TIDMADM
3 March 2022
Admiral Group plc announces full year results with growth in
Group profit and customers for the year ended 31 December 2021
2021 Results Highlights
2021 2020 % change
Group Profit before tax, continuing GBP769.0 GBP608.2
operations(1) (2) (3) million million +26%
Earnings per share, continuing
operations(1) (2) (3) 212.2 pence 170.7 pence +24%
Group profit before tax including
discontinued operations and gain GBP1,129.2 GBP637.6
on disposal(3) million million +77%
Full year dividend per share(4) 187.0 pence 156.5 pence +19%
First and second special dividends
per share from sale of Penguin
Portals comparison businesses 92.0 pence - -
Return on equity(1) (23) 56% 52% 8%
GBP3.51 GBP3.37
Group turnover(1) (3) (5) billion billion +4%
Group net revenue, continuing GBP1.55 GBP1.31
operations(1) billion billion +19%
Group customers(3) 8.36 million 7.66 million +9%
UK insurance customers(3) 6.44 million 5.98 million +7%
International car insurance
customers(3) 1.81 million 1.60 million +13%
Solvency ratio(3) 195% 187% 4%
Around 10,000 employees each receive free shares worth up to
GBP3,600 under the employee share scheme based on the full year
2021 results.
Comment from Milena Mondini de Focatiis, Group Chief Executive
Officer:
"Once again, we have delivered excellent service for a larger
number of customers and a strong set of results, due to unusual
market conditions, Admiral's underwriting discipline and a focus on
doing the common, uncommonly well.
In 2021 we improved in all of our key metrics, including
exceeding 8 million customers, increasing customer loyalty and
recording exceptional profits of GBP769 million.
We continued to evolve our market-leading core insurance
competencies in claims and risk-selection. For example, the
increased adoption of machine learning models has improved our
pricing effectiveness and agility and put us in a good position to
embrace changes such as the new FCA general insurance pricing
practices.
The strong performance of UK Motor insurance is the key driver
of our results. We also continued to expand our customer
proposition. In 2021 alone, beyond UK Motor we added more than half
a million customers, now representing around 40% of total Group
customers. We grew by double digits in both our UK Household and
International businesses, despite challenging market conditions
abroad, and our Loans stock balance is now larger than pre-Covid
levels. We are pleased to see the results of our ability to export
some of our competitive advantages to these new businesses and we
are also planting seeds for further diversification in the longer
term through Admiral Pioneer, for example with small business
insurance.
Our aim is to help more customers than ever to look after their
future, and to do this better every day. We are also keen to
contribute to secure the future of our communities by substantially
increasing our investment and committing to net zero by 2040 at the
latest.
I would like to thank all my colleagues for their hard work and
continued focus on our customers. They are the key to Admiral's
success and have made my first year as Group CEO so enjoyable."
Comment from Annette Court, Group Chair:
"A company is only as good as its people and Admiral is no
exception. At the start of 2021, Milena Mondini de Focatiis took
the helm as Group CEO and has successfully steered the Group
through a difficult year to another set of positive results and
increased profitability.
The business has continued to grow its customer numbers and been
recognised as a great place to work across operations as well as a
Diversity Leader in Europe; proof that, during times of
uncertainty, the Group continues to deliver for customers and
colleagues.
Admiral is an agile business that continues to deliver long-term
sustainable growth by adopting a test-and-learn approach to its
evolution. Diversification is a key focus for the Group and I
believe that Admiral is on the right course, and as we successfully
execute our strategy, will emerge even stronger.
On behalf of the Board, I would like to thank everyone at
Admiral for their hard work and dedication which made this year's
strong results possible."
Dividend
The Board has proposed a final dividend of 118.0 pence per share
(2020: 86.0 pence per share) representing a normal dividend (65% of
post-tax profits) of 42.2 pence per share and a special dividend of
75.8 pence per share. The special dividend includes 46.0 pence per
share as the second of three payments related to the Penguin
Portals disposal proceeds. The dividend will be paid on 6 June
2022. The ex-dividend date is 5 May 2022 and the record date is 6
May 2022.
Management presentation
Analysts and investors will be able to access the Admiral Group
management presentation which commences at 9:00am GMT on Thursday 3
March 2022 by registering on the Admiral website at
www.admiralgroup.co.uk. A copy of the presentation slides will also
be available on the website.
Investors & Analysts: Admiral
Marisja Kocznur marisja.kocznur@admiralgroup.co.uk
Media: Admiral Group plc
Addy Frederick +44 (0) 7436 035615
Media: FTI Consulting
Edward Berry +44 (0) 20 3727 1046
Tom Blackwell +44 (0) 20 3727 1051
Chair Statement
Background to the year
Well that was quite a challenging year - again! Against this
backdrop, Admiral continued to thrive.
Milena Mondini de Focatiis took over as Group CEO back in
January and has provided strong leadership. She has further built a
high-performing team which continues to take the business from
strength to strength, building on Admiral's solid foundations and
maintaining the key ingredients that make Admiral different. We
remain focused on continuously strengthening our core competences
while creating sustainable businesses for the future.
The welfare of our people remains a top priority. I am proud of
the way they have responded to the changing Covid situation in
looking after each other, our customers and the community at large,
whilst always remaining true to Admiral's values.
Looking back at 2021
Admiral has produced another strong set of results in 2021 in
both reported profit and growth. This is once again due to our
people. They make the real difference at Admiral and take care of
all the little things that make that difference; continuously
evolving and improving the business. They remain true to our
purpose to - Help more people to look after their future. Always
striving for better together - ensuring that we do the right things
in consideration of all of our stakeholders.
The Group has continued to grow with turnover increasing by 4%
to GBP3.51 billion, whilst customer numbers are 9% higher than 2020
at 8.36 million. Group pre-tax profit increased by 26% to GBP769
million. Covid continued to impact the results in all markets in
which we operate. In the UK profits were strong due to accident
frequency taking longer to return to more normal historical levels
than expected and strong prior year development, notably in the
first half of the year. We continue to maintain a prudent approach
and, as a result, benefited from strong reserve releases from past
years. Earnings per share rose by 24% and return on equity was 56%.
The Group's solvency ratio remains robust at 195% (187% at the end
of 2020).
In the UK we prepared for the changes resulting from the FCA
market pricing study for general insurance that will affect Motor
and Household insurance products. The full changes came into effect
in January 2022, and we anticipate that they will have a
significant impact on the market. We see this as an opportunity to
continue to build on Admiral's strengths and desire to do the right
thing for customers. As a reminder, approximately 80% of Admiral
customers shop around at renewal, so we are encouraged that the
majority choose to remain with us; this being an indicator of our
good customer experience and competitive pricing.
International insurance delivered good customer growth but an
overall loss as Covid-related accident frequency benefits returned
to more normal levels and competitive activity increased in most
markets.
We have continued to grow our Loans business. The loans book
remains resilient despite economic uncertainty largely as a result
of our prime customer base and prudent approach.
As I covered last year, we were pleased to complete the
successful sale of our Comparison businesses, although we were sad
to say goodbye to many colleagues.
Dividend
Our dividend policy remains that we pay a normal dividend of 65%
of post-tax profit and distribute each year as a special dividend
the available surplus over and above what we retain to meet
regulatory requirements, the future development needs of our
business and appropriate buffers.
As a result of the sale of the Comparison businesses, we
announced that the proceeds would be returned to shareholders as a
further special dividend phased equally over the interim 2021,
final 2021 and interim 2022 dividends. Therefore, the Directors
have recommended a final dividend of 118.0 pence per share (2020:
86.0 pence per share) for the year to 31 December 2021 representing
a distribution of 91% of our second half earnings (72.0 pence per
share) as well as 46.0 pence per share as the second of three
payments related to the Penguin Portals disposal proceeds.
This will bring the total dividend for the year to 279.0 pence
per share, an overall increase of 78%. This represents a pay-out
ratio of 88% of full year earnings (187.0 pence per share) and 92.0
pence per share related to the Penguin Portals disposal. The Group
has delivered a Total Shareholder Return (TSR) of 577% over the
last 10 years.
Group Board in 2021
The Board recognises the need for a strong corporate governance
framework and supporting processes across the Group and believes
that good governance, with the tone set from the top, is a key
factor in delivering sustainable business performance and creating
value for all the Group's stakeholders.
The Group strategy remains straightforward and highly focused on
building customer-centric, sustainable businesses for the
long-term. Within this context, we do not rest on our strengths,
but rather strive to keep doing what we're doing well and do it
better year after year.
In our UK Insurance business, we remain determined to strengthen
our core competitive advantages and nurture our culture of
innovation via our 'test and learn' approach. For example, we are
continuing to deploy technology relating to digital and
self-service to improve customer experience and overall
efficiencies.
We also continue to take these core strengths to new markets and
new products, both in the UK and abroad, which enhances our
diversification and the future growth of the business. We are agile
enough to adapt to evolving business environments and encourage
entrepreneurial initiatives to solve challenges and offer the best
outcome to our customers, people and investors. One example is
Admiral Pioneer, a business focusing on diversification through new
business areas, that builds on our traditional 'test and learn'
approach.
From a governance perspective, we continue to apply the
principles of the Corporate Governance Code which ensures that we
will continue to take on board the views of all of our stakeholders
in our discussions and decision making. As you would expect, we
already have strong links with our people and in 2021, the Board
revisited and enhanced several areas of focus including our
culture, engagement, diversity, our impact on the environment and
climate change, and how we give back and participate in the
communities in which we operate.
Once again Admiral was recognised as a great place to work in
2021 ranking as the 17(th) best workplace in Europe by Great Place
to Work as well as a Diversity leader in Europe by the Financial
Times. We were awarded 5(th) position at the 'Best Big Companies to
Work For' awards in the UK and are the only UK company to be listed
for 21 consecutive years. We were also named the 2(nd) best
workplace for women in the UK and recognised for our Wellbeing
initiatives. I could go on..!
Of course, this doesn't happen by accident. We continue to
believe that if people like what they do, they do it better. We
strive to create a diverse and inclusive workplace where our people
feel that they belong and their voices are valued.
Having our people as shareholders remains a distinctive element
of Admiral's incentive schemes. These are designed to ensure that
decisions are made by management to support long-term value growth,
that the right behaviours are rewarded and that our people's
interests are aligned with those of shareholders. Our core belief
is that over the long-term, share price appreciation depends on
delivering great outcomes for our customers.
During the year, I usually visit our overseas operations as well
as being present regularly in South Wales. This year I had the
pleasure of visiting our operations in the UK, France, Italy, Spain
and the US -- a mix of physical and virtual visits. All
Non-Executive Directors participated in a number of these visits.
We also attended the Employee Consultation Group meetings. This
allowed us to keep contact with our people during this difficult
period and directly hear their views and the challenges they faced.
The Admiral culture still shines through.
We reviewed the composition of the Board in 2021 and made two
new appointments: Evelyn Bourke, who has a wealth of experience in
financial services, risk, capital management and transformation,
now chairs the Remuneration Committee; and Bill Roberts who has
extensive insurance, underwriting and marketing experience brings
valuable knowledge and insight on the US insurance market. Manning
Rountree and Owen Clarke stepped down from the Board after many
years. We are thankful for the huge contribution they have
made.
The Board and I feel that there is a good balance of experience,
skills and knowledge to support and challenge the management team,
and that operations are supported by effective governance and
control systems.
The Board remains focused on the following areas:
-- Continuing to build on the remarkably special Admiral culture that places
our people, customers and wider impact on the community at the heart of
what we do
-- Continuing our trajectory of growth, profitability and innovation
-- Investing in the development and growth of our people
-- Ensuring excellent governance and the highest standards
-- Focusing on all aspects of ESG
Our role in Society
Admiral takes its role in society very seriously and has an
active approach to Corporate Responsibility by focusing on all our
stakeholders and the wider impact we have (more information in the
Sustainability Report on the Admiral website). We are proud to be
Wales' only FTSE 100 headquartered company and employ over 7,000
people in South Wales. Our people play an active part in the
communities in which we operate. We carefully consider our impact
on the community and environment, including factors such as the
green credentials of our buildings, raising funds for multiple
charities, and considering the impact of climate change across the
business.
This year we announced our ambition to be net zero by 2040 and
to be net zero across our operations for scope 1 and 2 emissions by
2030(6) . We aim to be an economically strong and responsible
business over the long-term, guided by a clear purpose, to make a
positive and significant impact not just on our customers and our
people, but on the economy and society as a whole.
Thank you
On behalf of the Board, I would like to thank everyone at
Admiral for their continued hard work, their adaptability and
caring behaviour and their contribution to the Group's results in
2021. I would also like to thank our shareholders for their support
and confidence. Most of all I would like to thank our customers for
placing their trust in us.
Annette Court
Group Chair
2 March 2022
Group Chief Executive Officer's Review
My first year as group CEO has been intense and not short of
challenges; at the same time there has been plenty to be proud of.
We have delivered -- yet again -- growth, strong financial results
and increased customer loyalty, surpassing 8m customers and
recording exceptional profits of GBP769 million(7) , due to unusual
market conditions and Admiral's disciplined approach. This has been
achieved despite turbulent conditions, starting with continued
disruption from Covid and ending with a massive collective effort
to plan and build rate structures well-adapted to life post the FCA
pricing reforms introduced in January 2022.
There is no doubt that David left me big boots to fill...
perhaps mine will be fancy Italian ones in a much smaller size!
Admiral may have more in common with a finely crafted pair of shoes
than you might expect. Our strong insurance capabilities and
technical competences are the sole on which everything is built,
our strategy is the design in continuous evolution to meet
ever-evolving customer needs and our people and unique culture are
the stitching which holds everything together. Like an expert
shoemaker, we strive to produce high quality products by doing the
common, uncommonly well.
So what do I mean by this? It's common to all insurers who
survive beyond infancy that they are competent in the core
insurance disciplines - notably risk selection, claims handling and
effective digital distribution and servicing. What sets Admiral
apart from most of our peers is our ability to deliver on these
consistently well and 2021 has been no different.
This consistent track record is only possible as we continue to
evolve and modernize our operating model and invest in innovation
for the long term. The adoption of machine learning models has
increased our pricing agility, enabling us to offer customers good
value products while protecting loss ratios. This will stand us in
good stead following the introduction of the UK FCA pricing
remedies in January. We also made great progress in the adoption of
Scaled Agile and our digital acceleration, deploying, for example,
a new claims system that allows our UK Household customers to
settle claims completely online if they wish to do so.
Adapting and expanding our proposition to customers is a
strategic priority for us. We are successfully scaling UK
Household, reaching 1.3 million customers, and the Loans business
grew to GBP607 million gross balances in 2021. Admiral Pioneer
launched its first product for SMEs last year and continues to
explore the evolution in mobility, seeding smaller businesses for
the future. We now have over 1.8 million customers across our
international businesses and continued to grow the customer base by
13% despite the market being as competitive as ever. We are also
working on building distribution capabilities outside of price
comparison to create more optionality for efficient growth and
realise more economies of scale.
A key feature of 2021 was saying goodbye to our friends at the
Penguin Portals comparison businesses, and we wish them the best of
luck. We successfully completed the sale process and believe a good
outcome was achieved for all. This will give us the chance to focus
even more on our main markets in the future.
Our people and our unique culture are what makes Admiral great
and will continue to do so. All our businesses have completed the
moved to hybrid working this year. Covid continued to create
uncertainty for both our businesses and colleagues, but we
demonstrated our agility and ability to quickly adapt to meet our
customers' needs and continue to deliver the great service they
expect from us. We have worked hard to ensure that Admiral remains
a fantastic place to work, and this year we have been named among
the top best places to work in every country in which we operate,
including the 5th best super large workplace in the UK and 1(st) in
Spain.
We have pledged to reach net zero emissions by 2040 as part of
our commitment to long-term sustainability and environmental
improvement. We are proud to support our local communities and in
2020 we established an Admiral Support Fund to provide support to
those most impacted by the pandemic, setting aside GBP6 million
over the past two years with over 350 organisations having received
support. This includes a GBP1 million donation we made to UNICEF to
help support our colleagues and communities in India. We are
excited about the continuous evolution of our sustainability
strategy and to continue to increase our support to our local
communities.
What a roller-coaster of a year! I am incredibly proud that we
are now helping more customers than ever to look after their
future.
Thank you so much to our enlarged Admiral family, our customers,
Board and shareholders who continue to support us. And more
importantly, thank you to all my colleagues, our people, who are
the key to Admiral's success.
Milena Mondini de Focatiis
Group Chief Executive Officer
2 March 2022
Group Chief Financial Officer's Review
I closed my 2020 review hoping for a more cheerful 2021, and
whilst the pandemic again put paid to that and Wales didn't win the
Euros (), Admiral's financial performance was strong, with all our
businesses growing customer numbers year-on-year along with a very
positive bottom-line outcome for the Group. Let me start by giving
a brief overview of the results:
GBPm 2021 2020 Change
UK Insurance 894 698 +196
International Insurance (12) 9 (21)
Admiral Loans (6) (14) +8
Share scheme cost (63) (51) (12)
Other (44) (34) (10)
Continuing operations pre-tax
profit* 769 608 +161
Restructure cost (56) - (56)
Continuing operations profit
after restructure cost 713 608 +105
==== ==== ======
* continuing operations = excluding results and gain on disposal
of the Comparison businesses sold by the Group in 2021
The standout positive is clearly the big increase in UK
Insurance profit - even more pronounced than in 2020 when the
impact of Covid on the results was first seen. The UK Household
business contributed another decent profit (GBP21m, up from
GBP15m), though the Motor business profit was nearly GBP190m higher
than 2020 and was the driver of the year-on-year increase.
The main reason for the step-up v 2020 is very positive
development of back year claims costs, leading to large releases of
reserves and increased profit commission revenue. Both the 2020 and
2021 financial years also benefited from current period loss ratios
that were notably lower than previous years, meaning profit for
both financial years was clearly elevated compared to the recent
past.
It is important to note that profit in the second half of 2021
was lower than the first half (GBP290m v GBP480m) as both the prior
year claims movements and Covid frequency benefits were much more
pronounced in the first six months. With frequency heading closer
to normal levels during H2 (apart from the very end of the year)
and premium rates having been discounted beforehand, a lower level
of profit was to be expected. We expect that Group profit in 2022
will be lower than 2021 and 2020.
You'll note a GBP56m restructure charge in the 2021 numbers
which reflects the cost of exiting leases on a number of the
Group's south Wales offices, impairment of some technology assets
and costs relating to a voluntary redundancy programme carried out
in late 2021. The move to smart working (reducing our office space
need) and ongoing shift of technology to the cloud and other system
upgrades (meaning some older systems required writing down) were
the key reasons behind the charge. The total cost of the
restructure is around GBP66m - GBP56m was recognised in 2021 with
the balance to flow through in subsequent years. A large majority
of the total is not an in-year cash outflow, and the restructure
will result in cost savings in 2022 and beyond. The strong Group
solvency position at the end of 2021 means we can 'look through'
this charge when proposing the final dividend.
The next biggest change in segment results year-on-year was the
loss from the International Insurance business following the profit
in 2020. Whilst we budgeted a loss for 2021, the actual result was
a little worse than plan. A number of things contributed to the
outturn, not least quite a big unwind of the lower Covid-related
frequency seen in the 2020 loss ratios and highly competitive
conditions in most markets which led to reduced average premium per
customer. Consistent with our objective to continue to scale, our
business continued to grow quite nicely, adding over 200,000
customers and increasing turnover by 6%. We also continued to
invest in the technology and capabilities that we believe set the
businesses up well for the future.
Other points of note from the results include:
-- The Admiral Loans result improved year-on-year, mainly due to a much
lower credit loss charge resulting from reduced economic uncertainty. The
business progressed very nicely and grew its balances to GBP607m from
GBP402m. We're planning for further strong growth in 2022 and hoping for
a further improvement in the bottom line
-- Share scheme costs moved higher due to an unusually positive combination
of increased share price, higher assumed share plan vesting due to strong
financial performance and also higher staff bonuses resulting from higher
shareholder dividends. To us this is a good illustration of the alignment
between reward for our people and outcomes for shareholders. In the
absence of a material increase in the share price during 2022, we don't
expect as high a cost in 2022
-- And finally other costs (which include the results from the Admiral
Pioneer businesses plus central overheads and finance costs) were also
higher, mainly driven by Admiral Pioneer, where as well as the results
from the existing Veygo business we started to invest in new ventures in
SME insurance in the UK and mobility insurance in France
Penguin Portals disposal
Moving away from the results, we completed the sale of Penguin
Portal Comparison businesses (confused.com in the UK being the
largest member) at the end of April 2021. Cash proceeds were
approximately GBP470m, whilst the gain recorded in the Group income
statement in 2021 was around GBP400m.
We have already started to return GBP400m of the proceeds to
shareholders in the form of special dividends, split equally over
the interim 2021, final 2021 and interim 2022 dividends. 46 pence
per share of the total final 2021 dividend (of 118 pence per share)
is in respect of the Penguin sale and the final 45 pence per share
will follow in October 2022.
Very best wishes to our former colleagues and friends in their
new home.
Co-insurance and reinsurance
We were pleased in the first half of 2021 to conclude important
negotiations with our largest reinsurer, Munich Re, to extend our
risk sharing partnership in the UK car insurance business covering
40% of the total premium. The co-insurance contract which expires
at the close of the 2021 underwriting year has been in effect in
some form for nearly two decades and we're delighted to be renewing
the long-term arrangement.
Munich will underwrite 20% of the business via a new
co-insurance contract due to expire at the end of 2029 and a
further 10% via a new quota share reinsurance contract expiring at
the end of 2026. The existing 10% quota share contract will also
remain in effect until at least the end of 2023. The changes should
result in higher profit commission income for Admiral from 2022
onwards, compared to the expiring arrangements.
Thank you
It's been said by my colleagues already in the report, but it
can't be said enough -- my most sincere thanks to everyone across
Admiral Group for their huge efforts -- always, but especially over
the past couple of pandemic-impacted years. I'm very much looking
forward to getting back to the office and meeting colleagues more
regularly, asap!
Geraint Jones
Group Chief Financial Officer
2 March 2022
2021 Group Overview
GBPm 2021 2020 2019
--------------------------------------------------- ------- ------ ------
Group Turnover (GBPbn) *1*2*3 3.51 3.37 3.30
Continuing operations
Underwriting profit including investment
income*2 347.0 333.1 238.0
Profit commission 304.5 134.0 114.9
Net other revenue and expenses *2 129.4 153.4 164.7
Operating profit, excluding restructure
cost 780.9 620.5 517.6
Group profit before tax, excluding restructure
cost 769.0 608.2 505.1
Group profit before tax, including restructure
cost 713.5 608.2 505.1
---------------------------------------------------
Statutory Group profit before tax, including
discontinued operations and gain on disposal 1,129.2 637.6 522.6
---------------------------------------------------
Analysis of profit from continuing operations:
UK Insurance 894.0 698.3 597.9
International Insurance (11.6) 8.8 (0.9)
Loans (5.5) (13.8) (8.4)
Other (107.9) (85.1) (83.5)
---------------------------------------------------
Group profit before tax, excluding restructure
cost 769.0 608.2 505.1
--------------------------------------------------- ------- ------ ------
Key metrics:
--------------------------------------------------- ------- ------ ------
Group loss ratio*2*4 58.5% 54.4% 64.9%
--------------------------------------------------- ------- ------ ------
Group expense ratio*2*4 26.7% 26.8% 23.7%
--------------------------------------------------- ------- ------ ------
Group combined ratio*2*4 85.2% 81.2% 88.6%
--------------------------------------------------- ------- ------ ------
Customer numbers (million) 8.36 7.66 6.98
--------------------------------------------------- ------- ------ ------
Earnings per share*3 continuing operations
excluding restructure cost 212.2p 170.7p 143.7p
--------------------------------------------------- ------- ------ ------
Earnings per share, continuing operations
including restructure cost 196.7p 170.7p 143.7p
--------------------------------------------------- ------- ------ ------
Dividends per share*5 187.0p 156.5p 140.0p
--------------------------------------------------- ------- ------ ------
Special dividends from sale of Penguin
Portals 92.0p -- --
--------------------------------------------------- ------- ------ ------
Return on Equity*2*3 56% 52% 52%
--------------------------------------------------- ------- ------ ------
Solvency Ratio*2 195% 187% 190%
--------------------------------------------------- ------- ------ ------
(*1) Group Turnover in 2020 includes the impact of the 'Stay at
Home' premium refund issued to UK Motor insurance customers, of
GBP97 million. Refer to note 14 to the financial statements for a
reconciliation to the net insurance premium impact of GBP21
million.
(*2) Alternative Performance Measures -- refer to the end of
this report for definition and explanation
(*) (3) Group Turnover, Earnings per share, Return on equity
presented on a continuing operations basis. 2021 Earnings per share
and Return on equity exclude the impact of the UK Insurance
restructure cost
(*) (4) See note 14 for a reconciliation of Turnover and
reported loss and expense ratios to the financial statements.
Ratios exclude the impact of the UK Insurance restructure cost
(*5) The 2019 dividend of 140.0 pence per share includes the
deferred special element of the 2019 final dividend of 20.7 pence
per share that was paid alongside the interim 2020 dividend.
Key highlights of the Group's results for 2021 are as
follows:
-- All parts of the Group grew in 2021 with turnover up 4% and customer
numbers up 9% year-on-year:
-- The UK Motor business reported strong growth in the first half of
the year, though was broadly flat in the second half as the market
became more competitive and Admiral increased prices, whilst the
UK Household and International Insurance businesses both continued
to grow customer numbers strongly (at +14% and +13% respectively)
-- Turnover outside the UK increased at a lower rate (+6%) than
customer numbers due to the impact of very competitive markets on
average premiums in those businesses
-- Group profit before tax (continuing operations, before restructure cost)
increased significantly to GBP769 million (+26%):
-- The main driver was a near GBP190 million increase the UK Motor
Insurance result, mainly due to improved prior year claims
releases and profit commission
-- The UK Household result (GBP21 million, +GBP6 million) benefited
from growth in the business and higher profit commission, as well
as reduced levels of extreme weather in 2021 than 2020
-- Outside the UK, the International Insurance business combined
result was around GBP20 million worse than 2020 resulting from a
higher combined ratio (mainly due to the unwind of the Covid
claims frequency benefits seen in 2020 but also due to expenses
related to growth)
-- Admiral Loans reported an improved result (2021: GBP6 million loss
v 2020: GBP14 million loss) as the charge for expected credit
losses reduced materially with the improved economic outlook; the
business also grew its gross loans balances significantly (GBP607
million in 2021 from GBP402 million in 2020)
-- Other Group items increased to GBP108 million (2020: GBP85 million)
driven by investment in potential new ventures, primarily within Admiral
Pioneer, and an increase in share schemes costs related to a higher share
price and higher share scheme bonuses linked to the strong dividend
Covid-19 impact
The Covid-19 ('Covid') pandemic continued to impact the 2021
results across the Group. In most markets, whilst road traffic
levels started to return towards normal levels, this was slower
than expected as lockdown restrictions persisted for longer,
particularly in the first half of the year. This resulted in
continued lower claims frequency relative to pre pandemic levels in
most markets, although the US saw a more rapid increase in
frequency which has now returned to pre-pandemic levels.
In light of an improved economic outlook, Admiral Loans grew
more rapidly in 2021 and reported a lower charge for expected
credit losses than in 2020. Provisions remain prudent, though
reflect the reduced likelihood of a severe economic downturn. No
significant increase in the level of defaults has been experienced
to date.
Admiral remained committed to supporting its customers, people
and local communities throughout the pandemic. Measures in 2021
have included continued assistance for customers needing support,
continue to prioritise the safety and wellbeing of our people and
numerous community initiatives to support charities in the areas in
which the Group operates.
Earnings per share
Earnings per share from continuing operations and excluding the
impact of the UK Insurance restructure cost, increased by 24% to
212.2 pence (2020: 170.7 pence), in line with the growth in pre-tax
profit. Earnings per share including the impact of the restructure
cost is 196.7 pence, up 15% on 2020.
Dividends
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 capital
requirements including appropriate headroom above the regulatory
minimum in line with internal risk appetite.
The Board has proposed a final dividend of 72.0 pence per share
(approximately GBP211 million), split as follows:
-- 42.2 pence per share normal dividend, based on the dividend policy of
distributing 65% of post-tax profits (continuing operations, including
the impact of the restructure cost); plus
-- A special dividend of 29.8 pence per share
This final dividend (excluding the further special dividend
referred to below) reflects a pay-out ratio of 91% for H2 2021,
based on earnings per share from continuing operations, excluding
the impact of the restructure cost (113% including the impact of
the restructure cost). It is 16% below the 2020 final dividend in
line with the lower second half earnings.
The total dividend from continuing operations for the 2021
financial year is 187.0 pence per share (approximately GBP547
million), 19% higher than 2020 (156.5 pence per share) and is equal
to 88% of earnings per share for the year (95% of earnings per
share net of restructure cost).
The Group also confirmed with its half year results announcement
in August 2021 that the net proceeds of GBP400 million from the
disposal of the Penguin Portals Comparison businesses will be
returned to shareholders in the form of special dividends phased
equally over the interim 2021, final 2021 and interim 2022
dividends. The Board has consequently declared a further special
dividend of 46.0 pence per share to reflect the second of these
payments.
Including the dividend from the Penguin Portals disposal, this
brings the total final 2021 dividend to 118.0 pence per share,
split 42.2 pence per share normal element and 75.8 pence per share
special element.
The total 2021 financial year dividend, including from the
Penguin Portals disposal, is 279.0 pence per share, approximately
GBP816.0 million.
The final dividend payment is due on 6 June 2022, ex-dividend
date 5 May 2022 and record date 6 May 2022.
Return on equity
The Group's return on equity was 56% in 2021, increasing from
52% in 2020. The Group's share of total post-tax profits from
continuing operations grew by 26%, with this growth higher than the
11% growth in the Group's share of average equity. The significant
dividend payments in the year (2020 final and 2021 interim
dividends) largely offset the strong 2021 profits and led to the
lower growth in the Group's share of average equity.
The Group's results are presented in the following sections
as:
-- UK Insurance -- including UK Motor (Car and Van), Household, Travel
-- International Insurance -- including L'olivier (France), Admiral Seguros
(Spain), ConTe (Italy), Elephant (US)
-- Admiral Loans
-- Other -- including compare.com (US comparison) and Admiral Pioneer
-- Discontinued operations -- Penguin Portals Group and Preminen Price
Comparison Holdings Limited Group (disposal of which completed in April
2021)
-- Group Capital Structure and Financial Position
UK Insurance Review
UK Insurance Review -- Cristina Nestares, CEO UK Insurance
Without doubt, the last couple of years have been quite
different to what we've been used to. But reflecting on them now,
it feels (within Admiral at least) that the important things have
stayed exactly the same. And it's the sameness in our core values
and our approach to our people, customers and products that has
contributed to yet another strong year, and which positions us well
for any challenges of 2022. Focus on the right things, test and
learn, make incremental improvements, care about people...all those
little things add up and drive the right outcomes, as they always
have done.
A consistent theme in Admiral's history has been the
underwriting performance of the UK Car insurance business and
knowing how to balance the desire to grow with the discipline and
judgement to do so at the right time. The changing face of the
pandemic has made it harder than ever to make the right call, where
lockdowns and varying restrictions have impacted mobility and
claims frequency to make pricing decisions more complex than usual.
We took a more cautious approach than most in the second half of
the year as the backdrop of increasing inflation and the
anticipated rebound in claims frequency made growth a little less
attractive, and therefore maintained a stable book size in the
final six months of the year.
It's this sensible approach to underwriting, along with the
effectiveness of our claims teams (whether working from home, in
the office or in face-to-face meetings with claimants) that has
continually led to strong current year results, and the consistent
stream of back-year releases. In 2021, the result has of course
benefitted from the exceptional tailwind of favourable frequency,
particularly in the first half of the year, but at the same time
demonstrated the exact same positive underlying themes as previous
years.
Another constant, and a cornerstone of Admiral's values, is to
focus on the customer, the customer, the customer... It's very
pleasing therefore that we've expanded our tiered proposition, that
was previously only available for Household insurance. We now
provide four distinct options for motor customers, ranging from an
Essentials tier aimed at price-sensitive customers to the Platinum
proposition that provides increased customer benefits. Whilst
continuing to improve our products and streamlining our sales
process is important, what's even more satisfying is that our
customer-centric approach throughout the lifecycle is valued. A key
output of that is a customer satisfaction that places our retention
rate significantly above market norms, including for customers that
have made a claim in the year.
We continue to enhance our customer proposition, and the
increasing investment in new products together with improvements in
our IT platforms and pricing capability has resulted in an increase
in costs in the year, which is more apparent given the reduction in
average premiums since the start of the pandemic. However, we've
also taken the opportunity to restructure some of our cost base by
exiting some buildings and writing off some of our IT estate. We
expect to continue to invest over the next several years to
maintain strong foundations for our future, and to allow us to
continue to provide a market-leading service to customers and
market-leading results for our investors.
A key part of that future is our UK Household business, which
will enter its tenth year in 2022. The business has grown by almost
14%, with UK Household customers reaching 1.3m by the end of the
year. We achieved this whilst delivering an increased profit of
GBP21.3 million (up 38% vs. 2020) which is a great result.
It would be remiss to mention the future without referencing the
FCA pricing reforms that came into force on the 1(st) of January.
There remains a good deal of uncertainty around the market's
response to what is one of the biggest pricing changes in recent
years, but we're confident that the foundation we've laid, and
particularly our pricing excellence and customer focus, leaves us
very well placed to meet the challenges and take advantage of the
opportunities this brings.
Finally, I'll come back to another topic that we hope will never
change. The way we work has altered dramatically since the start of
the pandemic and will continue to evolve in 2022 as we continue to
embrace smart working. However, Admiral's culture and the
engagement of our team is central to our success and very close to
our heart. We are therefore delighted to feature in the Best
Companies to Work For awards for the 21(st) year in a row, making
the top-5 for the 5(th) consecutive year. It was also very
rewarding to appear 2(nd) in the list of Best Companies to Work for
Women, another indication of Admiral's ongoing commitment to its
culture.
UK Insurance financial performance
2020(*) 2019(*)
GBPm 2021 (2) (2)
------------------------------------------------------ ------- ------- -------
Turnover(*1) 2,751.7 2,672.0 2,635.0
------------------------------------------------------ ------- ------- -------
Total premiums written 2,453.2 2,373.3 2,321.7
------------------------------------------------------ ------- ------- -------
Net insurance premium revenue 612.6 539.7 533.2
------------------------------------------------------ ------- ------- -------
Underwriting profit including investment income(*1) 394.9 346.5 257.4
------------------------------------------------------ ------- ------- -------
Profit commission and other income 499.1 351.8 340.5
------------------------------------------------------ ------- ------- -------
UK Insurance profit before tax, excluding restructure
cost 894.0 698.3 597.9
------------------------------------------------------ ------- ------- -------
Restructure cost (54.0) -- --
------------------------------------------------------ ------- ------- -------
UK Insurance profit before tax, including restructure
cost 840.0 698.3 597.9
------------------------------------------------------ ------- ------- -------
(*1) Alternative Performance Measures -- refer to note 14 at the
end of this report for definition and explanation
(*2) Re-presented to statutory profit before tax from group
share of profit before tax
Split of UK Insurance profit before tax
2020(*) 2019(*)
GBPm 2021 (1) (1)
------------------------------------------------------ ----- ------- -------
Motor 871.7 683.6 592.0
------------------------------------------------------ ----- ------- -------
Household 21.3 15.4 7.5
------------------------------------------------------ ----- ------- -------
Travel 1.0 (0.7) (1.6)
------------------------------------------------------ ----- ------- -------
UK Insurance profit before tax, excluding restructure
cost 894.0 698.3 597.9
------------------------------------------------------ ----- ------- -------
(*1) Re-presented to statutory profit before tax from group
share of profit before tax
Key performance indicators
2021 2020 2019
---------------------------------------- ----- ----- -----
Vehicles insured at year end(*1) 4.97m 4.75m 4.37m
---------------------------------------- ----- ----- -----
Households insured at year end(*1) 1.32m 1.16m 1.01m
---------------------------------------- ----- ----- -----
Travel policies insured at year end(*1) 0.15m 0.07m 0.09m
---------------------------------------- ----- ----- -----
Total UK Insurance customers(*1) 6.44m 5.98m 5.47m
---------------------------------------- ----- ----- -----
(*) (1) Alternative Performance Measures -- refer to the end of
the report for definition and explanation.
Key highlights for the UK insurance business for 2021
include:
-- Overall growth in UK Insurance business customer numbers of 7% to 6.4
million. The Motor business grew 5% year-on-year -- mainly in the first
half of the year -- as Admiral moved prices up ahead of the market in the
second half in response to increasing claims frequency.
-- The Household business reported strong growth in customers, reflecting
competitive pricing and growth in Admiral's MultiCover offering
-- A 27% increase in UK Motor profit to GBP871.7 million (2020: GBP683.6
million) driven by positive development of prior period claims resulting
in significantly higher reserve releases and profit commission,
especially in the first half of the year
-- A strong increase in Household profit to GBP21.3 million (2020: GBP15.4
million profit) as a result of growth in the business, higher profit
commission and more benign weather than in 2020
In addition, a review of the UK Insurance cost base was carried
out in the second half of 2021. The outcome was a one-off
restructure cost of GBP66.0 million, of which GBP55.5 million is
reflected in the 2021 accounts (GBP54.0 million within UK Insurance
and GBP1.5 million of share scheme expenses) and the remaining
amount will flow through in future years. The cost is primarily
related to the impairment of technology assets and the cost of
exiting a number of buildings in South Wales as a result of the
shift to hybrid working, as well as the cost of a voluntary
redundancy programme offered to employees in late 2021.
The majority of the cost is not an in-year cash outflow and
Admiral expects the impact of future benefits to be reflected in
the combined ratio in the long term as a result of this
restructure. The UK Insurance financial narrative below is focused
on the results excluding the impact of this restructure cost.
The business continued to invest in technology and digital
capabilities as part of the Admiral 2.0 strategy to strengthen core
competencies and increase the speed of delivery on customer
expectations. Investments included the implementation of a new
claims management system and continued digital development and
modern technology enhancements such as cloud technology and data
analytics, and are expected to have positive combined ratio
benefits in the long term.
UK Motor Insurance financial review
2020(*) 2019(*)
GBPm 2021 (5) (5)
--------------------------------------------------- ------- ------- -------
Turnover(*1) 2,522.5 2,473.8 2,455.3
--------------------------------------------------- ------- ------- -------
Total premiums written(*1) 2,244.3 2,193.0 2,158.5
--------------------------------------------------- ------- ------- -------
Net insurance premium revenue 496.5 451.4 452.6
Investment income(*2) 40.8 50.8 30.4
--------------------------------------------------- ------- ------- -------
Net insurance claims (86.1) (97.1) (164.7)
--------------------------------------------------- ------- ------- -------
Net insurance expenses (95.6) (77.2) (74.7)
--------------------------------------------------- ------- ------- -------
Underwriting profit including investment income(*)
(3) 355.6 327.9 243.6
--------------------------------------------------- ------- ------- -------
Profit commission 290.6 124.7 112.2
--------------------------------------------------- ------- ------- -------
Underwriting profit and profit commission 646.2 452.6 355.8
--------------------------------------------------- ------- ------- -------
Net other revenue(*) (4) 225.5 231.0 236.2
--------------------------------------------------- ------- ------- -------
UK Motor Insurance profit before tax 871.7 683.6 592.0
--------------------------------------------------- ------- ------- -------
Restructure cost (49.6) -- --
--------------------------------------------------- ------- ------- -------
UK Motor insurance profit including restructure
cost 822.1 683.6 592.0
--------------------------------------------------- ------- ------- -------
*1 Alternative Performance Measures -- refer to the end of this
report for definition and explanation
*2 Investment income includes GBP2.7 million of intra-group
interest (2020: GBP2.9 million; 2019: GBP2.8 million)
*3 Underwriting profit excludes contribution from underwritten
ancillaries (included in net other revenue)
*4 Net other revenue includes instalment income and contribution
from underwritten ancillaries and is analysed later in the
report.
*5 Re-presented to statutory profit before tax from group share
of profit before tax
Key performance indicators
GBPm 2021 2020 2019
--------------------------------------------- --------- --------- ---------
Reported Motor loss ratio(*1,*2) 53.0% 49.2% 60.7%
--------------------------------------------- --------- --------- ---------
Reported Motor expense ratio(*1,*3) 19.7% 19.8% 19.1%
--------------------------------------------- --------- --------- ---------
Reported Motor combined ratio 72.7% 69.0% 79.8%
--------------------------------------------- --------- --------- ---------
Written basis Motor expense ratio 19.9% 18.8% 18.5%
--------------------------------------------- --------- --------- ---------
Reported loss ratio before releases 78.8% 72.3% 87.6%
--------------------------------------------- --------- --------- ---------
Claims reserve releases -- original net
share(*1,*4) GBP128.1m GBP104.3m GBP121.7m
--------------------------------------------- --------- --------- ---------
Claims reserve releases -- commuted
reinsurance(*1,*5) GBP189.2m GBP137.3m GBP121.7m
--------------------------------------------- --------- --------- ---------
Total claims reserve releases GBP317.3m GBP241.6m GBP243.4m
--------------------------------------------- --------- --------- ---------
Other Revenue per vehicle GBP59 GBP61 GBP66
--------------------------------------------- --------- --------- ---------
Vehicles insured at year end 4.97m 4.75m 4.37m
--------------------------------------------- --------- --------- ---------
*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 14b.
*3 Motor expense ratio is calculated by including claims handling expenses that are reported within claims costs in the income statement. The impact of reinsurer caps is excluded. Reconciliation in note 14c.
*4 Original net share shows reserve releases on the proportion of the portfolio that Admiral wrote on a net basis at the start of the underwriting year in question.
*5 Commuted reinsurance shows releases, net of loss on commutation, on the proportion of the account that was originally ceded under quota share reinsurance contracts but has since been commuted and hence reported in underwriting profit rather than profit commission.
UK Motor profit increased by 27% during 2021 to GBP871.7 million
(2020: GBP683.6 million) with the reported combined ratio
increasing to 72.7% (2020: 69.0%).
Market prices remained depressed throughout 2021. Admiral
increased rates ahead of the market in the second half of the year
to reflect claims frequency returning towards more normal
pre-pandemic levels as well as increasing claims inflation. The
customer base grew by 5% year-on-year to 4.97 million (2020: 4.75
million) as reduced new business growth was partly offset by strong
retention. Turnover growth was more muted at 2% (GBP2.52 billion v
GBP2.47 billion) as a result of lower average premiums in the Car
insurance business in particular.
The results were impacted by a number of factors:
-- Net insurance premium revenue increased by 10% to GBP496.5 million (2020:
GBP451.4 million), with the 'Stay at Home' premium rebate reducing net
insurance premium in 2020 by GBP21.3 million. Excluding this impact, net
insurance premium increased by 5% reflecting the growth in both Car and
Van books in 2021. The majority of this growth came in the first half of
the year.
-- Investment income was lower than 2020 at GBP40.8 million (2020: GBP50.8
million). The prior period benefitted by GBP12.9 million from additional
investment income on cash held by Admiral relating to the portion of the
portfolio reinsured under quota share contracts (income that was
initially allocated as due to reinsurers in 2019, but subsequently
released and recognised in the 2020 income statement).
-- Excluding movements on reinsurer allocations and movements in provisions
for asset impairments (GBP2.6 million charge in the year, reflecting the
growing asset base), underlying investment income was broadly consistent
with 2020.
-- The 2021 reported loss ratio was higher than the 2020 reported loss ratio
at 53% (2020: 49%), the result of a higher current financial period loss
ratio, partially offset by more favourable prior period releases.
Reported Motor Loss Ratio
Impact of
claims
reserve
Reported loss releases -
ratio before original Reported
releases net share Loss Ratio
2020 72.3% -23.1% 49.2%
Change in current period loss
ratio +6.5% -- +6.5%
Change in claims reserve releases
-- original net share -- -2.7% -2.7%
-----------------------------------
2021 78.8% -25.8% 53.0%
----------------------------------- ------------------ ------------- -----------
-- The current accident period loss ratio was just over 6 points worse than
2020 as a result of increased claims frequency as road usage continued to
move closer to pre-pandemic levels, with the trend increasing throughout
the year
-- The higher current period loss ratio was partially offset by higher
reserve releases on Admirals' original net share of the business, which
improved the reported loss ratio by close to 26 percentage points in
2021, 3 percentage points higher than in 2020. This reflects the strong
positive development of claims reserves, in particular during the first
half of the year
-- The margin held above ultimate outcomes in the financial statement
reserves remains both significant and prudent. In relative terms, it is
slightly lower than that held at the end of 2020, reflecting the
assessment of a modest reduction in the level of uncertainty in the
claims reserves than in recent periods
-- Reserve releases from commuted reinsurance and profit commission were
significantly higher in 2021 than in 2020, with a combined total of
GBP479.8 million (2020: GBP262.0 million), as follows:
Reserve releases
-- commuted
GBPm reinsurance Profit commission Total
2020 137.3 124.7 262.0
Change in commuted releases +51.9 -- +51.9
Change in profit commission -- +165.9 +165.9
-----------------------------
2021 189.2 290.6 479.8
----------------------------- ---------------- ----------------- ------
-- Releases on reserves originally reinsured but since commuted were higher
at GBP189.2 million (v GBP137.3 million in 2020), with underwriting years
2017 -- 2019 making a more significant contribution than equivalent years
at the same stage of development in 2020. This is consistent with the
more favourable releases on the original net share and reflects the
larger than usual movements in loss ratios on those underwriting years in
H1.
-- Profit commission was significantly higher at GBP290.6 million (2020:
GBP124.7 million). This increase is positively impacted by profit
commission recognised on the 2020 underwriting year. 2020 is more
profitable than previous underwriting years at the same stage of
development as a result of the Covid-related claims frequency trends.
-- The reported expense ratio was broadly consistent at 19.7% in 2021 (2020:
19.8%) with the written basis ratio showing a modest increase to 19.9%
(2020: 18.8%) as a result of lower average premiums and continued
investment in technology and other assets as noted above
-- Other revenue (including ancillary products underwritten by Admiral) and
instalment income decreased to GBP225.5 million (2020: GBP231.0 million)
primarily resulting from lower contribution from optional ancillaries.
Further detail is set out in the Other Revenue and Instalment Income
section below.
Claims and reserves
As noted above, the Covid pandemic and relevant lockdowns led to
fewer miles driven, resulting in significantly lower Motor claims
frequency. The lockdown impact was less severe in 2021 compared to
2020, but remained below pre-Covid levels.
Claims inflation continued, in particular driven by higher
accidental damage claims due to a substantial increase in
second-hand car residual values which was in turn due to a shortage
in the supply of new vehicles. Large bodily injury and small bodily
injury claims experience remained benign, with frequency increasing
in line with overall the trend of increased miles driven. As
expected, the first projection of the 2021 accident period loss
ratio is higher than 2020 at the same point as a result of these
factors.
The Group continues to reserve conservatively, setting claims
reserves in the financial statements well above actuarial best
estimates to create a margin held to allow for unforeseen adverse
development.
Other Revenue and Instalment Income
UK Motor Insurance Other Revenue -- analysis of
contribution:
2020(*) 2019(*)
GBPm 2021 (1) (1)
-------------------------------------------------------- ------ ------- -------
Contribution from additional products & fees, including
those underwritten by Admiral(*) (2) 200.8 203.4 217.6
Instalment income 100.2 100.9 83.9
Other revenue 301.0 304.3 301.5
Internal costs(*) (3) (75.5) (73.3) (65.3)
Net other revenue 225.5 231.0 236.2
-------------------------------------------------------- ------ ------- -------
Other revenue per vehicle(*) (4) GBP59 GBP61 GBP66
-------------------------------------------------------- ------ ------- -------
Other revenue per vehicle net of internal costs GBP47 GBP50 GBP56
-------------------------------------------------------- ------ ------- -------
*1 Re-presented to statutory profit before tax from group share
of profit before tax
*2 Additional products underwritten by Admiral Included in
underwriting profit in income statement but re-allocated to Other
Revenue for purpose of KPIs
*3 Internal costs reflect an allocation of insurance expenses
incurred in generating other revenue
*4 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 to GBP225.5 million (2020: GBP231.0 million),
reflecting lower revenue due to the impact of whiplash reforms on
the Motor Legal Protection ancillary.
Other revenue per vehicle was lower at GBP59 (gross of costs;
2020: GBP61), as a result of the factors mentioned above. Net Other
Revenue (after deducting costs) per vehicle was GBP47 (2020:
GBP50).
UK Household Insurance financial performance
GBPm 2021 2020 2019
---------------------------------------------------- ----- ----- -----
Turnover(*1) 218.8 193.8 171.3
---------------------------------------------------- ----- ----- -----
Total premiums written(*1) 198.5 175.9 154.9
---------------------------------------------------- ----- ----- -----
Net insurance premium revenue 49.1 43.2 37.2
Underwriting profit(1*2) 3.9 2.5 0.7
---------------------------------------------------- ----- ----- -----
Profit commission and other income 17.4 12.9 6.8
---------------------------------------------------- ----- ----- -----
UK Household insurance profit excluding restructure
cost 21.3 15.4 7.5
---------------------------------------------------- ----- ----- -----
Restructure cost (4.4) -- --
---------------------------------------------------- ----- ----- -----
UK Household insurance profit including restructure
cost 16.9 15.4 7.5
---------------------------------------------------- ----- ----- -----
*1 Alternative Performance Measures -- refer to the end of this
report for definition and explanation
*2 Underwriting profit/(loss) excluding contribution from
underwritten ancillaries
Key performance indicators
2021 2020 2019
--------------------------------------------- ----- ----- -----
Reported Household loss ratio(*1) 63.3% 64.8% 69.1%
--------------------------------------------- ----- ----- -----
Reported Household expense ratio(*1) 30.3% 29.4% 28.9%
--------------------------------------------- ----- ----- -----
Reported Household combined ratio(*1) 93.6% 94.2% 98.0%
--------------------------------------------- ----- ----- -----
Impact of extreme weather and subsidence(*1) 2.2% 5.3% --
--------------------------------------------- ----- ----- -----
Households insured at year end(*1) 1.32m 1.16m 1.01m
--------------------------------------------- ----- ----- -----
(*1) Alternative Performance Measures -- refer to the end of this report for definition and explanation
The number of households insured increased by 14% to 1.32
million (2020: 1.16 million). Turnover increased by 13% to GBP218.8
million (2020: GBP193.8 million). The Household business grew
strongly in 2021 within a competitive market with premium pressure
in the second half of the year ahead of the introduction of the FCA
pricing reforms. The continued increase in MultiCover sales
supported this growth, particularly as a result of strong
retention.
The business continued to improve pricing capabilities in the
year, improving loss ratio performance and expanding digital
capabilities to support future growth. Over the year, the impact of
weather was relatively benign with some impact from storm Arwen in
the final quarter (2 point impact on the loss ratio vs much higher
5 point loss ratio weather impact in 2020). Claims trends
associated with the impact of Covid remained largely unchanged,
with favourable experience on escape of water and theft. The
business continued to strengthen its claims capabilities, including
the upgrade of its claims management system which offers improved
digital servicing and advanced data capabilities. The reported loss
ratio for the period improved to 63.3% and included 4 percentage
points of favourable development on prior accident years.
A combined ratio of 93.6% (2020: 94.2%) resulted in a net
underwriting profit of GBP3.9 million (2020: GBP2.5 million), which
was supplemented by profit commission and other income of GBP17.4
million (2020: GBP12.9 million). This led to a 38% increase in
profit to GBP21.3 million (2020: GBP15.4 million), before the
impact of the restructure cost. After the restructure costs of
GBP4.4 million are included, the profit for the year is GBP16.9
million, a 10% improvement on 2020.
The increase in profit commission and other income in the year
is attributable to quota share reinsurance and has increased
primarily due to favourable loss ratio performance in the recent
underwriting years. Other income is broadly consistent year on
year.
International Insurance
International Insurance -- Costantino Moretti -- CEO,
International Insurance
In 2021 our international operations made strong progress in
continuing to build sustainable, long term businesses in the
context of sophisticated and complex markets. Despite a challenging
year with negative average premium development putting pressure on
margins in Europe, competition in the US increasing direct
acquisition costs, and rising frequency trends in all markets, we
are proud of the response of our businesses which exhibit an
adaptability we are confident will propel them to further
success.
Turning first to the US, Elephant made strong headway in its
channel diversification efforts in response to high cost per sale
in direct acquisition. The team's focus on the agency channel in
particular, has paid dividends, and this channel now represents
almost 20% of Elephant's new business sales, up from about 12% last
year. This combined with other efforts on new business sales has
enabled Elephant's vehicle base to increase by 10% whilst slightly
improving the expense ratio. Though increasing claims inflation
impacted loss ratios in the second half of the year, the Elephant
team took action in line with the market to address this
impact.
In Europe, our businesses performed well despite difficult
market conditions. Each business continued to grow the customer
base despite continued headwinds from the pandemic, stagnant
aggregator volumes and strong competition. Distribution
diversification has paid off in all three of our European
businesses: for ConTe and Admiral Seguros brokers accounted for
more new business sales than ever, and for L'olivier focus on
direct channels has enabled very strong growth, with turnover up
26%.
Across the International Group our businesses made further
investments into Admiral 2.0. While ConTe adopted Scaled Agile in
2020 and saw material benefit in 2021, Admiral Seguros and
L'olivier laid the framework for this methodology in 2021 and are
poised to implement it across all departments in 2022. Further
digitisation of customer touchpoints across all four International
Businesses generated record percentages of transactions completed
online.
2021 was a successful-but-challenging year in which our
International businesses continued to adapt to the unusual
circumstances of the pandemic. We are proud of our performance and
look forward to an even stronger 2022 as we work towards our
strategy of building sustainable, scaled, and profitable businesses
in the long term.
France -- Pascal Gonzalvez -- CEO, L'olivier
2021, bis repetita: a very strong performance despite market
adversity.
L'olivier grew turnover by 26% in 2021, in the context of a
challenging market where price comparison quotes decreased by 7%.
We managed to double our customer base in less than 2.5 years, to
end the year with over 360,000 customers.
Our growth was coupled with a high quality of service as we
maintained an excellent Net Promoter Score and we won an important
award for 'best customer service of the year' in the non-life
insurance category.
To achieve this level of growth, L'olivier started to diversify
its acquisition channels and products.
One such example is a new partnership with BlaBlacar, the
leading online carpooling marketplace and app in France. In 2021 we
launched a co-branded motor insurance product with an innovative
telematics offering, for which we are seeing early signs of good
growth.
Also, we accelerated our multi-product journey with further
investment in our Household insurance book and the launch of
electric scooter insurance.
In parallel, we continued to make progress on our mantra to
reach our 2023 vision: #3D, Data & Digital to Double.
I strongly believe we are on the right path -- with a strong
team and clear strategy - to make it happen!
Italy -- Antonio Bagetta -- CEO, ConTe
Without a doubt 2021 will be remembered as a very tough and
challenging year, yet one where the team continued to work together
to build the business and serve our customers well.
Despite fierce competition in the market and significant price
decreases during the pandemic, ConTe ended 2021 with a profit for
the eighth year in a row and with a 10% increase in our active
customer base.
These results have been possible thanks to optimising our
distribution channel sales and a significant improvement in our
customers' digital journey.
Our business size, cost-conscious culture, and tech and digital
investments have driven our expense ratio improvement in a market
where premiums are shrinking.
We always aim for sustainable growth. That's why we evolved our
risk selection towards a stronger tech-data-driven approach,
digitising underwriting and antifraud procedures, and whilst
continuing to grow in our largest channel, price comparison, we
also focused more on broker channel profitability than ever
before.
ConTe continued to strengthen its brand in the Italian market
with presence on TV and with a partnership with the national
football team. These strategic marketing investments resulted in
ConTe being one of the most recognised and appreciated brands among
direct insurance companies.
Our people always come first. In 2021, we worked hard to improve
our work-life balance in a post Covid world to retain, attract and
develop the best talent. The new Smartworking4Future team,
following close engagement with staff, launched our new Hybrid
Model testing various new initiatives such as Short Friday (shorter
work day!). The ConTe team remains highly engaged and motivated,
continuing to prioritise our customers and build a stronger
business into 2022.
Spain -- Sarah Harris -- CEO, Admiral Seguros
Admiral Seguros grew active policies in 2021 by 13% against the
backdrop of a challenging market, and at the same time our people
remained highly engaged and we were ranked #1 Best Workplace by the
Great Place to Work Institute. This is a testament to the strong
culture of teamwork across Admiral Seguros, especially evident
during the uncertainties of Covid. In addition, we increased our
digital capabilities, allowing an acceleration towards a truly
omnichannel offering for our customers.
From a market perspective, car insurance shopping continued to
be significantly below 2019 levels, particularly affecting the
aggregator market. Claims driving frequency remained depressed in
the first half of the year, picking up over the summer months
closer to pre-Covid levels. Not so for prices, where aggressive
repositioning by several players led to a soft market throughout
2021. In this context we maintained a disciplined approach to
pricing. Policy growth was mostly driven by good renewal
performance, together with continued expansion into the broker
channel, where we continue to see opportunity. We made good
progress against our digital objectives, seeing more than a 40%
uplift in customer logins to our digital portal. The number of
claims registered online doubled over the course of the year. We
increased our investment in digital capabilities and started a
transformation to agile working across the organisation, which we
expect to bear fruit during 2022. Loss ratio remained under control
across all channels, with positive development on back years.
And what of the future? In 2022 we will continue to adapt the
way we work together, fully implementing a hybrid working model. We
have ambitious plans to continue improving in digital and data
capabilities, and to offer an even better service to our
customers.
US -- Alberto Schiavon -- CEO, Elephant
2021 was a mixed year for Elephant -- on the one hand, we
returned to growth, entered new states (Ohio, Georgia), and
improved our loss ratio compared to the market; yet at the same
time we reported a higher loss as claims costs increased across the
market. Our continued effort in improving Elephant's ease of doing
business, superior technology stack, advanced risk selection, and
competitive prices is showing some promising results, yet the
market remains quite volatile and still challenging.
By year end, vehicles in force had grown by 10%, with stronger
sales particularly in our Agency distribution channel. Elephant is
continuing to learn how to deploy our competitive advantages in
this new channel, while we benefit from the endorsement of bigger,
more familiar brands that attract customers we haven't
traditionally seen.
From a loss experience perspective, the beginning of the year
continued to see frequency-related benefits from 2020. By H2,
however, Elephant and industry peers saw these benefits disappear
as driving levels returned to normal. The intensity and speed of
this 'return-to-normality' was quite sudden, resulting in higher
overall losses this year. In response, we increased rates in line
with other carriers, in addition to a stronger internal focus on
data analytics and technology, risk selection and anti-fraud. While
Elephant closed the historical loss ratio gap with the rest of the
market, we remain prudent on the 2022 outlook, especially in
anticipation of inflationary trends.
I am incredibly proud and grateful to all our Elephant 'Herd'
members for their hard work and dedication in 2021 and look forward
to the many exciting projects planned for 2022.
International Insurance Review
International Insurance financial performance
GBPm 2021 2020 2019
--------------------------------------------------- ------- ------- -------
Turnover(*1) 690.3 648.8 623.6
--------------------------------------------------- ------- ------- -------
Total premiums written(*1) 623.8 584.0 562.6
--------------------------------------------------- ------- ------- -------
Net insurance premium revenue 221.0 204.2 168.6
--------------------------------------------------- ------- ------- -------
Investment income 0.5 -- 1.5
--------------------------------------------------- ------- ------- -------
Net insurance claims (170.8) (139.3) (137.2)
--------------------------------------------------- ------- ------- -------
Net insurance expenses (91.7) (78.8) (53.0)
--------------------------------------------------- ------- ------- -------
Underwriting result including investment income(*1) (41.0) (13.9) (20.1)
--------------------------------------------------- ------- ------- -------
Net other revenue 29.4 22.7 19.2
--------------------------------------------------- ------- ------- -------
International Insurance result (11.6) 8.8 (0.9)
--------------------------------------------------- ------- ------- -------
Key performance indicators
Reported Loss ratio(*2) 73.7% 64.3% 76.8%
----------------------------------------- ------ ------ ------
Expense ratio(*2) 44.8% 43.9% 37.6%
----------------------------------------- ------ ------ ------
Combined ratio(*3) 118.5% 108.2% 114.4%
----------------------------------------- ------ ------ ------
Combined ratio, net of Other Revenue(*4) 106.3% 97.9% 103.7%
----------------------------------------- ------ ------ ------
Vehicles insured at period end 1.81m 1.60m 1.42m
(*1) Alternative Performance Measures -- refer to the end of this report for definition and explanation.
(*2) Loss ratios and expense ratios have been adjusted to remove the impact of reinsurer caps so the underlying performance of the business is transparent.
(*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 2021: 119%; 2020: 107%; 2019: 113%.
(*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 2021: 107%; 2020: 96% 2019: 102%.
International Motor Insurance - Geographical analysis
2021 Spain Italy France US Total
----------------------------------- ----- ----- ------ ----- -----
Vehicles insured at period end (m) 0.37 0.85 0.36 0.23 1.81
Turnover*(1) (GBPm) 88.5 212.7 175.7 213.4 690.3
2020 Spain Italy France US Total
----------------------------------- ----- ----- ------ ----- -----
Vehicles insured at period end (m) 0.33 0.77 0.29 0.21 1.60
Turnover*(1) (GBPm) 83.9 213.0 139.3 212.6 648.8
(*1) Alternative Performance Measures -- refer to the end of this report for definition and explanation
Split of International Insurance result
GBPm 2021 2020 2019
------------------------------- ------ ----- -----
European Motor 4.8 15.3 9.0
------------------------------- ------ ----- -----
US Motor (13.0) (4.8) (9.6)
------------------------------- ------ ----- -----
Other (3.4) (1.7) (0.3)
------------------------------- ------ ----- -----
International Insurance result (11.6) 8.8 (0.9)
------------------------------- ------ ----- -----
Admiral has several insurance businesses outside the UK: Spain
(Admiral Seguros), Italy (ConTe), US (Elephant Auto) and France
(L'olivier).
The key features of the International Insurance results are:
-- Positive growth trajectory continued in 2021 within competitive markets,
with customer numbers increasing by 13% to 1.81 million (2020: 1.60
million) and combined turnover rising by 6% to GBP690.3 million (2020:
GBP648.8 million)
-- An aggregate loss of GBP11.6 million (2020: GBP8.8 million profit),
consisting of profit in the European Motor insurance businesses at GBP4.8
million (2020: GBP15.3 million) and a deterioration in Elephant Auto's
result (increased loss from GBP4.8 million to GBP13.0 million
year-on-year)
-- A higher combined ratio (net of other revenue) of 106% (2020: 98%),
primarily the result of a higher reported loss ratio across the European
and US motor businesses, with the Covid-related frequency benefits
experienced in 2020, almost fully unwinding by the end of 2021
-- An increased investment of GBP3.4 million for new product development
primarily related to the new French home insurance business
-- Increase in the combined expense ratio to 44.8% (2020: 43.9%). In
addition to investments in strengthening business fundamentals to further
build scale towards long term sustainable businesses, the operations
invested in some short-term growth opportunities. Continued premium
pressure in both the Spanish and Italian markets also impacted the ratio.
European Motor Insurance
The European insurance operations in Spain, Italy and France
insured 1.58 million vehicles at 31 December 2021 -- 14% higher
than a year earlier (31 December 2020: 1.39 million), whilst
turnover was up 9% at GBP476.9 million (2020: GBP436.2 million).
The aggregate motor insurance profit of GBP4.8 million was a result
of continued profitability in Italy, which was offset by losses in
France and Spain.
The European combined ratio net of other revenue (excluding the
impact of reinsurer caps) increased to 99% from 89%, primarily the
result of
loss ratio trends noted above. During the year, all businesses maintained a focus on improving core fundamentals, whilst cautiously expanding into new distribution channels to enhance future growth prospects and exploring new diversification opportunities.
Admiral Seguros (Spain) grew customers by 13% to 368,900 (31
December 2020: 327,500). The growth was supported by good progress
in the broker distribution channel and was achieved despite strong
market competition and pressure on premiums.
ConTe (Italy) faced similar challenging markets conditions seen
in Spain with some competitors aggressively discounting premium
rates. Despite market conditions, ConTe still performed strongly,
increasing vehicles insured by 10% to 853,300 (31 December 2020:
776,300).
L'olivier assurance (France) experienced near record growth in
2021. The customer base increased by 25% to 362,600 at year end (31
December 2020: 291,000). Investments to strengthen L'olivier's
market presence drove strong direct channel growth.
US Motor Insurance
In the US, Admiral underwrites motor insurance in eight states
(Virginia, Maryland, Illinois, Texas, Indiana, Tennessee, Ohio,
Georgia) through its Elephant Auto business. Elephant insured
228,700 vehicles at the end of 2021, 10% higher than 2020, and also
saw higher turnover of GBP213.4 million (2020: GBP212.6
million).
Elephant reported a higher loss for the period of GBP13.0
million (2020 loss of GBP4.8 million), impacted by challenging
market conditions as the US saw a more rapid return to pre-Covid
claims frequency levels than the European markets together with
increasing claims inflation, particularly in the second half of the
year. The market responded by increasing premiums, and Elephant
responded similarly with base rate increases. Competition in the
market remained strong, with large players increasing investment in
advertising which led to higher acquisition costs. The business
continued to focus on improving fundamentals such as risk selection
and the digital customer offering, whilst improving persistency and
more efficient acquisition.
Admiral Loans
Scott Cargill -- CEO, Admiral Financial Services Limited
2021 has been a fantastic year for Admiral Loans - strong
growth, customer payments performing better than expected and
exciting improvements in our capabilities.
Admiral Loans is now a relevant participant in what is a large
market in the UK and we've issued over 175,000 loans to date. Our
loans book now stands at over GBP600 million, 50% growth year on
year whilst retaining a focus on prime lending, proof that UK
customers are ready for a guaranteed rate proposition, and they
value the certainty and transparency it offers.
Progress in 2021 was particularly pleasing. The adoption of open
banking drove up new business conversion. Distribution expansion
allowed us to access more customers. Enhancing our self-service
functionality allowed 75% of transactions to be processed digitally
enabling future expense efficiency. A new cloud-based data platform
allows us to remain focussed on analytics.
We also made pleasing progress on integrating more closely with
the UK insurance business to offer loans to these customers. In
addition, we were winners of the Moneyfacts Consumer Awards in both
categories of best personal loans provider and best car finance
provider.
Looking to 2022, we enter with strong momentum. Monthly revenue
increased 50% through 2021 and we enter 2022 at an all-time record
level. We expect to benefit from our strong position in a growing
market as we see a continued shift to comparison and credit score
marketplaces. I expect to see continued growth in our loan balances
towards the GBP800-950 million range during 2022 assuming current
economic conditions. Combined with a tightly controlled cost base,
we should see improved economics in the coming years. I am
optimistic for 2022 and am confident in the team's ability to
execute on our business plan. Admiral built successful businesses
by doing the common things uncommonly well and Admiral Loans enters
2022 in good shape to achieve the same in UK lending.
I'd like to finish by thanking our customers and all of my
colleagues and wish everyone the best for 2022.
Loans Financial Review
GBPm 2021 2020 2019
--------------------------------------------------------- ------ ------ ------
Total interest income 36.6 36.8 30.8
Interest expense(*1) (8.8) (10.1) (9.1)
Net interest income 27.8 26.7 21.7
Other fee income 1.1 2.1 1.9
Total income 28.9 28.8 23.6
Movement in expected credit loss provision and write-off
of Loans (10.7) (25.8) (14.3)
Expenses (23.7) (16.8) (17.7)
Admiral Loans result (5.5) (13.8) (8.4)
--------------------------------------------------------- ------ ------ ------
(*1) Includes GBP2.7 million intra-group interest expense (2020:
GBP2.9 million; 2019: GBP2.8 million)
Admiral Loans offers a range of unsecured personal loans and car
finance products through comparison channels and also direct to
consumers via the Admiral website.
Gross loan balances totalled GBP607.0 million (2020: GBP401.8
million), with a GBP50.2 million (2020: GBP42.0 million) provision,
leading to a net loans balance of GBP556.8 million (2020: GBP359.8
million). Admiral Loans updated its expected credit loss models
with the latest economic assumptions and management overlays to
reflect the expectations of performance. This update reflects an
improved economic outlook compared to the prior year, but still
retaining caution with uncertainty remaining in the economy. This
update led to an GBP8.2 million net additional impairment provision
(2020: GBP18.0 million), with provision to loan balance coverage
ratio falling to 8.2% (2020: 10.4%). The total expected credit loss
charge including write-offs was GBP10.7 million (2020: GBP25.8
million). For further information, refer to note 7 in the financial
statements.
Admiral Loans recorded a pre-tax loss of GBP5.5 million in 2021
(improved from GBP13.8 million in 2020). The improved loss
predominantly reflects the reduction in credit loss charge
recognised in the period as noted above.
Expenses have increased to GBP23.7 million (2020 GBP16.8
million) as investment was made ahead of scale, coupled with higher
loan acquisition costs expensed as incurred on increased new loan
origination.
Admiral Loans is currently funded through a combination of
internal and external funding. The external funding is secured
against certain loans via transfer of the rights to the cash-flows
to two special purpose entities ("SPEs"), the second of which was
incorporated in October 2021. The securitisation and subsequent
issue of notes via SPEs does not result in a significant transfer
of risk from the Group.
Other Group Items
Other Group items financial review
GBPm 2021 2020 2019
-------------------------------------------------- ------- ------ ------
Share scheme charges, excluding restructure costs (63.3) (50.9) (49.0)
Other central overheads (19.8) (22.9) (20.0)
Finance charges (11.4) (12.1) (11.3)
Admiral Pioneer (10.2) (0.8) --
Other business development costs (3.7) (1.0) (2.1)
Compare.com loss before tax (3.5) (2.3) (7.2)
Other interest and investment return 4.0 4.9 6.1
Other Group items (107.9) (85.1) (83.5)
-------------------------------------------------- ------- ------ ------
Share scheme charges relate to the Group's two employee share
schemes (refer to note 9 to the financial statements). Charges
increased by GBP12.4 million (excluding discontinued operations) in
2021, to GBP63.3 million. The increase in the charge is driven by a
combination of the expected increase of the proportion of shares
that will eventually vest following strong Group results, as well
as a higher share price and higher bonuses linked to the Group's
dividend.
Finance charges of GBP11.4 million (2020: GBP12.1 million)
primarily represent interest on the GBP200 million subordinated
notes issued in July 2014.
Other central overheads totalled GBP19.8 million and include the
cost of a number of major Group projects, such as preparation for
the significant new insurance accounting standard, IFRS 17 and the
development of the internal model. Excluding the GBP6 million cost
of the Covid-19 relief fund in the prior year, the overheads are
approximately GBP3 million higher as a result of these regulatory
projects and other matters that are unlikely to be repeating.
As part of the investment in product diversification, Admiral
launched the Admiral Pioneer business in 2020 to focus on new
product diversification opportunities. This currently operates the
Veygo short term car insurance business, as well as investment in
new products such as tool insurance in the UK and small fleet
insurance in France. The business made a loss of GBP10.2 million in
2021.
Compare.com reported a higher loss of GBP3.5 million as a result
of increased investment in marketing and acquisition in a
challenging market environment in the US.
Other interest and investment income decreased to GBP4.0 million
in 2021 (2020: GBP4.9 million).
Discontinued Operations (Comparison)
GBPm 2021 2020 2019
--------------------------------------------- -------- -------- --------
Profit before tax in period 11.3 29.4 21.8
Gain on disposal 404.4 -- --
Total profit before tax from discontinued
operations 415.7 29.4 21.8
--------------------------------------------- -------- -------- --------
On the 30 April 2021, the Group announced that, following
regulatory and competition authority approvals, RVU had completed
the purchase of the Penguin Portals Group and Admiral's 50% share
of Preminen. MAPFRE also sold its 25% holding in Rastreator and 50%
holding in Preminen to RVU. The total transaction value was settled
in cash on completion.
The cash proceeds from the disposal amount to GBP471.8 million;
with the gain on disposal being GBP404.4 million.
The Group has confirmed plans for the use of the net proceeds
from the disposal and will return GBP400 million to shareholders in
the form of special dividends phased equally over the interim 2021,
final 2021 and interim 2022 dividends.
Group Capital Structure and Financial Position
The Group continues to manage its capital to ensure that all
entities 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's regulatory capital is based on the Solvency II
Standard Formula, with a capital add-on to reflect recognised
limitations in the Standard Formula with respect to Admiral's
business (predominantly in respect of profit commission
arrangements in co- and reinsurance agreements and risks arising
from claims including Periodic Payment Order (PPO) claims).
The Group continues to develop its partial internal model to
form the basis of future capital requirements. The expected
timescale for formal application has been extended beyond 2021 as a
result of a decision by the Admiral Group Board to review certain
aspects of the model. In the interim period before submission, the
current capital add-on basis will continue to be used to calculate
the regulatory capital requirement.
The estimated and unaudited regulatory Solvency II position for
the Group at the date of this report is as follows:
Group capital position (estimated and unaudited)
2021 2020
Group GBPbn GBPbn
--------------------------------------- ------ ------
Eligible Own Funds (post dividend)(*1) 1.36 1.47
Solvency II capital requirement(*)
(2) 0.70 0.79
Surplus over regulatory capital
requirement 0.66 0.68
--------------------------------------- ------ ------
Solvency ratio (post dividend)(*)
(3) 195% 187%
--------------------------------------- ------ ------
*1 2021 Own Funds includes a deduction for the third tranche of Penguin Portals dividend which is expected to be paid alongside the 2022 interim dividend in October 2022
*2 Solvency capital requirement includes updated capital add-on
which is subject to regulatory approval.
*3 Solvency ratio calculated on a volatility adjusted basis.
The Group's 2021 solvency ratio is strong at 195%. The solvency
ratio has increased by eight percentage points from the end of
2020, with surplus capital remaining at a consistent level. Both
Own Funds and the Solvency Capital Requirement have returned to a
more typical level after increasing at the end of 2020 as a result
of the strong underwriting profitability of the Covid-impacted
periods.
The Solvency Capital Requirement includes an updated capital
add-on which remains subject to regulatory approval. The solvency
ratio based on the previously approved capital add-on, that is
calculated at the balance sheet date rather than the date of this
report, and will be submitted to the regulator within the Q4
Quantitative Reporting Template (QRT) is as follows:
Regulatory solvency ratio (estimated and
unaudited) 2021 2020
----------------------------------------------- ---- ----
Solvency ratio as reported above 195% 187%
Change in valuation date (5%) (5%)
Other (including impact of updated, unapproved
capital add-on) (9%) 24%
Solvency ratio (QRT basis) 181% 206%
----------------------------------------------- ---- ----
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.
Solvency ratio sensitivities (estimated and unaudited)
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.
2021 2020
UK Motor -- incurred loss ratio +5% -9% -10%
UK Motor -- 1 in 200 catastrophe event -1% -1%
UK Household -- 1 in 200 catastrophe event -3% -2%
Interest rate -- yield curve down 50 bps -3% -4%
Credit spreads widen 100 bps -9% -6%
Currency -- 25% movement in euro and US dollar -3% -3%
ASHE -- long term inflation assumption up 0.5% -5% -3%
Loans -- severe peak unemployment scenario -1% -1%
Taxation
The tax charge from continuing operations reported in the
consolidated income statement is GBP130.2 million (2020: GBP106.2
million), equating to 18.2% of pre-tax profit (2020: 17.5%). The
increase in the effective tax charge is the result of lower
non-taxable investment income recognised in the year, and a higher
level of unrecognised deferred tax.
Investments and cash
Investment strategy
Admiral Group's investment strategy remains the same - the focus
is on capital preservation and low volatility of returns. Admiral
has an asset liability matching strategy to control interest rate,
inflation and currency risk, holds a prudent level of liquidity and
has a high-quality credit profile. All objectives continue to be
met. The Group's Investment Committee performs regular reviews of
the strategy to ensure it remains appropriate.
In 2021, the strategy has continued to focus on delivering
efficient and low volatility returns by widening the opportunity
set of investments without material change in market risk capital
allocated to investments. Additional inflation protection was
bought towards the start of the year. It holds a range of
government bonds, corporate bonds, alternative and private credit
assets, alongside liquid holdings in cash and money markets.
Admiral has a responsible investment strategy to reduce
Environmental, Social and Governance (ESG) related risks, whilst
achieving sustainable long-term returns. Importantly, ESG criteria
are considered within investment decision making and ensures all
our asset managers are signatories of the UN Principles for
Responsible Investment and have strong and credible practices. The
average ESG score in the portfolio is 'A' from MSCI.
Admiral is a member of the Institutional Investors Group for
Climate Change and has used the Net Zero Investment Framework to
implement a Net Zero strategy. The weighted average carbon
intensity of the corporate bonds is below benchmark and there's a
target in place to reduce this by 50% by 2030. Admiral also ensures
the asset managers have suitable engagement practices and are
engaging with climate laggards.
Cash and investments analysis
GBPm 2021 2020 2019
------------------------------------ ------- ------- -------
Fixed income and debt securities 2,594.3 2,101.3 1,957.8
Money market funds and other fair
value instruments 1,063.0 1,339.3 1,160.2
Cash deposits 85.3 65.4 116.5
Cash 372.7 351.7 281.7
Total(*1) 4,115.3 3,857.7 3,516.2
------------------------------------ ------- ------- -------
*1 Total Cash and Investments include GBP147.2 million (2020:
GBP74.8 million; 2019: GBP58.9 million) of Level 3 investments.
Refer to note 6e in the financial statements for further
information
Investment and interest income in 2021 (net of impairment
charges) was GBP42.6 million, a decrease of GBP10.3 million on 2020
(GBP52.9 million). 2020 investment and interest income was impacted
by adjustments related to investment income on cash held by Admiral
relating to the portion of the motor insurance business reinsured
under quota share contracts. GBP12.9 million of income earned in
2019 was recognised in the 2020 income statement as the projection
of the result of the 2019 underwriting year improved to a
profitable level.
The underlying rate of return for the year (excluding changes in
investment income allocated to reinsurers) on the Group's cash and
investments was 1.1% (2020: 1.3%).
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.
Cash flow
GBPm 2021 2020 2019
-------------------------------------------- ------- ------- -------
Operating cash flow, before movements
in investments 637.8 959.8 518.1
Transfers to financial investments (266.5) (176.0) (188.7)
Operating cash flow 371.3 783.8 329.4
Tax payments (126.7) (175.0) (92.8)
Investing cash flows (capital expenditure) (69.2) (43.1) (33.6)
Financing cash flows (750.7) (454.3) (392.4)
Loans funding through special purpose
entity 185.9 (46.2) 85.9
Net contributions from non-controlling
interests -- 2.4 1.6
Foreign currency translation impact (5.3) 2.4 6.8
Net proceeds from sale of Comparison
entities 457.0 -- --
Cash included in the disposal of Comparison
entities (41.3) -- --
Net cash movement 21.0 70.0 (95.1)
-------------------------------------------- ------- ------- -------
Movement in unrealised gains on investments (47.3) 40.7 34.6
Movement in accrued interest 17.4 54.8 41.5
Net increase in cash and financial
investments 257.6 341.5 169.7
-------------------------------------------- ------- ------- -------
The main items contributing to the operating cash inflow are as
follows:
GBPm 2021 2020 2019
------------------------------------------ ------- ----- -------
Profit after tax 996.7 527.8 428.4
Change in net insurance liabilities 40.8 94.8 50.4
Net change in trade receivables and
liabilities (65.3) 65.3 27.4
Change in loans and advances to customers (205.2) 77.3 (168.7)
Non-cash income statement items (261.7) 84.8 86.4
Taxation expense 132.5 109.8 94.2
Operating cash flow, before movements
in investments 637.8 959.8 518.1
------------------------------------------ ------- ----- -------
The net increase in cash and investments in the year is lower at
GBP257.6 million (2020: GBP341.5 million). The main drivers include
an increase in the funding requirements for the Admiral Loans
business and financing cash flows which include the increased
dividend.
Co-insurance and reinsurance
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. These arrangements include profit commission
terms which allow Admiral to retain a significant portion of the
profit generated.
Although the primary focus and disclosure is in relation to the
UK Motor insurance book, similar longer-term arrangements are in
place in the Group's international insurance operations and the UK
Household and Van businesses.
UK Motor Insurance
Munich Re and its subsidiary entity, Great Lakes, currently
underwrites 40% of the UK Motor business. In 2021, 30% of this
total is on a co-insurance basis, with the remaining 10% being
under a quota share reinsurance agreement. Admiral has agreed terms
for the extension of its contractual arrangements with Munich Re
and its subsidiary Great Lakes from 2022. The current 10% quota
share contract remains in place until at least 2023. For the
remaining 30% share, 20% of this total will be on a co-insurance
basis (via Great Lakes) and will extend to 2029. The remaining 10%
will be on a quota share reinsurance basis and these arrangements
extend to 2026. These changes should result in higher profit
commission income for Admiral from 2022 onwards compared to the
expiring arrangements.
The Group also has other quota share reinsurance arrangements
confirmed to the end of at least 2023, covering 38% of the business
written.
The nature of the co-insurance proportion underwritten by Munich
Re (via Great Lakes) in the UK is such that 30% of all Motor
premium and claims for the 2021 year accrue directly to Great Lakes
and are not reflected in the Group's financial statements.
Similarly, Great Lakes reimburses the Group for its proportional
share of expenses incurred in acquiring and administering this
business. Based on the above-mentioned change in contractual
agreements, this will change to 20% from 2022.
The quota share reinsurance arrangements result in all Motor
premiums and claims that are ceded to reinsurers being included in
the Group's financial statements.
Admiral tends to commute its UK Car Insurance quota share
reinsurance contracts 24-36 months after inception of an
underwriting year, assuming there is sufficient confidence in the
profitability of the business covered by the reinsurance
contract.
After an underwriting year is commuted, movements in financial
statement loss ratios result in reserve releases (or strengthening
if the loss ratios were to increase) rather than reduced or
increased profit commission.
During the first half of 2021, the majority of the 2019 quota
share contracts were commuted. At 31 December 2021, quota share
reinsurance contracts remained in place for a small portion of
2017, 2018 and 2019, and the full 2020 underwriting year. No
further contracts were commuted in the second half of 2021 (as is
usual).
Refer to note 5d(v) of the financial statements for further
analysis of reserve releases on business originally reinsured but
subsequently commuted.
UK Household Insurance
The Group's Household business is supported by long-term
proportional reinsurance arrangements covering 70% of the risk. The
initial contract terms for these arrangements are coming to an end
and analysis is ongoing in relation to future quota share
arrangements. In addition, the Group has non-proportional
reinsurance to cover the risk of catastrophes stemming from weather
events.
International Car Insurance
In 2021 Admiral retained 35% (Italy), 32.5% (France) and 30%
(Spain) of the underwriting risk respectively (2020: 35%, 30% and
30% respectively). In the USA, 45% (2020: 50%) of the risk was
retained within the Group.
Excess of loss reinsurance
The Group also purchases excess of loss reinsurance to provide
protection against large claims and reviews this cover annually.
The excess of loss cover remained similar to prior years with a
marginal increase in rates in the context of a hardening
market.
Profit commission
Admiral is potentially able to earn material amounts of profit
commission revenue from co- and reinsurance partners, depending on
the profitability of the insurance business underwritten by the
partner. Revenue is recognised in the income statement in line with
the financial statement loss ratios on Admiral's retained
underwriting.
Note 5b to the financial statements analyses profit commission
income by business, type of contract and by underwriting year.
Principal Risks and Uncertainties
The Group's 2021 Annual Report will contain an analysis of the
Principal Risks and Uncertainties identified by the Group's
Enterprise Risk Management Framework, along with the impacts of
those risks and actions taken to mitigate them.
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.
Consolidated Income Statement
For the year ended 31 December 2021
Year ended
31 December 31 December
2021 2020
Continuing operations Note GBPm GBPm
Insurance premium revenue 2,492.3 2,265.3
Insurance premium ceded to reinsurers (1,637.3) (1,513.7)
Net insurance premium revenue 5 855.0 751.6
Other revenue 8 314.8 329.4
Profit commission 5 304.5 134.0
Interest income 7 36.6 36.8
Interest expense 7 (6.1) (7.2)
Net interest income from loans 30.5 29.6
Investment return -- interest income at effective
interest rate 6 40.6 33.9
Investment return - other 6 4.6 26.8
Net revenue 1,550.0 1,305.3
Insurance claims and claims handling expenses 5 (1,506.8) (1,318.6)
Insurance claims and claims handling expenses recoverable
from reinsurers 1,174.5 1,025.4
Net insurance claims 5 (332.3) (293.2)
Operating expenses and share scheme charges 9 (970.1) (814.6)
Operating expenses and share scheme charges recoverable
from co- and reinsurers 9 491.1 456.6
Expected credit losses 6,9 (13.3) (33.6)
Net operating expenses and share scheme charges (492.3) (391.6)
Total expenses (824.6) (684.8)
Operating profit 725.4 620.5
Finance costs 6 (13.7) (14.3)
Finance costs recoverable from co- and reinsurers 6 1.8 2.0
Net finance costs (11.9) (12.3)
Profit before tax from continuing operations 713.5 608.2
Taxation expense 10 (130.2) (106.2)
Profit after tax from continuing operations 583.3 502.0
---------------------------------------------------------- ---- ----------- -----------
Profit before tax from discontinued operations 11.3 29.4
Gain on disposal 404.4 --
Taxation expense (2.3) (3.6)
Profit after tax from discontinued operations 13 413.4 25.8
---------------------------------------------------------- ---- ----------- -----------
Profit after tax from continuing and discontinued
operations 996.7 527.8
---------------------------------------------------------- ---- ----------- -----------
Profit after tax attributable to:
Equity holders of the parent 997.9 528.8
Non-controlling interests (NCI) (1.2) (1.0)
996.7 527.8
---------------------------------------------------------- ---- ----------- -----------
Earnings per share -- from continuing operations
Basic 12 196.7p 170.7p
Diluted 12 196.1p 170.4p
---------------------------------------------------------- ---- ----------- -----------
Earnings per share - from continuing and discontinued
operations
---------------------------------------------------------- ---- ----------- -----------
Basic 12 335.5p 179.5p
---------------------------------------------------------- ---- ----------- -----------
Diluted 12 334.5p 179.2p
---------------------------------------------------------- ---- ----------- -----------
Dividends declared and paid (total) 12 720.9 425.7
Dividends declared and paid (per share) 12 247.0p 147.5p
-----------
Consolidated statement of comprehensive income
For the year ended 31 December 2021
Year ended
31 December 31 December
2021 2020
Note GBPm GBPm
----------- -----------
Profit for the period -- from continuing and discontinued
operations 996.7 527.8
Other comprehensive income
Items that are or may be reclassified to profit or
loss
Movements in fair value reserve (50.1) 40.6
Deferred tax charge in relation to movement in fair
value reserve 10 1.4 (1.8)
Exchange differences on translation of foreign operations (10.4) 3.5
Movement in hedging reserve 6.6 (2.4)
Other comprehensive income for the period, net of
income tax (52.5) 39.9
---------------------------------------------------------- ----- ----------- -----------
Total comprehensive income for the period 944.2 567.7
---------------------------------------------------------- ----- ----------- -----------
Total comprehensive income for the period attributable
to:
Equity holders of the parent 945.7 568.6
Non-controlling interests (1.5) (0.9)
944.2 567.7
---------------------------------------------------------- ----- ----------- -----------
Consolidated statement of financial position
As at 31 December 2021
As at
31 December 31 December
2021 2020
Note GBPm GBPm
----------- -------------
ASSETS
Property and equipment 11 103.2 140.4
Intangible assets 11 179.9 166.7
Deferred income tax 10 9.3 --
Corporation tax assets 10 10.6 22.9
Reinsurance assets 5 2,176.1 2,083.2
Loans and advances to customers 7 556.8 359.8
Insurance and other receivables 6 1,208.5 1,182.0
Financial investments 6 3,742.6 3,506.0
Cash and cash equivalents 6 372.7 298.2
Assets associated with disposal group held for sale 13 -- 83.0
Total assets 8,359.7 7,842.2
---------------------------------------------------- ----- ----------- -----------
EQUITY
Share capital 12 0.3 0.3
Share premium account 13.1 13.1
Other reserves 12 44.0 94.9
Retained earnings 1,348.8 1,004.4
Total equity attributable to equity holders of the
parent 1,406.2 1,112.7
---------------------------------------------------- ----- ----------- -----------
Non-controlling interests 2.3 10.7
---------------------------------------------------- ----- ----------- -----------
Total equity 1,408.5 1,123.4
---------------------------------------------------- ----- ----------- -----------
LIABILITIES
Insurance contract liabilities 5 4,215.0 4,081.3
Subordinated and other financial liabilities 6 670.9 488.6
Trade and other payables 6, 11 1,960.0 1,991.2
Lease liabilities 6 105.3 122.8
Deferred income tax 10 -- 0.9
Liabilities associated with disposal group held for
sale 13 -- 34.0
Total liabilities 6,951.2 6,718.8
---------------------------------------------------- ----- ----------- -----------
Total equity and total liabilities 8,359.7 7,842.2
---------------------------------------------------- ----- ----------- -----------
The accompanying notes form part of these financial
statements.
These financial statements were approved by the Board of
Directors on 2 March 2022 and were signed on its behalf by:
Geraint Jones
Chief Financial Officer
Admiral Group plc
Company Number: 03849958
Consolidated cash flow statement
For the year ended 31 December 2021
Year ended
Restated
31 December 31 December
2021 2020
Note GBPm GBPm
----------- ------------
Profit after tax -- from continuing and discontinued
operations 996.7 527.8
Adjustments for non-cash items:
-- Depreciation of property, plant and equipment and
right-of-use assets 11 23.6 23.6
-- Impairment of property, plant and equipment and
right-of-use assets 11 23.8 3.1
-- Amortisation and impairment of intangible assets 11 44.7 19.2
-- Gain on disposal of Comparison entities held for
sale 13 (404.4) --
-- Movement in expected credit loss provision 6 13.3 25.8
-- Share scheme charges 9 65.2 54.0
-- Accrued interest income from loans and advances
to customers (0.8) 0.2
-- Interest expense on funding for loans and advances
to customers 6.1 7.2
-- Investment return 6 (45.2) (60.7)
-- Finance costs, including unwinding of discounts
on lease liabilities 12.0 12.4
-- Taxation expense 10 132.5 109.8
Change in gross insurance contract liabilities 5 133.7 106.3
Change in reinsurance assets 5 (92.9) (11.5)
Change in insurance and other receivables 6, 11 (9.2) 25.1
Change in gross loans and advances to customers 7 (205.2) 77.3
Change in trade and other payables, including tax
and social security 11 (56.1) 40.2
Cash flows from operating activities, before movements
in investments 637.8 959.8
Purchases of financial instruments (3,710.2) (2,389.2)
Proceeds on disposal/ maturity of financial instruments 3,397.1 2,160.6
Interest and investment income received 6 46.6 52.6
Cash flows from operating activities, net of movements
in investments 371.3 783.8
Taxation payments (126.7) (175.0)
Net cash flow from operating activities 244.6 608.8
Cash flows from investing activities:
Purchases of property, equipment and software 11 (69.2) (43.1)
Proceeds from sale of Comparison entities 471.8 --
Net costs paid on sale of Comparison entities (14.8) --
Net cash used in investing activities 387.8 (43.1)
Cash flows from financing activities:
Non-controlling interest capital contribution -- 2.4
Proceeds on issue of/ (Repayment of) loan backed
securities 6 185.9 (46.3)
Proceeds from other financial liabilities 6 -- 0.1
Finance costs paid, including interest expense paid
on funding for loans 6,7 (20.2) (19.2)
Repayment of lease liabilities 6 (9.6) (9.4)
Equity dividends paid 12 (720.9) (425.7)
Net cash used in financing activities (564.8) (498.1)
Net increase in cash and cash equivalents 67.6 67.6
Cash and cash equivalents at 1 January 351.7 281.7
Cash and cash equivalents included in disposal of
comparison entities (41.3) --
Effects of changes in foreign exchange rates (5.3) 2.4
Cash and cash equivalents at end of period 6 372.7 351.7
------------------------------------------------------- ----- ----------- ------------
Consolidated statement of changes in equity
For the year ended 31 December 2021
Attributable to the owners of the Company
Share Foreign Retained Non-
Share premium Fair value exchange profit controlling
capital account reserve Hedging reserve reserve and loss Total interests Total equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------- -------- ---------- ---------------- --------- --------- -------
At 1 January 2020 0.3 13.1 46.6 (1.2) 9.7 840.9 909.4 9.2 918.6
Profit/(loss) for the period -- from continuing and
discontinued operations -- -- -- -- -- 528.8 528.8 (1.0) 527.8
Other comprehensive income
Movements in fair value reserve -- -- 40.6 -- -- -- 40.6 -- 40.6
Deferred tax charge in relation to movement in fair
value reserve 10 -- -- (1.8) -- -- -- (1.8) -- (1.8)
Movement in hedging reserve -- -- -- (2.4) (2.4) -- (2.4)
Currency translation differences -- -- -- -- 3.4 -- 3.4 0.1 3.5
Total comprehensive income for the period -- -- 38.8 (2.4) 3.4 528.8 568.6 (0.9) 567.7
---------------------------------------------------- ----- -------- -------- ---------- ---------------- --------- --------- ------- ------------ ------------
Transactions with equity holders
Dividends 12 -- -- -- -- -- (425.7) (425.7) -- (425.7)
Share scheme credit -- -- -- -- -- 53.8 53.8 -- 53.8
Deferred tax credit on share scheme credit 10 -- -- -- -- -- 6.6 6.6 -- 6.6
Contributions by NCIs -- -- -- -- -- -- -- 2.2 2.2
Changes in ownership interests without a change in
control -- -- -- -- -- -- -- 0.2 0.2
Total transactions with equity holders -- -- -- -- -- (365.3) (365.3) 2.4 (362.9)
---------------------------------------------------- ----- -------- -------- ---------- ---------------- --------- --------- ------- ------------ ------------
As at 31 December 2020 0.3 13.1 85.4 (3.6) 13.1 1,004.4 1,112.7 10.7 1,123.4
---------------------------------------------------- ----- -------- -------- ---------- ---------------- --------- --------- ------- ------------ ------------
Consolidated statement of changes in equity (continued)
For the year ended 31 December 2021
Attributable to the owners of the Company
Share Foreign Retained Non-
Share premium Fair value exchange profit controlling
capital account reserve Hedging reserve reserve and loss Total interests Total equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------- -------- ---------- ---------------- --------- --------- -------
Balance at 1 January 2021 0.3 13.1 85.4 (3.6) 13.1 1,004.4 1,112.7 10.7 1,123.4
Profit/(loss) for the period -- from continuing and
discontinued operations -- -- -- -- -- 997.9 997.9 (1.2) 996.7
Other comprehensive income
Movements in fair value reserve -- -- (50.1) -- -- -- (50.1) -- (50.1)
Deferred tax charge in relation to movement in fair
value reserve 10 -- -- 1.4 -- -- -- 1.4 -- 1.4
Movement in hedging reserve -- -- -- 6.6 6.6 -- 6.6
Currency translation differences -- -- -- -- (10.1) -- (10.1) (0.3) (10.4)
Total comprehensive income for the period -- -- (48.7) 6.6 (10.1) 997.9 945.7 (1.5) 944.2
------------------------------------------------------ ----- -------- -------- ---------- ---------------- --------- --------- ------- ------------ ------------
Transactions with equity holders
Dividends 12 -- -- -- -- -- (720.9) (720.9) -- (720.9)
Share scheme credit 9 -- -- -- -- -- 63.1 63.1 -- 63.1
Deferred tax credit on share scheme credit 10 -- -- -- -- -- 6.0 6.0 -- 6.0
Transfer to gain on disposal of assets held for sale -- -- -- -- 1.3 (2.0) (0.7) 0.1 (0.6)
Change in ownership interests on sale of comparison -- -- -- -- -- -- -- (6.7) (6.7)
Change in ownership interests without a change in
control -- -- -- -- -- 0.3 0.3 (0.3) --
Total transactions with equity holders -- -- -- -- 1.3 (653.5) (652.2) (6.9) (659.1)
------------------------------------------------------ ----- -------- -------- ---------- ---------------- --------- --------- ------- ------------ ------------
As at 31 December 2021 0.3 13.1 36.7 3.0 4.3 1,348.8 1,406.2 2.3 1,408.5
------------------------------------------------------ ----- -------- -------- ---------- ---------------- --------- --------- ------- ------------ ------------
Notes to the financial statements
For the year ended 31 December 2021
1. General information
Admiral Group plc is a public limited company incorporated 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 consolidated financial statements have been prepared and
approved by the Directors in accordance with United Kingdom adopted
international accounting standards in conformity with the
requirements of the Companies Act 2006. The Company has elected to
prepare its parent company financial statements in accordance with
Financial Reporting Standard 101 Reduced Disclosure Framework (FRS
101).
2. Basis of preparation
The consolidated financial statements have been prepared on a
Going Concern basis. In making this assessment, the Directors' have
considered in detail the impact of the pandemic on the Group's
financial position and performance, including the projection of the
Group's profits, regulatory capital surpluses and sources of
liquidity for the next 12 months and beyond.
The following areas were focused on as part of this review:
-- The Group's profit projections, including:
-- The ongoing impact of the pandemic, including the return of claims
frequency towards pre-pandemic levels across all of the Group's
insurance businesses
-- Changes in premium rates and projected policy volumes across the
Group's insurance businesses, including early indications of the
impact of the FCA general insurance pricing reform which came into
effect at the start of 2022
-- Potential impacts on the cost of settling claims across all
insurance businesses, including the impact of inflationary
pressures
-- Projected trends in other revenue generated by the Group's
insurance business from fees and the sale of ancillary products
-- Projected contributions to profit from businesses other than the
UK Car insurance business
-- Expected trends in unemployment in the context of credit risks and
the growth of the Group's Loans business
-- The sale of the Group price comparison businesses, Penguin Portals and
Preminen along with the intention to return the remaining amount of net
proceeds back to shareholders
-- The Group's solvency position, which has been closely monitored through
periods of market volatility, in particular, early in the pandemic. The
Group continues to maintain a strong solvency position above target
levels
-- The adequacy of the Group's liquidity position after considering all of
the factors noted above
-- The results of business plan scenarios and stress tests on the projected
profitability, solvency and liquidity positions including the impact of
severe downside scenarios that assume severe adverse economic, credit and
trading stresses
-- The regulatory environment, in particular focusing on regulatory guidance
issued by the FCA and the PRA in the UK and ongoing communications
between management and regulators
-- A review of the Company's principal risks and uncertainties and the
assessment of emerging risks
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 of 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.
Restatement of prior year Consolidated cash flow statement
A prior period classification error within the Consolidated cash
flow statement has been identified impacting the year ended 31
December 2020. In the prior period, amounts that should have been
presented as interest and investment income received were
incorrectly presented as proceeds on disposal/maturity of financial
instruments. The prior periods have been restated, resulting in an
increase of GBP42.5 million in interest and investment income
received, and a corresponding decrease in proceeds on
disposal/maturity of financial instruments. The error has had no
impact on the Consolidated statement of financial position,
Consolidated income statement or the Earnings per share
calculations within.
Adoption of new and revised standards
The Group has adopted the following IFRSs and interpretations
during the year, which have been issued and endorsed:
-- Amendments to IFRS 16 Leases: Covid-19 Related Rent Concessions beyond 30
June 2021
The application of this amendment has not had a material impact
on the Group's results, financial position and cash flows.
3. Critical accounting judgements and key sources of estimation
uncertainty
In applying the Group's accounting policies as described in the
notes to the financial statements, the Directors are required to
make judgements (other than those involving estimations) that have
a significant impact on the amounts recognised and to make
estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
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 revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future periods.
Full details of critical accounting judgements and key sources of
estimation uncertainty will be included in the Group's 2021 Annual
Report. There have been no significant changes to these judgements
or uncertainties during the year.
4. Group consolidation and operating segments
4a. Segment reporting
The Group has five reportable segments, as described below.
These segments represent the principal split of business that is
regularly reported to the Group's Board of Directors, which is
considered to be the Group's chief operating decision maker in line
with IFRS 8 Operating Segments.
UK Insurance
The segment consists of the underwriting of Motor, Household and
Travel insurance and other products that supplement these insurance
policies within the UK. It also includes the generation of revenue
from additional products and fees from underwriting insurance in
the UK. The Directors consider the results of these activities to
be reportable as one segment as the activities carried out in
generating the revenue are not independent of each other and are
performed as one business. This mirrors the approach taken in
management reporting.
International Insurance
The segment consists of the underwriting of car and home
insurance and the generation of revenue from additional products
and fees from underwriting car insurance outside of the UK. It
specifically covers the Group operations Admiral Seguros in Spain,
ConTe in Italy, L'olivier Assurance in France and Elephant Auto in
the US. None of these operations are reportable on an individual
basis, based on the threshold requirements in IFRS 8.
Admiral Loans
The segment relates to the Admiral Loans business launched in
2017, which provides unsecured personal loans and car finance
products in the UK, primarily through the comparison channel.
Other
The 'Other' segment is designed to be comprised of all other
operating segments that are not separately reported to the Group's
Board of Directors and do not meet the threshold requirements for
individual reporting. It includes compare.com (the US comparison
business), and Admiral Pioneer.
Discontinued operations (Comparison)
As set out in note 13 to the financial statements, on 29
December 2020 the Group announced its planned sale of the majority
of its comparison businesses. The sale was completed on 30 April
2021. The comparison operations are presented as discontinued
operations in both 2021 and 2020. The results for 2021 are
reflective of the profit on disposal and four months of trading
prior to disposal.
The segment relates to the comparison businesses disposed of
including: Confused.com in the UK, Rastreator in Spain, LeLynx in
France, and the Preminen entities, which have a head office in
Spain and operations in Mexico, and Penguin Portals, the
intermediate holding company of Confused.com, LeLynx and
Rastreator.
Taxes are not allocated across the segments and, as with the
corporate activities, are included in the reconciliation to the
consolidated income statement and consolidated statement of
financial position.
An analysis of the Group's revenue and results for the year
ended 31 December 2021, by reportable segment, is shown below. The
accounting policies of the reportable segments are materially
consistent with those presented in the notes to the financial
statements for the Group.
Year ended 31 December 2021
UK International Admiral Discontinued Total
Insurance Insurance Loans Other operations(*5) Eliminations(*6) (continuing) Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------- ------------- ------- ------ --------------- ---------------- ------------- -------
Turnover(*1) 2,751.7 690.3 37.6 27.9 67.2 (7.8) 3,507.3 3,566.9
------------------------- ---------- ------------- ------- ------ --------------- ---------------- ------------- -------
Net insurance
premium revenue 612.6 230.0 -- 12.4 -- -- 855.0 855.0
Other Revenue
and profit commission 577.8 34.6 1.0 6.1 67.2 (7.8) 619.3 678.9
Net interest income -- -- 27.8 -- -- 2.7 30.5 30.5
Investment return(*2) 40.8 0.5 -- -- -- (2.7) 38.6 38.6
Net revenue 1,231.2 265.1 28.8 18.5 67.2 (7.8) 1,543.4 1,603.0
Net insurance
claims (144.5) (176.2) -- (11.6) -- -- (332.3) (332.3)
Expenses (246.7) (100.5) (34.3) (20.6) (55.5) 7.8 (401.9) (449.8)
Gain on disposal -- -- -- -- 404.4 -- -- 404.4
Segment profit/(loss)
before tax 840.0 (11.6) (5.5) (13.7) 416.1 -- 809.2 1,225.3
------------------------- ---------- ------------- ------- ------ --------------- ---------------- ------------- -------
Other central revenue and expenses, including
share scheme charges (88.3) (88.7)
Investment and interest
income 4.0 4.0
Finance costs(*3) (11.4) (11.4)
Consolidated profit
before tax (*4) 713.5 1,129.2
Taxation expense (130.2) (132.5)
Consolidated profit
after tax 583.3 996.7
------------------------------------- ------------- ------- ------ --------------- ---------------- ------------- -------
Other segment
items:
Intangible and
tangible asset
additions 94.8 47.6 0.6 1.2 -- -- 144.2 144.2
Depreciation and
amortisation 65.5 44.5 0.7 0.2 -- -- 110.9 110.9
-------------------------
*1 Turnover is an Alternative Performance Measure presented before intra-group eliminations and consists of total premiums written (including co-insurers' share) and Other revenue. Refer to the glossary and note 14 for further information.
*2 Investment return is reported net of impairment on financial assets, in line with management reporting.
*3 GBP0.6 million 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.
*4 Profit before tax above of GBP1,129.2 million is presented
cumulative of profit before tax from continuing operations
(GBP713.5 million) and discontinued operations (GBP415.7 million,
including GBP0.4 million of central expenses).
*5 See note 13 for further detail on discontinued
operations.
*6 Eliminations are in respect of the intra-group trading between the Group's comparison and UK and International Insurance entities and intra-group interest. Of the GBP7.8 million elimination of other revenue and profit commission, GBP7.6 million relates to discontinued operations, with the remaining GBP0.2 million relating to Compare.com
Revenue and results for the corresponding reportable segments
for the year ended 31 December 2020 are shown below.
Year ended 31 December 2020
UK International Admiral Discontinued Total
Insurance Insurance Loans Other operations(5*5) Eliminations(*6) (continuing) Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------- ------------- ------- ----- ---------------- ---------------- ------------- -------
Turnover(*1) 2,672.0 648.8 38.4 6.8 183.9 (22.2) 3,365.8 3,527.7
-------------------------- ---------- ------------- ------- ----- ---------------- ---------------- ------------- -------
Net insurance premium
revenue 539.8 211.8 -- -- -- -- 751.6 751.6
Other Revenue and
profit commission 427.9 27.4 1.6 6.7 183.9 (22.2) 463.4 625.3
Net interest income -- -- 26.7 -- -- 2.9 29.6 29.6
Investment return(*2) 50.8 -- 0.5 -- -- (3.3) 48.0 48.0
Net revenue 1,018.5 239.2 28.8 6.7 183.9 (22.6) 1,292.6 1,454.5
Net insurance claims (150.2) (143.0) -- -- -- -- (293.2) (293.2)
Expenses (170.0) (87.4) (42.6) (9.8) (151.4) 22.2 (309.6) (439.0)
Segment profit/(loss)
before tax 698.3 8.8 (13.8) (3.1) 32.5 (0.4) 689.8 722.3
-------------------------- ---------- ------------- ------- ----- ---------------- ---------------- ------------- -------
Other central revenue and expenses, including
share scheme charges (74.8) (77.9)
Investment and interest
income 4.9 4.9
Finance costs(*3) (11.7) (11.7)
Consolidated profit
before tax (*4) 608.2 637.6
Taxation expense (106.2) (109.8)
Consolidated profit
after tax 502.0 527.8
-------------------------- ---------- ------------- ------- ----- ---------------- ---------------- ------------- -------
Other segment items:
Intangible and tangible
asset additions 59.1 43.0 0.2 0.5 1.6 -- 102.8 104.4
Depreciation and
amortisation 57.2 41.5 0.9 0.4 1.8 -- 100.0 101.8
*1 Turnover is an Alternative Performance Measure presented before intra-group eliminations and consists of total premiums written (including co-insurers' share) and Other revenue. Refer to the glossary and note 14 for further information.
*2 Investment return is reported net of impairment on financial assets, in line with management reporting.
*3 GBP0.7 million 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.
*4 Profit before tax above of GBP637.6 million is presented
cumulative of profit before tax from continuing operations
(GBP608.2 million) and discontinued operations (GBP29.4 million,
including GBP3.1 million of central expenses).
*5 See note 13 for further detail on discontinued
operations.
*6 Eliminations are in respect of the intra-group trading
between the Group's comparison and UK and International Insurance
entities. Of the GBP22.2 million elimination of other revenue and
profit commission, GBP22.0 million relates to discontinued
operations, with the remaining GBP0.2 million relating to
Compare.com.
Segment revenues
The UK and International 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 Discontinued operations (Comparison) revenues from
transactions with other reportable segments is GBP7.6 million
(2020: GBP22.0 million) which has been eliminated on consolidation,
along with GBP0.2 million (2020: GBP0.2 million) of revenues from
compare.com that are also eliminated on consolidation.
Revenues from external customers for products and services are
consistent with the split of reportable segment revenues.
Information about geographical locations
All material revenues from external customers, and net assets
attributed to a foreign country, are shown within the International
Insurance reportable segment shown on the previous pages.
Segment assets and liabilities
The identifiable segment assets and liabilities at 31 December
2021 are as follows:
As at 31 December 2021
--------------------------------------------------------------------------------
UK International Admiral Discontinued
Insurance Insurance Loans Other operations Eliminations Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------- ------------- ------- ------- ------------ ------------ -------
Reportable segment
assets 6,428.8 1,059.0 762.2 150.8 -- (635.0) 7,765.8
------------------- ---------- ------------- ------- ------- ------------ ------------ -------
Reportable segment
liabilities 5,342.8 934.8 629.4 429.3 -- (589.5) 6,746.8
------------------- ---------- ------------- ------- ------- ------------ ------------ -------
Reportable segment
net assets 1,086.0 124.2 132.8 (278.5) -- (45.5) 1,019.0
------------------- ---------- ------------- ------- ------- ------------ ------------ -------
Unallocated assets
and liabilities 389.5
------------------- ---------- ------------- ------- ------- ------------ ------------ -------
Consolidated net
assets 1,408.5
------------------- ---------- ------------- ------- ------- ------------ ------------ -------
Unallocated assets and liabilities consist of other central
assets and liabilities, plus deferred and current corporation tax
balances. These assets and liabilities are not regularly reviewed
by the Board of Directors in the reportable segment format.
Eliminations represent inter-segment funding, balances included
in insurance and other receivables and deemed loan receivables in
respect of securitised loan receivables.
The segment assets and liabilities at 31 December 2020 are as
follows:
As at 31 December 2020
--------------------------------------------------------------------------------
UK International Admiral Discontinued
Insurance Insurance Loans Other operations Eliminations Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------- ------------- ------- ------- ------------ ------------ -------
Reportable segment
assets 6,446.7 1,006.0 427.3 226.1 112.6 (702.9) 7,515.8
------------------- ---------- ------------- ------- ------- ------------ ------------ -------
Reportable segment
liabilities 5,359.5 858.4 426.5 461.4 57.0 (654.2) 6,508.6
------------------- ---------- ------------- ------- ------- ------------ ------------ -------
Reportable segment
net assets 1,087.2 147.6 0.8 (235.3) 55.6 (48.7) 1,007.2
------------------- ---------- ------------- ------- ------- ------------ ------------ -------
Unallocated assets
and liabilities 116.2
------------------- ---------- ------------- ------- ------- ------------ ------------ -------
Consolidated net
assets 1,123.4
------------------- ---------- ------------- ------- ------- ------------ ------------ -------
5. Premium, claims and profit commissions
5a. Net insurance premium revenue
31 December 31 December
2021 2020(*1)
GBPm GBPm
Total insurance premiums written including co-insurers'
share(*2) 3,098.7 2,957.2
-------------------------------------------------------- ----------- -----------
Group gross premiums written excluding co-insurance 2,513.6 2,344.0
Outwards reinsurance premiums (1,643.0) (1,555.9)
Net insurance premiums written 870.6 788.1
Change in gross unearned premium provision (21.3) (78.7)
Change in reinsurers' share of unearned premium
provision 5.7 42.2
Net insurance premium revenue 855.0 751.6
-------------------------------------------------------- ----------- -----------
*1 See note 14d for the impact of the "stay at home" premium
refund issued to UK motor insurance customers on premiums written
and net insurance premium revenue.
*2 Alternative Performance Measures -- refer to the end of the
report for definition and explanation, and to note 14a 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 ('AECS') and Elephant
Insurance Company. The vast majority of contracts are short term in
duration, lasting for 10 or 12 months.
5b. Profit commission
31 December 31 December
2021 2020
GBPm GBPm
Underwriting year (UK Motor only)
2016 and prior 65.7 63.3
2017 28.7 23.3
2018 18.6 5.5
2019 27.6 20.9
2020 150.0 11.7
2021 -- --
Total UK Motor profit commission(*1) 290.6 124.7
---------------------------------------------------- ----------- -----------
Total UK Household and International profit
commission(*1) 13.9 9.3
Total profit commission 304.5 134.0
---------------------------------------------------- ----------- -----------
*1 From the total UK motor profit commission of GBP290.6 million
(2020: GBP124.7 million), GBP162.9 million (2020: GBP102.3 million)
relates to co-insurance arrangements and GBP127.7 million (2020:
GBP22.4 million) to reinsurance arrangements. The UK Household and
International profit commission relates solely to reinsurance
arrangements.
Sensitivities of the recognition of profit commission to
movements in the booked loss ratio are shown in note 5c(i).
5c. Reinsurance assets and insurance contract liabilities
(i) Sensitivity of recognised amounts to changes in
assumptions
Underwriting year loss ratios -- UK Car Insurance
The following table sets out the impact on equity and post-tax
profit or loss at 31 December 2021 that would result from a 1%, 3%
and 5% increase and decrease in the UK Car Insurance loss ratios
used for each underwriting year for which material amounts remain
outstanding. This includes the impact on profit commission of the
respective changes in booked loss ratios, which are also shown
separately below.
Total impact on Income Statement (including profit
commission) Underwriting year
2018 2019 2020 2021
------ ------ ------ -----
Booked loss ratio 73% 72% 66% 90%
Impact of 1% deterioration in booked loss ratio
(GBPm) (15.8) (15.2) (16.6) (1.9)
Impact of 3% deterioration in booked loss ratio
(GBPm) (47.3) (45.4) (49.7) (5.7)
Impact of 5% deterioration in booked loss ratio
(GBPm) (76.9) (70.7) (82.0) (9.6)
Impact of 1% improvement in booked loss ratio
(GBPm) 15.8 15.2 16.6 1.9
Impact of 3% improvement in booked loss ratio
(GBPm) 47.8 46.0 49.7 5.7
Impact of 5% improvement in booked loss ratio
(GBPm) 80.4 77.4 82.8 9.6
As above, the impact is stated net of reinsurance and includes
the change in net insurance claims along with the associated profit
commission movements that result from changes in loss ratios. The
figures are stated net of tax at the current rate.
The following table sets out the impact on equity and post-tax
profit or loss at 31 December 2021 that would result from a 1%, 3%
and 5% increase and decrease in the UK Car Insurance loss ratios
used for each underwriting year for which material amounts remain
outstanding, on profit commission only.
Impact on profit commission only Underwriting year
2018 2019 2020 2021
------ ------ ------ ----
Booked loss ratio 73% 72% 66% 90%
Impact of 1% deterioration in booked loss ratio
(GBPm) (4.0) (5.9) (12.8) -
Impact of 3% deterioration in booked loss ratio
(GBPm) (12.1) (17.3) (38.3) -
Impact of 5% deterioration in booked loss ratio
(GBPm) (18.2) (23.7) (62.9) -
Impact of 1% improvement in booked loss ratio
(GBPm) 4.0 5.9 12.8 -
Impact of 3% improvement in booked loss ratio
(GBPm) 12.6 17.9 38.3 -
Impact of 5% improvement in booked loss ratio
(GBPm) 21.6 30.5 63.8 -
Sensitivities to key assumptions in the best estimate reserves
have not been presented, given the significant and prudent margin
held above best estimate reserves and the co- and reinsurance
arrangements that are also considered when determining the net
impact on the income statement. The underwriting year sensitivities
presented above are considered to provide relevant and transparent
information on the changes to key inputs to the financial
statements.
(ii) Analysis of recognised amounts
31 December 31 December
2021 2020
GBPm GBPm
Gross
Claims outstanding(*1) 3,045.0 2,919.9
Unearned premium provision 1,170.0 1,161.4
Total gross insurance liabilities 4,215.0 4,081.3
------------------------------------------------- ----------- -----------
Recoverable from reinsurers
Claims outstanding 1,415.7 1,319.3
Unearned premium provision 760.4 763.9
Total reinsurers' share of insurance liabilities 2,176.1 2,083.2
Net
Claims outstanding(*2) 1,629.3 1,600.6
Unearned premium provision 409.6 397.5
Total insurance liabilities -- net 2,038.9 1,998.1
------------------------------------------------- ----------- -----------
*1 Gross claims outstanding at 31 December 2021 is presented before the deduction of salvage and subrogation recoveries totalling GBP87.6 million (2020: GBP70.5 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 (v) below.
(iii) Analysis of claims incurred
The following tables illustrate the development of gross and net
UK Insurance and International Insurance claims incurred for the
past ten financial periods, including the impact of re-estimation
of claims provisions at the end of each financial year. The first
table shows actual gross claims incurred and the second shows
actual net claims incurred. Figures are presented on an
underwriting year basis.
Financial year ended 31 December
Analysis of
claims incurred 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Total
(gross amounts) GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------- ------- ------- ------- --------- --------- --------- --------- --------- --------- ---------
Underwriting
year (UK insurance)
2012 and prior (789.2) (249.6) 129.2 127.7 11.8 91.1 57.7 25.5 14.6 9.7
2013 -- (431.1) (325.5) 53.6 44.4 34.2 35.2 8.2 15.4 22.0 (543.6)
2014 -- -- (438.2) (347.1) 25.6 17.1 52.0 15.7 22.5 19.0 (633.4)
2015 -- -- -- (428.4) (411.2) 21.7 53.3 58.0 34.0 25.8 (646.8)
2016 -- -- -- -- (529.4) (463.7) 82.1 54.8 46.1 50.3 (759.8)
2017 -- -- -- -- -- (691.8) (615.0) 123.1 79.5 82.5 (1,021.7)
2018 -- -- -- -- -- -- (818.8) (546.9) 52.8 80.3 (1,232.6)
2019 -- -- -- -- -- -- -- (812.4) (476.2) 89.8 (1,198.8)
2020 -- -- -- -- -- -- -- -- (697.4) (519.5) (1,216.9)
2021 -- -- -- -- -- -- -- -- -- (881.7) (881.7)
UK Insurance
gross claims
incurred (789.2) (680.7) (634.5) (594.2) (858.8) (991.4) (1,153.5) (1,074.0) (908.7) (1,021.8)
Underwriting
year (International
Insurance)(*1)
2012 and prior (112.2) (52.6) 11.5 7.0 10.6 4.4 4.8 3.1 (0.4) --
2013 -- (68.2) (57.8) 4.2 7.7 3.3 5.8 1.3 0.2 0.8 (102.7)
2014 -- -- (85.2) (65.5) 4.4 5.8 5.5 2.0 (0.4) 0.5 (132.9)
2015 -- -- -- (92.6) (101.6) 7.7 3.1 0.1 (0.1) 0.1 (183.3)
2016 -- -- -- -- (138.9) (125.3) 11.7 6.9 3.6 1.4 (240.6)
2017 -- -- -- -- -- (174.1) (147.3) 16.5 8.6 5.0 (291.3)
2018 -- -- -- -- -- -- (204.9) (165.7) 20.1 6.2 (344.3)
2019 -- -- -- -- -- -- -- (293.8) (141.2) 13.3 (421.7)
2020 -- -- -- -- -- -- -- -- (233.6) (160.6) (394.2)
2021 -- -- -- -- -- -- -- -- -- (285.7) (285.7)
International
Insurance gross
claims incurred (112.2) (120.8) (131.5) (146.9) (217.8) (278.2) (321.3) (429.6) (343.2) (419.0)
--------------------- ------- ------- ------- ------- --------- --------- --------- --------- --------- --------- ---------
Other gross
claims incurred (1.7) (2.2) (7.1) (5.4) (0.1) (3.6) (1.1) -- -- --
Claims handling
costs (26.0) (22.9) (21.4) (22.6) (27.1) (35.5) (37.9) (64.5) (66.7) (66.0)
Total gross
claims incurred (929.1) (826.6) (794.5) (769.1) (1,103.8) (1,308.7) (1,513.8) (1,568.1) (1,318.6) (1,506.8)
--------------------- ------- ------- ------- ------- --------- --------- --------- --------- --------- --------- ---------
Financial year ended 31 December
Analysis of claims
incurred (net 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Total
amounts) GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Underwriting year
(UK Insurance)
2012 and prior (344.3) (57.9) 129.2 126.8 41.8 96.7 50.5 22.1 11.6 10.1
2013 -- (184.4) (135.0) 38.4 49.3 36.4 34.7 4.4 13.7 19.3 (123.2)
2014 -- -- (187.0) (144.1) (16.4) 25.3 38.4 17.2 18.6 13.6 (234.4)
2015 -- -- -- (182.1) (162.0) (2.6) 42.6 48.2 26.1 27.8 (202.0)
2016 -- -- -- -- (219.4) (180.7) 48.1 50.7 46.6 41.8 (212.9)
2017 -- -- -- -- -- (214.3) (182.9) 77.8 67.1 72.6 (179.7)
2018 -- -- -- -- -- -- (261.0) (165.2) 40.6 62.3 (323.3)
2019 -- -- -- -- -- -- -- (258.1) (142.5) 56.9 (343.7)
2020 -- -- -- -- -- -- -- -- (218.5) (169.1) (387.6)
2021 -- -- -- -- -- -- -- -- -- (321.2) (321.2)
UK Insurance net
claims incurred (344.3) (242.3) (192.8) (161.0) (306.7) (239.2) (229.6) (202.9) (136.7) (185.9)
Underwriting year
(International
Insurance)
2012 and prior (48.6) (22.5) 4.6 3.4 4.4 2.2 2.3 1.4 (0.1) --
2013 -- (26.6) (23.5) 1.7 4.8 0.9 3.0 0.7 0.1 0.3 (38.6)
2014 -- -- (31.6) (23.3) 1.8 1.8 2.2 0.8 (0.1) 0.2 (48.2)
2015 -- -- -- (33.4) (39.6) 5.1 1.3 1.3 -- 0.1 (65.2)
2016 -- -- -- -- (47.9) (43.5) 6.3 2.4 1.5 0.6 (80.6)
2017 -- -- -- -- -- (60.7) (51.5) 5.5 3.2 2.3 (101.2)
2018 -- -- -- -- -- -- (71.2) (58.4) 7.8 2.7 (119.1)
2019 -- -- -- -- -- -- -- (89.6) (50.1) 4.9 (134.8)
2020 -- -- -- -- -- -- -- -- (95.4) (52.7) (148.1)
2021 -- -- -- -- -- -- -- -- -- (81.9) (81.9)
International
Insurance net
claims incurred (48.6) (49.1) (50.5) (51.6) (76.5) (94.2) (107.6) (135.9) (133.1) (123.5)
------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Other net claims
incurred (0.8) (2.1) (6.9) (5.4) (0.2) (2.6) (1.1) -- -- --
Claims handling
costs (10.8) (9.5) (8.9) (9.4) (11.2) (11.1) (11.8) (20.5) (23.4) (22.9)
Total net claims
incurred (404.5) (303.0) (259.1) (227.4) (394.6) (347.1) (350.1) (359.3) (293.2) (332.3)
------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
The table below shows the development of UK Car Insurance loss
ratios for the past six financial periods, presented on an
underwriting year basis.
Financial year ended 31 December
UK Car Insurance loss ratio
development 2016 2017 2018 2019 2020 2021
------ ----- ----- ----- -----
Underwriting year (UK Car only)
2016 88% 84% 77% 73% 68% 64%
2017 -- 87% 83% 75% 70% 65%
2018 -- -- 92% 81% 78% 73%
2019 -- -- -- 92% 76% 72%
2020 -- -- -- -- 72% 66%
2021 -- -- -- -- -- 90%
(iv) Analysis of claims reserve releases
The following table analyses the impact of movements in prior
year claims provisions on a gross and net basis. Figures are
presented on an underwriting year basis.
Financial year ended 31 December
2016 2017 2018 2019 2020 2021
Gross GBPm GBPm GBPm GBPm GBPm GBPm
Underwriting year (UK Motor
insurance)
2016 and prior 135.7 214.0 245.1 141.8 116.2 112.5
2017 -- -- 25.4 110.6 69.8 75.0
2018 -- -- -- 83.2 57.3 64.1
2019 -- -- -- -- 54.8 76.2
2020 -- -- -- -- -- 52.9
Total gross release (UK Motor
Insurance) 135.7 214.0 270.5 335.6 298.1 380.7
---------------------------------- ------ ------ ----- ----- ----- -----
Total gross release (UK Household
Insurance) -- 1.6 4.6 8.3 9.2 6.0
---------------------------------- ------ ------ ----- ----- ----- -----
Total gross release (UK Travel
Insurance) -- -- -- -- -- 2.2
---------------------------------- ------ ------ ----- ----- ----- -----
Total gross release (International
Insurance) 21.0 23.2 35.2 39.1 53.2 52.0
---------------------------------- ------ ------ ----- ----- ----- -----
Total gross release 156.7 238.8 310.3 383.0 360.5 440.9
---------------------------------- ------ ------ ----- ----- ----- -----
Financial year ended 31 December
2016 2017 2018 2019 2020 2021
Net GBPm GBPm GBPm GBPm GBPm GBPm
----- ----- ----- ----- ----- -----
Underwriting year (UK Motor Insurance)
2016 and prior 75.4 165.9 213.0 141.8 116.2 112.5
2017 -- -- 8.0 75.8 67.7 72.4
2018 -- -- -- 25.8 40.7 61.9
2019 -- -- -- -- 17.0 54.6
2020 -- -- -- -- -- 15.9
Total net release (UK Motor Insurance) 75.4 165.9 221.0 243.4 241.6 317.3
---------------------------------------------------------- ----- ----- ----- ----- ----- -----
Total net release (UK Household Insurance) -- 0.5 1.4 2.5 2.8 2.5
---------------------------------------------------------- ----- ----- ----- ----- ----- -----
Total net release (UK Travel Insurance) -- -- -- -- -- 2.2
---------------------------------------------------------- ----- ----- ----- ----- ----- -----
Total net release (International Insurance) 9.9 9.5 13.5 14.4 18.6 16.4
---------------------------------------------------------- ----- ----- ----- ----- ----- -----
Total net release 85.3 175.9 235.9 260.3 263.0 338.4
---------------------------------------------------------- ----- ----- ----- ----- ----- -----
Analysis of net releases on UK Motor Insurance:
-- Net releases on Admiral net share (UK motor) 58.3 92.1 111.4 121.7 104.3 128.1
-- Releases on commuted quota share reinsurance contracts
(UK motor) 17.1 73.8 109.6 121.7 137.3 189.2
Total net release as above 75.4 165.9 221.0 243.4 241.6 317.3
---------------------------------------------------------- ----- ----- ----- ----- ----- -----
Admiral typically commutes quota share reinsurance contracts in
its UK Car Insurance business 24 or 36 months following the start
of the underwriting year. After commutation, any changes in claims
costs on the commuted proportion of the business are reflected
within claims costs and are separately analysed here. Releases on
the share of business originally reinsured but since commuted are
analysed by underwriting year as follows:
Financial year ended 31 December
2016 2017 2018 2019 2020 2021
GBPm GBPm GBPm GBPm GBPm GBPm
----- ----- ----- ----- ----- -----
Underwriting year
2016 and prior 17.1 73.8 109.6 80.2 67.9 66.3
2017 -- -- -- 41.5 46.0 50.1
2018 -- -- -- -- 23.4 43.5
2019 -- -- -- -- -- 29.3
Total releases on commuted quota share reinsurance
contracts (UK motor) 17.1 73.8 109.6 121.7 137.3 189.2
----------------------------------------------------- ----- ----- ----- ----- ----- -----
Profit commission is analysed in note 5c.
(v) Reconciliation of movement in claims provision
31 December 2021
Gross Reinsurance Net
GBPm GBPm GBPm
--------- ----------- -------
Claims provision at start of period 2,919.9 (1,319.3) 1,600.6
Claims incurred (excluding claims handling costs and
releases) 1,881.8 (1,234.0) 647.8
Reserve releases (440.9) 102.5 (338.4)
Movement in claims provision due to commutation -- 318.4 318.4
Claims paid and other movements (1,315.8) 716.7 (599.1)
Claims provision at end of period 3,045.0 (1,415.7) 1,629.3
----------------------------------------------------- --------- ----------- -------
31 December 2020
Gross Reinsurance Net
GBPm GBPm GBPm
--------- ----------- -------
Claims provision at start of period 2,899.4 (1,354.2) 1,545.2
Claims incurred (excluding claims handling costs and
releases) 1,612.4 (1,079.6) 532.8
Reserve releases (360.5) 97.5 (263.0)
Movement in claims provision due to commutation -- 352.7 352.7
Claims paid and other movements (1,231.4) 664.3 (567.1)
Claims provision at end of period 2,919.9 (1,319.3) 1,600.6
----------------------------------------------------- --------- ----------- -------
(vii) Reconciliation of movement in net unearned premium
provision
31 December 2021
Gross Reinsurance Net
GBPm GBPm GBPm
--------- ----------- -------
Unearned premium provision at start of period 1,161.4 (763.9) 397.5
Written in the period 2,513.6 (1,643.0) 870.6
Earned in the period (2,492.3) 1,637.3 (855.0)
Translation differences (12.7) 9.2 (3.5)
Unearned premium provision at end of period 1,170.0 (760.4) 409.6
--------------------------------------------- --------- ----------- -------
31 December 2020
Gross Reinsurance Net
GBPm GBPm GBPm
--------- ----------- -------
Unearned premium provision at start of period 1,075.6 (717.5) 358.1
Written in the period 2,344.0 (1,555.9) 788.1
Earned in the period (2,265.3) 1,513.7 (751.6)
Translation differences 7.1 (4.2) 2.9
Unearned premium provision at end of period 1,161.4 (763.9) 397.5
--------------------------------------------- --------- ----------- -------
6. Investment income and costs
6a. Investment return
31 December 31 December
2021 2020
GBPm GBPm
At EIR Other Total At EIR Other Total
---------------------------------- ------ ------
Investment return
On assets classified as FVTPL -- 3.6 3.6 -- 8.5 8.5
On assets classified as
FVOCI(*1*3) 40.0 2.3 42.3 32.5 5.0 37.5
On assets classified as amortised
costs(*1) 0.6 -- 0.6 1.4 -- 1.4
Net unrealised losses
Unrealised losses on forward
contracts -- -- -- -- -- --
Accrual for reinsurers' share
of investment return -- (1.6) (1.6) -- 12.9 12.9
Interest receivable on cash and
cash equivalents(*1) -- 0.3 0.3 -- 0.4 0.4
Total investment and interest
income (*2) 40.6 4.6 45.2 33.9 26.8 60.7
---------------------------------- ------ ----- ----- ------ ----- -----
*1 Interest received during the year was GBP46.6 million (2020:
GBP52.6 million)
*2 Total investment return excludes GBP2.7 million of
intra-group interest (2020: GBP2.9 million)
*3 Realised gains on sales of debt securities classified as
FVOCI are GBP2.3 million (2020: GBP5.0 million)
6b. Finance costs
31 December 31 December
2021 2020
Continuing operations GBPm GBPm
Interest payable on subordinated loan notes
and other credit facilities(*1*2) 11.4 11.7
Interest payable on lease liabilities 2.3 2.6
Interest recoverable from co and re-insurers (1.8) (2.0)
Total finance costs on continuing operations 11.9 12.3
--------------------------------------------- ----------- -----------
*1 Interest paid during the year was GBP14.1 million (2020:
GBP14.0 million)
*2 See note 7e for details of credit facilities
Finance costs represent interest payable on the GBP200.0 million
(2020: GBP200.0 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.
6c. Expected credit losses
31 December 31 December
2021 2020
Note GBPm GBPm
Expected credit losses on financial
investments 6f 2.6 7.8
Expected credit losses on Loans and advances
to customers(*1) 7b 10.7 25.8
Total expense for expected credit losses 13.3 33.6
---------------------------------------------- ---- ----------- -----------
*1 Includes GBP2.5 million (2020: GBP7.8 million) of write-offs,
with total movement in the expected credit loss provision being
GBP10.7 million (2020: GBP25.8 million).
6d. Financial assets and liabilities
The Group's financial assets and liabilities can be analysed as
follows:
31 December 31 December
2021 2020
Continuing operations GBPm GBPm
Financial investments measured at FVTPL
Money market and other funds 1,055.6 1,339.3
Derivative financial instruments 5.2 --
Equity Investments (designated FVTPL) 2.2 --
1,063.0 1,339.3
Financial investments classified as FVOCI
Debt securities 2,408.6 1,912.7
Government gilts(*1) 166.4 177.3
2,575.0 2,090.0
Equity investments (designated FVOCI) 19.3 11.3
2,594.3 2,101.3
Financial assets measured at amortised cost
Deposits with credit institutions 85.3 65.4
Total financial investments 3,742.6 3,506.0
--------------------------------------------------- ----------- -----------
Other financial assets
Insurance receivables 956.6 977.9
Trade and other receivables (measured at amortised
cost) 251.9 204.1
Insurance and other receivables 1,208.5 1,182.0
Loans and advances to customers (note 7) 556.8 359.8
Cash and cash equivalents 372.7 298.2
Total financial assets from continuing operations 5,880.6 5,346.0
--------------------------------------------------- ----------- -----------
Financial liabilities
Subordinated notes 204.4 204.3
Loan backed securities 446.5 260.7
Other borrowings 20.0 20.0
Derivative financial instruments -- 3.6
Subordinated and other financial liabilities 670.9 488.6
Trade and other payables(*) (2) 1,960.0 1,991.2
Lease liabilities 105.3 122.8
Total financial liabilities 2,736.2 2,602.6
--------------------------------------------------- ----------- -----------
*1 Government gilts include UK government issued securities which are owned by the parent company and reviewed separately by the Group Investment Committee.
*2 Trade and other payables total balance of GBP1,960.0 million (2020: GBP1,991.2 million) above includes GBP1,528.4 million (2020: GBP1,502.6 million) in relation to tax and social security, deferred income and reinsurer balances that are outside the scope of IFRS 9.
The maturity profile of financial assets and liabilities under
the scope of IFRS 4 and 9 at 31 December 2021 is as follows:
On demand < 1 year Between 1 and 2 years > 2 years
GBPm GBPm GBPm GBPm
Financial investments
Money market funds and
derivative financial
instruments -- 1,057.9 1.7 1.1
Deposits with credit
institutions -- 75.3 10.0 --
Debt securities -- 713.2 304.5 1,390.8
Government gilts(*1) -- -- 57.9 108.4
Total financial
investments -- 1,846.4 374.1 1,500.3
Trade and other
receivables -- 1,208.5 -- --
Loans and advances to
customers -- 171.3 174.7 210.8
Cash and cash
equivalents 372.7 -- -- --
Total financial assets 372.7 3,226.2 548.8 1,711.1
----------------------- --------- -------- --------------------- ---------
Financial liabilities
Subordinated notes -- 11.0 11.0 211.0
Loan backed securities -- 170.2 126.7 172.0
Other borrowings -- 20.0 -- --
Trade and other
payables(*) (2) -- 1,706.5 -- --
Total financial
liabilities -- 1,907.7 137.7 383.0
----------------------- --------- -------- --------------------- ---------
*1 Government gilts include UK government issued securities which are owned by the parent company and reviewed separately by the Group Investment Committee.
*2 Of the GBP1,706.5 million held within trade and other payables in the maturity table, GBP1,274.9 million do not meet the definition of a financial liability under IFRS 9 but fall within the scope of IFRS 4 hence are included in the above maturity profile.
The maturity profile of financial assets and liabilities under
the scope of IFRS 4 and 9 at 31 December 2020 was as follows:
On demand < 1 year Between 1 and 2 years > 2 years
GBPm GBPm GBPm GBPm
Financial investments
Money market funds and
derivative financial
instruments -- 1,339.3 -- --
Deposits with credit
institutions -- 55.4 10.0 --
Debt securities -- 202.7 429.1 1,280.9
Government gilts -- -- -- 177.3
Total financial
investments -- 1,597.4 439.1 1,458.2
Trade and other
receivables -- 204.1 -- --
Loans and advances to
customers -- 116.9 125.6 117.3
Cash and cash
equivalents 298.2 -- -- --
Total financial assets 298.2 1,918.4 564.7 1,575.5
----------------------- --------- -------- --------------------- ---------
Financial liabilities
Subordinated notes -- 11.0 11.0 222.0
Loan backed securities -- 102.7 83.8 86.1
Other borrowings -- 20.3 -- --
Trade and other
payables(*1) -- 1,751.4 -- --
Total financial
liabilities -- 1,885.4 94.8 308.1
----------------------- --------- -------- --------------------- ---------
*1 Of the GBP1,751.4 million held within trade and other payables, GBP1,262.8 million do not meet the definition of a financial liability under IFRS 9 but fall within the scope of IFRS 4 hence are included in the above maturity profile.
The maturity profile of gross insurance liabilities at the end
of 2021 is as follows:
< 1 year 1--3 years > 3 years
GBPm GBPm GBPm
Claims outstanding 909.9 829.8 1,305.3
Unearned premium provision 1,170.0 -- --
Total gross insurance liabilities 2,079.9 829.8 1,305.3
---------------------------------- -------- ---------- ---------
The maturity profile of gross insurance liabilities at the end
of 2020 was as follows:
< 1 year 1--3 years > 3 years
GBPm GBPm GBPm
Claims outstanding 874.3 816.3 1,229.3
Unearned premium provision 1,161.4 -- --
Total gross insurance liabilities 2,035.7 816.3 1,229.3
---------------------------------- -------- ---------- ---------
6e. Financial investments
31 December 2021
FVTPL FVOCI Amortised Cost(*2) Total
GBPm GBPm GBPm GBPm
AAA- AA 500.6 906.9 21.2 1,428.7
A 401.0 1,007.9 426.2 1,835.1
BBB 42.6 477.9 10.6 531.1
Sub BBB 22.0 71.7 -- 93.7
Not rated(*1) 96.8 129.9 -- 226.7
Total financial investments 1,063.0 2,594.3 458.0 4,115.3
---------------------------- ------- ------- ------------------ -------
*1 GBP72.3 million of the unrated exposure stems from money market funds, which are rated AAA, but the underlying securities are not. The remaining unrated exposure is a mixture of private debt (GBP127.5 million) and other holdings (GBP26.8 million).
*2 Investments held at amortised cost comprise deposits with
credit institutions and cash.
31 December 2020
FVTPL FVOCI Amortised Cost(*2) Total
GBPm GBPm GBPm GBPm
AAA- AA 471.9 889.7 38.8 1,400.4
A 637.0 756.7 325.9 1,719.6
BBB 52.3 380.1 52.3 484.7
Sub BBB 31.7 -- 0.1 31.8
Not rated(*1) 146.4 74.8 -- 221.2
Total financial investments 1,339.3 2,101.3 417.1 3,857.7
---------------------------- ------- ------- ------------------ -------
*1 The majority (GBP136.7 million) of the unrated exposure stems from money market funds, which are rated AAA, but the underlying securities are not. These specific exposures are repurchase agreements. The remaining unrated exposure is a mixture of private debt (GBP70.3 million) and other holdings (GBP14.2 million).
*2 Investments held at amortised cost comprise deposits with
credit institutions, and cash (including cash held by discontinued
operations of GBP53.5 million)
The table below shows how the financial assets held at fair
value have been measured using the fair value hierarchy:
Represented
(*1)
31 December
31 December 2021 2020
FVTPL FVOCI FVTPL FVOCI
GBPm GBPm GBPm GBPm
Level one (quoted prices
in active markets) 1,060.8 2,449.5 1,339.3 2,026.5
Level two (use of observable
inputs) -- -- -- --
Level three (use of significant
unobservable inputs) 2.2(*) (2) 144.8 -- 74.8
Total 1,063.0 2,594.3 1,339.3 2,101.3
-------------------------------- ---------- ------- ------- -------
*1 GBP63.5 million has been reclassified between Level One and
Level Three as at 31 December 2020.
*2 Gains through the Income Statement are recognized within
Investment return. See note 6b for further information.
Fair value measurement using significant unobservable inputs
(level three)
Level three investments consist of debt securities and equity
investments. Debt securities are comprised primarily of investments
in debt funds which are valued at the proportion of the Group's
holding of the Net Asset Value (NAV) reported by the investment
vehicle. In addition, there is a small allocation of privately
placed bonds which do not trade on active markets, these are valued
using discounted cash-flow models designed to appropriately reflect
the credit and illiquidity of these instruments. The key
unobservable input across private debt securities is the discount
rate which is based on the credit performance of the assets.
Equity securities are comprised of investments in Private Equity
and Infrastructure Equity funds, which are valued at the proportion
of the Group's holding of the NAV reported by the investment
vehicle. These are based on several unobservable inputs including
market multiples and cash flow forecasts.
There were no significant inter-relationships between
unobservable inputs that materially affect fair values.
The table below presents the movement in the period relating to
financial instruments valued using a level three valuation:
Equity Securities Debt Securities Total
Level Three Investments GBPm GBPm GBPm
Balance as at 1 January 2021 11.3 63.5 74.8
Gains / (losses) recognised in
Income statement 0.2 1.4 1.6
Gains / (losses) recognised in
Other Comprehensive Income 2.6 1.5 4.1
Purchases 8.5 80.9 89.4
Disposals (0.6) (21.8) (22.4)
Translation differences (0.5) -- (0.5)
Balance as at 31 December 2021 21.5 125.5 147.0
------------------------------- ----------------- --------------- ------
Equity Securities Debt Securities Total
Level Three Investments GBPm GBPm GBPm
Balance as at 1 Jan 2020 7.5 51.4 58.9
Gains / (losses) recognised in
Income statement -- 1.5 1.5
Gains / (losses) recognised in
Other Comprehensive Income 0.5 (1.4) (0.9)
Purchases 3.3 27.0 30.3
Disposals (0.7) (15.0) (15.7)
Translation differences 0.7 -- 0.7
Balance as at 31 December 2020 11.3 63.5 74.8
------------------------------- ----------------- --------------- ------
6f. Cash and cash equivalents
31 December 31 December
2021 2020
Continuing operations GBPm GBPm
Cash at bank and in hand(*1) 372.7 298.2
Total cash and cash equivalents 372.7 298.2
-------------------------------- ----------- -----------
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. All cash and cash equivalents
are measured at amortised cost.
For cash at bank and cash deposits and other receivables, the
fair value approximates to the book value due to their short
maturity.
6g. Other assets
Insurance and other receivables
31 December 31 December
2021 2020
Continuing operations GBPm GBPm
Insurance receivables(*1) 956.6 977.9
Trade and other receivables 221.5 179.0
Prepayments and accrued income 30.4 25.1
Total insurance and other receivables 1,208.5 1,182.0
-------------------------------------- ----------- -----------
*1 Insurance receivables at 31 December 2021 include GBP87.6 million in respect of salvage and subrogation recoveries (2020: GBP70.5 million).
Insurance receivables
Insurance receivables are measured at historic cost. Given the
short-term duration of these assets no bad debt provision has been
recognised.
6h. Financial and lease liabilities
31 December 2021
--------------------------------------------------------------------------------------------
Subordinated Lease
Notes Loan backed securities Other borrowings and derivatives liabilities Total
GBPm GBPm GBPm GBPm GBPm
------------ ---------------------- -------------------------------- ------------ ------
Financial
liability
at the
start of
the
period 204.3 260.7 23.6 122.8 611.4
Interest
payable
per Income
Statement 11.1 5.5 0.9 2.3 19.8
Cash-flows (11.0) 180.3 (0.9) (12.3) 156.1
Other
foreign
exchange
and
non-cash
movements -- -- (3.6) (7.5) (11.1)
Financial
liability
at the end
of the
period 204.4 446.5 20.0 105.3 776.2
----------- ------------ ---------------------- -------------------------------- ------------ ------
31 December 2020
--------------------------------------------------------------------------------------------
Subordinated Lease
Notes Loan backed securities Other borrowings and derivatives liabilities Total
GBPm GBPm GBPm GBPm GBPm
------------ ---------------------- -------------------------------- ------------ ------
Financial liability at the start of the period 204.2 304.5 21.4 137.1 667.2
Interest payable per Income Statement 11.1 6.2 1.6 2.6 21.5
Cash-flows (11.0) (50.0) (1.5) (12.4) (74.9)
Other foreign exchange and non-cash movements -- -- 2.1 (0.4) 1.7
Transferred to assets associated with disposal group
held for sale -- -- -- (4.1) (4.1)
Financial liability at the end of the period 204.3 260.7 23.6 122.8 611.4
----------------------------------------------------- ------------ ---------------------- -------------------------------- ------------ ------
Subordinated notes
Financial liabilities are inclusive of GBP200.0 million
subordinated notes issued on 25 July 2014 at a fixed rate of 5.5%
with a redemption date of 25 July 2024.
The notes are unsecured subordinated obligations of the Group
and rank pari passu without any preference among themselves. In the
event of a winding-up or bankruptcy, they are to be repaid only
after the claims of all other creditors have been met.
There have been no defaults on any of the notes during the year.
The Group has the option to defer interest payments on the notes
but to date has not exercised this right.
The fair value of subordinated notes (level one valuation based
on quoted prices in active markets) at 31 December 2021 is GBP217.1
million (2020: GBP222.9 million).
Other borrowings
The Group holds a revolving credit facility of GBP200.0 million
which expires in April 2023. The Group also holds a separate credit
facility
of GBP20.0 million which expires in August 2022. GBP20.0 million was drawn under this agreement as at 31 December 2021 (2020: GBP20.0 million), which is shown within other borrowings in the table above.
The carrying value is a reasonable approximation of fair
value.
Loan backed securities
Asset backed senior loan note facilities of GBP650.0 million
have been established in relation to the Admiral Loans business
(see note 3 for details of the accounting treatment of SPEs). As at
the year end, GBP446.5 million (2020: GBP260.7 million) of these
facilities had been utilised.
The carrying value is a reasonable approximation of fair
value.
7. Loans and advances to customers
7a. Loans and advances to customers
31 December 31 December
2021 2020
GBPm GBPm
Loans and advances to customers -- gross carrying
amount 607.0 401.8
Loans and advances to customers -- provision (50.2) (42.0)
Total loans and advances to customers -- net of
provision 556.8 359.8
-------------------------------------------------- ----------- -----------
Loans and advances to customers are comprised of the
following:
31 December 31 December
2021 2020
GBPm GBPm
Unsecured personal loans 566.9 371.3
Finance leases 40.1 30.5
Total loans and advances to customers, gross 607.0 401.8
--------------------------------------------- ----------- -----------
Fair value measurement
The loans and advances are recognised at fair value at the point
of origination and then subsequently on an amortised cost basis.
This is deemed a reasonable approximation of fair value.
Expected credit losses
The expected credit loss model is a three-stage model based on
forward looking information regarding changes in the credit quality
since origination. Credit risk is measured using a Probability of
Default (PD), Exposure at Default (EAD) and Loss Given Default
(LGD) defined as follows:
-- Probability of Default (PD): The likelihood of an account defaulting;
calibrated through analysis of historic customer behaviour. Where
customers have already met the definition of default this is 100%. For
customers that are not in default the PD is determined through analysis
of historic data at a credit grade level. A behavioural PD is
then used after two months based on observed default rates by month on
book and risk grade.
-- Exposure at Default: The amount of balance at the time of default. For
loans that are in arrears the EAD is taken as the current balance plus
any expected interest arrears. For up-to-date loans the EAD is calculated
as the expected balance 3 months prior to each period, plus three months
of interest arrears to account for the time it takes to default following
falling into arrears.
-- Loss Given Default (LGD): The amount of the asset not recovered following
a borrower's default, determined through analysis of historic recovery
performance.
The PD is applied to the EAD to calculate the expected loss
excluding recoveries. The LGD is then applied to this loss to
calculate the total expected loss including recoveries. A
forward-looking provision is also calculated, as set out later in
this note.
Loan assets are segmented into three stages of credit
impairment:
-- Stage 1 -- no significant increase in credit risk of the financial asset
since inception
-- Stage 2 -- significant increase in credit risk of the financial asset
since inception
-- Stage 3 -- financial asset is credit impaired.
For assets in stage 1, the allowance is calculated as the
expected credit losses from events within 12 months after the
reporting date. For assets in stages 2 and 3 the allowance is
calculated as the expected credit loss from events in the remaining
lifetime of each asset.
Enhancements to Expected Credit Loss methodology
There have been several enhancements to the provisioning
methodology since the 31 December 2020 year end position. The key
changes include:
-- The definition of default to now includes loans 3 cycles in
arrears (previously 4 cycles or more)
-- The Significant Increase in Credit Risk (SICR) criteria and
forward-looking probability of default modelling have been updated
utilising enhanced analysis
Significant increase in credit risk (SICR) (stage 2)
As explained above, stage 1 assets have an ECL allowing for
losses in the next twelve months, stage 2 or 3 assets have an ECL
allowing for losses over the remaining lifetime of the contract. An
asset moves to stage 2 when its credit risk has increased
significantly since initial recognition. IFRS 9 does not prescribe
a definition of significant increase in credit risk but does
include a rebuttable presumption that this does occur for loan
assets which are 30 days past due (which the Group does not
rebut).
The Group has deemed a significant increase in credit risk to
have occurred where:
-- the loan is 1 to 2 loan payments in arrears, or
-- the behavioural PD has moved outside a specified threshold from the
application PD.
Credit impaired (stage 3)
The Group does not rebut the presumption within IFRS 9 that
default has occurred when an exposure is greater than 90 days past
due, which is consistent with a customer being three or more
payments in arrears. In addition, a loan is deemed to be credit
impaired where:
-- there is an Individual Voluntary Arrangement (IVA) agreement confirmed or
proposed, or;
-- customer has started or progressed bankruptcy action, or;
-- a repayment plan is in place, or;
-- customer is deceased.
Judgements Required - Post Model Adjustments (PMAs)
As at 31 December 2021, the expected credit loss allowance
included PMAs totalling GBP9.1 million.
31 December 31 December
2021 2020
Post Model Adjustment GBPm GBPm
Model Performance 2.0 4.9
Inflation 2.5 --
Economic Scenarios 4.6 --
9.1 4.9
---------------------- ----------- -----------
PMAs are calculated using management judgement and analysis. The
key categories of PMAs are as follows:
Model Performance
Inflation
The impairment models operated are currently not highly
sensitive to inflation expectations. Inflation is anticipated to
rise significantly in 2022 and a resulting increase in cost of
living could alter the ability of some customers to make their loan
payments. A PMA has been held to acknowledge this.
Economic Scenarios
Throughout 2020 and 2021, large fluctuations in forecasts for
unemployment have been observed as forecasters seek to anticipate
the unprecedented impact of Covid on the economy. As a result,
management judged to hold a PMA equivalent to a 1% increase in the
scenario weighted unemployment rate to account for uncertainty in
the forecasts.
Write-off policy
Loans are written off where there is no reasonable expectation
of recovery. The Group's policy is to write-off balances to their
estimated net realisable value. Write-offs are actioned on a
case-by-case basis taking into account the operational position and
the collections strategy.
Forward-looking information
Under IFRS 9 the provision must reflect an unbiased and
probability-weighted amount that is determined by evaluating a
range of possible outcomes. The means by which the Group has
determined this is to run scenario analyses.
Management judgment has been used to define the weighting and
severity of the different scenarios based on available data.
The key economic driver of credit losses from the scenarios is
the likelihood of a customer entering hardship through
unemployment. Unemployment forecasts include a risk grade split of
PD based on the correlation between grade-level default rates
observed relative to the change in unemployment rates in the
previous downturn, adjusted for the unemployment forecast expected
in the current economic environment.
The scenario weighting assumptions used are detailed below,
along with the unemployment rate assumed in each scenario at 31
December 2021.
31 December
2021
Scenario 31 December 31 December
peak Unemployment 2021 2020
rate Weighting Weighting
Base 4.3% 40% 40%
Upturn 4.0% 10% 5%
Downturn 6.3% 30% 25%
--------- ------------------ ----------- -----------
Severe 6.6% 20% 30%
--------- ------------------ ----------- -----------
Whilst the macroeconomic environment outlook has improved since
the prior year, there is a still a great deal of uncertainty and
volatility within economic forecasts. The weightings have been
updated to reflect this more positive outlook, with the uncertainty
element incorporated into post model adjustments. The adjustments
are not typically assessed under each distinct economic scenario
used to generate ECL, but instead are applied on the basis of final
modelled ECL which reflects the probability weighted view of all
scenarios.
Sensitivities to key areas of estimation uncertainty
The key areas of estimation uncertainty identified are in the PD
and the forward-looking scenarios.
31 December 31 December
31 December 2021 31 December 2020
2021 Sensitivity 2020 Sensitivity
Weighting GBPm Weighting GBPm
Base 40% (2.5) 40% (2.0)
Upturn 10% (9.7) 5% (4.9)
Downturn 30% 6.9 25% 0.3
--------- ----------- ------------ ----------- ------------
Severe 20% 11.1 30% 3.2
--------- ----------- ------------ ----------- ------------
The sensitivities in the above tables show the variance to ECL
that would be expected if the given scenario unfolded rather than
the weighted position the provision is based on. At 31 December
2021 the implied weighted peak unemployment rate is 5.8%: the table
shows that in a downturn scenario with a 6.3% peak unemployment
rate the provision would increase by GBP6.9 million, whilst the
upturn would reduce the provision by GBP9.7 million, base case
reduce by GBP2.5 million and severe increase the provision by
GBP11.1 million.
Stage 1 assets represent 84% of the total loan assets; a 0.1%
increase in the stage 1 PD, i.e. from 2.4% to 2.5% would result in
a GBP0.6 million increase in ECL.
The impact of the coronavirus pandemic and the various support
measures that were put in place have resulted in an economic
environment that is skewed from historical economic conditions --
particularly around levels of unemployment and inflation. As a
result, there is a greater need for management judgements to be
applied alongside the use of models, therefore at 31 December 2021
post model overlays resulted in additional ECL allowances totalling
GBP9.1 million (2020: GBP4.9 million). This comprises judgements
added due to uncertainty in economic forecasts, cohorts of
customers exposed to inflation through lower levels of disposable
income, and customers deemed to be at higher risk of
unemployment.
Amounts arising from ECL: loans and advances to customers
The Group is exposed to credit risk from the Admiral Loans
business.
The following table sets out information about the credit
quality of the loans and advances to customers measured at
amortised cost. Credit grades are used to segment customers by
apparent credit risk at the time of acquisition. Higher grades are
the lowest credit risk with each subsequent grade increasing in
expected credit risk. The Group does not have any purchased or
originated credit impaired assets. These tables are inclusive of
the finance lease assets which are held by the Group, further
analysis of these balances can be found in note 7b.
All probability of default figures included in this paragraph
allow for forward-looking information, i.e. the PDs are a weighted
average from the economic scenarios considered. The average
probability of default in for stage 1 assets is 2.4% (2020: 4.8%)
reflecting the expectation of defaults within 12 months of the
reporting date. The average PD for assets in stage 2 is 30.0%
(2020: 67.0%) reflecting expected losses over the remaining life of
the assets. The PD for assets in stage 3 is 100% (2020: 100%) as
these assets are deemed to have defaulted.
31 December 31 December
2021 2020
Stage Stage
Stage 1 2 3
12- month Lifetime Lifetime
ECL ECL ECL Total Total
GBPm GBPm GBPm GBPm GBPm
Credit Grade(*)
(1)
Higher 350.1 55.0 - 405.1 269.6
Medium 130.3 11.6 - 141.9 94.1
Lower 30.2 1.8 - 32.0 17.0
Credit
impaired - - 28.0 28.0 21.1
Gross carrying
amount 510.6 68.4 28.0 607.0 401.8
------------------ ---------- --------- --------- ----------- -----------
Expected
credit loss
allowance (13.7) (12.7) (23.5) (49.9) (41.5)
Other loss
allowance(*)
(2) (0.3) - - (0.3) (0.5)
Carrying amount 496.6 55.7 4.5 556.8 359.8
------------------ ---------- --------- --------- ----------- -----------
*1 Credit grade is the internal credit banding given to a customer at origination. This is based on external credit rating information.
*2 Other loss allowance covers losses due to a reduction in current or future vehicle value or costs associated with recovery and sale of vehicles.
The following tables reconcile the opening and closing gross
carrying amount and expected credit loss allowance.
Stage Stage
Stage 1 2 3
12- month Lifetime Lifetime
ECL ECL ECL Total
2021 GBPm GBPm GBPm GBPm
Gross carrying amount as at 1 January
2021 343.2 37.5 21.1 401.8
---------- --------- --------- -------
Transfers
Transfers from stage 1 to stage
2 (42.2) 42.2 - -
Transfers from stage 1 to stage
3 (4.7) - 4.7 -
Transfers from stage 2 to stage
1 17.6 (17.6) - -
Transfers from stage 2 to stage
3 - (5.6) 5.6 -
Transfers from stage 3 to stage
1 0.4 - (0.4) -
Transfers from stage 3 to stage
2 - 0.3 (0.3) -
Principal redemption payments (163.2) (22.5) (2.9) (188.6)
Write-offs - - (2.4) (2.4)
New financial assets originated
or purchased 359.5 34.1 2.6 396.2
Gross carrying amount as at 31 December
2021 510.6 68.4 28.0 607.0
---------------------------------------- ---------- --------- --------- -------
Stage 1 Stage 2 Stage 3
12- month ECL Lifetime ECL Lifetime ECL Total
2020 GBPm GBPm GBPm GBPm
Gross carrying amount
as at 1 January 2020 456.2 6.5 16.4 479.1
Transfers
Transfers from stage 1
to stage 2 (26.5) 26.5 -- --
Transfers from stage 1
to stage 3 (9.5) -- 9.5 --
Transfers from stage 2
to stage 1 0.8 (0.8) -- --
Transfers from stage 2
to stage 3 -- (2.6) 2.6 --
Transfers from stage 3
to stage 1 -- -- -- --
Transfers from stage 3
to stage 2 -- -- -- --
Principal redemption
payments (180.0) (1.3) (1.6) (182.9)
Write-offs -- -- (7.7) (7.7)
New financial assets
originated or
purchased 102.2 9.2 1.9 113.3
Gross carrying amount
as at 31 December
2020 343.2 37.5 21.1 401.8
----------------------- -------------- ------------- ------------- -------
Stage Stage
Stage 1 2 3
12- month Lifetime Lifetime
ECL ECL ECL
2021 GBPm GBPm GBPm Total
Expected credit loss allowance
as at 1 January 2021 10.9 12.7 17.9 41.5
------------------------------------ ---------- --------- --------- -----
Movements with a profit and loss
impact
Transfers
Transfers from stage 1 to stage
2 (1.3) 2.3 - 1.0
Transfers from stage 1 to stage
3 (0.4) - 0.6 0.2
Transfers from stage 2 to stage
1 3.1 (5.1) - (2.0)
Transfers from stage 3 to stage
1 0.1 - (0.2) (0.1)
Changes in PDs/LGDs/EADs (8.8) (4.8) 5.6 (8.0)
New financial assets originated
or purchased 10.1 7.6 2.0 19.7
Total net profit and loss charge
in the period 2.8 - 8.0 10.8
------------------------------------ ---------- --------- --------- -----
Write-offs - - (2.4) (2.4)
------------------------------------ ---------- --------- --------- -----
Expected credit loss allowance
as at 31 December 2021 13.7 12.7 23.5 49.9
------------------------------------ ---------- --------- --------- -----
Other movements with no profit
and loss impact
Transfers
Transfers from stage 2 to stage
3 -- (4.0) 4.0 --
Transfers from stage 3 to stage
2 -- 0.1 (0.1) --
Stage 1 Stage 2 Stage 3
12- month ECL Lifetime ECL Lifetime ECL
2020 GBPm GBPm GBPm Total
Expected credit loss
allowance as at 1
January 2020 5.6 3.4 14.4 23.4
------------------------- -------------- ------------- ------------- -----
Movements with a profit
and loss impact
Transfers
Transfers from stage 1 to
stage 2 (0.7) 1.1 -- 0.4
Transfers from stage 1 to
stage 3 (0.2) -- 0.4 0.2
Transfers from stage 2 to
stage 1 0.2 (0.4) -- (0.2)
Transfers from stage 3 to
stage 1 0.1 -- (0.1) --
Changes in PDs/LGDs/EADs 2.4 5.2 9.3 16.9
New financial assets
originated or purchased 3.5 3.4 1.6 8.5
Total net profit and loss
charge in the period 5.3 9.3 11.2 25.8
------------------------- -------------- ------------- ------------- -----
Write-offs -- -- (7.7) (7.7)
------------------------- -------------- ------------- ------------- -----
Expected credit loss
allowance as at 31
December 2020 10.9 12.7 17.9 41.5
------------------------- -------------- ------------- ------------- -----
Other movements with no
profit and loss impact
Transfers
Transfers from stage 2 to
stage 3 -- (2.4) 2.4 --
Transfers from stage 3 to
stage 2 -- 0.1 (0.1) --
7b. Finance lease receivables
Loans and advances to customers include the following finance
leases. The Group is the lessor for leases of cars.
31 December 31 December
2021 2020
GBPm GBPm
Gross finance lease receivables
Less than 1 year 11.7 8.4
Between 1 to 5 years 33.3 24.9
More than 5 years -- --
45.0 33.3
Unearned finance income (5.2) (3.3)
Net financial lease receivables 39.8 30.0
Less impairment allowance (1.3) (0.8)
38.5 29.2
-------------------------------- ----------- -----------
Net finance lease receivables
Less than 1 year 9.2 6.7
Between 1 to 5 years 30.6 23.3
More than 5 years -- --
39.8 30.0
-------------------------------- ----------- -----------
The net investment in finance leases shown above is net of the
unguaranteed residual value of GBP0.3 million (2020: GBP0.5
million).
7c. Interest income
31 December 31 December
2021 2020
GBPm GBPm
From loans and advances to customers 34.0 34.8
From finance leases 2.6 2.0
Total interest income 36.6 36.8
------------------------------------- ----------- -----------
Interest income receivable is recognised in the income statement
using the effective interest method, which calculates the amortised
cost of the financial asset and allocates the interest income over
the expected product life.
7d. Interest expense
31 December 31 December
2021 2020
GBPm GBPm
Interest payable on loan backed securities 5.5 6.2
Interest payable on other credit facilities 0.6 1.0
Total interest expense(*1) 6.1 7.2
-------------------------------------------- ----------- -----------
*1 Interest paid in total during the year was GBP6.1 million
(2020: GBP5.2 million)
Interest expense represents the interest payable on loan backed
securities through SPEs of GBP650.0 million (2020: GBP400.0
million) of which GBP446.5 million was drawn down at 31 December
2021 (2020: GBP260.7 million), and funding specifically allocated
to the Admiral Loans business, in the form of credit facilities of
GBP120.0 million (2020: GBP120.0 million) of which GBP20.0 million
was drawn down at 31 December 2021 (2020: GBP20.0 million). Admiral
Group also has a further credit facility of GBP100.0 million (2020:
GBP100.0 million) of which GBPnil was drawn down at 31 December
2021 (2020: GBPnil).
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 GBP678.9 million (2020: GBP625.3
million) represents total other revenue and profit commission and
is disaggregated into the segments included in note 4.
Year ended 31 December 2021
UK International Admiral Total Comparison
Insurance Insurance Loans Other (continuing) (discontinued)(*2) Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Major products/ service
line
Instalment income 101.7 3.7 -- -- 105.4 -- 105.4
Fee and commission revenue 137.2 28.3 1.0 -- 166.5 -- 166.5
Revenue from law firm 25.0 -- -- -- 25.0 -- 25.0
Comparison(*1) -- -- -- 5.3 5.3 59.6 65.0
Other 12.0 -- -- 0.6 12.6 -- 12.6
Total other revenue 275.9 32.0 1.0 5.9 314.8 59.6 374.4
Profit commission 301.9 2.6 -- -- 304.5 -- 304.5
Total other revenue and 678.9
profit commission 577.8 34.6 1.0 5.9 619.3 59.6
-------------------------- ------------ ------------- ------- ----- ------------- ------------------- ------
Timing of revenue
recognition
Point in time 309.6 28.3 1.0 5.9 344.8 59.6 404.4
Over time 27.5 -- -- -- 27.5 -- 27.5
Revenue outside the scope
of IFRS 15 240.7 6.3 -- -- 247.0 -- 247.0
577.8 34.6 1.0 5.9 619.3 59.6 678.9
-------------------------- ------------ ------------- ------- ----- ------------- ------------------- ------
Year ended 31 December 2020
International Admiral Total Discontinued
UK Insurance Insurance Loans Other (continuing) (Comparison)(*2) Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Major products/ service
line
Instalment income 102.4 4.0 -- -- 106.4 -- 106.4
Fee and commission revenue 155.3 21.8 1.6 -- 178.7 -- 178.7
Revenue from law firms 26.7 -- -- -- 26.7 -- 26.7
Comparison(*1) -- -- -- 5.9 5.9 161.9 167.8
Other 11.1 -- -- 0.6 11.7 -- 11.7
Total other revenue 295.5 25.8 1.6 6.5 329.4 161.9 491.3
Profit commission 132.4 1.6 -- -- 134.0 -- 134.0
Total other revenue and
profit commission 427.9 27.4 1.6 6.5 463.4 161.9 625.3
-------------------------- ------------ ------------- ------- ----- ------------- ------------------- --------
Timing of revenue
recognition
Point in time 267.1 21.8 1.6 6.5 297.0 161.9 458.9
Over time 28.4 -- -- -- 28.4 -- 28.4
Revenue outside the scope
of IFRS 15 132.4 5.6 -- -- 138.0 -- 138.0
427.9 27.4 1.6 6.5 463.4 161.9 625.3
-------------------------- ------------ ------------- ------- ----- ------------- ------------------- --------
*1 Comparison revenue excludes GBP7.8 million (31 December 2020: GBP22.2 million) of income from other Group companies, including GBP7.6 million (2020: GBP22.0 million) from discontinued operations.
*2 See note 13 for further detail on discontinued operations.
Instalment income is recognised using the effective interest
rate over the term of the policy and is outside the scope of IFRS
15. Profit commission from reinsurers is recognised under IFRS 4
and is discussed further in note 5 to the financial statements.
9. Expenses
9a. Operating expenses and share scheme charges
31 December 2021
Recoverable
from co- and
Gross reinsurers Net
Continuing operations GBPm GBPm GBPm
Acquisition of insurance contracts (*1) 179.5 (113.0) 66.5
Administration and other marketing costs (insurance
contracts) 540.0 (343.8) 196.2
Insurance contract expenses 719.5 (456.8) 262.7
Administration and other marketing costs (other) 151.5 -- 151.5
Share scheme charges 99.1 (34.3) 64.8
Movement in expected credit loss provision 13.3 -- 13.3
Total expenses and share scheme charges -- continuing
operations 983.4 (491.1) 492.3
------------------------------------------------------ ----- ------------- -----
31 December 2020
Recoverable
from co- and
Gross reinsurers Net
Continuing operations GBPm GBPm GBPm
Acquisition of insurance contracts(*1) 166.2 (106.8) 59.4
Administration and other marketing costs (insurance
contracts) 437.4 (321.0) 116.4
Insurance contract expenses 603.6 (427.8) 175.8
Administration and other marketing costs (other) 131.3 -- 131.3
Share scheme charges 79.7 (28.8) 50.9
Movement in expected credit loss provision 33.6 -- 33.6
Total expenses and share scheme charges -- continuing
operations 848.2 (456.6) 391.6
------------------------------------------------------ ----- ------------- -----
*1 Acquisition of insurance contracts expense excludes GBP0.3
million (2020: GBP0.2 million) of aggregator fees from other Group
companies.
The GBP196.2 million (2020: GBP116.4 million) administration and
marketing costs allocated to insurance contracts is principally
made up of salary costs.
31
December 31 December
Analysis of other administration and 2021 2020
other marketing costs:Continuing operations GBPm GBPm
Expenses relating to additional products
and fees 91.9 80.6
Loans expenses (excluding movement on
ECL provision) 23.7 16.8
Other expenses 35.9 33.9
Total - continuing operations 151.5 131.3
--------------------------------------------- --------- ------------
Refer to note 14 for a reconciliation between insurance contract
expenses and the reported expense ratio.
9b. Employee costs and other expenses
31 December 2021 31 December 2020
Total Net Total Net
Continuing operations GBPm GBPm GBPm GBPm
------- ---------- ------- ----------
Salaries 338.2 111.9 298.8 100.1
Social security charges 35.4 12.8 32.6 11.6
Pension costs 17.7 6.0 16.2 5.4
Share scheme charges (see note 9f) 99.1 64.8 79.7 50.6
Total employee expenses 490.4 195.5 427.3 167.7
---------------------------------------------------------- ------- ---------- ------- ----------
Depreciation charge:
-- Owned assets 13.4 3.4 12.0 3.0
-- ROU assets 10.2 2.7 10.0 2.9
Amortisation charge:
-- Software 19.3 5.6 19.1 5.6
-- Deferred acquisition costs 180.6 68.0 166.4 59.0
Auditor's remuneration (including VAT) (total Group):
-- Fees payable for the audit of the Company's annual
accounts 0.1 0.1 0.1 0.1
-- Fees payable for the audit of the Company's subsidiary
accounts 1.5 0.6 1.2 0.6
-- Fees payable for audit related assurance services
pursuant to legislation or regulation 0.8 0.5 0.5 --
GBP34,800 (inclusive of VAT) (2020: GBP8,880) was payable to the
auditor for other services in the year.
Total and net expenses are before and after co- and reinsurance
arrangements respectively.
Audit fees are 64% (2020: 70%) of total fees and 36% (2020: 30%)
of total fees are for non-audit services, which are classed as
audit related assurance services under the FRC rules on non-audit
services.
The amortisation of software and deferred acquisition cost
assets is charged to expenses in the income statement.
9c. Employee numbers (including Directors)
Average for the year
2021 2020
Number Number
---------- ----------
Direct customer contact employees 7,271 7,278
Support employees 3,454 3,559
Total 10,725 10,837
---------------------------------- ---------- ----------
Total average employees in 2021 relating to comparison entities
disposed of during the year were 222 (2020: 643).
9d. Directors' remuneration
(i) Directors' remuneration
31
December 31 December
2021 2020
GBPm GBPm
Directors' emoluments 1.1 2.1
Amounts receivable under SIP and DFSS share schemes 3.0 2.7
Company contributions to money purchase pension plans - -
Total 4.1 4.8
------------------------------------------------------ --------- -----------
(ii) Number of Directors
2021 2020
Number Number
Retirement benefits are accruing to the following
number of Directors under:
-- Money purchase schemes 2 3
9e. Employee share schemes
Total share scheme costs for the Group excluding discontinued
operations are analysed below:
31 December 2021
SIP charge (i) DFSS charge (ii) Total charge
------------------ --------------
Gross Net Gross Net Gross Net
GBPm GBPm GBPm GBPm GBPm GBPm
------- ------- -------- -------- ------ ------
IFRS 2 charge for
equity settled
share schemes 19.9 13.7 41.3 27.0 61.2 40.7
IFRS 2 charge for
cash settled share
schemes -- -- 5.0 2.9 5.0 2.9
Total IFRS 2 charge 19.9 13.7 46.3 29.9 66.2 43.6
Social security
costs on IFRS 2
charge 0.8 0.5 9.0 6.4 9.8 6.9
Discretionary bonus
on shares allocated
but unvested -- -- 23.1 14.3 23.1 14.3
Total share scheme
charges -
continuing
operations 20.7 14.2 78.4 50.6 99.1 64.8
-------------------- ------- ------- -------- -------- ------ ------
Re-presented 31 December 2020
SIP charge (i) DFSS charge (ii) Total charge
---------------- ------------------ --------------
Gross Net Gross Net Gross Net
GBPm GBPm GBPm GBPm GBPm GBPm
------- ------- -------- -------- ------ ------
IFRS 2 charge for
equity settled
share schemes 17.3 11.6 34.3 21.8 51.6 33.4
IFRS 2 charge for
cash settled share
schemes -- -- 3.9 2.2 3.9 2.2
Total IFRS 2 charge 17.3 11.6 38.2 24.0 55.5 35.6
Social security
costs 1.7 1.1 8.4 5.7 10.1 6.8
Discretionary bonus
on shares allocated
but unvested -- -- 14.1 8.5 14.1 8.5
Total share scheme
charges -
continuing
operations 19.0 12.7 60.7 38.2 79.7 50.9
-------------------- ------- ------- -------- -------- ------ ------
Total share scheme costs for discontinued operations were GBP0.4
million (2020: GBP3.1 million). The total IFRS 2 charge for equity
settled share schemes for discontinued operations were GBP0.5
million (2020: GBP2.6 million).
Net share scheme charges are presented after allocations to
co-insurers (in the UK and Italy) and reinsurers (in the
International Insurance businesses). The proportion of net to gross
share scheme charges would be expected to be consistent in each
period, at approximately 65%.
10. Taxation
10a. Taxation
31 December 31 December
2021 2020
Continuing operations GBPm GBPm
Current tax
Corporation tax on profits for the year 129.2 101.6
Under-provision relating to prior periods 4.2 0.6
Current tax charge 133.4 102.2
Deferred tax
Current period deferred taxation movement (1.5) 4.0
(Over) provision relating to prior periods (1.7) --
Total tax charge per consolidated income statement 130.2 106.2
--------------------------------------------------- ----------- -----------
Factors affecting the total tax charge are:
31 December 31 December
2021 2020
Continuing operations GBPm GBPm
Profit before tax 713.5 608.2
---------------------------------------------------- ----------- -----------
Corporation tax thereon at effective UK corporation
tax rate of 19.0% (2020: 19.0%) 135.6 115.5
Expenses and provisions not deductible for tax
purposes 2.2 0.7
Non-taxable income (8.3) (10.5)
Impact of change in UK tax rate on deferred tax
balances (3.6) 0.4
Adjustments relating to prior periods 2.5 0.6
Impact of different overseas tax rates (1.4) (1.6)
Unrecognised deferred tax 3.2 1.1
Total tax charge for the period as above 130.2 106.2
---------------------------------------------------- ----------- -----------
The corporation tax recoverable for continuing operations as at
31 December 2021 was GBP10.6 million (2020: GBP22.9 million
recoverable). See note 13 for details of the corporation tax charge
on discontinued operations.
In 2021, over 130 countries reached a historic agreement to
reform the international tax framework. The main aim of the
agreement was to ensure that large, multinational corporations pay
their fair share of tax in the countries in which they operate and
this included the introduction of a new global minimum corporate
income tax rate of 15%. In January 2022, the UK reiterated its
intention to implement new legislation to give effect to this new
framework, with these changes expected to come into force in 2023.
The new rules are not expected to have a material impact on the
Group.
10b. Deferred income tax asset / (liability)
Analysis of deferred tax asset / (liability)
Tax treatment
of share Capital Carried Other
schemes allowances forward losses Fair value reserve differences Total
GBPm GBPm GBPm GBPm GBPm GBPm
Balance brought forward at 1 January 2020 5.9 (2.1) -- (5.4) 1.2 (0.4)
Tax treatment of share scheme charges through income
or expense (3.2) -- -- -- -- (3.2)
Tax treatment of share scheme charges through
reserves 6.6 -- -- -- -- 6.6
Capital allowances -- 0.7 -- -- -- 0.7
Carried forward losses -- -- 2.9 -- -- 2.9
Transferred to disposal group held for sale (0.5) (0.3) (2.9) -- (0.5) (4.2)
Movement in fair value reserve -- -- -- (1.8) -- (1.8)
Other difference -- -- -- -- (1.5) (1.5)
Balance carried forward at 31 December 2020 8.8 (1.7) -- (7.2) (0.8) (0.9)
Tax treatment of share scheme charges through income
or expense (6.3) -- -- -- -- (6.3)
Tax treatment of share scheme charges through
reserves 6.0 -- -- -- -- 6.0
Capital allowances -- 9.5 -- -- -- 9.5
Carried forward losses -- -- -- -- -- --
Movement in fair value reserve -- -- -- 1.4 -- 1.4
Other difference -- -- -- -- (0.4) (0.4)
Balance carried forward at 31 December 2021 8.5 7.8 -- (5.8) (1.2) 9.3
----------------------------------------------------- ------------- ----------- --------------- ------------------- ------------ -----
Positive amounts presented above relate to a deferred tax asset
position.
The average effective rate of tax for 2021 is 19.0% (2020:
19.0%). An increase to the main rate of corporation tax in the UK
to 25% was announced in the 2021 Budget and is expected to come
into effect in 2023. This will increase the Group's future tax
charge accordingly.
The deferred tax asset has increased during the year, mainly
relating to capital allowances. The increase in capital allowances
is due to the impairments recognised on property and equipment and
intangible assets as part of the restructure costs referenced in
the financial narrative earlier in this report. It is anticipated
that these timing differences will reverse when the tax rate is
increased to 25% which ultimately contributes to an increase in the
deferred tax asset
The deferred tax asset in relation to carried forward losses
(for continuing operations) remains at GBPnil at the year-end
(2020: GBPnil) due to uncertainty over the availability of future
taxable profits against which to offset utilise any deferred tax
asset.
At 31 December 2021, the Group had unused tax losses amounting
to GBP261.8 million (2020: GBP236.8 million), relating primarily to
the Group's US businesses Elephant Auto and compare.com, for which
no deferred tax asset has been recognised. The earliest expiry date
for any of these tax losses is 2029. The total aggregated
unrecognised deferred tax liabilities on temporary differences
associated with subsidiaries is GBPnil (2020: GBPnil).
11. Other assets and other liabilities
11a. Property and equipment
ROU
Improvements to short leasehold buildings Computer equipment Office equipment Furniture and fittings Asset -- Leasehold buildings Total
GBPm GBPm GBPm GBPm GBPm GBPm
Cost
At 1 January 2020 33.4 71.4 22.4 10.6 134.4 272.2
Transfer of assets associated with disposal group
held for sale (1.2) (6.2) (0.9) (0.2) (5.5) (14.0)
Additions 3.1 14.1 0.8 0.2 0.1 18.3
Impairment -- -- -- -- (3.1) (3.1)
Disposals -- (0.6) -- (0.3) (1.8) (2.7)
Foreign exchange and other movements 0.7 (0.1) 0.3 (0.1) 0.1 0.9
At 31 December 2020 36.0 78.6 22.6 10.2 124.2 271.6
-------------------------------------------------- ----------------------------------------- ------------------ ---------------- ---------------------- ----------------------------- ------
Depreciation
At 1 January 2020 19.8 58.7 18.4 9.1 11.8 117.8
Transfer of depreciation associated with disposal
group held for sale (0.6) (5.2) (0.5) (0.2) (1.6) (8.1)
Charge for the year 3.7 6.8 1.8 0.5 10.8 23.6
Disposals -- (0.7) -- (0.2) (1.5) (2.4)
Foreign exchange and other movements(1) 0.1 -- 0.3 (0.1) -- 0.3
At 31 December 2020 23.0 59.6 20.0 9.1 19.5 131.2
-------------------------------------------------- ----------------------------------------- ------------------ ---------------- ---------------------- ----------------------------- ------
Net book amount
At 1 January 2020 13.6 12.7 4.0 1.5 122.6 154.4
Net book amount
At 31 December 2020 13.0 19.0 2.6 1.1 104.7 140.4
Cost
At 1 January 2021 36.0 78.6 22.6 10.2 124.2 271.6
Additions 1.9 7.6 0.4 0.7 5.6 16.2
Impairment (0.2) -- (0.7) (0.6) (17.8) (19.3)
Disposals (0.3) (17.1) (0.1) (0.3) (8.2) (26.0)
Foreign exchange and other movements (0.4) (0.2) (0.3) (0.1) (0.5) (1.5)
At 31 December 2021 37.0 68.9 21.9 9.9 103.3 241.0
-------------------------------------------------- ----------------------------------------- ------------------ ---------------- ---------------------- ----------------------------- ------
Depreciation
At 1 January 2021 23.0 59.6 20.0 9.1 19.5 131.2
Charge for the year 3.9 8.2 0.9 0.4 10.2 23.6
Impairment (0.2) -- (0.7) (0.6) -- (1.5)
Disposals (0.2) (10.4) (0.1) (0.3) (3.8) (14.8)
Foreign exchange and other movements (0.2) (0.1) (0.2) (0.1) (0.1) (0.7)
At 31 December 2021 26.3 57.3 19.9 8.5 25.8 137.8
-------------------------------------------------- ----------------------------------------- ------------------ ---------------- ---------------------- ----------------------------- ------
Net book amount
At 31 December 2021 10.7 11.6 2.0 1.4 77.5 103.2
1 Within foreign exchange and other movements for the ROU asset,
GBP0.6 million relates to remeasurements of the ROU asset due to
amendments to the payment terms of the leasing arrangement.
The Impairment recognised in property and equipment in the
period reflects the decision to exit lease agreements in the UK in
2022 and 2023. The impaired right of use assets are now held at a
recoverable amount determined based upon a value in use
calculation.
11b. Intangible assets
Deferred Software
acquisition -- Internally Software
Goodwill costs generated(*1) -- Other(*2) Total
Re-presented GBPm GBPm GBPm GBPm GBPm
At 1 January 2020 62.3 24.8 69.5 3.7 160.3
Additions -- 61.3 19.8 5.0 86.1
Amortisation charge -- (59.0) (17.3) (1.9) (78.2)
Disposals -- -- -- (1.2) (1.2)
Transfer of assets associated with
disposal group held for sale -- -- (0.6) (0.6) (1.2)
Foreign exchange movement -- 0.2 1.2 (0.5) 0.9
At 31 December 2020 62.3 27.3 72.6 4.5 166.7
Additions -- 69.4 36.8 21.8 128.0
Amortisation charge -- (68.0) (18.1) (1.2) (87.3)
Disposals -- -- -- -- --
Impairment -- -- (25.4) -- (25.4)
Transfer of assets associated with
disposal group held for sale -- -- -- -- --
Foreign exchange movement -- (0.5) (1.5) (0.1) (2.1)
At 31 December 2021 62.3 28.2 64.4 25.0 179.9
----------------------------------- -------- ------------ -------------- ------------- ------
(*) (1) Gross carrying amount and accumulated amortisation of internally generated software as at the end of 2021 are GBP119.7 million (2020: GBP149.7 million) and GBP55.3 million respectively (2020: GBP77.1 million).
(*) (2) Gross carrying amount and accumulated amortisation of other software as at the end of 2021 are GBP55.9 million (2020: GBP35.1 million) and GBP30.9 million respectively (2020: GBP30.6 million).
Impairment recognised in internally generated software relates
to impairment of technology assets which are to be replaced as a
result of the continued investment in technology and digital
capabilities outlined as part of the Admiral 2.0 strategy. The
impaired assets are now held at recoverable amounts determined by
value in use calculations.
Goodwill relates to the acquisition of Group subsidiary EUI
Limited (formerly Admiral Insurance Services Limited) in November
1999. As described in the accounting policies, the amortisation of
this asset ceased on transition to IFRS on 1 January 2004. All
annual impairment reviews since the transition date have indicated
that the estimated recoverable value of the asset is greater than
the carrying amount and therefore no impairment losses have been
recognised.
Only one year of forecasts is required to support the
recoverable value of goodwill above. Given the short time period
used to support the recoverable amount, no terminal growth rate or
discounting is applied.
An analysis of deferred acquisition costs is given in the table
below:
Gross Reinsurance Net
GBPm GBPm GBPm
------- ----------- ------
At 1 January 2020 74.6 (49.8) 24.8
Additions 168.4 (107.1) 61.3
Amortisation (166.4) 107.4 (59.0)
Foreign exchange movement 1.0 (0.8) 0.2
At 31 December 2020 77.6 (50.3) 27.3
-------------------------- ------- ----------- ------
Additions 181.4 (112.0) 69.4
Amortisation (180.6) 112.6 (68.0)
Foreign exchange movement (1.5) 1.0 (0.5)
At 31 December 2021 76.9 (48.7) 28.2
-------------------------- ------- ----------- ------
11c. Trade and other payables
31 December 31 December
2021 2020
GBPm GBPm
Trade payables 39.8 34.9
Amounts owed to co-insurers 161.9 240.9
Amounts owed to reinsurers 1,274.9 1,262.8
Other taxation and social security liabilities 71.7 72.9
Other payables 112.4 135.6
Accruals and deferred income (see below) 299.3 244.1
Total trade and other payables 1,960.0 1,991.2
----------------------------------------------- ----------- -----------
Of amounts owed to reinsurers (recognised under IFRS 4),
GBP1,169.8 million (2020: GBP1,175.1 million) is held under funds
withheld arrangements.
Analysis of accruals and deferred income:
31 December 31 December
2021 2020
GBPm GBPm
Premium received in advance of policy inception 117.4 98.3
Accrued expenses 117.5 77.2
Deferred income 64.4 68.6
Total accruals and deferred income as above 299.3 244.1
------------------------------------------------ ----------- -----------
11d. Leases
The Group occupies various properties under leasing arrangements
that are now recognised as right of use assets and lease
liabilities. A maturity analysis of lease liabilities based on
contractual undiscounted cash flows is set out below:
31 December 31 December
2021 2020
GBPm GBPm
Maturity analysis -- contractual undiscounted cash
flows
Within one year 12.9 13.8
Between two to five years 41.8 42.4
Between five to ten years 32.7 39.1
Over ten years 35.4 50.0
Total 122.8 145.3
--------------------------------------------------- ----------- -----------
Amounts recognised in the statement of financial position are as
follows:
31 December 31 December
2021 2020
GBPm GBPm
Lease liabilities
Current 10.5 11.0
Non-Current 94.8 111.8
Total 105.3 122.8
------------------ ----------- -----------
See note 11a for right of use assets depreciation and the
carrying amount of right of use asset at the end of the reporting
period. Only one class of underlying assets is identified as
leasehold buildings. Total cash outflows in relation to leases is
disclosed under 6h.
The Group has no significant financial commitments other than
those accounted for as right of use assets and lease liabilities
under IFRS 16.
11e. Contingent liabilities
The Group's legal entities operate in numerous tax jurisdictions
and on a regular basis are subject to review and enquiry by the
relevant tax authority.
One of the Group's previously owned subsidiaries was subject to
a Spanish Tax Audit which concluded with the Tax Authority denying
the application of the VAT exemption relating to insurance
intermediary
services. The Company has appealed 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. Whilst the Company is no longer part of the Admiral Group, the contingent liability which the Company is exposed to has been indemnified by the Admiral Group up to a cap of GBP22 million.
The Group is also in discussions with tax authorities in Italy
and Spain on various corporate tax matters. To date these
discussions have focused primarily on the transfer pricing and
cross-border arrangements in place between the Group's
intermediaries and insurers.
No provision has been made in these financial statements in
relation to the matters noted above.
The Group is, from time to time, subject to threatened or actual
litigation and/or legal and/or regulatory disputes, investigations
or similar actions both in the UK and overseas. All potentially
material matters are assessed, with the assistance of external
advisers if appropriate, and in cases where it is concluded that it
is more likely than not that a payment will be made, a provision is
established to reflect the best estimate of the liability. In some
cases it will not be possible to form a view, for example if the
facts are unclear or because further time is needed to properly
assess the merits of the case. No provisions are held in relation
to such matters. In these circumstances, specific disclosure of a
contingent liability will be made where material.
The Directors do not consider that the final outcome of any such
current case will have a material adverse effect on the Group's
financial position, operations or cash flows, and no material
provisions are currently held in relation to such matters.
A number of the Group's contractual arrangements with reinsurers
include features that, in certain scenarios, allow for reinsurers
to recover losses incurred to date. The overall impact of such
scenarios would not lead to an overall net economic outflow from
the Group.
12. Share capital
The Group's capital includes share capital and the share premium
account, other reserves which are comprised of the fair value
reserve, hedging reserve and foreign exchange reserve, and retained
earnings.
12a. Dividends
Dividends were proposed, approved and paid as follows:
31 December 31 December
2021 2020
GBPm GBPm
Proposed March 2020 (77.0 pence per share, 56.3
pence per share approved April 2020 and paid June
2020) -- 162.3
Declared August 2020 (91.2 pence per share, including
20.7 pence per share deferred, paid October 2020) -- 263.4
Proposed March 2021 (86.0 pence per share, approved
April 2021 and paid June 2021) 250.8 --
Declared August 2021 (161.0 pence per share, paid
October 2021) 470.1 --
Total dividends 720.9 425.7
------------------------------------------------------ ----------- -----------
The dividends proposed in March (approved in April) represent
the final dividends paid in respect of the 2019 and 2020 financial
years. The dividends declared in August are interim distributions
in respect of 2020 and 2021.
A 2021 final dividend of 118.0 pence per share (approximately
GBP347 million) has been proposed, made up of 72.0 pence per share
relating to continuing operations, and 46.0 pence per share as the
second special dividend relating to the disposal of the Penguin
Portal comparison businesses.
12b. Earnings per share
31 December 31 December
2021 2020
GBPm GBPm
Profit for the financial year after taxation
attributable to equity shareholders --
continuing operations 585.0 502.9
--------------------------------------------- ----------- -----------
Profit for the financial year after taxation
attributable to equity shareholders --
discontinued operations 412.9 25.9
--------------------------------------------- ----------- -----------
Profit for the financial year after taxation
attributable to equity shareholders --
continuing and discontinued operations 997.9 528.8
--------------------------------------------- ----------- -----------
Weighted average number of shares -- basic 297,480,041 294,563,978
--------------------------------------------- ----------- -----------
Unadjusted earnings per share -- basic
-- continuing operations 196.7p 170.7p
--------------------------------------------- ----------- -----------
Unadjusted earnings per share -- basic
-- discontinued operations 138.8p 8.8p
--------------------------------------------- ----------- -----------
Unadjusted earnings per share -- basic
-- continuing and discontinued operations 335.5p 179.5p
--------------------------------------------- ----------- -----------
Weighted average number of shares -- diluted 298,351,248 295,034,233
--------------------------------------------- ----------- -----------
Unadjusted earnings per share -- diluted 196.1p 170.4p
-- continuing operations
--------------------------------------------- ----------- -----------
Unadjusted earnings per share -- diluted 138.4p 8.8p
-- discontinued operations
--------------------------------------------- ----------- -----------
Unadjusted earnings per share -- diluted 334.5p 179.2p
-- continuing and discontinued operations
--------------------------------------------- ----------- -----------
The difference between the basic and diluted number of shares at
the end of 2021 (being 871,207 2020: 470,255) relates to awards
committed, but not yet issued under the Group's share schemes.
Refer to note 9 for further detail.
12c. Share capital
31 December 31 December
2021 2020
GBPm GBPm
Authorised
500,000,000 ordinary shares of 0.1 pence 0.5 0.5
Issued, called up and fully paid
299,554,720 ordinary shares of 0.1 pence 0.3 --
296,692,063 ordinary shares of 0.1 pence -- 0.3
0.3 0.3
----------------------------------------- ----------- -----------
12d. Related party transactions
The Board considers that only the Executive and Non-Executive
Directors of Admiral Group plc are key management personnel.
A summary of the remuneration of key management personnel is as
follows, with further detail relating to the remuneration and
shareholdings of key management personnel set out in the Directors'
Remuneration Report.
Key management personnel received short term employee benefits
in the year of GBP3,077,686 (2020: GBP2,522,280), post-employment
benefits of GBP30,643 (2020: GBP22,999) and share based payments of
GBP2,149,734 (2020: GBP2,249,425). 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%.
12e. Post balance sheet events
No events have occurred since the reporting date that materially
impact these financial statements.
13. Discontinued Operations
13a. Description
On the 29 December 2020, the Group announced that it had reached
an agreement with ZPG Comparison Services Holdings UK Limited
("RVU") that RVU would purchase the Penguin Portals Group ("Penguin
Portals", comprising online comparison portals Confused.com,
Rastreator.com and LeLynx.fr and the Group's technology operation
Admiral Technologies) and its 50% share of Preminen Price
Comparison Holdings Limited ("Preminen"). MAPFRE would also sell
its 25% holding in Rastreator and 50% holding in Preminen as part
of the transaction.
Management considered these entities to meet the definition of a
disposal group as set out under IFRS 5 above. The disposal group is
included within the "Discontinued (comparison)" operating segment
as stated in note 4.
On the 30 April 2021, the Group announced that, following
regulatory and competition authority approvals, RVU had completed
the purchase of the Penguin Portals Group and acquired Admiral's
50% share of Preminen. MAPFRE also sold its 25% holding in
Rastreator and 50% holding in Preminen to RVU. The total
transaction value was settled in cash on completion.
13b. Financial performance and cash flow information
Financial information relating to the discontinued operations
for the financial year ending 31 December 2021 and 2020 are
presented below. The results for the financial year ending 31
December 2021 relates to the profit earned prior to completion on
30 April 2021, and the gain recognised on disposal.
31 December 2021 31 December 2020
Gross Eliminations Net Gross Eliminations Net
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue (Other
Revenue) 67.2 (7.6) 59.6 183.9 (22.0) 161.9
Interest Income -- -- -- -- -- --
Net Revenue 67.2 (7.6) 59.6 183.9 (22.0) 161.9
Operating expenses
and share scheme
charges (55.8) 7.6 (48.2) (154.4) 22.0 (132.4)
Operating profit 11.4 -- 11.4 29.5 -- 29.5
Finance costs (0.1) -- (0.1) (0.1) -- (0.1)
Gain on disposal
sale of Comparison
entities held for
sale 404.4 -- 404.4 -- -- --
Profit before tax
from discontinued
operations 415.7 -- 415.7 29.4 -- 29.4
Taxation expense (2.3) -- (2.3) (3.6) -- (3.6)
Profit after tax
from discontinued
operations 413.4 -- 413.4 25.8 -- 25.8
-------------------- ------ ------------ ------ ------- ------------ -------
Due to the availability of certain tax reliefs on the gain of
the comparison businesses sold, the effective tax rate for 2021 for
discontinued operations is lower than the current standard
corporate tax rate.
Operating expenses and share scheme charges include GBP0.4
million (2020: GBP3.1 million) of share scheme expenses that are
not included in the segmental result in note 4. The net cash flows
incurred by the disposal group are as follows:
31 December 31 December
2021 2020
GBPm GBPm
Net cash inflow from operating activities 10.6 36.1
Net cash (outflow) from investing activities (0.2) (1.0)
Net cash (outflow) from financing activities (22.6) (15.9)
Net cash (outflow)/ inflow from discontinued
operations (12.2) 19.2
--------------------------------------------- ----------- -----------
13c. Assets disposed of
Consideration received consisted of cash only and was received
at the point of completion. The total consideration received by the
Group in cash was GBP471.8 million. This excludes any costs
incurred by the Group in relation to the sale. The total gain on
disposal is GBP404.4 million.
The carrying amount of assets and liabilities as at the date of
sale (30 April 2021) are outlined below. The comparative balance is
the assets classified as held for sale as at 31 December 2020. All
assets previously held for sale have been disposed of as at 31
December 2021.
30 April 31 December
2021 2020
GBPm GBPm
Assets Note
Property and equipment 11a 5.4 5.9
Intangible assets 11b 1.1 1.2
Deferred tax asset 10b 4.2 4.2
Trade and other receivables 41.9 18.2
Corporation tax asset 0.2 -
Cash and cash equivalents 41.3 53.5
Assets associated with disposal group held
for sale 94.1 83.0
---------------------------------------------- ---- -------- -----------
Liabilities
Trade and other payables 33.3 24.9
Lease liabilities 3.6 4.1
Corporation tax liability - 5.0
Liabilities directly associated with disposal
group held for sale 36.9 34.0
---------------------------------------------- ---- -------- -----------
13d. Gain on disposal
31 December
2021
GBPm
Gross sales proceeds 508.1
Accrued sale proceeds less dividends received
prior to disposal and costs to sell recharged
from purchaser (7.4)
Non-controlling interest share of sales proceeds (28.9)
Total Admiral Group cash received 471.8
Costs to sell incurred by seller, out of proceeds (17.6)
Proceeds to Admiral, net of minority interests
and transaction costs 454.2
Assets held for sale (note 13c) (57.2)
Non-controlling interest share of assets held
for sale 6.6
Other adjustments 0.8
Gain on disposal of comparison entities held
for sale 404.4
-------------------------------------------------- -----------
14. Reconciliations
The following tables reconcile significant key performance
indicators and non-GAAP measures included in the Strategic Report
to items included in the financial statements.
14a. Reconciliation of continuing operations turnover to
reported gross premiums written and other revenue as per the
financial statements
Re-presented
31 December 31 December
2021 2020
GBPm GBPm
Gross premiums written after co-insurance per note
5a of financial statements 2,513.6 2,344.0
Premiums underwritten through co-insurance
arrangements 585.1 613.2
Total premiums written 3,098.7 2,957.2
Other Revenue (*) (1) 314.8 329.4
Admiral Loans interest income 36.6 36.8
3,450.1 3,323.4
Other(*) (2) 57.2 42.4
Turnover as per note 4a of financial statements(*)
(1) (*) (3) 3,507.3 3,365.8
Intra-group income elimination(*) (4) 0.2 0.2
Total turnover -- continuing operations (*1*3) 3,507.5 3,366.0
--------------------------------------------------- ------------ ------------
(*1) Continuing operations
(*2) Other reconciling items represent co-insurer and reinsurer shares of Other Revenue in the Group's Insurance businesses outside of UK Car Insurance.
(*3) See note 14d for the impact of the "Stay at home" premium refund issued to UK motor insurance customers on Turnover in H1 2020.
(*4) Intra-group income elimination relates to comparison income earned in the Group from other Group companies
14b. Reconciliation of claims incurred to reported loss ratios,
excluding releases on commuted reinsurance
Int.
UK Motor UK Home Ins Other Group
December 2021 GBPm GBPm GBPm GBPm GBPm
Net insurance claims
(note 5) 86.1 31.8 170.8 43.6 332.3
Deduct claims handling
costs (12.1) (1.4) (8.9) (0.5) (22.9)
Prior year release/strengthening
-- net original share 128.1 1.8 16.4 2.2 148.5
Prior year release/strengthening
-- commuted share 189.2 0.7 -- -- 189.9
Impact of reinsurer
caps -- -- 1.0 -- 1.0
Impact of weather events -- (1.1) -- -- (1.1)
Attritional current
period claims 391.3 31.8 179.3 45.3 647.7
-------- ------- ------ ----- -------
Net insurance premium
revenue 496.5 49.1 221.0 88.4 855.0
Loss ratio -- current
period attritional 78.8% 64.8% 81.1% -- 75.8%
Loss ratio -- current
period weather events -- 2.2% -- -- 0.1%
Loss ratio -- prior
year release/strengthening
(net original share) (25.8%) (3.7%) (7.4%) -- (17.4%)
Loss ratio -- reported 53.0% 63.3% 73.7% -- 58.5%
Int.
UK Motor UK Home Ins Other Group
December 2020 GBPm GBPm GBPm GBPm GBPm
Net insurance claims
(note 5) 97.1 29.3 139.3 27.5 293.2
Deduct claims handling
costs (12.3) (1.3) (9.8) -- (23.4)
Prior year release/strengthening
-- net original share 104.3 2.8 18.6 -- 125.7
Prior year release/strengthening
-- commuted share 137.3 -- -- -- 137.3
Impact of reinsurer
caps -- -- 1.9 -- 1.9
Impact of weather events -- (2.3) -- -- (2.3)
Attritional current
period claims 326.4 28.5 150.0 27.5 532.4
-------- ------- ------ ----- -------
Net insurance premium
revenue 451.4 43.2 204.2 52.8 751.6
Loss ratio -- current
period attritional 72.3% 65.9% 73.4% -- 70.8%
Loss ratio -- current
period weather events -- 5.3% -- -- 0.3%
Loss ratio -- prior
year release/strengthening
(net original share) (23.1%) (6.4%) (9.1%) -- (16.7%)
Loss ratio -- reported 49.2% 64.8% 64.3% -- 54.4%
14c. Reconciliation of expenses related to insurance contracts
to reported expense ratios
UK Motor UK Home Int. Ins Other Group
December 2021 GBPm GBPm GBPm GBPm GBPm
Net insurance expenses
(note 9) 136.7 17.9 91.3 16.8 262.7
Restructure Costs(*1) (41.6) (4.4) -- -- (46.0)
Claims handling costs 12.1 1.4 8.9 0.5 22.9
Intra-group expenses elimination(*)
(2) -- -- 0.3 -- 0.3
Impact of reinsurer caps (10.1) -- (1.7) -- (11.8)
Net IFRS 16 finance costs 0.5 -- 0.1 -- 0.6
Adjusted net insurance
expenses 97.6 14.9 98.9 17.3 228.7
-------- ------- -------- ----- ------
Net insurance premium
revenue 496.5 49.1 221.0 88.4 855.0
Expense ratio -- reported 19.7% 30.3% 44.8% -- 26.7%
UK Motor UK Home Int. Ins Other Group
December 2020 GBPm GBPm GBPm GBPm GBPm
Net insurance expenses
(note 9) 76.7 11.4 78.5 9.2 175.8
Claims handling costs 12.3 1.3 9.8 -- 23.4
Intra-group expenses elimination(*)
(2) -- -- 0.2 -- 0.2
Impact of reinsurer caps -- -- 1.1 -- 1.1
Net IFRS 16 finance costs 0.5 -- 0.1 -- 0.6
Adjusted net insurance
expenses 89.5 12.7 89.7 9.2 201.1
-------- ------- -------- ----- -----
Net insurance premium
revenue 451.4 43.2 204.2 52.8 751.6
Expense ratio -- reported 19.8% 29.4% 43.9% -- 26.8%
*1 Restructure costs of GBP8.0 million relate to ancillary costs. Total restructure costs incurred within UK insurance are GBP54.0 million.
*2 The intra-group expenses elimination amount relates to aggregator fees charges by the Group's comparison business, Compare.com to other Group companies: given the re-presentation of other comparison businesses to discontinued operations, those expenses are now included in net insurance expenses in note 9, as acquisition costs.
14d. Reconciliation of Impact of "Stay at Home" premium refund issued to UK Motor Insurance customers on Turnover, Total written premiums, Gross written premiums and net insurance premium revenue
31 December
2020
GBPm
Total "Stay at Home" premium refund issued
to UK Motor insurance customers 110.0
Insurance premium tax (12.7)
Impact of premium refund on turnover and total
written premium 97.3
Co-insurer share of premium refund (27.3)
Impact of premium refund on gross written premium
and gross earned premium 70.0
Reinsurer share of premium refund on reinsurers'
written and earned premium (48.9)
Impact of premium refund on net insurance premium
revenue (written and earned) 21.1
-------------------------------------------------- -----------
Whilst the impact on premium in the prior period is GBP21.1
million, the ultimate impact is expected to be the substantial
majority of the total premium refunded due to the Group's co- and
reinsurance profit commission arrangements. The majority of this
was reflected in 2020.
14e. Reconciliation of earnings per share, continuing operations excluding restructure costs
31 December
2021
GBPm
Profit for the financial year after taxation
attributable to equity shareholders -- continuing
operations 585.0
Post-tax impact of restructure costs 46.3
Profit for the financial year after restructure
costs and taxation attributable to equity shareholders
-- continuing operations 631.3
Weighted average number of shares - basic 297,480,041
Earnings per share, continuing operations excluding 212.2p
restructure costs
---------------------------------------------------------- -----------
Consolidated financial summary (unaudited)
Basis of preparation
The figures below are as stated in the Group financial
statements preceding this financial summary and issued previously.
Only selected lines from the income statement and balance sheet
have been included.
Income statement
2021 2020 2019(*1) 2018 2017
GBPm GBPm GBPm GBPm GBPm
Total premiums 3,098.7 2,957.2 2,938.6 2,766.4 2,499.4
--------------------------------------------------- ------- ------- -------- ------- -------
Net insurance premium revenue 855.0 751.6 709.4 671.8 619.1
Other Revenue 345.3 359.0 348.8 460.6 401.1
Profit commission 304.5 134.0 114.9 93.2 67.0
Investment and interest income 45.2 60.7 35.7 36.0 41.7
Net revenue 1,550.0 1,305.3 1,208.8 1,261.6 1,128.9
Net insurance claims (332.3) (293.2) (359.3) (350.1) (347.1)
Net expenses (492.3) (391.6) (331.9) (424.0) (366.9)
Operating profit 725.4 620.5 517.6 487.5 414.9
Net finance costs (11.9) (12.3) (12.5) (11.3) (11.4)
Profit before tax from continuing operations 713.5 608.2 505.1
Profit before tax from discontinued operations 415.7 29.4 17.5
Profit before tax from continuing and discontinued
operations 1,129.2 637.6 522.6 476.2 403.5
--------------------------------------------------- ------- ------- -------- ------- -------
*1 Re-presented from financial year 2019 to reflect discontinued operations
Balance sheet
2021 2020(*1) 2019 2018 2017
GBPm GBPm GBPm GBPm GBPm
Property and equipment 103.2 146.3 154.4 28.1 31.3
Intangible assets 179.9 167.9 160.3 162.0 159.4
Deferred income tax 9.3 3.3 -- 0.2 0.3
Corporation tax asset 10.6 17.9 -- -- --
Reinsurance assets 2,176.1 2,083.2 2,071.7 1,883.5 1,637.6
Insurance and other receivables 1,208.5 1,200.2 1,227.7 1,082.0 939.7
Loans and advances to customers 556.8 359.8 455.1 300.2 66.2
Financial investments 3,742.6 3,506.0 3,234.5 2,969.7 2,697.8
Cash and cash equivalents 372.7 351.7 281.7 376.8 326.8
Total assets 8,359.7 7,836.3 7,585.4 6,802.5 5,859.1
-------------------------------- ------- -------- ------- ------- -------
Equity 1,408.5 1,123.4 918.6 771.1 655.8
Insurance contracts 4,215.0 4,081.3 3,975.0 3,736.4 3,313.9
Subordinated and other financial
liabilities 670.9 488.6 530.1 444.2 224.0
Trade and other payables 1,960.0 2,016.1 1,975.9 1,801.5 1,641.6
Lease liabilities 105.3 126.9 137.1 -- --
Deferred income tax -- -- 0.4 -- --
Current tax liabilities -- -- 48.3 49.3 23.8
Total equity and total
liabilities 8,359.7 7,836.3 7,585.4 6,802.5 5,859.1
-------------------------------- ------- -------- ------- ------- -------
*1 Balance sheet is shown on a total group basis (including discontinued operations)
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 Annual Report and 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 14a to the financial statements.
It has been redefined in the current period
to exclude revenue from discontinued operations.
This measure has been presented by the Group
in every Annual 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 UK Car insurance
business has historically shared a significant
proportion of the risks with Munich Re, a third-party
reinsurance 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 Annual Report 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 14a
to the financial statements.
This measure has been presented by the Group
in every Annual 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.
As noted in the Turnover metric above, in 2020
a reduction of GBP97 million has been reflected
within 2020 total premiums written, to reflect
the "Stay at Home" premium rebate.
---------------------- -------------------------------------------------------
Group profit before Group profit before tax represents profit before
tax tax from continuing operations, excluding restructure
costs
---------------------- -------------------------------------------------------
Earnings per share, Earnings per share from continuing operations
continuing operations before restructure costs represents the profit
after tax attributable to equity shareholders
excluding restructure costs, divided by the
weighted average number of basic shares.
---------------------- -------------------------------------------------------
Underwriting result For each insurance business an underwriting
(profit or loss) result 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 on insurance
assets less claims incurred and insurance expenses.
---------------------- -------------------------------------------------------
Loss Ratio Reported loss ratios are expressed as a percentage
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 14b to the
accounts and explanation is as follows.
UK reported motor loss ratio: Within the UK
insurance segment the Group separately presents
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 Ratio Reported expense ratios are expressed as a
percentage 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 14c to the
accounts and explanation is as follows.
UK reported motor expense ratio: Within the
UK insurance segment the Group separately presents
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, ii) include
intra-group aggregator fees charged by the
UK comparison business to the UK insurance
business and iii) 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 iv) exclude restructure costs
International insurance expense ratio: As for
the UK Motor loss ratio, the international
insurance expense ratios presented exclude
the underwriting of other products that supplement
the car insurance policy. The motor 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
reinsurer caps.
---------------------- -------------------------------------------------------
Combined Ratio Reported combined ratios are the sum of the
loss and expense ratios as defined above. Explanation
of these figures is noted above and reconciliation
of the calculations are provided in notes 14b
and 14c.
---------------------- -------------------------------------------------------
Return on Equity Return on equity is calculated as profit after
tax from continuing operations, before restructure
costs, 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 excluding any net
assets related to discontinued operations,
including the exclusion of the net proceeds
from sale still to be distributed. This average
is determined by dividing the opening and closing
positions for the year by two. It has been
redefined in the current period to exclude
the impact of discontinued operations.
---------------------- -------------------------------------------------------
Group Customers Group customer numbers reflect the total number
of cars, households and vans on cover at the
end of the year, across the Group, and the
total number of travel insurance and loans
customers.
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 Rate Effective tax rate is defined as the approximate
tax rate derived from dividing the Group's
profit before tax by the tax charge going through
the income statement. It is a measure historically
presented by the Group and enables users to
see how the tax cost incurred by the Group
compares over time and to current corporation
tax rates.
---------------------- -------------------------------------------------------
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 The probability-weighted average of all future
estimate claims 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 calculation
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 motor insurance
quota share contracts after 24-36 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 recognised 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 via salvage and subrogation
arrangements or under reinsurance contracts.
It includes both claims payments and movements
in claims reserves.
--------------------- --------------------------------------------------------
Net insurance premium Also referred to as net earned premium. The element
revenue of premium, less reinsurance premium, earned
in the period.
--------------------- --------------------------------------------------------
Net promotor score NPS is currently measured based on a subset of
customer responding to a single question: On
a scale of 0-10 (10 being the best score), how
likely would you recommend our company to a friend,
family or colleague through phone, online or
email. Answers are then placed in 3 groups; Detractors:
scores ranging from 0 to 6]; Passives/neutrals:
scores ranging from [7 to 8]; Promoters: scores
ranging from [9 to 10] and the final NPS score
is : % of promoters - % of detractors
--------------------- --------------------------------------------------------
Ogden discount The discount rate used in calculation of personal
rate injury claims settlements in the UK.
--------------------- --------------------------------------------------------
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).
--------------------- --------------------------------------------------------
Scaled Agile Scaled Agile is a framework that uses a set of
organisational and workflow patterns for implementing
agile practices at an enterprise scale. Scaled
agile at Admiral represents the ability to drive
agile at the team level whilst applying the same
sustainable principles of the group.
--------------------- --------------------------------------------------------
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 ratio A projected actuarial best estimate loss ratio
for a particular accident year or underwriting
year.
--------------------- --------------------------------------------------------
Underwriting year The year in which an insurance policy was incepted.
--------------------- --------------------------------------------------------
Underwriting year Also referred to as the written basis. Claims
basis incurred 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 An insurance policy can be written in one calendar
basis year but earned over a subsequent calendar year.
--------------------- --------------------------------------------------------
(1) Group profit before tax, Earnings per share, Group turnover,
Group net revenue and Return on equity are presented on a
continuing operations basis
(2) Group profit before tax, Earnings per share and Return on
equity exclude the impact of one-off restructure costs totalling
GBP55.5 million in 2021 (2020: GBPnil)
(3) Alternative Performance Measures -- refer to the end of the
report for definition and explanation
(4) Prior period full year dividend excludes the 20.7 pence
special dividend, deferred from 2019
(5) Group turnover in 2020 includes the impact of the 'Stay at
Home' premium refund issued to UK motor insurance customers of
GBP97 million. Refer to the Alternative Performance measures
section of this report for further detail and explanation
(6) (Refer to HY21 Results presentation on
www.admiralgroup.co.uk)
(7) (Profit before tax from continuing operations, excluding
impact of restructur) (e) (cost)
(END) Dow Jones Newswires
March 03, 2022 02:00 ET (07:00 GMT)
Copyright (c) 2022 Dow Jones & Company, Inc.
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