.8 9.0 66.1 1.1 253.0
Year ended 31 December 2018
International
UK Insurance Car Insurance Comparison Other Total
GBPm GBPm GBPm GBPm GBPm
-------------- ----------- ----- -----
Major products/ service line
Comparison(*1) -- -- 131.7 -- 131.7
Instalment income 82.6 2.7 -- -- 85.3
Fee and commission revenue 172.4 15.9 -- 1.9 190.2
Revenue from law firms 30.5 -- -- -- 30.5
Other 10.8 -- -- 0.7 11.5
Total other revenue 296.3 18.6 131.7 2.6 449.2
Profit commission 93.2 -- -- -- 93.2
Total other revenue and profit
commission 389.5 18.6 131.7 2.6 542.4
Timing of revenue recognition
Point in time 275.3 15.9 131.7 2.6 425.5
Over time 33.4 -- -- -- 33.4
Revenue outside the scope of IFRS
15 80.8 2.7 -- -- 83.5
389.5 18.6 131.7 2.6 542.4
*1 -- Comparison revenue excludes GBP9.7 million (30 June 2018: GBP10.5
million, 31 December 2018: GBP19.3 million) of income from other Group
companies.
Instalment income and profit commission from reinsurers is not within
the scope of IFRS 15 Revenue from Contracts with Customers due to the
nature of the income.
9. Expenses
9a. Operating expenses and share scheme charges
30 June 2019
Recoverable
from co- and
Gross reinsurers Net
GBPm GBPm GBPm
Acquisition of insurance contracts(*1) 67.6 (51.6) 16.0
Administration and other marketing costs (insurance
contracts) 193.9 (149.6) 44.3
Insurance contract expenses 261.5 (201.2) 60.3
Administration and other marketing costs (other) 135.9 -- 135.9
Share scheme charges 40.5 (14.0) 26.5
Total expenses and share scheme charges 437.9 (215.2) 222.7
30 June 2018
Recoverable
from co- and
Gross reinsurers Net
GBPm GBPm GBPm
Acquisition of insurance contracts(*1) 62.1 (49.3) 12.8
Administration and other marketing costs (insurance
contracts) 209.5 (166.3) 43.2
Insurance contract expenses 271.6 (215.6) 56.0
Administration and other marketing costs (other) 123.7 -- 123.7
Share scheme charges 33.8 (11.9) 21.9
Total expenses and share scheme charges 429.1 (227.5) 201.6
31 December 2018
Recoverable
from co- and
Gross reinsurers Net
GBPm GBPm GBPm
Acquisition of insurance contracts(*1) 135.1 (103.8) 31.3
Administration and other marketing costs (insurance
contracts) 381.6 (287.9) 93.7
Insurance contract expenses 516.7 (391.7) 125.0
Administration and other marketing costs (other) 249.2 -- 249.2
Share scheme charges 76.9 (27.1) 49.8
Total expenses and share scheme charges 842.8 (418.8) 424.0
*1 -- Acquisition of insurance contracts expense excludes GBP9.7 million
(H1 2018: GBP10.5 million, FY 2018: GBP19.3 million) of comparison fees
from other Group companies.
The GBP44.3 million (H1 2018: GBP43.2 million, FY 2018: GBP93.7 million)
administration and marketing costs allocated to insurance contracts is
principally made up of salary costs.
Analysis of other administration and other marketing costs:
30 June 30 June
2019 2018 31 December 2018
GBPm GBPm GBPm
Expenses relating to additional products and fees 37.4 32.1 63.4
Comparison operating expenses 78.0 74.0 144.4
Loans expenses (including movement on expected credit
loss provision) 14.4 10.3 22.9
Other expenses 6.1 7.3 18.5
Total 135.9 123.7 249.2
Refer to note 13 for a reconciliation between insurance contract
expenses and the reported expense ratio.
9b. Staff share schemes
Analysis of share scheme costs (per income statement):
30 June 2019 30 June 2018 31 December 2018
Total Net Total Net Total Net
GBPm GBPm GBPm GBPm GBPm GBPm
------ ------ --------
SIP charge (i) 9.4 6.5 8.6 5.9 18.1 12.3
DFSS charge (ii) 31.1 20.0 25.2 16.0 58.8 37.5
Total share scheme
charges 40.5 26.5 33.8 21.9 76.9 49.8
---------------------- ------ ------ ------ ------ -------- --------
The total share scheme charges of GBP40.5 million (H1 2018: GBP33.8
million; FY 2018: GBP76.9 million) can be analysed between share scheme
charges calculated in line with IFRS 2 of GBP28.7 million (H1 2018: 25.1
million; FY 2018 GBP57.3 million) and other share scheme related costs
of GBP11.8 million (H1 2018: GBP8.7 million; FY 2018 GBP19.6 million).
Net share scheme charges are presented after allocations to co-insurers
and reinsurers in line with contractual arrangements.
The consolidated cash flow statement also shows the gross charge in the
reconciliation between 'profit after tax' and 'cash flows from operating
activities'. The co-insurance share of the charge is included in the
'change in trade and other payables' line.
10. Taxation
10a. Taxation
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
Current tax
Corporation tax on profits for the year 41.0 37.2 81.4
Under provision relating to prior periods -- 0.4 0.2
Current tax charge 41.0 37.6 81.6
Deferred tax
Current period deferred taxation movement (4.0) (2.8) 3.8
Under provision relating to prior periods -- -- 0.3
Total tax charge per Consolidated Income
Statement 37.0 34.8 85.7
Factors affecting the total tax charge are:
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
Profit before tax 218.2 210.7 476.2
Corporation tax thereon at effective UK corporation
tax rate of 19.0% (2018: 19.0%) 41.5 40.0 90.5
Expenses and provisions not deductible for
tax purposes -- -- 0.7
Non-taxable income (2.2) (2.7) (6.0)
Impact of change in UK tax rate on deferred
tax balances (1.0) (0.6) 0.5
Adjustments relating to prior periods -- 0.4 0.6
Impact of different overseas tax rates (3.7) (4.1) (8.2)
Unrecognised deferred tax 2.4 1.9 4.7
Movement on deferred tax asset on US losses -- (0.1) 2.9
Total tax charge for the period as above 37.0 34.8 85.7
The outstanding corporation tax payable as at 30 June 2019 was GBP43.0
million (HY 2018: GBP38.4 million; FY 2018: GBP49.3 million).
10b. Deferred income tax asset
Tax treatment Carried
of share Capital forward Fair value Other
schemes allowances losses reserve differences Total
GBPm GBPm GBPm GBPm GBPm GBPm
Balance brought forward at
1 January 2018 6.1 (4.5) 2.9 -- (4.2) 0.3
Tax treatment of share scheme
charges through income or
expense 3.2 -- -- -- -- 3.2
Tax treatment of share scheme
charges through reserves 0.9 -- -- -- -- 0.9
Capital allowances -- 0.1 -- -- -- 0.1
Other difference -- -- -- -- (0.1) (0.1)
Balance carried forward at
30 June 2018 10.2 (4.4) 2.9 -- (4.3) 4.4
Balance carried forward at
1 January 2018 6.1 (4.5) 2.9 (4.6) 0.4 0.3
Tax treatment of share scheme
charges through income or
expense (2.2) -- -- -- -- (2.2)
Tax treatment of share scheme
charges through reserves 3.3 -- -- -- -- 3.3
Capital allowances -- 0.9 -- -- -- 0.9
Carried forward losses -- -- (2.9) -- -- (2.9)
Movement in fair value reserve -- -- -- 0.7 -- 0.7
Other differences -- -- -- -- 0.1 0.1
Balance carried forward at
31 December 2018 7.2 (3.6) -- (3.9) 0.5 0.2
Tax treatment of share scheme
charges through income or
expense 4.0 -- -- -- -- 4.0
Tax treatment of share scheme
charges through reserves 2.5 -- -- -- -- 2.5
Capital allowances -- (0.1) -- -- -- (0.1)
Movement in fair value reserve -- -- -- (1.4) -- (1.4)
Other differences -- -- -- -- 0.1 0.1
Balance carried forward 30
June 2019 13.7 (3.7) -- (5.3) 0.6 5.3
The UK corporation tax rate reduced from 20% to 19% on 1 April 2017. The
average effective rate of tax for 2019 is 19.0% (2017: 19.25%). A
further reduction to the main rate of corporation tax to 17% (effective
from 1 April 2020) was enacted on 15 September 2016. This will reduce
the Group's future current tax charge accordingly.
The deferred tax asset at 30 June 2019 has been calculated based on the
rate at which each timing difference is most likely to reverse.
At 30 June 2019 the Group had unused tax losses amounting to GBP229.0
million (H1 2018: GBP173.7 million, FY 2018: GBP217.5 million), relating
to the Group's US businesses Elephant Auto and compare.com, for which no
deferred tax asset has been recognized.
11. Other Assets and Other Liabilities
11a. Property and equipment
Improvements
to short ROU Asset
leasehold Computer Office Furniture -- Leasehold
buildings equipment equipment and fittings buildings Total
GBPm GBPm GBPm GBPm GBPm GBPm
Cost
At 1 January 2018 28.7 57.2 19.7 9.8 -- 115.4
Additions 0.2 2.3 0.9 -- -- 3.4
Disposals -- (0.1) (0.1) -- -- (0.2)
Transfers (0.5) -- -- -- -- (0.5)
Foreign exchange movement (0.1) -- (0.1) -- -- (0.2)
At 30 June 2018 28.3 59.4 20.4 9.8 -- 117.9
Depreciation
At 1 January 2018 14.9 45.9 15.2 8.1 -- 84.1
Charge for the year 1.2 3.3 1.1 0.4 -- 6.0
Disposals -- (0.1) (0.1) -- -- (0.2)
Foreign exchange movement (0.1) -- -- -- -- (0.1)
At 30 June 2018 16.0 49.1 16.2 8.5 -- 89.8
Net book amount
At 1 January 2018 13.8 11.3 4.5 1.7 -- 31.3
Net book amount
At 30 June 2018 12.3 10.3 4.2 1.3 -- 28.1
Cost
At 1 January 2018 28.7 57.2 19.7 9.8 -- 115.4
Additions 3.1 4.9 1.9 0.1 -- 10.0
Disposals (0.7) (0.1) (0.2) (0.2) -- (1.2)
Transfers (1.2) -- -- -- -- (1.2)
Foreign exchange movement (0.1) 0.1 -- 0.1 -- 0.1
At 31 December 2018 29.8 62.1 21.4 9.8 -- 123.1
Depreciation
At 1 January 2018 14.9 45.9 15.2 8.1 -- 84.1
Charge for the year 2.8 6.5 1.9 0.8 -- 12.0
Disposals (0.7) (0.1) (0.1) (0.1) -- (1.0)
Foreign exchange movement (0.2) -- -- 0.1 -- (0.1)
At 31 December 2018 16.8 52.3 17.0 8.9 -- 95.0
Net book amount
At 31 December 2018 13.0 9.8 4.4 0.9 -- 28.1
Cost
At 1 January 2019 29.8 62.1 21.4 9.8 -- 123.1
Initial application of IFRS
16 -- -- -- -- 136.7 136.7
Additions 3.1 6.4 0.3 0.3 -- 10.1
Disposals -- -- -- -- -- --
Transfers -- -- -- -- -- --
Foreign exchange movement 0.1 0.1 -- -- 0.4 0.6
At 30 June 2019 33.0 68.6 21.7 10.1 137.1 270.5
Depreciation
At 1 January 2019 16.8 52.3 17.0 8.9 -- 95.0
Initial application of IFRS
16 -- -- -- -- -- --
Charge for the year 1.6 3.1 0.7 0.2 6.7 12.3
Disposals -- -- -- -- -- --
Foreign exchange movement -- 0.1 0.1 -- -- 0.2
At 30 June 2019 18.4 55.5 17.8 9.1 6.7 107.5
Net book amount
At 30 June 2019 14.6 13.1 3.9 1.0 130.4 163.0
11b. Intangible assets
Deferred
acquisition
Goodwill costs Software(*1) Total
GBPm GBPm GBPm GBPm
At 1 January 2018 62.3 20.6 76.5 159.4
Additions -- 26.3 7.4 33.7
Amortisation charge -- (23.3) (6.4) (29.7)
Disposals -- -- (1.1) (1.1)
Transfers -- -- 0.5 0.5
Foreign exchange movement -- -- -- --
At 30 June 2018 62.3 23.6 76.9 162.8
At 1 January 2018 62.3 20.6 76.5 159.4
Additions -- 53.1 13.9 67.0
Amortisation charge -- (50.5) (15.5) (66.0)
Disposals -- -- -- --
Transfers -- -- 1.2 1.2
Foreign exchange movement -- 0.2 0.2 0.4
At 31 December 2018 62.3 23.4 76.3 162.0
Additions -- 27.2 3.4 30.6
Amortisation charge -- (25.5) (8.2) (33.7)
Disposals -- -- -- --
Transfers -- -- -- --
Foreign exchange movement -- -- -- --
At 30 June 2019 62.3 25.1 71.5 158.9
(*1 -- Software additions relating to internal development are
immaterial in both 2019 and 2018)
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. 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. Refer to
the accounting policy for goodwill in the 2018 financial statements for
further information.
11c. Trade and other payables
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
Trade payables 44.0 34.3 37.9
Amounts owed to co-insurers 149.4 169.8 153.2
Amounts owed to reinsurers 1,093.9 967.5 1,122.7
Other taxation and social security liabilities 82.8 74.4 60.4
Other payables 180.9 198.6 196.0
Accruals and deferred income 260.1 219.4 231.3
Total trade and other payables 1,811.1 1,644.0 1,801.5
Of amounts owed to reinsurers, GBP963.7 million (H1 2018: GBP873.7
million, FY 2018: GBP1,022.7 million) is held under funds withheld
arrangements.
11d. Contingent liabilities
Rastreator Comparador Correduria Seguros ("Rastreator Comparador"), the
Group's Spanish Comparison business, has recently undergone a tax audit
in respect of the 2013 and 2014 financial years. As a result of the
audit, the Spanish Tax Authority has denied the VAT exemption relating
to insurance intermediary services which Rastreator Comparador has
applied. Rastreator Comparador will appeal this decision via the
Spanish Courts and is confident in defending its position which is, in
its view, in line with the EU Directive and is also consistent with the
way similar supplies are treated throughout Europe.
The potential liability for the financial years currently subject to
audit is approximately EUR5m, and, as identified in note 7, a bank
guarantee has been provided to the Spanish Tax Authority for this
amount. If the exemption is also disallowed in respect of later years,
the liability could increase to EUR19m. No provision has been made in
these financial statements in relation to this matter.
12. Dividends, Earnings and Share Capital
12a. Dividends
Dividends were declared and paid as follows.
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
March 2018 (58.0 pence per share, paid June
2018) -- 163.3 163.3
August 2018 (60.0 pence per share, paid October
2018) -- -- 169.4
March 2019 (66.0 pence per share, paid June
2019) 188.0 -- --
Total 188.0 163.3 332.7
The dividend declared in March 2018 represented the final dividend paid
in respect of the 2017 financial year (August 2018 - interim dividend
for 2018). The dividend proposed in March 2019 was the final dividend
paid in respect of the 2018 financial year.
An interim dividend of 63.0 pence per share (GBP179.5 million) has been
declared in respect of the 2019 financial year.
12b. Earnings per share
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
Profit for the financial year after taxation attributable
to equity shareholders 183.2 177.2 395.1
Weighted average number of shares -- basic 290,734,955 287,551,161 288,197,247
Unadjusted earnings per share -- basic 63.0p 61.6p 137.1p
Weighted average number of shares -- diluted 291,401,887 288,172,467 288,845,845
Unadjusted earnings per share - diluted 62.9p 61.5p 136.8p
The difference between the basic and diluted number of shares at the end
the period (being 666,932; H1 2018: 621,306, FY 2018: 648,598) relates
to awards committed, but not yet issued under the Group's share schemes.
12c. Share capital
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
Authorised
500,000,000 ordinary shares of 0.1 pence 0.5 0.5 0.5
Issued, called up and fully paid
290,502,737 ordinary shares of 0.1p -- -- 0.3
287,741,113 ordinary shares of 0.1p -- 0.3 --
290,949,880 ordinary shares of 0.1p 0.3 -- --
0.3 0.3 0.3
During the first half of 2019, 447,143 (30 June 2018: 526,851; 31
December 2018: 3,288,475) new ordinary shares of 0.1p were issued to the
trusts administering the Group's share schemes.
447,143 (30 June 2018: 526,851; 31 December 2018: 988,475) of these were
issued to the Admiral Group Share Incentive Plan Trust for the purposes
of this share scheme.
No shares (30 June 2018: nil; 31 December 2018: 2,300,000) were issued
to the Admiral Group Employee Benefit Trust for the purposes of the
Discretionary Free Share Scheme.
12d. 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.
The Group's dividend policy is to pay 65% of post-tax profits as a
normal dividend and to pay a further special dividend comprising
earnings not required to be held in the Group for solvency or buffers.
Refer to the financial review for further information about the Group's
capital structure and financial
position.
12e. Related party transactions
Details relating to the remuneration and shareholdings of key management
personnel are set out in the Directors' Remuneration Report within the
Group's 2018 Annual 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%.
The Board considers that Executive and Non-Executive Directors of
Admiral Group plc are key management personnel. Aggregate compensation
for the Executive and Non-Executive Directors is disclosed in the
Directors' Remuneration Report in the 2018 Annual Report.
13. Reconciliations
The following tables reconcile significant KPIs and Alternative
Performance Measures included in the financial review above to items
included in the financial statements.
13a. Reconciliation of turnover to reported total premiums written and
other revenue as per the financial statements
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
Gross premiums written after co-insurance
per note 5a of financial statements 1,161.1 1,085.7 2,166.7
Premiums underwritten through co-insurance
arrangements and true up of 2018 gross written
premium 312.9 315.4 587.4
Total premiums written before co-insurance
arrangements 1,474.0 1,401.1 2,754.1
Other Revenue 233.1 223.4 449.2
Admiral loans interest income and other fee
income 13.3 5.1 15.4
1,720.4 1,629.6 3,218.7
Other(*1) 26.1 21.9 44.9
Turnover as per note 4 of financial statements 1,746.5 1,651.5 3,263.6
Intra-group income elimination(*2) 9.7 10.5 19.3
Total turnover 1,756.2 1,662.0 3,282.9
(*1 -- Other reconciling items represent co-insurer and reinsurer shares
of Other Revenue in the Group's Insurance businesses outside of UK Car
Insurance.)
(*2 -- Intra-group income elimination related to comparison income
earned in the Group from other Group companies.)
13b. Reconciliation of claims incurred to reported loss
ratio, excluding releases on commuted reinsurance
Int. Int.
UK Motor UK Home UK Other(*1) UK Total Int. Other(*1) Total Group
June 2019 GBPm GBPm GBPm GBPm Car GBPm GBPm GBPm GBPm
Net insurance claims 106.2 12.6 11.3 130.1 66.0 3.9 69.9 200.0
Deduct claims handling
costs (6.1) (0.5) -- (6.6) (3.6) -- (3.6) (10.2)
Prior year release/strengthening
-- net original share 50.0 2.7 -- 52.7 9.0 -- 9.0 61.7
Prior year release/strengthening
-- commuted share 52.8 -- -- 52.8 -- -- -- 52.8
Impact of reinsurer
caps -- -- -- -- (1.5) -- (1.5) (1.5)
Impact of weather
events -- -- -- -- -- -- -- --
Attritional current
period claims 202.9 14.8 11.3 229.0 69.9 3.9 73.8 302.8
-------- ------- ------------ -------- --------- ---------- ------ -------
Net insurance premium
revenue 225.4 18.1 21.2 264.7 80.6 3.9 84.5 349.2
Loss ratio -- current
period attritional 90.0% 81.7% -- -- 86.7% -- -- 86.8%
Loss ratio -- prior
year release/strengthening
(net original share) (22.2%) (14.9%) -- -- (11.2%) -- -- (17.7%)
Loss ratio -- reported 67.8% 66.8% -- -- 75.5% -- -- 69.1%
*1 "Other" includes travel insurance (UK) and underwritten ancillaries.
Int. Int. Int.
UK Motor UK Home UK Other UK Total Car Other Total Group
June 2018 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Net insurance claims 104.1 13.1 11.8 129.0 49.7 1.5 51.2 180.2
Deduct claims handling
costs (5.8) (0.2) -- (6.0) -- -- -- (6.0)
Prior year release/strengthening
-- net original share 56.5 1.2 -- 57.7 6.1 -- 6.1 63.8
Prior year release/strengthening
-- commuted share 35.2 -- -- 35.2 -- -- -- 35.2
Impact of reinsurer
caps -- -- -- -- 1.8 -- 1.8 1.8
Impact of weather events -- (3.7) -- (3.7) -- -- -- (3.7)
Attritional current
period claims 190.0 10.4 11.8 212.2 57.6 1.5 59.1 271.3
-------- ------- -------- -------- ------ ------ ------ -------
Net insurance premium
revenue 221.1 14.7 18.8 254.6 66.2 2.9 69.1 323.7
Loss ratio -- current
period attritional 85.9% 70.7% -- -- 87.0% -- -- 83.8%
Loss ratio -- current
period weather events -- 25.3% -- -- -- -- -- 1.1%
Loss ratio -- prior
year release/strengthening
(net original share) (25.6%) (8.4%) -- -- (9.2%) -- -- (19.7%)
Loss ratio -- reported 60.3% 87.6% -- -- 77.8% -- -- 65.2%
Int. Int. Int.
UK Motor UK Home UK Other UK Total Car Other Total Group
December 2018 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Net insurance claims 189.2 29.3 24.0 242.5 104.1 3.5 107.6 350.1
Deduct claims handling
costs (11.3) (0.5) -- (11.8) -- -- -- (11.8)
Prior year release/strengthening
-- net original share 111.4 1.4 -- 112.8 13.5 -- 13.5 126.3
Prior year release/strengthening
-- commuted share 109.6 -- -- 109.6 -- -- -- 109.6
Impact of reinsurer
caps -- -- -- -- 4.5 -- 4.5 4.5
Impact of weather events -- (3.5) -- (3.5) -- -- -- (3.5)
Impact of subsidence -- (2.5) -- (2.5) -- -- -- (2.5)
Attritional current
period claims 398.9 24.2 24.0 447.1 122.1 3.5 125.6 572.7
Net insurance premium
revenue 452.5 31.2 40.2 523.9 141.7 6.2 147.9 671.8
Loss ratio -- current
period attritional 88.1% 77.6% -- -- 86.1% -- -- 85.2%
Loss ratio -- current
period weather events -- 11.2% -- -- -- -- -- 0.5%
Loss ratio -- current
period subsidence events -- 7.9% -- -- -- -- -- 0.4%
Loss ratio -- prior
year release/strengthening
(net original share) (24.6%) (4.4%) -- -- (9.5%) -- -- (18.8%)
Loss ratio -- reported* 63.5% 92.3% -- -- 76.6% -- -- 67.3%
(*The group reported loss ratio has been represented at H1 2019 to
include the impact of weather events, in line with June 2018.)
13c. Reconciliation of expenses related to insurance contracts to
reported expense ratio
Int. Int. Int.
UK Motor UK Home UK Other UK Total Car Other Total Group
June 2019 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Net insurance expenses 30.1 4.5 2.6 37.2 23.0 0.1 23.1 60.3
Claims handling costs 6.1 0.5 -- 6.6 3.6 -- 3.6 10.2
Intra-group expenses
elimination(*1) 5.7 0.4 -- 6.1 3.6 -- 3.6 9.7
Impact of reinsurer
caps -- -- -- -- 0.6 -- 0.6 0.6
Net IFRS 16 finance
costs 0.3 -- -- 0.3 0.1 -- 0.1 0.4
Other adjustment(*2) -- -- -- -- -- (0.1) (0.1) (0.1)
Adjusted net insurance
expenses 42.2 5.4 2.6 50.2 30.9 -- 30.9 81.1
Net insurance premium
revenue 225.4 18.1 21.2 264.7 80.6 3.9 84.5 349.2
Expense ratio --
reported 18.7% 30.1% -- -- 38.4% -- -- 23.2%
Int. Int. Int.
UK Motor UK Home UK Other UK Total Car Other Total Group
June 2018 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Net insurance expenses 27.0 4.0 1.5 32.5 22.1 1.4 23.5 56.0
Claims handling costs 5.8 0.2 -- 6.0 -- -- -- 6.0
Intra-group expenses
elimination(*1) 6.9 0.4 -- 7.3 3.2 -- 3.2 10.5
Impact of reinsurer
caps -- -- -- -- 0.8 -- 0.8 0.8
Other adjustment(*2) -- -- -- -- -- (1.4) (1.4) (1.4)
Adjusted net insurance
expenses 39.7 4.6 1.5 45.8 26.1 -- 26.1 71.9
Net insurance premium
revenue 221.1 14.7 18.8 254.6 66.2 2.9 69.1 323.7
Expense ratio --
reported 17.9% 32.1% -- -- 39.4% -- -- 22.2%
Int. Int. Int.
UK Motor UK Home UK Other UK Total Car Other Total Group
December 2018 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Net insurance expenses 59.7 7.4 5.6 72.7 49.7 2.6 52.3 125.0
Claims handling costs 11.3 0.5 -- 11.8 -- -- -- 11.8
Intra-group expenses
elimination(*1) 12.3 0.8 -- 13.1 6.2 -- 6.2 19.3
Impact of reinsurer
caps -- -- -- -- 0.2 -- 0.2 0.2
Other adjustment(*2) -- -- -- -- -- (2.6) (2.6) (2.6)
Adjusted net insurance
expenses 83.3 8.7 5.6 97.6 56.1 -- 56.1 153.7
Net insurance premium
revenue 452.5 31.2 40.2 523.9 141.7 6.2 147.9 671.8
Expense ratio --
reported 18.4% 28.1% -- -- 39.6% -- -- 22.9%
(*1 -- The intra-group expenses elimination amount relates to aggregator
fees charges by the Group's comparison entities to other Group
companies.)
(*2 -- Other adjustments relate to additional products underwritten in
the Group's International Car Insurance businesses. The contribution
from these products is reported as ancillary income and as such the
amounts are excluded for the purpose of calculation of expense ratios.)
13d. Reconciliation of reported profit before tax to adjusted
profit before tax
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
Reported profit before tax per the
condensed consolidated income statement 218.2 210.7 476.2
Non-controlling interest share of
profit before tax 2.0 1.0 3.1
Group's share of profit before tax 220.2 211.7 479.3
14. Statutory Information
The financial information set out above does not constitute the
company's statutory accounts. Statutory accounts for 2018 have been
delivered to the registrar of companies, and those for 2019 will be
delivered in due course. The auditors have reported on those accounts;
their reports were (i) unqualified, (ii) did not include a reference to
any matters to which the auditors drew attention by way of emphasis
without qualifying their report and (iii) did not contain a statement
under section 498 (2) or (3) of the Companies Act 2006.
Glossary
Alternative Performance Measures
Throughout this report, the Group uses a number of Alternative
Performance Measures (APMs); measures that are not required or commonly
reported under International Financial Reporting Standards, the
Generally Accepted Accounting Principles (GAAP) under which the Group
prepares its financial statements.
These APMs are used by the Group, alongside GAAP measures, for both
internal performance analysis and to help shareholders and other users
of the Group's financial statements to better understand the Group's
performance in the period in comparison to previous periods and the
Group's competitors.
The table below defines and explains the primary APMs used in this
report. Financial APMs are usually derived from financial statement
items and are calculated using consistent accounting policies to those
applied in the financial statements, unless otherwise stated. Non
financial KPIs incorporate information that cannot be derived from the
financial statements but provide further insight into the performance
and financial position of the Group.
APMs may not necessarily be defined in a consistent manner to similar
APMs used by the Group's
competitors. They should be considered as a supplement rather than a
substitute for GAAP measures.
Turnover Turnover is defined as total premiums written (as below),
other revenue and income from Admiral Loans. It is
reconciled to financial statement line items in note
13a to the financial statements.
This measure has been presented by the Group in every
financial report since it became a listed Group in
2004. It reflects the total value of the revenue generated
by the Group and analysis of this measure over time
provides a clear indication of the size and growth
of the Group.
The measure was developed as a result of the Group's
business model. The core UK Car Insurance business
has historically shared a significant proportion of
the risks with Munich Re, a third party insurance Group,
through a co-insurance arrangement, with the arrangement
subsequently being replicated in some of
the Group's International Insurance operations. Premiums
and claims accruing to the external co-insurer are
not reflected in the Group's income statement and therefore
presentation of this metric enables users of the financial
reports to see the scale of the Group's insurance operations
in a way not possible from taking
the income statement in isolation.
-------- -------------------------------------------------------------------
Total premiums Total premiums written are the total forecast
written premiums, net of forecast cancellations written
in the underwriting year within the Group, including
co- insurance. It is reconciled to financial statement
line items in note 13a to the financial statements.
This measure has been presented by the Group in
every financial report since it became a listed
Group in 2004. It reflects the total premiums
written by the
Group's insurance intermediaries and analysis
of this measure over time provides a clear indication
of the growth in premiums, irrespective of how
co-insurance agreements have changed over time.
The reasons for presenting this measure are consistent
with that for the Turnover APM noted above.
------------------- -----------------------------------------------------------
Group's share of Group's share of profit before tax represents
profit profit before tax, excluding the impact of non-controlling
before tax interests. It is reconciled to statutory profit
before tax in note 13d to the financial statements.
This measure is useful in presenting the limit
of the Group's exposure to the expenditure incurred
in starting up new businesses and demonstrates
the 'test- and-learn' strategy employed by the
Group to expansion into new territories.
Underwriting result For each insurance business an underwriting result
(profit or loss) is presented showing the segment result prior
to the inclusion of profit commission, other income
contribution and instalment income. It demonstrates
the insurance result, i.e. premium revenue and
investment income less claims incurred and insurance
expenses.
Loss Reported loss ratios are expressed as a percentage
ratio of claims incurred divided by net earned premiums.
There are a number of instances within the Annual Report
where adjustments are made to this calculation in order
to more clearly present the underlying performance
of the Group and operating segments within the Group.
The calculations of these are presented within note
13b to the accounts and explanation is as follows.
UK reported car insurance loss ratio: Within the UK
Insurance segment the Group separately present motor
ratios, i.e. excluding the underwriting of other products
that supplement the car insurance policy. The motor
ratio is adjusted to i) exclude the impact of reserve
releases on commuted reinsurance contracts and ii)
exclude claims handling costs that are reported within
claims costs in the income statement.
International Insurance loss ratio: As for the UK motor
loss ratio, the International Insurance loss ratios
presented exclude the underwriting of other products
that supplement the car insurance policy. The motor
ratio is adjusted to exclude the claims element of
the impact of reinsurer caps as inclusion of the impact
of the capping of reinsurer claims costs would distort
the underlying performance of the business.
Group loss ratios: Group loss ratios are reported on
a consistent basis as the UK and international ratios
noted above. Adjustments are made to i) exclude the
impact of reserve releases on commuted reinsurance
contracts, ii) exclude claims handling costs that are
reported within claims costs in the income statement
and
iii) exclude the claims element of the impact of international
reinsurer caps.
Expense Reported expense ratios are expressed as a percentage
ratio of net operating expenses divided by net earned
premiums.
There are a number of instances within the Annual
Report where adjustments are made to this calculation
in order to more clearly present the underlying
performance of the Group and operating segments
within the Group. The calculations of these are
presented within note 13c to the accounts and explanation
is as follows.
UK reported car expense ratio: Within the UK Insurance
segment the Group separately present motor ratios,
i.e. excluding the underwriting of other products
that supplement the car insurance policy. The motor
ratio is adjusted to i) include claims handling
costs that are reported within claims costs in the
income statement and ii) include intra-group aggregator
fees charged by the UK comparison business to the
UK Insurance business.
International Insurance expense ratio: As for the
UK car loss ratio, the International Insurance expense
ratios presented exclude the underwriting of other
products that supplement the car insurance policy.
The car ratio is adjusted to i) exclude the expense
element of the impact of reinsurer caps as inclusion
of the impact of the capping of reinsurer expenses
would distort the underlying performance of the
business and ii) include intra-group aggregator
fees charged by the overseas comparison businesses
to the international insurance businesses.
Group expense ratios: Group expense ratios are reported
on a consistent basis as the UK and international
ratios noted above. Adjustments are made to i) include
claims handling costs that are reported within claims
costs in the income statement, ii) include intra-group
aggregator fees charged by the Group's
comparison businesses to the Group's insurance businesses
and iii) exclude the
expense element of the impact of international reinsurer
caps.
----------- -----------------------------------------------------------------
Combined Reported combined ratios are the sum of the loss
ratio and expense ratios as defined above. Explanation
of these figures is noted above and reconciliation
of the calculations are provided in notes 13b and
13c.
-----------------------------------------------------------------
Return on Return on equity is calculated as profit after tax
equity for the period attributable to equity holders of
the Group divided by the average total equity attributable
to equity holders of the Group in the year. This
average is determined by dividing the opening and
closing positions for the year by two.
The relevant figures for this calculation can be
found within the consolidated statement of changes
in equity.
-----------------------------------------------------------------
Group Group customer numbers are the total number of cars,
customers households and vans on cover at the end of the year,
across the Group.
This measure has been presented by the Group in
every Annual Report since it became a listed Group
in 2004. It reflects the size of the Group's customer
base and analysis of this measure over time provides
a clear indication of the growth. It is also a useful
indicator of the growing significance to the Group
of the
different lines of business and geographic regions.
Effective tax Effective tax rate is defined as the approximate
rate 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.
Additional Terminology
There are many other terms used in this report that are specific to the
Group or the markets in which it operates. These are defined as follows:
Accident year The year in which an accident occurs, also referred
to as the earned basis.
-------------------- -----------------------------------------------------------
Actuarial best A probability-weighted average of all future claims
estimate and cost scenarios calculated using historical
data, actuarial methods and judgement.
-----------------------------------------------------------
ASHE 'Annual Survey of Hours and Earnings' -- a statistical
index that is typically used for calculating inflation
of annual payment amounts under Periodic Payment
Order (PPO) claims settlements.
-----------------------------------------------------------
Claims reserves A monetary amount set aside for the future payment
of incurred claims that have not yet been settled,
thus representing a balance sheet liability.
-----------------------------------------------------------
Co-insurance An arrangement in which two or more insurance companies
agree to underwrite insurance business on a specified
portfolio in specified proportions. Each co- insurer
is directly liable to the policyholder for their
proportional share.
-----------------------------------------------------------
Commutation An agreement between a ceding insurer and the reinsurer
that provides for the valuation, payment, and complete
discharge of all obligations between the parties
under a particular reinsurance contract.
The Group typically commutes UK car insurance quote
share contracts after 24 months from the start
of an underwriting year where it makes economic
sense to do so. Although an individual underwriting
year may be profitable, the margin held in the
financial statement claims reserves may mean that
an accounting loss on commutation must be recognized
at the point of commutation of the reinsurance
contracts. This loss on commutation unwinds in
future periods as the financial statement loss
ratios develop to ultimate.
-----------------------------------------------------------
Insurance market The tendency for the insurance market to swing
cycle between highs and lows of profitability over time,
with the potential to influence premium rates (also
known as the "underwriting cycle").
-----------------------------------------------------------
Net claims The cost of claims incurred in the period, less
any claims costs recovered under reinsurance contracts.
It includes both claims payments and movements
in claims reserves.
-----------------------------------------------------------
Net insurance Also referred to as net earned premium. The element
premium revenue of premium, less reinsurance premium, earned in
the period.
-----------------------------------------------------------
Ogden discount The discount rate used in calculation of personal
rate injury claims settlements. The rate is set by the
Lord Chancellor.
-----------------------------------------------------------
Periodic Payment A compensation award as part of a claims settlement
Order (PPO) that involves making a series of annual payments
to a claimant over their remaining life to cover
the costs of the care they will require.
-----------------------------------------------------------
Premium A series of payments are made by the policyholder,
typically monthly or annually, for part of or all
of the duration of the contract. Written premium
refers to the total amount the policyholder has
contracted for, whereas earned premium
refers to the recognition of this premium over
the life of the contract.
-----------------------------------------------------------
Profit commission A clause found in some reinsurance and coinsurance
agreements that provides
for profit sharing.
-------------------------------------------------------------
Reinsurance Contractual arrangements whereby the Group transfers
part or all of the insurance risk accepted to another
insurer. This can be on a quota share basis (a
percentage share of premiums, claims and expenses)
or an excess of loss basis (full reinsurance for
claims over an agreed value).
-------------------------------------------------------------
Securitisation A process by which a group of assets, usually loans,
is aggregated into a pool, which is used to back
the issuance of new securities. A company transfer
assets to a special purpose entity (SPE) which
then issues securities backed by the assets.
-------------------------------------------------------------
Special Purpose An entity that is created to accomplish a narrow
Entity (SPE) and well-defined objective. There are specific
restrictions or limited around ongoing activities.
The Group uses an SPE set up under a securitisation
programme.
-------------------------------------------------------------
Ultimate loss A projected actuarial best estimate loss ratio
ratio for a particular accident year or underwriting
year.
-------------------------------------------------------------
Underwriting year The year in which an insurance policy is incepted.
-------------------------------------------------------------
Underwriting year Also referred to as the written basis. Claims incurred
basis are allocated to the calendar year in which the
policy was underwritten. Underwriting year basis
results are calculated on the whole account (including
co-insurance and reinsurance shares) and include
all premiums, claims, expenses incurred and other
revenue (for example instalment income and commission
income relating to the sale of products that are
ancillary to the main insurance policy) relating
to policies incepting in the relevant underwriting
year.
-------------------------------------------------------------
Written/Earned A policy can be written in one calendar year but
basis earned over a subsequent calendar year.
-------------------------------------------------------------
Responsibility statement of the directors in respect of the half-yearly
financial report
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU;
-- the interim management report includes a fair review of the information
required by:
1. DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed
set of financial statements; and a description of the principal
risks and uncertainties for the remaining six months of the year;
and
2. DTR 4.2.8R of the Disclosure and Transparency Rules, being related
party transactions that have taken place in the first six months
of the current financial year and that have materially affected
the financial position or performance of the entity during that
period; and any changes in the related party transactions
described in the last annual report that could do so.
By order of the Board,
Geraint Jones
Chief Financial Officer
13 August 2019
INDEPENDENT REVIEW REPORT TO ADMIRAL GROUP PLC
We have been engaged by the company to review the condensed set of
financial statements in the half-yearly financial report for the six
months ended 30 June 2019 which comprises the condensed consolidated
income statement, the condensed consolidated statement of comprehensive
income, the condensed consolidated statement of financial position, the
condensed consolidated cash flow statement, the condensed consolidated
statement of changes in equity and related notes 1 to 14. We have read
the other information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the Independent
Auditor of the Entity" issued by the Financial Reporting Council. Our
work has been undertaken so that we might state to the company those
matters we are required to state to it in an independent review report
and for no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the company,
for our review work, for this report, or for the conclusions we have
formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing
the half-yearly financial report in accordance with the Disclosure
Guidance and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly
financial report has been prepared in accordance with International
Accounting Standard 34 "Interim Financial Reporting" as adopted by the
European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on the
condensed set of financial statements in the half-yearly financial
report based on our review.
Scope of review
We conducted our review in accordance with International Standard on
Review Engagements (UK and Ireland) 2410 "Review of Interim Financial
Information Performed by the Independent Auditor of the Entity" issued
by the Financial Reporting Council for use in the United Kingdom. A
review of interim financial information consists of making inquiries,
primarily of persons responsible for financial and accounting matters,
and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the
half-yearly financial report for the six months ended 30 June 2019 is
not prepared, in all material respects, in accordance with International
Accounting Standard 34 as adopted by the European Union and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
London, United Kingdom
13 August 2019
(END) Dow Jones Newswires
August 14, 2019 02:00 ET (06:00 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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