TIDMADM
10 August 2022
2022 Interim Results Highlights
Admiral Group reports solid first half profits and growth
despite inflationary environment
Six months ended:
30 June 30 June 30 June % change % change
2022 2021 2019 vs. 2021 vs. 2019
Group profit before tax (1) GBP251.3m GBP482.2m GBP210.5m -48% +19%
Earnings per share (1) 67.0p 132.9p 60.9p -50% +10%
Interim dividend per share 60.0p 115.0p 63.0p -48% -5%
Special dividend per share
from sale of Penguin Portals
comparison businesses 45.0p 46.0p -- -- --
Return on equity (1 2) 37% 68% 47% -31pts -10pts
Group turnover(1 2) GBP1.85bn GBP1.75bn GBP1.68bn +6% +10%
Group net revenue (1) GBP0.72bn GBP0.79bn GBP0.65bn -9% +10%
Group customers(2) 9.11m 8.02m 6.74m +14% +35%
UK Insurance customers(2) 6.94m 6.22m 5.32m +12% +30%
International Insurance
customers(2) 1.94m 1.71m 1.36m +13% +43%
Gross loans balances GBP786.6m GBP469.4m GBP437.0m +68% +80%
Solvency ratio (post-dividend)
(2) 185% 209% 190% -24pts -5pts
1 Group profit before tax, Earnings per share, Group turnover,
Net revenue and Return on equity presented on a continuing
operations basis
2 Alternative Performance Measures - refer to the end of the
report for definition and explanation
Around 10,000 employees each receive free shares worth up to
GBP1,800 under the employee share scheme based on the interim 2022
results.
Comment from Milena Mondini de Focatiis, Group Chief Executive
Officer
"Admiral has delivered a solid set of results and good customer
growth in the first half of the year. We are happy with this
progress against the backdrop of a more turbulent cycle than usual,
and high levels of inflation. Although, as expected, profit has
decreased against last year, the unique conditions of the pandemic
years make 2019 a better comparison - with profit and customer
numbers increasing by 19% and 35% respectively since then.
"We have remained disciplined, adapting our rates in response to
the higher inflation environment earlier than the market and
maintaining a cautious approach to reserving, as we always do. We
continue to focus on good execution through the cycle. Our strong
balance sheet and focus on profitability over growth puts us on a
strong footing for when conditions improve.
"It is pleasing to see the majority of our growth coming from
more and more customers across all of our products and geographies
choosing to stay with us. We are committed to delivering great
service and to support all of our customers, including those who
are experiencing financial difficulty.
"We have made good progress on our diversification strategy.
More than half of our customer growth came from our new products
and geographies, with UK Household up 18% and Admiral Money loans
balances up by almost 70% whilst the business made its first small
profit. We now serve 1.9 million customers across our international
businesses.
"I would like to thank all of my colleagues across the Group who
make the business such a great place to work, and whose dedication
and adaptability has enabled us to meet our 9 million customers'
needs during this period."
Dividend
The Board has declared an interim dividend of 60.0 pence per
share, made up of a normal dividend of 44.2 pence and a special
dividend of 15.8 pence per share. The payment represents 90% of
earnings per share for the first half.
The Board has also declared a further special dividend of 45.0
pence per share reflecting the final payment of the phased return
to shareholders of the proceeds from the sale of the Penguin
Portals comparison businesses. This payment, along with the
previous two payments of 46.0 pence per share, brings the total
amount returned to shareholders to just over GBP400 million.
The total interim dividend, including the further special
dividend is 105.0 pence per share, made of a normal dividend of
44.2 pence per share and a special dividend of 60.8 pence per
share.
Payment will be on 30 September 2022. The ex-dividend date is 1
September 2022 and the record date is 2 September 2022.
Management presentation
Analysts and investors will be able to access the Admiral Group
management presentation which commences at 10.30 BST on Wednesday
10 August 2022 by registering at the following link for webcast at
https://www.globenewswire.com/Tracker?data=2hYy16zMugCVmdHLTQVpzBRR5MYSxrDoBSbkyw8YZc5Nwk5LnBkS5lqErgVTFcGuB2mXPnh2sM5BeJFAcVssZQcCiz2_5YMh46sc_AuqcfmbGC7psQnIsTCODKNVPE8fuYqNB2yG9s_yHaOWcmkKsNPySRsrA0S71VrGPhdWC3Carc0aSbzU_EB_XrvQM_v0rqEqdAYOj6EOE7xKg_mrzkv1rI6ukgfOges0QOn-SQf78TaOXPXqh4ckl8O_96_ayOH4M1jAUOFXE-XtoXzYkdtiZ036VXJFC5nPRv7VRYiCiBQZc5AUvI_5hdkLyhKqWjBz8T1thpiwlLiluvJQpvF5MQs8a2kwdNIyRTcTvLB21pgMEDG-ZjHe-qTh9_2YfDmt7BLoplNRcVTDPMtXJamOyx5pLjKApvq8tN_53-h7MiimOA_rCfEHI0QVdEkGQBqQZHN7SUr3DGNm084Ln9BNutFauX8wL-AmMwk-n_HZFkhGlNnittvsiEJxAuf0ypaawU0BqV2Ksn2oDBkrKSUg52E93q2Mo8RcArNCPlQup6fIabp37sehgJYKfeBrWH2yEu0_kSpcwNt9US3ileoD6YdJrKoLV3ewe4r3nW-WlVR7E-OT9aiWzwgEKHaEZreXRKaB3c4dbuiyoDJlDqQX38ibYvqk7Y4NhDgMVUmKiElLofrhu9fOMmDuhPVGeFPyHVdx0pQmnxFAw4VtDgikxFz7lof_PY6cOsxvwb_cr7-QxLixu_65FGaHz4uGx2nqEjtu6YA_selZZ8PNXuiibPHNHI5zCCEPCXVEHxKRSnU4n8oYDIF1TYM5cyLUl_R2CcyAh8oMvcBJ2HsE9Cy9Js0g1jcnMkX32K7G-bNHz4S_R3C_-SkK-wx0YJY3KQ5s6SfD5ML7bSJWeB2BMLFHxOpTYF3-_LUbAvzVY4aIF1vaBDtEnkfe-3FqS5k20-3ZDDyDfssd3NHcbhBPtWmTM8cmPac-FGoAO6kZH0vu-9PWTqycUYLxUDcreEmJJILmyoLuZmrMAuDybN2qDdg34tU2nOOV5T0nha7vfs3XMGpsF3H3zcxdOiaOGUspRTb8xSWfVh8D2jIb0RgSAUCx42vrS_0xQvyPj-UEQPwruxFrdhEEDB2W2GscfZQ7zGU6RW3E9YKe20-of7N4lcFN3IF8RP6X-QYS1XK7DaMJaM0VWvd4ax2xfs7oOVDh4LbLj43R4A_vy2iLhBamt6LMB5B4YnTkxfyHUI_Lit3GpVNZ3_apUas0IVNL_iMZhtv3VaFdZOGYnB4g3h3tbkH6IyZfnLx85JB8y6MBcNuOQLlWBvOfowvKkJp-R6BSLHkU1K5stx5dJ0NnEgiNGLdsvwzFOCO2X_0icdSohhbwQ16EskIge8fSSEdTex_3Ssb3JJclc0mP2cFZcJqXUI1CK15WUoCK6LkUIc5YAZXtr36IkHCKUQGQOQpoFOXruAB-c3IqW3UwG8ksuHy1WZZNRBySsXMxD4F-PwR6PCc1qcNO311Qgkgpjzh77R9sa32UADBYOW-1WSPn837wmwi5on64Ec1-vU3kQQQMQ3YzcxuSM_sQ5g08RnNcF_RJiW7GVBEo3KcUoIRpwZz1t8Crydm2gfQnLAriewAE15YpNROcc76zE9Af6ayBOtNkhHkY3tJcNDRfKBur4HqNLOzf1XEIAdlMYqpf62D7gvcHYeTKFfb5HBN-doRsDw-mAGg6GsMXqkKVAzMsNrqoulIO89-tK2UbujJUongDF7tcoGpT4SDlViP3XiJ96GkGL4sPsP5ygLWgkLz5Y_rMrDdPVf46RHSP3TB1C8mKQPhT2FanUOWHRjTK_qf_n0Gro79qeOKvSLQ4YQWwupMjHSe3CxZEBaaoVLS712rFdySlCNugfTcqkiAvd1PkyHJMrvGykWFXhRiihP60kaazUSloXtrsCO6nKYg61z_sbcPMh3dCc-czQruZYNX-XAouemX-z1x_pGmGe87T2UJmYLA6kXUIS_b9qm-lRp2TnZl_qU9HiMSGnQ5St3ElmQzVbVfU7isQW7FiqerWD3pTH9nPypV-tfk41m9PAQ5sR0A=
https://edge.media-server.com/mmc/p/8s7r4iut or via conference call
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https://register.vevent.com/register/BI60d5a8704b4f49eaa19bd36b6abfd763.
A copy of the presentation slides will be available at
https://www.globenewswire.com/Tracker?data=_e3sEbalS2r-6KDyp4kUYWrua5o5HQvo6SiS9qNESFXS0p9qZ49KXnI1fCrmBRRzBKwr5Ud56cWd-jPcg_8g-ukZXDoeJZf5beyGxCLIkNQ=
www.admiralgroup.co.uk
H1 2022 Group overview
30 June 30 June 30 June % change % change
GBPm 2022 2021 2019 vs. 2021 vs. 2019
Group turnover (GBPbn) (*1*3) 1.85 1.75 1.68 +6% +10%
Underwriting profit including
investment income(*1) 106.6 244.5 96.0 -56% +11%
Profit commission 75.5 187.3 36.1 -60% +109%
Net other revenue and
expenses(*1) 75.1 56.3 84.6 +33% -11%
Operating profit(*3) 257.2 488.1 216.7 -47% +19%
Group profit before tax(*3) 251.3 482.2 210.5 -48% +19%
Analysis of profit:
UK Insurance 321.8 543.5 255.0 -41% +26%
International Insurance (21.6) (0.9) (2.7) nm nm
International Insurance --
European Motor 0.2 4.9 3.8 nm nm
International Insurance --
US Motor (19.8) (4.2) (6.2) nm nm
International Insurance --
Other (2.0) (1.6) (0.3) nm nm
---------
Admiral Money 0.2 (1.9) (4.3) nm nm
Other (49.1) (58.5) (37.5) +16% -31%
Group profit before tax 251.3 482.2 210.5 -48% +19%
Key metrics
Group loss ratio(*1*2) 67.6% 49.1% 69.1% +19pts -2pts
Group expense ratio(*1*2) 29.1% 26.1% 23.2% +3pts +6pts
Group combined ratio(*1) 96.7% 75.2% 92.3% +22pts +4pts
Customer numbers (million)(*1) 9.11 8.02 6.74 +14% +35%
Earnings per share (*3) 67.0p 132.9p 60.9p -50% +10%
Interim dividend per share 60.0p 115.0p 63.0p -48% -5%
Special dividend from sale
of Penguin Portals 45.0p 46.0p -- -- --
Return on equity(*1*3) 37% 68% 47% -31pts -10pts
Solvency ratio(*1) 185% 209% 190% -24pts -5pts
*1 Alternative Performance Measures -- refer to the end of the
report for definition and explanation
*2 See notes 13b and 13c for a reconciliation of reported loss
and expense ratios to the financial statements
*3 Group turnover, Operating profit, Group profit before tax,
Earnings per share, Return on equity presented on a continuing
operations basis
nm -- not meaningful
Group Highlights
The Group delivered another solid set of results in the first
half of 2022 against a backdrop of challenging market conditions
and an elevated inflationary environment. Following on from two
outlier years of higher profits resulting from Covid and related
factors, Group profits have returned to a level more comparable to
pre-Covid periods whilst delivering positive change in a number of
key metrics. Highlights are as follows:
--9.1 million Group customers at the end of the first half of
2022, a 35% increase from 6.7 million at the end of the first half
of 2019 and with over 1 million customers added since half year
2021
--Group pre-tax profits of GBP251 million, 48% lower than the
exceptional first half of 2021, but 19% higher than H1 2019
--UK Insurance business year-on-year growth in both turnover
(+3%) and customer numbers (+12%), despite significant rate
increases in UK Motor in response to elevated claims inflation
--UK Insurance profit of GBP322 million, 41% lower than 2021
(GBP544 million) with higher current period claims and lower
reserve releases and profit commission, but 26% ahead of H1
2019
--Strong performance from UK Household, with pre-tax profit of
GBP7 million (GBP17 million excluding the impact of exceptional
weather in the period)
--A worse overall International Insurance result (loss of GBP22
million v loss of GBP1 million in H1 2021) than recent years,
primarily driven by a more significant loss in US Motor Insurance
(due to much higher claims inflation) offsetting a small profit in
European motor insurance
--Strong performance from Admiral Money, with a 68% increase in
loans balances compared to 30 June 2021, continued favourable
default experience and a first small profit for the first half of
2022
Earnings per share
Earnings per share for the first half is 67.0 pence (H1 2021:
132.9 pence). The reduction compared to 2021 is for the reasons
noted above. Earnings per share is 10% ahead of H1 2019 (60.9
pence), with this increase being lower than the growth in pre-tax
profits (19%) due to a higher effective tax rate in 2022 compared
to 2019, primarily related to the higher loss in the US in the
current period.
Return on equity
The Group's return on equity was 37% in the first half of 2022,
31 points lower than H1 2021 and 10 points lower than the
comparable period in 2019 despite the growth in profit vs 2019.
This is the result of a significant growth in the average equity
between H1 2019 and H1 2022. Whilst the Group pays out the majority
of its post-tax profits in dividends, the higher level of
profitability through 2020 and 2021 means that the quantum of
profit that is retained has been at a higher than typical level,
increasing net equity over these periods.
Dividends and solvency
The Group's dividend policy is to pay 65% of post-tax profits as
a normal dividend and to pay a further special dividend comprising
earnings not required to be held in the Group for solvency or
buffers.
The Board has declared an interim dividend of 60.0 pence per
share (approximately GBP177 million) split as follows:
-- 44.2 pence per share normal dividend
-- A special dividend of 15.8 pence per share
The 2022 interim dividend (excluding the further special
dividend referred to below) reflects a pay-out ratio of 90% of
earnings per share. 60.0 pence per share is 48% lower than the
interim 2021 dividend (115.0 pence per share) with the movement
being in line with the reduction in profit noted above.
The Board has declared a further special dividend of 45.0 pence
per share reflecting the final payment of the phased return to
shareholders of the proceeds from the sale of the Penguin Portals
comparison businesses which completed in 2021. This payment, along
with the previous two payments of 46.0 pence per share, brings the
total amount returned to shareholders to just over GBP400
million.
The total interim dividend, including the further special
dividend is 105.0 pence per share, split 44.2 pence per share
normal element and 60.8 pence per share, special element.
The payment date is 30 September 2022, ex-dividend date 1
September 2022 and record date 2 September 2022.
The Group reports a strong solvency ratio of 185% post-dividend.
The ratio has reduced by 24 percentage points from H1 2021 (a
reduction of 10 percentage points from the end of 2021). The
reduction from H1 2021 is primarily due to a reduction in own funds
of approximately GBP170 million -- arising through both the impact
of widening credit spreads on the Group's investment portfolio, and
lower generation of economic capital.
Global context and inflation
Various macroeconomic and other factors (including significantly
higher inflation, supply chain pressures and labour shortages) have
influenced Admiral's businesses and markets during 2022.
Elevated levels of inflation in insurance claims has been an
important issue in the period, and the levels of claims frequencies
have also returned near to, or to, pre-pandemic levels. The main
drivers of claims inflation are higher used car prices, higher
repair costs, longer repair timescales and higher expected levels
of wage inflation impacting the projected costs of bodily injury
claims.
Admiral continues to manage these challenges with a disciplined,
long term approach to pricing and business volume and continues to
take a very conservative approach to reserving for insurance
claims. Admiral Money continued to cautiously grow its loans
portfolio in the first half of 2022, though has further tightened
underwriting criteria in response to economic conditions and
outlook. Provisions for credit losses remain appropriately prudent,
though no significant increase in the level of arrears and defaults
has been seen to date.
The Group's results are presented in the following sections:
-- UK Insurance -- including UK Motor (Car and Van), Household and Travel
-- International Insurance -- including L'olivier (France), Admiral Seguros
(Spain), ConTe (Italy), and Elephant (US)
-- Admiral Money
-- Other Group Items -- including compare.com (US comparison) and Admiral
Pioneer
UK Insurance
30 June 30 June 30 June 30 June
GBPm 2022 2021 2020 2019
----------------------------------------- ------- ------- ------- -------
Turnover(*1) 1,409.9 1,372.0 1,248.4 1,338.8
Total premiums written(*1) 1,265.1 1,230.9 1,101.6 1,186.0
Net insurance premium revenue 306.2 295.6 251.7 264.7
Underwriting profit including investment
income(*1) 153.6 259.6 158.1 106.7
Profit commission and other revenue 168.2 283.9 155.9 148.3
UK Insurance profit before tax 321.8 543.5 314.0 255.0
*1 Alternative Performance Measures -- refer to the end of this
report for definition and explanation
Split of UK Insurance profit before
tax 30 June 30 June 30 June 30 June
GBPm 2022 2021 2020 2019
------------------------------------ ------- ------- ------- -------
Motor 317.3 530.4 310.6 252.0
Household 6.9 13.9 5.5 4.2
Travel (2.4) (0.8) (2.1) (1.2)
UK Insurance profit 321.8 543.5 314.0 255.0
Key performance indicators
30 June 30 June 30 June
30 June 2022 2021 2020 2019
--------------------------------- ------------ ------- ------- -------
Vehicles insured at period end 5.14m 4.93m 4.42m 4.33m
Households insured at period end 1.46m 1.23m 1.07m 0.92m
Travel Insurance customers 0.34m 0.06m 0.09m 0.07m
Total UK Insurance customers 6.94m 6.22m 5.58m 5.32m
Highlights for the UK Insurance business for H1 2022
include:
-- In UK Motor Insurance:
-- Customer growth of 4% to 5.14 million customers (30 June 2021:
4.93 million)
-- Profit of GBP317.3 million, down from the elevated profit in H1
2021 of GBP530.4 million, but higher than the pre-pandemic profit
in H1 2019 of GBP252.0 million
-- In UK Household Insurance:
-- Customer growth of 18% to 1.46 million (30 June 2021: 1.23
million)
-- Profit of GBP6.9 million, lower than the GBP13.9 million profit in
H1 2021 as a result of weather events which had a GBP10 million
negative impact on the current period result (no significant
weather impact in H1 2021)
UK Motor Insurance
30 June 30 June 30 June 30 June
GBPm 2022 2021 2020 2019
------------------------------------------- ---------- ---------- ---------- ----------
Turnover(*1) 1,271.8 1,266.0 1,158.3 1,255.2
-------------------------------------------
Total premiums written(*1) 1,135.9 1,135.0 1,019.8 1,110.1
-------------------------------------------
Net insurance premium revenue 234.8 242.4 208.5 225.4
Investment income 19.8 20.7 30.6 15.9
Net insurance claims (60.9) 16.6 (48.9) (106.2)
Net insurance expenses (57.5) (39.9) (38.6) (36.1)
-------------------------------------------
Underwriting profit including investment
income(*1*2) 136.2 239.8 151.6 99.0
Profit commission 71.0 177.7 41.1 35.0
-------------------------------------------
Underwriting profit and profit
commission 207.2 417.5 192.7 134.0
Net other revenue(*3) 110.1 112.9 117.9 118.0
-------------------------------------------
UK Motor Insurance profit before tax 317.3 530.4 310.6 252.0
-------------------------------------------
*1 Alternative Performance Measures -- refer to the end of this
report for definition and explanation
*2 Underwriting profit excludes contribution from underwritten
ancillaries (included in net other revenue)
*3 Net other revenue includes instalment income and contribution
from underwritten ancillaries. Further detail is given in the Other
revenue section below
Key performance indicators
30 June 30 June 30 June 30 June
2022 2021 2020 2019
----------------------------------------- --------- ---------- ---------- ---------
Reported Motor loss ratio(*1*2) 63.1% 39.4% 49.4% 67.8%
Reported Motor expense ratio(*1*3) 20.7% 19.0% 21.3% 18.7%
Reported Motor combined ratio(*1) 83.8% 58.4% 70.7% 86.5%
-----------------------------------------
Written basis Motor expense ratio(*1) 19.5% 18.7% 18.8% 17.5%
-----------------------------------------
Reported loss ratio before releases(*1) 91.3% 72.9% 80.2% 90.0%
-----------------------------------------
Claims reserve releases -- original
net share(*1*4) GBP66.2m GBP81.1m GBP64.2m GBP50.0m
Claims reserve releases -- commuted
reinsurance(*1*5) GBP93.4m GBP118.3m GBP60.0m GBP52.8m
Total claims reserve releases(*1) GBP159.6m GBP199.4m GBP124.2m GBP102.8m
-----------------------------------------
Claims reserve releases -- original
net share as a % of net premium revenue
(*1) 28.2% 33.5% 30.8% 22.2%
Vehicles insured at period end(*1) 5.14m 4.93m 4.42m 4.33m
-----------------------------------------
Other revenue per vehicle(*1) GBP59 GBP58 GBP64 GBP66
-----------------------------------------
*1 Alternative Performance Measures -- refer to the end of this
report for definition and explanation
*2 Motor loss ratio adjusted to exclude impact of reserve
releases on commuted reinsurance contracts. Reconciliation in note
13b
*3 Motor expense ratio is calculated by including claims
handling expenses that are reported within claims costs in the
income statement, and excluding the impacts of reinsurance caps.
Reconciliation in note 13c
*4 Original net share shows reserve releases on the proportion
of the account that Admiral wrote on a net basis at the start of
the underwriting year in question
*5 Commuted reinsurance shows releases on the proportion of the
account that was originally ceded under quota share reinsurance
contracts but has since been commuted and hence reported through
underwriting profit and not profit commission
UK Motor profit in the first six months of 2022 was GBP317.3
million, lower than the same period in 2021 (H1 2021: GBP530.4
million) as a result of the non-repeat of the Covid-impacted
favourable performance in 2021 across current year, and prior year
claims as well as profit commission. Both 2020 and 2021 (especially
H2 2020 and H1 2021) are considered exceptional periods, delivering
much lower loss ratios than is the norm as a result of
Covid-related factors.
When compared to H1 2019, UK Motor profit has grown by 26% (11%
adjusting for the adverse Ogden impact in the first half of 2019).
With the reported loss ratio before releases broadly consistent
with that in H1 2019, the larger business combined with continued
favourable prior period development results in a higher level of
profit generated from reserve releases and profit commission.
The business delivered 4% growth in customer numbers
year-on-year (all coming in the first half of 2022), primarily as a
result of strong customer retention, within a challenging market.
After the FCA's general insurance pricing reforms came into effect
at the start of the year, Admiral saw a notable increase in
retention and remains well positioned in the market.
As the expected level of claims inflation increased during the
period, new business and renewal prices were increased
significantly (by around 16% from March to the end of July), and by
more than the market average. Admiral will continue to prioritise
underwriting profitability over growth in the second half of the
year if the current level of inflation persists as expected.
Net insurance premium revenue at GBP234.8 million is 3% lower
than H1 2021, with lower average earned premium reflecting the
effects of the FCA pricing reform, a competitive market environment
and a shift in mix towards the renewal book. The price increases in
the first half are expected to increase average premium over the
course of the second half of the year as the premium earns
through.
The lower average premium (common with the market), along with
continued technology investment resulted in an increase in reported
expense ratio (20.7% vs 19.0% in H1 2021). The same drivers led to
a similar increase in the written expense ratio (19.5% vs 18.7% in
H1 2021).
Investment income in the period was GBP19.8 million (H1 2021:
GBP20.7 million) with higher underlying investment income being
offset by a reduction in income arising from cash held by Admiral
relating to the portion of the book that is ceded through quota
share reinsurance (GBP2.3 million reduction; H1 2021: GBPnil).
Claims, Reserve Releases and Profit Commission
There are a number of trends impacting UK motor claims in the
first half of 2022 which result in the increase in reported loss
ratio (39.4% in H1 2021 to 63.1% in H1 2022):
Reported Motor loss ratio
Impact of
Reported loss claims reserve
ratio before releases - net Reported loss
releases original share ratio
H1 2021 72.9% (33.5%) 39.4%
Change in current period loss
ratio +18.4% -- +18.4%
Change in claims reserve release
-- original net share -- +5.3% +5.3%
H1 2022 91.3% (28.2%) 63.1%
------------------------------------ ------------- --------------- -------------
-- The current period loss ratio increased by 18.4 points which can be
primarily attributed to:
-- Continuing return towards pre-pandemic road usage over the last 12
months (although still below historic levels) and therefore an
increase in claims frequency compared to H1 2021, with a partial
offset arising from a reduction in frequency for smaller bodily
injury claims following the whiplash reforms
-- Higher than usual levels of inflation in damage claims costs
(further detail follows below)
-- Slightly lower average premium in the period following a shift in
portfolio mix towards renewals business
-- Prior period releases reduced by 5.3 points to 28.2% from the elevated
level experienced in H1 2021 (33.5%):
-- Though lower than in H1 2021, Admiral continues to see favourable
development in best estimate reserves, primarily for large bodily
injury claims which are initially projected cautiously
-- This benefit is partially offset by an allowance in the best
estimate for the potential effects of excess inflation on bodily
injury claims
-- The margin held above best estimate reserves is broadly consistent
with year end 2021 and remains significant and prudent
Claims Inflation and Reserving
Admiral's actuarial reserving team calculates best estimate
claims reserves for UK motor claims reserves, using standard
actuarial techniques applied to paid and incurred claims data,
overlayed with assumptions and judgements where it is considered
that the data does not fully reflect potential future trends and
developments. The best estimate claims reserves are validated
through comparison with projections performed by an independent,
external actuarial firm. Projections show an increase in average
ultimate claims cost in the first half of 2022 compared to 2021 of
around 11%.
The impact of inflation on third party and own damage claims is
observed reasonably quickly, with the elevated levels due to
market-wide factors such as high second hand car values (impacting
total loss claims), parts supply chain issues and underlying
challenges in supply of labour leading to higher repair costs.
The longer term impacts of the current inflation spike on bodily
injury claims is highly uncertain. Admiral does not currently
observe material changes in inflation for bodily injury claims
settled in 2022 to date, when compared to 2021. However, an
allowance in the best estimate reserve is held to reflect the
potential impacts of higher than historic levels of future wage
inflation on certain elements of large bodily injury claims
reserves.
In addition to the inflationary environment, there continues to
be a high level of uncertainty within motor claims across the
market arising from (and not limited to), the continued adjustment
of claims frequency post Covid (for both road usage trends and the
relationship between road usage and claims frequency), the impact
of the whiplash reforms on smaller bodily injury claims and the
future path of the Ogden discount rate.
As a result of this uncertainty, Admiral continues to hold a
significant and prudent margin above best estimate reserves which
sits at a broadly consistent confidence level when compared to the
end of 2021 and other recent periods.
The factors impacting current and prior period claims also
impact reserve releases on business originally ceded to reinsurers
and subsequently commuted, and profit commission on current co-and
reinsurance contracts:
-- Combined releases on commuted reinsurance and profit commission total
GBP164.4 million (H1 2021: GBP296.0 million). The reduction of GBP131.6
million is explained by:
-- The higher current period loss ratio - meaning that no profit
commission is recognised on the 2021 and 2022 underwriting years,
compared to the unusually high GBP89 million recognised on the
equivalent years in H1 2021; and
-- The lower level of prior period release - resulting in combined
releases from commuted reinsurance and profit commission on the
2020 and prior underwriting years being GBP43 million lower than
the equivalent underwriting years in H1 2021
UK Motor Co- and Reinsurance
Admiral makes significant use of proportional risk sharing
agreements (co-insurance and quota share reinsurance) which include
profit commission terms that allow Admiral to retain a significant
portion of the profit generated.
Munich Re and its subsidiary entity Great Lakes currently
underwrite 40% of Admiral's UK Car insurance business. The details
of these arrangements with Munich Re are as set out in the 2021
Annual Report.
Admiral has other UK Motor quota share agreements confirmed to
the end of at least 2024, covering 38% of business written.
The Group tends to commute its UK Motor insurance quota share
agreements 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 and having assessed
the solvency implications of the commutation for the Group and its
underwriting subsidiary. During the first half of 2022, just over
half of the quota share reinsurance covering the 2020 underwriting
year was commuted. The majority of quota share reinsurance covering
2019 and prior underwriting years was commuted prior to the start
of this half year period.
Other Revenue and Instalment Income
UK Motor Insurance Other Revenue -- analysis of
contribution:
30 30 30 30
June June June June
GBPm 2022 2021 2020 2019
-------------------------------------------------------- ------ ------ ------ ------
Contribution from additional products & fees, including
those underwritten by Admiral(*1) 104.4 97.2 105.1 111.1
Instalment income 39.8 50.8 47.6 42.0
Other revenue 144.2 148.0 152.7 153.1
Internal costs(*2) (34.1) (35.1) (34.8) (35.1)
Net other revenue 110.1 112.9 117.9 118.0
Other revenue per vehicle(*3) GBP59 GBP58 GBP64 GBP66
-------------------------------------------------------- ------ ------ ------ ------
Other revenue per vehicle net of internal costs GBP48 GBP48 GBP54 GBP56
*1 Additional products underwritten by Admiral Included in
underwriting profit in income statement but re-allocated to other
revenue for purpose of KPIs.
*2 Internal costs reflect an allocation of insurance expenses
incurred in generating other revenue.
*3 Other revenue (before internal costs) divided by average
active vehicles, rolling 12-month basis.
Overall contribution (other revenue net of costs plus instalment
income) was slightly lower at GBP110.1 million (H1 2021: GBP112.9
million), mainly due to instalment income which was lower due to
lower average premiums impacting the level of interest charged.
Other revenue was equivalent to GBP59 per vehicle (gross of
costs), largely consistent with 2021. Net Other revenue (after
deducting costs) per vehicle remained at GBP48 (H1 2021: GBP48),
also consistent with 2021.
UK Household Insurance
GBPm 30 June 2022 30 June 2021 30 June 2020 30 June 2019
------------------- ------------ --------------- ------------ ------------
Turnover(*1) 120.7 104.6 87.0 80.0
Total premiums
written(*1) 111.8 94.5 78.7 72.2
Net insurance
premium revenue 26.1 23.3 20.9 18.1
Underwriting
profit/(loss)
(*1*2) 0.9 1.7 (0.7) 0.6
Profit commission
and other income 6.0 12.2 6.2 3.6
------------------- ------------ --------------- ------------ ------------
UK Household
Insurance profit
before tax 6.9 13.9 5.5 4.2
*1 Alternative Performance Measures -- refer to the end of this
report for definition and explanation
*2 Underwriting profit excludes contribution from underwritten
ancillaries (included in net other revenue)
*3 Profit commission and other income includes instalment income
and contribution from underwritten ancillaries
Key performance indicators
30 June 2022 30 June 2021 30 June 2020 30 June 2019
---------------------- ------------ ------------ ------------ ------------
Reported Household
loss ratio(*1) 64.4% 63.6% 69.0% 66.8%
Reported Household
expense ratio(*1) 33.0% 32.5% 34.2% 30.1%
Reported Household
combined ratio(*1) 97.4% 96.1% 103.2% 96.9%
Impact of extreme
weather and
subsidence(*1)
(GBPm) 9.9 -- 5.0 --
Households insured at
period end (m) 1.46 1.23 1.07 0.92
---------------------- ------------ ------------ ------------ ------------
*1 Alternative Performance Measures -- refer to the end of this
report for definition and explanation
The UK Household insurance business experienced another period
of strong top line growth, with turnover increasing by 15% to
GBP120.7 million (H1 2021: GBP104.6 million). The number of
households insured increased by 18% to 1.46 million (30 June 2021:
1.23 million). Growth was delivered both through the price
comparison channel where Admiral increased competitiveness, as well
as through MultiCover. Average market premiums were lower, impacted
by the implementation of the FCA reforms, with Admiral average
premiums also being lower.
Profit before tax for the period was GBP6.9 million (H1 2021:
GBP13.9 million), including a GBP10 million negative impact (on
claims and profit commission) from exceptional weather due to
storms in the first half of the year. The loss ratio increased
modestly to 64.4% (H1 2021: 63.6%) despite the storms. The
underlying loss ratio (excluding exceptional weather) continued to
improve due to ongoing improvements in claims management. In
addition, the business continued to invest in technical and digital
capabilities and made pricing structure enhancements.
Admiral's expense ratio was broadly in line with the comparative
period at 33.0% (H1 2021: 32.5%), largely as a result of lower
average premiums offsetting the benefits of increased scale.
International Insurance
30 June 30 June 30 June 30 June
GBPm 2022 2021 2020 2019
----------------------------------------- ---------- ---------- ---------- ----------
Turnover(*1) 393.7 347.2 329.5 319.5
----------------------------------------- ---------- ---------- ----------
Total premiums written(*1) 355.4 314.3 297.6 288.0
----------------------------------------- ---------- ---------- ----------
Net insurance premium revenue 116.4 111.7 95.5 80.6
----------------------------------------- ---------- ---------- ----------
Investment income 0.3 0.6 (0.1) 0.9
----------------------------------------- ---------- ---------- ----------
Net insurance claims (105.1) (82.1) (63.3) (66.0)
----------------------------------------- ---------- ---------- ----------
Net insurance expenses (50.7) (44.7) (37.7) (26.7)
----------------------------------------- ---------- ---------- ----------
Underwriting result(*1) (39.1) (14.5) (5.6) (11.2)
----------------------------------------- ---------- ---------- ----------
Net other revenue 17.5 13.6 12.1 8.5
----------------------------------------- ---------- ---------- ----------
International Insurance loss/ (profit)
before tax (21.6) (0.9) 6.5 (2.7)
----------------------------------------- ---------- ---------- ----------
Key performance indicators
30 June 30 June 30 June 30 June
2022 2021 2020 2019
------------------------------ ---------- ---------- ---------- ----------
Loss ratio(*1*2) 82.8% 70.2% 63.2% 75.5%
Expense ratio(*1*2) 45.0% 43.9% 44.8% 38.4%
------------------------------
Combined ratio(*3) 127.8% 114.1% 108.0% 113.9%
------------------------------
Combined ratio, net of other
revenue(*4) 113.1% 102.2% 95.4% 103.3%
------------------------------
Claims reserve releases
(GBPm) 7.6 6.5 11.7 9.0
------------------------------
Vehicles insured at period
end (m) 1.94m 1.71m 1.49m 1.36m
------------------------------
*1 Alternative Performance Measures -- refer to the end of this
report for definition and explanation
*2 Loss and expense ratios adjusted to remove the impact of
reinsurer caps
*3 Combined ratio is calculated on Admiral's net share of
premiums and excludes Other Revenue. It excludes the impact of
reinsurer caps. Including the impact of reinsurer caps the reported
combined ratio would be H1 2022: 134%; H1 2021: 114%; H1 2020:
106%; H1 2019: 115%.
*4 Combined ratio, net of Other Revenue is calculated on
Admiral's net share of premiums and includes Other Revenue.
Including the impact of reinsurer caps the reported combined ratio,
net of Other Revenue would be H1 2022: 119%; H1 2021: 102%; H1
2020: 93%; H1 2019: 104%
International Motor Insurance -- Geographical analysis *1
30 June 2022 Spain Italy France US Total
--------------------------------- ----- ----- ------ ----- -----
Vehicles insured at period end 0.40m 0.92m 0.38m 0.24m 1.94m
---------------------------------
Turnover (GBPm) 51.0 115.3 99.5 127.9 393.7
---------------------------------
30 June 2021 Spain Italy France US Total
---------------------------------
Vehicles insured at period end 0.35m 0.82m 0.32m 0.22m 1.71m
---------------------------------
Turnover (GBPm) 44.6 112.4 87.4 102.8 347.2
---------------------------------
*1 Alternative Performance Measures -- refer to the end of this
report for definition and explanation
Split of International Insurance result
30 June 30 June 30 June 30 June
GBPm 2022 2021 2020 2019
----------------------------------------- ---------- ---------- ---------- ----------
European Motor 0.2 4.9 10.4 3.8
-----------------------------------------
US Motor (19.8) (4.2) (3.3) (6.2)
-----------------------------------------
Other (2.0) (1.6) (0.6) (0.3)
-----------------------------------------
International Insurance loss/ (profit)
before tax (21.6) (0.9) 6.5 (2.7)
-----------------------------------------
Admiral's International insurance businesses continued to grow
turnover and customer numbers despite a challenging context of
lower vehicle sales across markets resulting in reduced insurance
shopping, and continued premium pressures within competitive
markets. Customer numbers increased by 13% to 1.94 million (30 June
2021: 1.71 million) and turnover grew by 13% to GBP393.7 million
(H1 2021: GBP347.2 million). The combined ratio, net of other
revenue, increased to 113% (H1 2021: 102%). This was largely driven
by much higher claims inflation in the US business and market, a
continued increase in claims frequency in the first half of 2022,
and pressure on premium revenue particularly in Italy, where
competition remained high.
The expense ratio increased slightly to 45% (H1 2021: 44%). This
was partly due to lower premiums as a result of premium pressure in
Italy and Spain, as well as the cost of accelerated growth with the
focus to achieve scale for long term sustainability of the
businesses.
The European insurance operations in Spain, Italy and France
insured 1.70 million vehicles at 30 June 2022 -- 14% higher than a
year earlier (30 June 2021: 1.49 million). Turnover was up 9% to
GBP265.8 million (H1 2021: GBP244.4 million). The combined European
Motor profit was GBP0.2 million (H1 2021: profit of GBP4.9
million), a GBP4.7 million decrease driven by accelerated growth,
increasing frequency, a weather event in France, and lower average
market premiums, particularly in Italy. The combined ratio net of
other revenue (excluding the impact of reinsurer caps) increased to
104% from 96%, impacted by lower average market premiums and
worsened claims experience primarily due to higher damage claims
inflation and increased frequency.
Admiral Seguros (Spain) grew by 16% to 0.4 million customers
over the past year (30 June 2021:0.35 million). The growth was
supported by strong acquisition through the broker channel and
improved retention, despite the competitive market environment.
Investments in the business continue to focus on building
sustainable growth through the broker channel and partnerships,
while developing IT capabilities to drive future efficiency and
speed.
The Group's largest international operation, ConTe in Italy,
continued to grow and increased vehicles insured by 12% to 0.92
million (30 June 2021: 0.82 million). The market environment during
the period was challenging with a high level of competitiveness and
premium pressure, driving lower average premiums. Within this
context, the business grew strongly and continued to focus on
increasing efficiency and risk selection capabilities.
L'olivier assurance (France) continued to grow strongly. The
customer base increased by 19% to 0.38 million at 30 June 2022 (30
June 2021: 0.32 million) with investments in direct channel
acquisition including targeted digital advertising, exploring
partnership opportunities, and an enhanced user experience driving
strong growth and customer satisfaction. Growth came despite
reduced shopping in the market, driven by lower sales of new and
used cars and lower levels of switching. A hail weather event in H1
2022 impacted the French Motor result by an estimated GBP2
million.
In the US, Admiral underwrites motor insurance in eight states
through its Elephant Auto business. The number of vehicles insured
increased by 10% to 0.24 million at 30 June 2022 (30 June 2021:
0.22 million) and turnover was up by 24% to GBP127.9 million (H1
2021: GBP102.8 million; in local currency turnover was up 16%).
Growth was driven largely through continued expansion of the agent
channel and partnerships, as a mechanism to achieve scale
efficiently.
Although growth was strong, the business maintains a cautious
approach with a focus on risk selection capabilities and improving
customer lifetime value. This has been displayed in a shift toward
higher tier, multi-vehicle policies.
Elephant reported a significantly higher loss of GBP19.8 million
in the period (H1 2021: GBP4.2 million loss), largely due to the
very strong increase in severity inflation seen across the US
market. Elephant responded with strong action through large price
increases which significantly reduced the rate of growth. As a
result of the elevated claims inflation, the combined ratio net of
other revenue deteriorated to 123% (H1 2021: 110%). Elephant will
continue to prioritise improving its loss ratio ahead of growth in
the immediate future.
Admiral Money
30 June 30 June 30 June 30 June
GBPm 2022 2021 2020 2019
--------------------------------------- ---------- ---------- ---------- ----------
Total interest income 25.5 15.7 19.8 13.3
Interest expense(*1) (5.6) (4.3) (5.1) (4.1)
Net interest income 19.9 11.4 14.7 9.2
Other fee income 0.2 0.5 0.9 0.9
Total income 20.1 11.9 15.6 10.1
Credit loss charge (9.0) (4.0) (16.2) (6.0)
Expenses (10.9) (9.8) (8.8) (8.4)
Admiral Money profit/ (loss) before
tax 0.2 (1.9) (9.4) (4.3)
--------------------------------------- ---------- ---------- ---------- ----------
(*1) Includes GBP0.8 million intra-group interest expense (H1
2021: GBP1.4 million; H1 2020: GBP1.5 million; H1 2019: GBP1.2
million)
Admiral Money (previously known as Admiral Loans) distributes
and underwrites unsecured personal loans and car finance products
through the comparison channel and direct to consumers via the
Admiral website.
Gross loans balances grew strongly, up 68% to GBP786.6 million
at the end of June 2022 (30 June 2021: GBP469.4 million). After a
credit loss provision of GBP53.5 million (30 June 2021: GBP43.7
million), the net loans balance was GBP733.1 million (30 June 2021:
GBP425.7 million).
Throughout 2021 and 2022 Admiral Money has tightened its lending
criteria in response to higher inflation. Credit loss models
reflect the latest economic assumptions and post model adjustments
to maintain an appropriate level of prudence given the economic
outlook. The provision to loans balance coverage ratio reduced to
6.8% (30 June 2021: 9.3%) as strong new business growth has moved
the portfolio mix towards lower coverage in stage 1.
The business recorded its first pre-tax profit of GBP0.2 million
in the first half of 2022 (improving from a GBP1.9 million loss in
H1 2021). The improvement was driven primarily by strong interest
income growth on the back of the growth in the loan portfolio.
Admiral Money is funded through a combination of internal and
external funding sources. The external funding is secured against
certain loans via a transfer of the rights to the cash-flows to two
special purpose entities ("SPEs"). During H1 2022 one of the SPEs
was extended, providing funding with improved terms for the next
three years. The securitisation and subsequent issue of notes via
SPEs does not result in a significant transfer of risk from the
Group.
Other Group Items
30 June 30 June 30 June 30 June
GBPm 2022 2021 2020 2019
------------------------------ ---------- ---------- ---------- ----------
Share scheme charges (26.1) (30.6) (21.3) (24.2)
Compare.com loss before tax (1.7) (1.4) (0.8) (4.6)
Other interest and
investment income 8.0 1.5 3.0 2.7
Business development costs (12.6) (3.8) (0.5) (0.4)
Other central costs (11.0) (18.5) (11.2) (5.5)
Finance charges (5.7) (5.7) (5.9) (5.5)
Total (49.1) (58.5) (36.7) (37.5)
------------------------------ ---------- ---------- ---------- ----------
Share scheme charges relate to the Group's two employee share
schemes. The reduction in charge in the period is driven by a
combination of the expected decrease of the proportion of shares
that will eventually vest following lower Group results, as well as
a lower share price, compared to the first half of 2021.
Business development costs increased to GBP12.6 million (H1
2021: GBP3.8 million), primarily attributed to Admiral Pioneer. As
part of the investment in product diversification, Admiral launched
Admiral Pioneer in 2020 to focus on new product diversification
opportunities. Pioneer businesses include Veygo (short term and
learner driver car insurance in the UK), small business insurance
in the UK and small fleet insurance in France. Pioneer made a loss
of GBP9.6 million in H1 2022 (H1 2021: GBP2.2 million).
Compare.com reported a loss of GBP1.7 million, as a result of
modestly increased investment in marketing and acquisition in a
challenging market in the US.
Other central costs consist of Group-related expenses and
include the cost of a number of significant Group projects,
including preparation for the significant new insurance accounting
standard, IFRS 17, and the development of the internal capital
model. The reduction in the period is primarily due to the higher
costs of regulatory projects and matters during 2021.
Finance charges of GBP5.7 million (H1 2021: GBP5.7 million)
primarily relate to interest on the GBP200 million subordinated
notes issued in July 2014 (refer to note 6 to the financial
statements).
Other interest and investment income increased to GBP8.0 million
in H1 2022 (H1 2021: GBP1.5 million), with GBP4.7 million
attributed to gains from the sale of UK government bonds in the
period.
Group capital structure and financial position
Group capital position (estimated)
30 June 31 December 30 June
2022 2021 2021
GBPbn GBPbn GBPbn
---------------------------------------------- ------- ----------- -------
Eligible Own Funds (post-dividend) 1.24 1.36 1.41
Solvency II capital requirement 0.67 0.70 0.68
----------------------------------------------
Surplus over regulatory capital requirement 0.57 0.66 0.73
----------------------------------------------
Solvency ratio (post-dividend) 185% 195% 209%
----------------------------------------------
The Group reports a strong solvency ratio of 185% post-dividend.
The solvency ratio has reduced by 10 percentage points from the end
of 2021. This is primarily due to a reduction in eligible own funds
of approximately GBP120 million -- roughly half of the reduction
arises through the impact of widening credit spreads on the Group's
investment portfolio, with the other half the result of a lower
generation of economic capital in the current period.
The Group solvency on a regulatory basis is estimated at 164%,
primarily as a result of a higher solvency capital requirement. In
the regulatory basis, the capital add-on approved by the PRA is
fixed and so does not reflect the reduction in profit commission
risk (as a result of lower profit commission recognised within Own
Funds on the current underwriting years) in the period.
The Group continues to develop its partial internal model to
form the basis of future capital requirements. As noted in the
Group's 2021 Annual Report, the expected timescale for formal
application has been extended 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.
Solvency ratio sensitivities
30 30
June 31 December June
2022 2021 2021
--------------------------------------- ----------- ----------- -----------
UK Motor -- incurred loss ratio +5% -10% -9% -24%
UK Motor -- 1 in 200 catastrophe event -1% -1% -1%
UK Household -- 1 in 200 catastrophe
event -4% -3% -3%
Interest rate -- yield curve down 50
bps -1% -3% -3%
Interest rate -- yield curve down 100
bps -2% -5% -6%
Credit spreads widen 100 bps -9% -9% -9%
Currency -- 25% movement in euro and
US dollar -3% -3% -2%
ASHE -- long term inflation assumption
up 50 bps -3% -5% -3%
Loans -- 100% weighting to 'severe'
scenario(*1) -1% -1% -1%
----------- ----------- -----------
(*1) Refer to note 7 to the financial statements for further
information on the 'severe' scenario
Investments and cash
Admiral's investment strategy was unchanged in H1 2022. The main
focus of the Group's strategy is capital preservation, with
additional priorities including low volatility of returns, high
levels of liquidity and matching of asset and liability durations
and currencies.
Investment return
30 June 30 June 30 June 30 June
GBPm 2022 2021 2020 2019
Investment return 27.8 23.1 21.3 23.3
Movement on investment returns allocated
to reinsurers (2.3) - 12.9 (4.5)
Unrealised gains/ (losses) on forward
contracts 0.4 (0.6) 0.2 (0.4)
Movement in provision for expected
credit losses 1.4 (1.1) (2.4) (0.1)
------------------------------------------- ------------ ------------ ----------
Total 27.3 21.4 32.0 18.3
------------------------------------------- ------------ ------------ ----------
Net investment income for the first half of 2022 was GBP27.3
million (H1 2021: GBP21.4 million).
Investment income in 2022 was adversely impacted by investment
income adjustments related to UK motor quota share reinsurance
arrangements of GBP2.3 million (H1 2021: nil). Provisions for
expected credit losses developed favourably, leading to a GBP1.4
million release of provisions (H1 2021: GBP1.1 million adverse
impact).
The investment return on the Group's investment portfolio
excluding unrealised gains and losses, the release of the
investment income accruals held in relation to reinsurance
contracts and the movement in provision for expected credit losses,
was GBP27.8 million in H1 2022 (compared to GBP23.1 million in H1
2021), with the annualised rate of return higher at 1.4% (H1 2021:
1.2%) as a result of higher reinvestment yields.
The increase in yields and widening of credit spreads in the
first six months of 2022 resulted in a reduction in the market
value of the portfolio of GBP173.2 million (H1 2021: GBP32.2
million), the movement being reflected in the statement of other
comprehensive income.
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. Total cash and
investments at 30 June 2022 was GBP3,900.3 million (31 December
2021: GBP4,115.3 million; 30 June 2021: GBP4,275.2 million), the
lower balance at the end of the current period reflecting the
market value reduction noted above as well as the payment of the
second tranche of the Penguin Portals disposal proceeds to
shareholders.
Cash and investments analysis
30 June 31 December 30 June
GBPm 2022 2021 2021
------------------------------------ ---------- ----------------- -----------
Fixed income and debt securities 2,461.6 2,594.3 2,317.4
Money market funds and other fair
value instruments 866.2 1,063.0 1,465.9
Cash deposits 65.9 85.3 96.0
Cash 506.6 372.7 395.9
-------------------------------------
Total 3,900.3 4,115.3 4,275.2
-------------------------------------
Taxation
The tax charge for the period is GBP51.1 million (H1 2021:
GBP88.2 million), which equates to 20.3% (H1 2021: 18.3%) of profit
before tax. The increase in the tax rate is primarily driven a
higher loss in the US insurance business for which no deferred tax
asset is recognised.
Principal Risks and Uncertainties
Admiral has performed a robust assessment of its principal risks
and uncertainties (PR&Us), including those which would threaten
its business model, future performance, liquidity and solvency. The
result of this assessment has concluded that Admiral's PR&Us
are consistent with those reported in the Group's 2021 Annual
Report (pages 116 -- 123). However, given the ongoing importance of
the following topics, additional commentary has been provided on:
Inflation; the Russia-Ukraine conflict; climate change; people
risk; and cyber and operational resilience.
Inflation and Outlook
The Group Risk Committee reviews regular information on the
Group's solvency and liquidity positions in response to market
volatility and wider economic uncertainty, considering factors such
as increases in inflation, the wider impact of supply chain
disruption, and the pressures on individual household finances.
The impact of increasing claims inflation continues to evolve.
In most markets, claims frequency has increased but has remained
below pre-pandemic levels. The exception is in the US, where
frequency returned to normal levels very early. From this
perspective, the insurance environment has to some extent
recalibrated and is more comparable to 2019, after two outlier
years of the pandemic.
However, global uncertainties and supply chain pressure have
influenced inflation in the countries in which Admiral operates.
Vehicle repair costs have increased through a combination of parts
and labour shortages across markets and vehicle replacement costs
in the second hand market have remained high. Similarly, labour
shortages and cost of living concerns will contribute to wage
inflation impacting large bodily injury claims. The Whiplash
reforms have started to reduce the costs of small bodily injury
claims and these savings will be passed back to customers.
Admiral continues to manage these challenges with a disciplined,
long-term approach to pricing and growth, with a focus on building
the business for the long term. The business also continues to
maintain a prudent reserving approach to claims.
The impact of the pandemic on Admiral's PR&Us, as well as
the steps taken to appropriately manage these risks, continues to
be overseen by the Group Risk Committee. The Committee continues to
support the prioritisation of a high level of service to our
customers and employee physical wellbeing and mental health.
Russia-Ukraine conflict
The potential impact of the Russia-Ukraine conflict, as well as
an escalation of geopolitical tensions, on Admiral's PR&Us, has
been considered and is being monitored. The Group does not have any
direct exposure to Russia or Ukraine, either through its operations
or investment portfolios.
Climate change
Admiral remains committed to recognising and understanding the
threats and opportunities posed by climate change to the Group, as
well as to mitigating its impact on the environment.
Climate-related risks can impact on all of Admiral's business
lines, operations, investments, and
reinsurance arrangements. Admiral Group recognises that while there are risks from delayed action, there are also opportunities from considering the challenges, including the potential to accelerate the Group's transformation, to build resilience, and to gain competitive advantage in new and existing markets.
As part of this work there is an ongoing Group focus on:
-- Ensuring full compliance with regulatory and disclosure requirements,
such as complying with the FCA's new listing rule, LR 9.8.6R.
-- Researching climate-change trends and better understanding the risks
arising from climate change.
-- Incorporating climate-related risk drivers into business-as-usual risk
management, such as enhancing Admiral's stress and scenario testing to
incorporate climate-change related financial risks.
-- Continuing efforts to further reduce the Group's carbon footprint.
People Risk
People Risk, which comprises Recruitment Risk, Retention Risk,
Employment Law Risk and Health and Safety Risk, has been rising
during the pandemic as entities across the Group are noticing
differences as a result of changing external factors including
inflation, cost of living and changing work conditions. This is
being monitored in each entity with updates being provided to
committees as appropriate. Admiral has had a very strong culture,
often a competitive advantage in attracting and retaining talent.
Admiral continues to monitor and adapt to any disruption in local
markets as conditions evolve post-pandemic.
Cyber and Operational Resilience:
Admiral has continued to enhance its technology, cyber and
operational resilience capabilities, as well as to monitor the
related risks. Key developments in these areas include:
-- In the UK, an Operational Resilience programme was completed at the end
of March 2022 in line with regulatory requirements. Work will continue
in this area.
-- Ongoing security improvement programmes are to continue across the Group.
Disclaimer on forward-looking statements
Persons receiving this announcement should not place undue
reliance on forward-looking statements. Unless otherwise required
by applicable law, regulation or accounting standard, the Group
does not undertake to update or revise any forward-looking
statements, whether as a result of new information, future
developments or otherwise.
Condensed consolidated income statement (unaudited)
Six months ended Year ended
30 June 30 June 31 December
2022 2021 2021
Note GBPm GBPm GBPm
----------- --------------
Insurance premium revenue 1,291.3 1,222.5 2,492.3
Insurance premium ceded to reinsurers (851.2) (806.3) (1,637.3)
Net insurance premium revenue 5 440.1 416.2 855.0
Other revenue 8 154.4 152.5 314.8
Profit commission 5 75.5 187.3 304.5
Interest income 7 25.5 15.7 36.6
Interest expense 7 (4.8) (2.9) (6.1)
Net interest income from loans 20.7 12.8 30.5
Investment return -- interest income
at effective interest rate 6 26.4 19.8 40.6
Investment return -- other 6 (0.5) 2.7 4.6
Net revenue 716.6 791.3 1,550.0
Insurance claims and claims handling
expenses (915.4) (597.3) (1,506.8)
Insurance claims and claims handling
expenses recoverable reinsurers 695.4 501.5 1,174.5
Net insurance claims (220.0) (95.8) (332.3)
Operating expenses and share scheme
charges 9 (456.5) (440.8) (970.1)
Operating expenses and share scheme
charges recoverable from co- and
reinsurers 9 224.7 238.5 491.1
Expected credit losses 6, 9 (7.6) (5.1) (13.3)
Net operating expenses and share
scheme charges (239.4) (207.4) (492.3)
Total expenses (459.4) (303.2) (824.6)
Operating profit 257.2 488.1 725.4
Finance costs 6 (6.7) (6.7) (13.7)
Finance costs recoverable from
co- and reinsurers 6 0.8 0.8 1.8
Net finance costs (5.9) (5.9) (11.9)
Profit before tax from continuing
operations 251.3 482.2 713.5
Taxation expense 10 (51.1) (88.2) (130.2)
Profit after tax from continuing
operations 200.2 394.0 583.3
Profit before tax from discontinued
operations -- 11.3 11.3
Gain on disposal -- 404.4 404.4
Taxation expense -- (2.3) (2.3)
Profit after tax from discontinued
operations -- 413.4 413.4
Profit after tax from continuing
and discontinued operations 200.2 807.4 996.7
Profit after tax attributable to:
Equity holders of the parent 200.9 807.6 997.9
Non-controlling interests (NCI) (0.7) (0.2) (1.2)
200.2 807.4 996.7
Earnings per share -- From continuing
operations
Basic 12 67.0p 132.9p 196.7p
Diluted 12 66.9p 132.7p 196.1p
Earnings per share -- From continuing
and discontinued operations
Basic 12 67.0p 272.0p 335.5p
Diluted 12 66.9p 271.6p 334.5p
Dividends declared and paid (total) 12 348.1 250.8 720.9
Dividends declared and paid (per 12 118.0p 86.0p 247.0p
share)
--------------
Condensed consolidated statement of comprehensive income
(unaudited)
Six months ended Year ended
30 June 30 June 31 December
2022 2021 2021
Note GBPm GBPm GBPm
Profit for the period -- from continuing
and discontinued operations 200.2 807.4 996.7
Other comprehensive income
Items that are or may be reclassified
to profit or loss
Movements in fair value reserve (173.2) (32.2) (50.1)
Deferred tax charge in relation to movement
in fair value reserve 9.5 0.5 1.4
Exchange differences on translation
of foreign operations 4.0 (7.0) (10.4)
Movement in hedging reserve 12.3 1.9 6.6
Other comprehensive income for the period,
net of income tax (147.4) (36.8) (52.5)
Total comprehensive income for the period 52.8 770.6 944.2
Total comprehensive income for the period
attributable to:
Equity holders of the parent 53.5 771.2 945.7
Non-controlling interests (0.7) (0.6) (1.5)
52.8 770.6 944.2
Condensed consolidated statement of financial position
(unaudited)
As at
30 June 30 June 31 December
2022 2021 2021
Note GBPm GBPm GBPm
------- -----------
ASSETS
Property and equipment 93.1 131.6 103.2
Intangible assets 11 214.5 177.4 179.9
Deferred income tax 19.4 7.3 9.3
Corporation tax asset 4.3 -- 10.6
Reinsurance assets 5 2,346.1 1,911.9 2,176.1
Loans and advances to customers 7 733.1 425.7 556.8
Insurance and other receivables 6 1,325.4 1,223.9 1,208.5
Financial investments 6 3,393.7 3,879.3 3,742.6
Cash and cash equivalents 6 506.6 395.9 372.7
Total assets 8,636.2 8,153.0 8,359.7
---------------------------------------- ----- ------- ------- -----------
EQUITY
Share capital 12 0.3 0.3 0.3
Share premium account 13.1 13.1 13.1
Other reserves (103.4) 59.8 44.0
Retained earnings 1,226.7 1,595.3 1,348.8
Total equity attributable to equity
holders of the parent 1,136.7 1,668.5 1,406.2
Non-controlling interests 1.6 3.5 2.3
Total equity 1,138.3 1,672.0 1,408.5
LIABILITIES
Insurance contracts liabilities 5 4,504.3 4,019.2 4,215.0
Subordinated and other financial
liabilities 6 887.4 548.8 670.9
Trade and other payables 6, 11 2,013.2 1,783.8 1,960.0
Lease liabilities 6 93.0 114.9 105.3
Corporation tax liabilities -- 14.3 --
Total liabilities 7,497.9 6,481.0 6,951.2
---------------------------------------- ----- ------- ------- -----------
Total equity and total liabilities 8,636.2 8,153.0 8,359.7
Condensed consolidated cash flow statement (unaudited)
Six months ended Year ended
30 June 30 June 31 December
2022 2021 2021
Note GBPm GBPm GBPm
---------- -----------
Profit after tax 200.2 807.4 996.7
Adjustments for non-cash items:
-- Depreciation of property, plant and equipment and
right-of-use assets 8.8 12.0 23.6
-- Gain on disposal of right-of-use assets (1.8) -- --
-- Impairment/ disposal of property, plant and equipment
and right-of-use assets -- -- 23.8
-- Amortisation and impairment of intangible assets 11 9.5 8.4 44.7
-- Gain on disposal of Comparison entities held for sale -- (404.4) (404.4)
-- Movement in expected credit loss provision 6 7.6 2.8 13.3
-- Share scheme charges 9 26.1 31.1 65.2
-- Accrued interest income from loans and advances to
customers (0.5) (0.2) (0.8)
-- Interest expense on funding for loans and advances to
customers 4.8 2.9 6.1
-- Investment return 6 (25.9) (22.5) (45.2)
-- Finance costs, including unwinding of discounts on
lease liabilities 6 5.9 6.0 12.0
-- Taxation expense 10 51.1 90.5 132.5
Change in gross insurance contract liabilities 5 289.3 (62.1) 133.7
Change in reinsurance assets 5 (170.0) 171.3 (92.9)
Change in insurance and other receivables 6 (120.7) (23.2) (9.2)
Change in gross loans and advances to
customers 7 (179.6) (67.6) 205.2)
Change in trade and other payables, including
tax and social security 11 53.2 (232.3) (56.1)
Cash flows from operating activities,
before movements in investments 158.0 320.1 637.8
Purchases of financial instruments (1,606.7) (1,898.5) (3,710.2)
Proceeds on disposal/ maturity of financial
instruments 1,808.0 1,480.8 3,397.1
Interest and investment income received 6 26.2 21.5 46.6
Cash flows from operating activities,
net of movements in investments 385.5 (76.1) 371.3
Taxation payments (46.7) (57.8) (126.7)
Net cash flow from operating activities 338.8 (133.9) 244.6
Cash flows from investing activities:
Purchases of property, equipment and software (44.1) (27.3) (69.2)
Proceeds from sale of Comparison entities -- 471.8 471.8
Net costs paid on sale of Comparison entities -- (14.8) (14.8)
Net cash used in investing activities (44.1) 429.7 387.8
Cash flows from financing activities:
Proceeds on issue of loan backed securities 191.7 38.7 185.9
Proceeds from other financial liabilities 15.0 20.0 --
Finance costs paid, including interest
expense paid on funding for loans 6 (11.2) (9.6) (20.2)
Repayment of lease liabilities (4.2) (4.7) (9.6)
Equity dividends paid 12 (348.1) (250.8) (720.9)
Net cash used in financing activities (156.8) (206.4) (564.8)
Net increase in cash and cash equivalents 137.9 89.4 67.6
Cash and cash equivalents at 1 January 372.7 351.7 351.7
Cash and cash equivalents included within
disposal of Comparison entities -- (41.3) (41.3)
Effects of changes in foreign exchange
rates (4.0) (3.9) (5.3)
Cash and cash equivalents at end of period 6 506.6 395.9 372.7
Condensed consolidated statement of changes in equity
(unaudited)
Attributable to the owners of the Company
Share Fair Foreign Retained
Share premium value Hedging exchange profit Non-controlling Total
Capital account reserve reserve reserve and loss Total interests equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------- -------- -------- --------- --------- -------
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 -- -- -- -- -- 807.6 807.6 (0.2) 807.4
Other comprehensive
income
Movements in fair value
reserve -- -- (32.2) -- -- -- (32.2) -- (32.2)
Deferred tax charge
in relation to movement
in fair value reserve -- -- 0.5 -- -- -- 0.5 -- 0.5
Movement in hedging
reserve -- -- -- 1.9 -- -- 1.9 -- 1.9
Currency translation
differences -- -- -- -- (6.6) -- (6.6) (0.4) (7.0)
Total comprehensive income
for the period -- -- (31.7) 1.9 (6.6) 807.6 771.2 (0.6) 770.6
Transactions with equity
holders
Dividends 12 -- -- -- -- -- (250.8) (250.8) -- (250.8)
Share scheme credit -- -- -- -- -- 33.2 33.2 -- 33.2
Deferred tax credit
on share scheme credit -- -- -- -- -- 2.9 2.9 -- 2.9
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)
Total transactions with
equity holders -- -- -- -- 1.3 (216.7) (215.4) (6.6) (222.0)
------------------------------------- -------- -------- -------- -------- --------- --------- ------- --------------- -------
As at 30 June 2021 0.3 13.1 53.7 (1.7) 7.8 1,595.3 1,668.5 3.5 1,672.0
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 -- -- 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 -- -- -- -- -- 63.1 63.1 -- 63.1
Deferred tax credit
on share scheme credit -- -- -- -- -- 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 transaction 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
Condensed consolidated statement of changes in equity
(unaudited) (continued)
Attributable to the owners of the Company
Share Fair Foreign Retained
Share premium value Hedging exchange profit Total
Capital account reserve reserve reserve and loss Total Non-controlling equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm interests GBPm GBPm
-------- -------- -------- --------- --------- -------
At 1 January 2022 0.3 13.1 36.7 3.0 4.3 1,348.8 1,406.2 2.3 1,408.5
Profit/(loss) for the
period -- -- -- -- -- 200.9 200.9 (0.7) 200.2
Other comprehensive
income
Movements in fair value
reserve -- -- (173.2) -- -- -- (173.2) -- (173.2)
Deferred tax charge
in relation to movement
in fair value reserve -- -- 9.5 -- -- -- 9.5 -- 9.5
Movement in hedging
reserve -- -- -- 12.3 -- -- 12.3 -- 12.3
Currency translation
differences -- -- -- -- 4.0 -- 4.0 -- 4.0
Total comprehensive income
for the period -- -- (163.7) 12.3 4.0 200.9 53.5 (0.7) 52.8
Transactions with equity
holders
Dividends 12 -- -- -- -- -- (348.1) (348.1) -- (348.1)
Share scheme credit -- -- -- -- -- 29.9 29.9 -- 29.9
Deferred tax credit on
share scheme credit -- -- -- -- -- (4.8) (4.8) -- (4.8)
Total transactions with
equity holders -- -- -- -- -- (323.0) (323.0) -- (323.0)
----------------------------- -------- -------- -------- -------- --------- --------- ------- --------------- -------
As at 30 June 2022 0.3 13.1 (127.0) 15.3 8.3 1,226.7 1,136.7 1.6 1,138.3
Notes to the financial statements (unaudited)
1. General information
Admiral Group plc (the "Company") is a public limited company
incorporated and domiciled in England and Wales. Its registered
office is at T Admiral, David Street, Cardiff, CF10 2EH and its
shares are listed on the London Stock Exchange.
The condensed interim financial statements comprise the results
and balances of the Company and its subsidiaries (the Group) for
the six-month period ended 30 June 2022 and the comparative periods
for the six-months ended 30 June 2021 and the year ended 31
December 2021. This condensed set of financial statements has been
prepared in accordance with IAS 34 Interim Financial Reporting as
adopted by the UK, and should be read in conjunction with the
Group's last annual consolidated financial statements as at and for
the year ended 31 December 2021 ("last annual financial
statements") prepared in accordance with United Kingdom adopted
international accounting standards in conformity with the
requirements of the Companies Act 2006. They do not include all of
the information required for a complete set of IFRS financial
statements. However, selected explanatory notes are included to
explain events and transactions that are significant to an
understanding of the changes in the Group's financial position and
performance since the last annual financial statements.
As required by the FCA's Disclosure and Transparency Rules, the
condensed set of financial statements has been prepared applying
the accounting policies and presentation that were applied in the
preparation of the Company's published consolidated financial
statements for the year ended 31 December 2021, except where new
accounting standards apply as noted below.
The financial statements of the Company's subsidiaries are
consolidated in the Group financial statements. In accordance with
IAS 24, transactions or balances between Group companies that have
been eliminated on consolidation are not reported as related party
transactions.
The comparative figures for the financial year ended 31 December
2021 are not the Company's statutory accounts for that financial
year. Those accounts have been reported on by the Company's
auditors and delivered to the registrar of companies. The report of
the auditors was:
1.
1.
1.
1. unqualified;
2. did not include a reference to any matters to which
the auditors drew attention by way of emphasis
without qualifying their report; and
3. did not contain a statement under section 498 (2) or
(3) of the Companies Act 2006.
The accounts have been prepared on a going concern basis. In
considering the appropriateness of this assumption, the Board have
reviewed the Group's projections for the next 12 months and beyond.
Further information is given in note 2 below.
2. Basis of preparation
The condensed set of interim financial statements have been
prepared applying the accounting policies and presentation that
were applied in the preparation of the Company's published
consolidated financial statements for the year ended 31 December
2021.
A number of other IFRS and interpretations have been endorsed by
the UK in the period to 30 June 2022 and although they have been
adopted by the Group, none of them has had a material impact on the
Group's financial statements.
The Group's assessment of the impact of standards that have yet
to be adopted remains consistent with that reported on page 230 of
the Group's 2021 Annual Report. In particular, IFRS 17 has an
effective date of 1 January 2023. The main changes for the Group
comprise the mandatory discounting of claims reserves, the
introduction and increased disclosure of the risk adjustment for
non-financial risk, and a higher likelihood and transparency of any
loss-making portfolios due to the increased granularity of the
onerous contract assessment. In addition, there are significant
changes to the presentation of the income statement; gross written
premium will no longer be presented and insurance and reinsurance
results will be presented separately. The Group continues to work
through the impact of these factors, and towards implementation by
the effective date of 1 January 2023. At this moment it is too
early to disclose the quantitative impact as of 2023 given that the
preparation of the transition balance sheet and the decisions on
key accounting policy choices are ongoing.
The consolidated financial statements have been prepared on a
Going Concern basis. In considering this requirement, the directors
have taken into account the following:
-- The Group's profit projections, including:
-- Changes in premium rates and projected policy volumes across the
Group's insurance businesses, including the impact of the UK FCA
general insurance pricing reform which came into effect at the
start of the period
-- The impacts of the current elevated inflationary environment on
the cost of settling claims across all of the Group's insurance
businesses
-- The return of motor claims frequency towards pre-pandemic levels
-- 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 inflation and unemployment in the context of
credit risks and the growth of the Admiral Money business
-- The Group's solvency position, which has been closely monitored through
periods of market volatility. The Group continues to maintain a strong
solvency position above target levels
-- The adequacy of the Group's liquidity position after considering all 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, focusing on regulatory guidance issued by the
FCA and the PRA in the UK and regular communications between management
and regulators
-- A review of the Company's principal risks and uncertainties and the
assessment of emerging risks
Following consideration of all 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 consolidated financial statements.
The accounting policies set out in the notes to the financial
statements have, unless otherwise stated, been applied consistently
to all periods presented in these Group financial statements.
The financial statements are prepared on the historical cost
basis, except for the revaluation of financial assets classified as
fair value through profit or loss or as fair value through other
comprehensive income. The financial statements are presented in
pounds sterling, rounded to the nearest GBP0.1 million.
Subsidiaries are entities controlled by the Group. The Group
controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
In assessing control, the Group takes into consideration potential
voting rights that are currently exercisable. The acquisition date
is the date on which control is transferred to the acquirer. The
financial statements of subsidiaries are included in the
consolidated financial statements from the date that control
commences until the date that control ceases. Losses applicable to
the non-controlling interests in a subsidiary are allocated to the
non-controlling interests even if doing so causes the
non-controlling interests to have a deficit balance.
3. Critical accounting judgements and estimates
The Group's 2021 Annual Report provides full details of
significant judgements and estimates used in the application of the
Group's accounting policies. There have been no additional critical
judgements or estimates applied in the period.
Note 5 provides further information as to the changes in the
estimates with respect to the calculation of insurance
reserves.
Note 7 provides further information as to changes in the
estimates with respect to the calculation of the expected credit
loss provision for the Admiral Money business.
4. Operating segments
The Group has four reportable segments; UK Insurance,
International Insurance, Admiral Money, and Other. The result of
the discontinued operations is also shown for completeness. These
reportable segments are consistent with those set out on page 234
of the Group's 2021 Annual Report.
Segment income, results and other information
An analysis of the Group's revenue and results for the period
ended 30 June 2022, by reportable segment, is shown below. The
accounting policies of the reportable segments are consistent with
those presented in the notes to the 2021 Group financial
statements.
Six months ended 30 June 2022
International Admiral
UK Insurance Insurance Money Other Eliminations(*4) Total (continuing)
GBPm GBPm GBPm GBPm GBPm GBPm
------------ ------------- ------- ------ ---------------- ------------------
Turnover(*1) 1,409.9 393.7 25.7 18.0 (0.2) 1,847.1
Net insurance
premium revenue 306.2 121.4 -- 12.5 -- 440.1
Other revenue
and profit commission 204.7 20.8 0.2 4.4 (0.2) 229.9
Net interest
income -- -- 19.9 -- 0.8 20.7
Investment return(*2) 19.8 0.3 -- -- (0.8) 19.3
Net revenue 530.7 142.5 20.1 16.9 (0.2) 710.0
Net insurance
claims (102.0) (108.7) -- (9.3) -- (220.0)
Expenses (106.9) (55.4) (19.9) (18.9) 0.2 (200.9)
Segment profit/(loss)
before tax 321.8 (21.6) 0.2 (11.3) -- 289.1
----------------------- ------------ ------------- ------- ------ ---------------- ------------------
Other central revenue and expenses, including
share scheme charges (40.1)
Investment and interest income 8.0
Finance costs(*3) (5.7)
Consolidated profit before tax 251.3
Taxation expense (51.1)
Consolidated profit
after tax 200.2
Revenue and results for the corresponding reportable segments
for the period ended 30 June 2021 are shown below.
Six months ended 30 June 2021
International Admiral Discontinued Total
UK Insurance Insurance Money Other operations Eliminations(*4) (continuing) Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------ ------------- ------- ----- ------------ ---------------- ------------- -------
Turnover(*1) 1,372.0 347.2 16.2 11.1 67.2 (7.7) 1,746.4 1,806.0
Net insurance
premium revenue 295.6 116.0 -- 4.6 -- -- 416.2 416.2
Other revenue
and profit commission 320.0 16.1 0.5 3.3 67.2 (7.7) 339.8 399.4
Net interest
income -- -- 11.4 -- -- 1.4 12.8 12.8
Investment return(*2) 20.7 0.6 -- -- -- (1.4) 19.9 19.9
Net revenue 636.3 132.7 11.9 7.9 67.2 (7.7) 788.7 848.3
Net insurance
claims (8.1) (84.6) -- (3.1) -- -- (95.8) (95.8)
Expenses (84.7) (49.0) (13.8) (8.4) (55.4) 7.7 (155.8) (203.6)
Gain on disposal
of Comparison
entities -- -- -- -- 404.4 -- -- 404.4
Segment profit/(loss)
before tax 543.5 (0.9) (1.9) (3.6) 416.2 -- 537.1 953.3
Other central revenue and expenses, including
share scheme charges (50.7) (51.2)
Investment and interest income 1.5 1.5
Finance costs(*3) (5.7) (5.7)
Consolidated profit before
tax 482.2 897.9
Taxation expense (88.2) (90.5)
Consolidated profit after
tax 394.0 807.4
Revenue and results for the corresponding reportable segments
for the year ended 31 December 2021 are shown below.
Year ended 31 December 2021
-----------------------------------------------------------------------------------------------------
International Admiral Discontinued Total
UK Insurance Insurance Money Other (Comparison) Eliminations(*4) (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
of Penguin Portals
businesses -- -- -- -- 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 713.5 1,129.2
Taxation expense (130.2) (132.5)
Consolidated profit after tax 583.3 996.7
*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 13 for further information.
*2 Investment return is reported net of impairment of financial
assets, in line with management reporting.
*3 GBP0.2 million of IFRS 16 interest expense (being the Group's
net share of IFRS 16 interest expense) included within the Finance
Costs in the Income Statement has been reallocated to individual
segments within expenses, in line with management segmental
reporting.
*4 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 GBP0.2 million (H1 2021:
GBP7.7 million, FY 2021: GBP7.8 million) elimination of other
revenue and profit commission, GBPnil (H1 2021: GBP7.6 million, FY
2021: GBP7.6 million) relates to discontinued operations, with the
remaining GBP0.2 million (H1 2021: GBP0.1 million, FY 2021: GBP0.2
million) relating to compare.com. GBP0.8 million (H1 2021: GBP1.4
million, FY 2021: GBP2.7 million) of intra-group interest charges
related to the UK Insurance and Admiral Money segment have also
been eliminated on consolidation.
5. Premium, Claims and Profit Commissions
5a. Net insurance premium revenue
30 June 30 June 31 December
2022 2021 2021
GBPm GBPm GBPm
---------------------------------------- ------------- -------------
Total insurance premiums including
co-insurers' share(*1) 1,634.2 1,553.1 3,098.7
Group gross premiums written excluding
co-insurance 1,428.0 1,253.9 2,513.6
Outwards reinsurance premiums (965.5) (821.3) (1,643.0)
Net insurance premiums written 462.5 432.6 870.6
Change in gross unearned premium
provision (136.7) (31.4) (21.3)
Change in reinsurers' share of unearned
premium provision 114.3 15.0 5.7
Net insurance premium revenue 440.1 416.2 855.0
*1 Alternative Performance Measures -- refer to the end of the
report for definition and explanation, and to note 13a for
reconciliation to Group gross premiums written
The Group's share of its insurance business was underwritten by
Admiral Insurance (Gibraltar) Limited, Admiral Insurance Company
Limited, Admiral Europe Compania Seguros ('AECS'), and Elephant
Insurance Company. The vast majority of contracts are short term in
duration, lasting for between 6 and 12 months.
5b. Profit commission
30 June 30 June 31 December
2022 2021 2021
GBPm GBPm GBPm
------------- ----------- ---------------
Underwriting year
2017 & prior 23.7 53.1 94.4
2018 15.4 13.3 18.6
2019 10.8 22.8 27.6
2020 21.1 88.5 150.0
2021 -- -- --
Total UK motor profit commission(*1) 71.0 177.7 290.6
------------------------------------- ------------- ----------- ---------------
Total UK household and International
profit commission(*1) 4.5 9.6 13.9
Total profit commission 75.5 187.3 304.5
(*1) Of the total UK motor profit commission recognised of
GBP71.0 million (H1 2021: GBP177.7 million, FY 2021: GBP290.6
million), GBP53.8 million (H1 2021: GBP100.5 million, FY 2021
GBP162.9 million) relates to co-insurance arrangements and GBP17.2
million (H1 2021: GBP77.2 million, FY 2021 GBP127.8 million) to
reinsurance arrangements. The UK Household and International profit
commission relates solely to reinsurance arrangements.
No profit commission has yet been recognised on the 2021
underwriting year as the combined ratios calculated from the
financial statement loss ratios on these years sit above the
threshold for profit commission recognition.
Sensitivities of the recognition of profit commission to
movements in the booked loss ratio are shown in note 5c (iv).
5c. Reinsurance assets and insurance contract liabilities
1. Analysis of recognised amounts:
30 June 30 June 31 December
2022 2021 2021
GBPm GBPm GBPm
Gross
Claims outstanding(*1) 3,183.2 2,837.4 3,045.0
Unearned premium provision 1,321.1 1,181.8 1,170.0
-----------
Total gross insurance liabilities 4,504.3 4,019.2 4,215.0
-----------
Recoverable from reinsurers
Claims outstanding 1,458.8 1,140.4 1,415.7
Unearned premium provision 887.3 771.5 760.4
-----------
Total reinsurers' share of insurance
liabilities 2,346.1 1,911.9 2,176.1
-----------
Net
Claims outstanding(*2) 1,724.4 1,697.0 1,629.3
Unearned premium provision 433.8 410.3 409.6
-----------
Total insurance liabilities - net 2,158.2 2,107.3 2,038.9
-----------
*1 Gross claims outstanding at 30 June 2022 is presented before
the deduction of salvage and subrogation recoveries totaling
GBP107.0 million (30 June 2021: GBP70.1 million, 31 December 2021:
GBP87.6 million).
*2 The Group typically commutes quota share reinsurance
contracts in its UK Motor Insurance business 24 to 36 months
following the start of the underwriting year. After commutation,
claims outstanding from these contracts are included in the Group's
net claims outstanding balance. Refer to note (ii) below.
(ii) Analysis of net claims reserve releases:
The following table analyses the impact of movements in prior
year claims provisions on a net basis. This data is presented on an
underwriting year basis.
30 June 30 June 31 December
2022 2021 2021
Net GBPm GBPm GBPm
----------- -----------
Underwriting year (UK Motor Insurance):
2017 & prior 54.1 102.3 184.9
2018 50.1 45.3 61.9
2019 22.4 42.2 54.6
2020 24.5 9.6 15.9
2021 8.5 -- --
Total net release (UK Motor Insurance) 159.6 199.4 317.3
Total net release (UK Household Insurance) 1.4 2.0 2.5
Total net release (UK Travel Insurance) 0.1 -- 2.2
Total net release (International Insurance) 7.6 6.5 16.4
Total net release 168.7 207.9 338.4
Analysis of net releases on UK Motor
Insurance
-- Net releases on Group net share (UK Motor) 66.2 81.1 128.1
-- Releases on commuted quota share reinsurance
contracts (UK Motor) 93.4 118.3 189.2
Total UK Motor net releases as above 159.6 199.4 317.3
Releases on the share of reserves originally reinsured but since
commuted are analysed by underwriting year as follows:
30 June 30 June 31 December
2022 2021 2021
Net GBPm GBPm GBPm
Underwriting year:
2017 & prior 34.1 63.2 116.4
2018 34.6 30.5 43.5
2019 13.0 24.6 29.3
2020 11.7 -- --
Total releases on commuted quota share
reinsurance contracts 93.4 118.3 189.2
--------------------------------------- ------- ------- -----------
The table below shows the development of UK Car Insurance loss
ratios for the past six financial periods, presented on an
underwriting year basis.
31 December 30 June
----------------------------
UK Car Insurance loss
ratio development 2017 2018 2019 2020 2021 2022
Underwriting year (UK
Car only)
2017 87% 83% 75% 70% 65% 63%
2018 -- 92% 81% 78% 73% 70%
2019 -- -- 92% 76% 72% 70%
2020 -- -- -- 72% 66% 64%
2021 -- -- -- -- 90% 87%
2022 -- -- -- -- -- 93%
(iii) Reconciliation of movement in claims provision
30 June 2022
Gross Reinsurance Net
GBPm GBPm GBPm
----------- -------
Claims provision at start of period 3,045.0 (1,415.7) 1,629.3
Claims incurred (excluding claims
handling costs and releases) 1,112.8 (738.4) 374.4
Reserve releases (235.1) 66.4 (168.7)
Movement in claims provision due
to commutation -- 194.1 194.1
Claims paid and other movements (739.5) 434.8 (304.7)
Claims provision at end of period 3,183.2 (1,458.8) 1,724.4
30 June 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) 827.6 (535.3) 292.3
Reserve releases (263.1) 55.2 (207.9)
Movement in claims provision due
to commutation -- 318.4 318.4
Claims paid and other movements (647.0) 340.6 (306.4)
Claims provision at end of period 2,837.4 (1,140.4) 1,697.0
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
(iv) Sensitivity of recognised amounts to changes in assumptions:
The following table sets out the impact on equity and post-tax
profit or loss at 30 June 2022 that would result from a 1%, 3% and
5% deterioration and improvement in the UK Car insurance loss
ratios used for each underwriting year for which material amounts
remain outstanding.
Underwriting year
------------------------------
Impact on income statement (including profit
commission) 2018 2019 2020 2021
Booked loss ratio - 30 June 2022 70% 70% 64% 87%
Impact of 1% deterioration in booked loss
ratio (GBPm) (16.1) (15.1) (16.4) (3.2)
Impact of 3% deterioration in booked loss
ratio (GBPm) (47.3) (45.2) (49.2) (9.7)
Impact of 5% deterioration in booked loss
ratio (GBPm) (77.7) (74.7) (82.0) (16.2)
Impact of 1% improvement in booked loss ratio
(GBPm) 16.1 15.3 16.4 3.2
Impact of 3% improvement in booked loss ratio
(GBPm) 48.2 46.4 49.2 9.7
Impact of 5% improvement in booked loss ratio
(GBPm) 80.4 77.5 82.0 16.2
The following table sets out the impact on equity and post-tax
profit or loss at 30 June 2022 that would result from a 1%, 3% and
5% deterioration and improvement in the UK Car insurance loss
ratios used for each underwriting year for which material amounts
remain outstanding, on profit commission only.
Underwriting year
----------------------------
Impact on profit commission
only 2018 2019 2020 2021
Booked loss ratio - 30 June
2022 70% 70% 64% 87%
Impact of 1% deterioration in
booked loss ratio (GBPm) (4.5) (5.1) (7.9) --
Impact of 3% deterioration in
booked loss ratio (GBPm) (12.6) (15.4) (23.8) --
Impact of 5% deterioration in
booked loss ratio (GBPm) (19.8) (25.1) (39.7) --
Impact of 1% improvement in
booked loss ratio (GBPm) 4.5 5.4 7.9 --
Impact of 3% improvement in
booked loss ratio (GBPm) 13.5 16.7 23.8 --
Impact of 5% improvement in
booked loss ratio (GBPm) 22.5 27.9 39.7 --
6. Investment income and finance costs
6a. Investment return
30 June 30 June 31 December
2022 2021 2021
GBPm GBPm GBPm
Investment return
On assets classified as FVTPL (2.6) 3.3 3.6
On debt securities classified as FVOCI(*2) 29.2 19.5 42.3
On assets classified as amortised cost 0.9 0.3 0.6
Net unrealised losses
Unrealised gains/(losses) on forward contracts 0.4 (0.6) --
Movement in reinsurers' share of investment
return (2.3) -- (1.6)
Interest receivable on cash and cash
equivalents 0.3 -- 0.3
Total investment and interest income(*1) 25.9 22.5 45.2
*1 Total investment return excludes GBP0.8 million of
intra-group interest (30 June 2021: GBP1.4million, 31 December
2021: GBP2.7 million)
*2 Realised gains/losses on sales of debt securities classified
as FVOCI are immaterial
6b. Financial assets and liabilities
The Group's financial instruments can be analysed as
follows:
30 June 30 June 31 December
2022 2021 2021
GBPm GBPm GBPm
Financial investments measured at FVTPL
Money market funds 663.9 1,275.2 868.0
Other funds 183.0 189.1 187.6
Derivative financial instruments 15.3 -- 5.2
Equity investments (designated FVTPL) 4.0 1.6 2.2
866.2 1,465.9 1,063.0
Financial investments classified as
FVOCI
Corporate debt securities 1,857.4 1,892.0 2,101.0
Government debt securities 460.3 328.6 348.5
Private debt securities 119.6 83.3 125.5
2,437.3 2,303.9 2,575.0
Equity investments (designated FVOCI) 24.3 13.5 19.3
2,461.6 2,317.4 2,594.3
Financial assets measured at amortised
cost
Deposits with credit institutions 65.9 96.0 85.3
Total financial investments 3,393.7 3,879.3 3,742.6
Other financial assets
Insurance receivables 1,017.9 979.9 956.6
Trade and other receivables (measured
at amortised cost) 307.5 244.0 251.9
Insurance and other receivables 1,325.4 1,223.9 1,208.5
Loans and advances to customers (note
7) 733.1 425.7 556.8
Cash and cash equivalents 506.6 395.9 372.7
Total financial assets 5,958.8 5,924.8 5,880.6
--------------------------------------------- ------- ------- -----------
Financial liabilities
Subordinated notes 204.4 204.3 204.4
Loan backed securities 638.2 299.6 446.5
Other borrowings 35.0 40.0 20.0
Derivative financial instruments 9.8 4.9 --
Subordinated and other financial liabilities 887.4 548.8 670.9
Trade and other payables 2,013.2 1,783.8 1,960.0
Lease liabilities 93.0 114.9 105.3
Total financial liabilities 2,993.6 2,447.5 2,736.2
The table below shows how the financial assets held at fair
value have been measured using the fair value hierarchy:
31 December
30 June 2022 30 June 2021 2021
FVTPL FVOCI FVTPL FVOCI FVTPL FVOCI
GBPm GBPm GBPm GBPm GBPm GBPm
Level one (quoted prices in
active markets) 862.2 2,317.7 1,464.3 2,220.5 1,060.8 2,449.5
Level two (use of observable
inputs) -- -- -- -- -- --
Level three (use of significant
unobservable inputs) 4.0 143.9 1.6 96.9 2.2 144.8
Total(*1) 866.2 2,461.6 1,465.9 2,317.4 1,063.0 2,594.3
-------------------------------- ----- ------- ------- ------- ------- -------
*1 There were no transfers between fair value hierarchy levels
in the reporting period
The majority of investments held at fair value through profit
and loss at the end of the period are invested in funds; mainly
money market funds. The measurement of investments at the end of
the period, for the majority investments held at fair value, is
based on active quoted market values (level one).
Level three investments consist of private debt securities and
equity investments. Private 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:
30 June 30 June 31 December
2022 2021 2021
Level Three Investments GBPm GBPm GBPm
-----------------------------------------------
Balance as at 1 January 147.0 74.8 74.8
Gains recognised in the Income Statement 2.2 1.1 1.6
(Losses)/gains recognised in Other
Comprehensive Income (1.9) 1.5 4.1
Purchases 14.1 29.1 89.4
Disposals (14.8) (7.7) (22.4)
Translation differences 1.3 (0.3) (0.5)
Balance as at 30 June/ 31 December 147.9 98.5 147.0
The amortised cost carrying amount of receivables is a
reasonable approximation of fair value.
The fair value of subordinated notes (level one valuation) at 30
June 2022 is GBP201.1 million (30 June 2021: GBP225.5 million, 31
December 2021: GBP217.1 million).
7. Loans and Advances to Customers
30 June 30 June 31 December
2022 2021 2021
GBPm GBPm GBPm
--------------------------------------------------
Loans and advances to customers -- gross carrying
amount 786.6 469.4 607.0
Loans and advances to customers -- provision (53.5) (43.7) (50.2)
Total loans and advances to customers 733.1 425.7 556.8
Loans and advances to customers are comprised of the
following:
30 June 30 June 31 December
2022 2021 2021
GBPm GBPm GBPm
Unsecured personal loans 750.3 430.6 566.9
Finance leases 36.3 38.8 40.1
Total loans and advances to customers, gross 786.6 469.4 607.0
--------------------------------------------- ------- ------- -----------
The table below shows the gross carrying value of loans in
stages 1 -- 3.
30 June 30 June 31 December
2022 2021 2021
Gross carrying amount Expected credit loss allowance Other loss allowance*1 Carrying amount Carrying amount Carrying amount
GBPm GBPm GBPm GBPm GBPm GBPm
Stage
1 652.8 (11.8) (0.3) 640.7 358.0 496.6
Stage
2 106.8 (20.1) -- 86.7 64.3 55.7
Stage
3 27.0 (21.3) -- 5.7 3.4 4.5
Total 786.6 (53.2) (0.3) 733. 1 425.7 556.8
*1 Other loss allowance covers losses due to a reduction in
current or future vehicle value or costs associated with recovery
and sale of vehicles.
Forward-looking information
Forecasts of macroeconomic variables and associated probability
weightings of several scenarios are procured from an external
provider. These scenarios represent a range of outcomes, with both
potential upside and downside included to provide a blended view
that represents managements best estimate of the expected
outcome.
The key economic driver of the losses from the scenarios is
the
likelihood of a customer entering hardship through unemployment. The scenario weighting assumptions and unemployment rate used are detailed below:
Scenario Scenario Scenario
Probability Probability Probability Peak Unemployment
Weighting Weighting Weighting Peak Unemployment Peak Unemployment rate %
30 June 30 June 31 December rate % rate % 31 December
2022 2021 2021 30 June 2022 30 June 2021 2021
Base 40% 40% 40% 4.1 7.2 4.3
Upturn 10% 5% 10% 3.5 6.4 4.0
Downturn 40% 25% 30% 6.1 8.0 6.3
Severe 10% 30% 20% 8.2 9.1 6.6
Probability
weighted
Peak 100% 100% 100% 5.3 7.9 5.8
------------
Sensitivities to key areas of estimation uncertainty
30
June Sensitivity 30 June Sensitivity 31 December Sensitivity
2022 (GBPm) 2021 (GBPm) 2021 (GBPm)
---------
Base 40% (3.6) 40% (1.8) 40% (2.5)
Upturn 10% (6.7) 5% (3.9) 10% (9.7)
Downturn 40% 2.6 25% 0.2 30% 6.9
Severe 10% 9.1 30% 3.0 20% 11.1
---------
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. The sensitivity to
each of the scenarios has reduced since year end, driven by
improvements in forecast unemployment rates across each scenario
during the period. However, uncertainty remains around the impact
of rising inflation on customer repayment performance. This is
reflected in the post model adjustments made by management detailed
below.
Post Model Adjustments (PMAs)
30 June 2021 31 December 2021
Post Model Adjustments 30 June 2022 (GBPm) (GBPm) (GBPm)
Model Performance 2.0 0.4 2.0
Inflation 9.4 0.1 2.5
Economic Scenarios 0.8 4.7 4.6
-----------------------
12.2 5.2 9.1
-----------------------
At 30 June 2022, the expected credit loss allowance included
PMAs totaling GBP12.2 million (30 June 2021: GBP5.2 million; 31
December 2021: GBP9.1 million).
Model Performance
The model has been calibrated on historical data that may not
fully reflect the risk of losses in the recent and ongoing, highly
volatile macro-economic period. For this reason a Model Performance
PMA has been made. It effectively recalibrates the modelled
probability of default of the loans to reflect recent monitored
performance.
Inflation
This PMA has been updated to reflect the increased inflation
outlook which has increased significantly since the end of 2021.
Inflation could adversely impact the ability of some customers to
make their loan repayments. A PMA is held to acknowledge this.
Economic Scenarios
An uncertainty factor determined by management judgment has been
added to reflect the recent volatility in unemployment forecasts.
This factor has been reduced as variability between successive
forecasts has fallen.
Credit grade information
Credit grade is the internal credit banding given to a customer
at origination and is based on external credit rating information.
The credit grading as at 30 June 2022 and comparative periods is as
follows:
30 June 30 June 31 December
2022 2021 2021
Stage 1 Stage 2 Stage 3
12- month ECL Lifetime ECL Lifetime ECL Total Total Total
GBPm GBPm GBPm GBPm GBPm GBPm
Credit Grade
Higher 460.3 77.5 -- 537.8 306.5 405.1
Medium 155.9 23.1 -- 179.0 113.8 141.9
Lower 36.6 6.2 -- 42.8 25.3 32.0
Credit
Impaired -- -- 27.0 27.0 23.8 28.0
Gross
carrying
amount 652.8 106.8 27.0 786.6 469.4 607.0
8. Other 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 GBP229.9 million (H1 2021:
GBP399.4 million, FY 2021: GBP678.9 million) represents total other
revenue and profit commission and is disaggregated into the
segments included in note 4.
Six months ended 30 June 2022
International Admiral
UK Insurance Insurance Money Other Total
GBPm GBPm GBPm GBPm GBPm
-------------------------------- ------------ ------------- ------- ----- ------
Major products/ service
line
Instalment income 40.7 3.0 -- -- 43.7
Fee and commission
revenue 75.4 17.0 0.2 -- 92.6
Revenue from law firm 8.0 -- -- -- 8.0
Comparison(*1) -- -- -- 4.0 4.0
Other 5.9 -- -- 0.2 6.1
Total other revenue 130.0 20.0 0.2 4.2 154.4
Profit commission 74.7 0.8 -- -- 75.5
Total other revenue
and profit commission 204.7 20.8 0.2 4.2 229.9
Timing of revenue recognition
Point in time 134.1 17.0 0.2 4.2 155.5
Over time 9.0 -- -- -- 9.0
Revenue outside the
scope of IFRS 15 61.6 3.8 -- -- 65.4
204.7 20.8 0.2 4.2 229.9
Six months ended 30 June 2021
International Admiral Total Comparison
UK Insurance Insurance Money Other (continuing) (discontinued) Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------ ------------- ------- ----- -------------- --------------- -----
Major products/ service
line
Instalment income 51.5 1.8 -- -- 53.3 -- 53.3
Fee and commission
revenue 62.5 14.1 0.5 -- 77.1 -- 77.1
Revenue from law firm 13.4 -- -- -- 13.4 -- 13.4
Comparison(*1) -- -- -- 2.9 2.9 59.6 62.5
Other 5.5 -- -- 0.3 5.8 -- 5.8
Total other revenue 132.9 15.9 0.5 3.2 152.5 59.6 212.1
Profit commission 187.1 0.2 -- -- 187.3 -- 187.3
Total other revenue
and profit commission 320.0 16.1 0.5 3.2 339.8 59.6 399.4
Timing of revenue
recognition
Point in time 167.7 14.1 0.5 3.2 185.5 59.6 245.1
Over time 14.2 -- -- -- 14.2 -- 14.2
Revenue outside the
scope of IFRS 15 138.1 2.0 -- -- 140.1 -- 140.1
320.0 16.1 0.5 3.2 339.8 59.6 399.4
Year ended 31 December 2021
International Admiral Total Comparison
UK Insurance Insurance Money Other (continuing) (discontinued) 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 profit commission 577.8 34.6 1.0 5.9 619.3 59.6 678.9
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
*1 Comparison revenue excludes GBP0.2 million (H1 2021: GBP7.7
million, FY 2021: GBP7.8 million) of income from other Group
companies, including GBPnil (H1 2021: GBP7.6 million, FY 2021:
GBP7.6 million) from discontinued operations.
9. Expenses
30 June 2022
Recoverable
from co- and
Gross reinsurers Net
GBPm GBPm GBPm
Acquisition of insurance contracts 90.9 (51.4) 39.5
Administration and other marketing costs (insurance
contracts) 252.9 (159.0) 93.9
Insurance contract expenses 343.8 (210.4) 133.4
Administration and other marketing costs (other) 72.3 -- 72.3
Share scheme charges 40.4 (14.3) 26.1
Movement in the expected credit loss provision 7.6 -- 7.6
Total expenses and share scheme charges 464.1 (224.7) 239.4
30 June 2021
Recoverable
from co- and
Gross reinsurers Net
Continuing operations GBPm GBPm GBPm
Acquisition of insurance contracts 89.5 (56.3) 33.2
Administration and other marketing costs (insurance
contracts) 229.6 (165.6) 64.0
Insurance contract expenses 319.1 (221.9) 97.2
Administration and other marketing costs (other) 74.5 -- 74.5
Share scheme charges 47.2 (16.6) 30.6
Movement in expected credit loss provision 5.1 -- 5.1
Total expenses and share scheme charges 445.9 (238.5) 207.4
31 December 2021
Recoverable
from co- and
Gross reinsurers Net
Continuing operations GBPm GBPm GBPm
Acquisition of insurance contracts 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 983.4 (491.1) 492.3
Analysis of other administration and other marketing costs:
30 June 30 June
2022 2021 31 December 2021
Continuing operations GBPm GBPm GBPm
Expenses relating to additional products and fees 39.3 43.0 91.9
Loans expenses (excluding movement on Expected Credit
Loss provision) 10.9 9.8 23.7
Other expenses 22.1 21.7 35.9
Total 72.3 74.5 151.5
10. Taxation
30 June 30 June 31 December
2022 2021 2021
Continuing operations GBPm GBPm GBPm
Current tax
Corporation tax on profits for the year 54.2 81.7 129.2
Under provision relating to prior periods 2.3 7.1 4.2
Current tax charge 56.5 88.8 133.4
Deferred tax
Current period deferred taxation movement (5.4) (0.6) (1.5)
(Over) provision relating to prior periods -- -- (1.7)
Total tax charge per Consolidated Income
Statement 51.1 88.2 130.2
Factors affecting the total tax charge are:
30 June 30 June 31 December
2022 2021 2021
Continuing operations GBPm GBPm GBPm
Profit before tax 251.3 482.2 713.5
Corporation tax thereon at effective UK corporation
tax rate of 19.0% (2021: 19.0%) 47.8 91.6 135.6
Expenses and provisions not deductible for
tax purposes 0.2 (0.1) 2.2
Non-taxable income (3.1) (3.7) (8.3)
Impact of change in UK tax rate on deferred
tax balances (1.1) 2.6 (3.6)
Adjustments relating to prior periods 2.3 7.1 2.5
Impact of different overseas tax rates 1.0 (10.4) (1.4)
Unrecognised deferred tax 4.0 1.1 3.2
Total tax charge for the period as above 51.1 88.2 130.2
---------------------------------------------------- ------- ------- -----------
11. Other Assets and Other Liabilities
11a. Intangible assets
Deferred Software
acquisition -- internally Software
Goodwill costs generated -- Other Total
GBPm GBPm GBPm GBPm GBPm
At 1 January 2021 62.3 27.3 72.6 4.5 166.7
Additions -- 31.3 19.4 1.3 52.0
Amortisation
charge -- (31.3) (7.1) (1.3) (39.7)
Impairment -- -- -- -- --
Disposals -- -- -- -- --
Foreign exchange
movement -- (0.6) (1.3) 0.3 (1.6)
At 30 June 2021 62.3 26.7 83.6 4.8 177.4
At 1 January 2021 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)
Impairment -- -- (25.4) -- (25.4)
Disposals -- -- -- -- --
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
Additions -- 41.4 25.9 13.9 81.2
Amortisation
charge -- (38.5) (4.7) (2.0) (45.2)
Impairment -- -- (2.8) -- (2.8)
Disposals -- -- -- -- --
Foreign exchange
movement -- 0.8 (0.7) 1.3 1.4
At 30 June 2022 62.3 31.9 82.1 38.2 214.5
11b. Trade and other payables
30 June 30 June
2022 2021 31 December 2021
GBPm GBPm GBPm
Trade payables 49.3 40.5 39.8
Amounts owed to co-insurers 69.5 128.3 161.9
Amounts owed to reinsurers 1,358.2 1,131.0 1,274.9
Other taxation and social security
liabilities 94.5 80.7 71.7
Other payables 129.6 151.5 112.4
Accruals and deferred income 312.1 251.8 299.3
Total trade and other payables 2,013.2 1,783.8 1,960.0
Of amounts owed to reinsurers, GBP1,237.6 million (30 June 2021:
GBP1,029.9 million, 31 December 2021: GBP1,169.8 million) is held
under funds withheld arrangements.
11c. 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 material provisions have 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. 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. Dividends, Earnings and Share Capital
12a. Dividends
Dividends were proposed, approved and paid as follows.
30 June 30 June 31 December
2022 2021 2021
GBPm GBPm GBPm
-------------------------------------------------------- ---------- ---------- -------------
Proposed, March 2021 (86.0 pence per share, approved
April 2021 and paid June 2021) -- 250.8 250.8
Declared August 2021 (161.0 pence per share, paid
October 2021) -- -- 470.1
Proposed, March 2022 (118.0 pence per share, approved
April 2022 and paid June 2022) 348.1 -- --
Total 348.1 250.8 720.9
-------------------------------------------------------- ---------- ---------- -------------
The dividends proposed in March (approved in April) represent
the final dividends paid in respect of the 2020 and 2021 financial
years. The dividend declared in August reflects the 2021 interim
dividend.
A 2022 interim dividend of 105.0 pence per share (approximately
GBP310 million) has been declared, reflecting 60.0 pence per share
relating to continuing operations, and 45.0 pence per share as the
third special dividend relating to the disposal of the Penguin
Portal comparison businesses.
12b. Earnings per share
30 June 30 June 31 December
2022 2021 2021
GBPm GBPm GBPm
Profit for the financial year after
taxation attributable to equity shareholders
-- continuing operations 200.9 394.7 585.0
Weighted average number of shares --
basic 299,753,132 296,881,162 297,480,041
Unadjusted earnings per share -- basic
-- continuing operations 67.0p 132.9p 196.7p
Weighted average number of shares --
diluted 300,354,415 297,315,818 298,351,248
Unadjusted earnings per share -- diluted 66.9p 132.7p 196.1p
-- continuing operations
The difference between the basic and diluted number of shares at
the end the period (being 601,283; 30 June 2021: 434,656 31
December 2021: 871,207) relates to awards committed, but not yet
issued under the Group's share schemes.
12c. Share capital
30 June 30 June
2022 2021 31 December 2021
GBPm GBPm GBPm
Authorised
500,000,000 ordinary shares of 0.1 pence 0.5 0.5 0.5
Issued, called up and fully paid
297,021,168 ordinary shares of 0.1p -- 0.3 --
299,554,720 ordinary shares of 0.1p -- -- 0.3
299,893,517 ordinary shares of 0.1p 0.3 -- --
Total share capital 0.3 0.3 0.3
During the first half of 2022, 338,797 (HY 2021: 329,105; FY
2021: 2,862,657) new ordinary shares of 0.1p were issued to the
trusts administering the Group's share schemes.
338,797 (HY 2021: 329,105; FY 2021: 632,657) of these were
issued to the Admiral Group Share Incentive Plan Trust for the
purposes of this share scheme.
No shares (HY 2021: nil; FY 2021: 2,230,000) were issued to the
Admiral Group Employee Benefit Trust for the purposes of the
Discretionary Free Share Scheme.
12d. Objectives, policies and procedures for managing capital
The Group manages its capital to ensure that all entities within
the Group can continue as going concerns and to ensure that
regulated entities comfortably meet regulatory requirements. Excess
capital above these levels within subsidiaries is paid up to the
Group holding company in the form of dividends on a regular
basis.
The Group's dividend policy is to pay 65% of post-tax profits as
a normal dividend and to pay a further special dividend comprising
earnings not required to be held in the Group for solvency or
buffers.
12e. Related party transactions
Details relating to the remuneration and shareholdings of key
management personnel are set out in the Directors' Remuneration
Report within the Group's 2021 Annual Report. Key management
personnel can obtain discounted motor insurance at the same rates
as all other Group staff.
The Board considers that Executive and Non-Executive Directors
of Admiral Group plc are key management personnel. Aggregate
compensation for the Executive and Non-Executive Directors is
disclosed in the Directors' Remuneration Report in the 2021 Annual
Report.
13. Reconciliations
The following tables reconcile significant Key Performance
Indicators (KPIs) and Alternative Performance Measures (APMs)
included in the financial review above to items included in the
financial statements.
13a. Reconciliation of turnover to reported total premiums written and other revenue as per the financial statements
30 June 30 June 31 December
2022 2021 2021
GBPm GBPm GBPm
Gross premiums written after co-insurance
per note 5a of financial statements 1,428.0 1,253.9 2,513.6
Premiums underwritten through co-insurance
arrangements 206.2 299.2 585.1
Total premiums written 1,634.2 1,553.1 3,098.7
Other revenue(*1) 154.4 152.5 314.8
Admiral Money interest income 25.5 15.7 36.6
1814.1 1,721.3 3,450.1
Other(*2) 33.0 25.1 57.2
Turnover as per note 4 of financial statements 1,847.1 1,746.4 3,507.3
Intra-group income elimination(*3) 0.2 0.1 0.2
Total turnover(*1) 1,847.3 1,746.5 3,507.5
*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 Intra-group income elimination relates to comparison income
earned by compare.com from other Group entities.
13b. Reconciliation of claims incurred to reported loss ratio, excluding releases on commuted reinsurance
Int.
UK Motor UK Home Ins Other Group
June 2022 GBPm GBPm GBPm GBPm GBPm
Net insurance claims (note 5) 60.9 17.4 105.1 36.6 220.0
Deduct claims handling costs (6.1) (0.8) (6.9) (0.5) (14.3)
Prior year release/strengthening --
net original share 66.2 1.2 7.6 0.1 75.1
Prior year release/strengthening --
commuted share 93.4 0.2 -- -- 93.6
Impact of reinsurer caps -- -- (1.8) -- (1.8)
Impact of weather events -- (3.2) -- -- (3.2)
Attritional current period claims 214.4 14.8 104.0 36.2 369.4
-------- ------- ------ ----- -------
Net insurance premium revenue 234.8 26.1 116.4 62.8 440.1
Loss ratio -- current period attritional 91.3% 56.7% 89.3% -- 84.0%
Loss ratio -- current period weather
events -- 12.3% -- -- 0.7%
Loss ratio -- prior year release/strengthening
(net original share) (28.2%) (4.6%) (6.5%) -- (17.1%)
Loss ratio -- reported 63.1% 64.4% 82.8% -- 67.6%
Int.
UK Motor UK Home Ins Other Group
June 2021 GBPm GBPm GBPm GBPm GBPm
Net insurance claims (note 5) (16.6) 14.7 82.1 15.6 95.8
Deduct claims handling costs (6.1) (0.7) (4.4) (0.1) (11.3)
Prior year release/strengthening --
net original share 81.1 1.2 6.5 -- 88.8
Prior year release/strengthening --
commuted share 118.3 0.8 -- -- 119.1
Impact of reinsurer caps -- -- 0.7 -- 0.7
Impact of weather events -- -- -- -- --
Attritional current period claims 176.7 16.0 84.9 15.5 293.1
-------- ------- ------ ----- -------
Net insurance premium revenue 242.4 23.3 111.7 38.8 416.2
Loss ratio -- current period attritional 72.9% 68.8% 76.0% -- 70.4%
Loss ratio -- prior year release/strengthening
(net original share) (33.5%) (5.2%) (5.8%) -- (21.3%)
Loss ratio -- reported 39.4% 63.6% 70.2% -- 49.1%
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%
13c. Reconciliation of expenses related to insurance contracts to reported expense ratio
Int.
UK Motor UK Home Ins Other Group
June 2022 GBPm GBPm GBPm GBPm GBPm
Net insurance expenses (note 9) 57.3 7.8 50.5 17.8 133.4
Claims handling costs 6.1 0.8 6.9 0.5 14.3
Intra-group expenses elimination(*1) -- -- 0.2 -- 0.2
Impact of reinsurer caps (14.9) -- (5.2) -- (20.1)
Net IFRS 16 finance costs 0.2 -- -- -- 0.2
Adjusted net insurance expenses 48.7 8.6 52.4 18.3 128.0
Net insurance premium revenue 234.8 26.1 116.4 62.8 440.1
Expense ratio -- reported 20.7% 33.0% 45.0% - 29.1%
Int.
UK Motor UK Home Ins Other Group
June 2021 GBPm GBPm GBPm GBPm GBPm
Net insurance expenses (note 9) 39.8 6.9 44.5 6.0 97.2
Claims handling costs 6.1 0.7 4.4 0.1 11.3
Intra-group expenses elimination(*1) -- -- 0.1 -- 0.1
Impact of reinsurer caps -- -- -- -- --
Net IFRS 16 finance costs 0.1 -- 0.1 -- 0.2
Adjusted net insurance expenses 46.0 7.6 49.1 6.1 108.8
Net insurance premium revenue 242.4 23.3 111.7 38.8 416.2
Expense ratio -- reported 19.0% 32.5% 43.9% -- 26.1%
Int.
UK Motor UK Home 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 (*2) (41.6) (4.4) -- -- (46.0)
Claims handling costs 12.1 1.4 8.9 0.5 22.9
Intra-group expenses elimination(*1) -- -- 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%
*1 The intra-group expenses elimination amount relates to
aggregator fees charges by the Group's comparison entities to other
Group companies
*2 Restructure costs of GBP8.0 million relate to ancillary
costs. Total restructure costs incurred within UK Insurance were
GBP54.0 million.
14. Statutory Information
The financial information above does not constitute the
Company's statutory accounts. Statutory accounts for 2021 have been
delivered to the Registrar of Companies, and those for 2022 will be
delivered in due course. The auditors have reported on the
statutory accounts for 2021, and their reports were (i)
unqualified, (ii) did not include a reference to any matters to
which the auditors drew attention by way of emphasis without
qualifying their report and (iii) did not contain a statement under
section 498 (2) or (3) of the Companies Act 2006.
Glossary
Alternative Performance Measures
Throughout this report, the Group uses a number of Alternative
Performance Measures (APMs); measures that are not required or
commonly reported under International Financial Reporting
Standards, the Generally Accepted Accounting Principles (GAAP)
under which the Group prepares its financial statements.
These APMs are used by the Group, alongside GAAP measures, for
both internal performance analysis and to help shareholders and
other users of the 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 Money. It is reconciled
to financial statement line items in note 13a 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 premiums,
Written net of forecast cancellations written in the underwriting
year within the Group, including co-insurance. It is
reconciled to financial statement line items in note
13a to the financial statements.
This measure has been presented by the Group in every
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.
Group profit Group profit before tax represents profit before tax
before tax from continuing operations, excluding restructure costs
(which were relevant for FY 2021).
Earnings per Earnings per share from continuing operations before
share, continuing restructure costs represents the profit after tax attributable
operations to equity shareholders excluding restructure costs, divided
by the weighted average number of basic shares.
Underwriting For each insurance business an underwriting result is
result (profit presented showing the segment result prior to the inclusion
or loss) 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 13b 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 13c 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 13b and 13c.
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 excludes 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 Admiral Money 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 Effective tax rate is defined as the approximate tax
Rate 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 claims
estimate and cost scenarios calculated using historical data,
actuarial methods and judgement.
ASHE 'Annual Survey of Hours and Earnings' -- a statistical
index that is typically used for 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 between
cycle 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 Also referred to as net earned premium. The element of
premium revenue premium, less reinsurance premium, earned in the period.
Net promotor NPS is currently measured based on a subset of customer
score 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 injury
rate claims settlements in the UK.
Periodic Payment A compensation award as part of a claims settlement that
Order (PPO) 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 A clause found in some reinsurance and coinsurance agreements
commission 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 and
Entity (SPE) well-defined objective. There are specific restrictions
or limited around ongoing activities. The Group uses
an SPE set up under a securitisation programme.
Ultimate loss A projected actuarial best estimate loss ratio for a
ratio particular accident year or underwriting year.
Underwriting The year in which an insurance policy was incepted.
year
Underwriting Also referred to as the written basis. Claims incurred
year basis are allocated to the calendar year in which the policy
was underwritten. Underwriting year basis results are
calculated on the whole account (including co-insurance
and reinsurance shares) and include all premiums, claims,
expenses incurred and other revenue (for example instalment
income and commission income relating to the sale of
products that are ancillary to the main insurance policy)
relating to policies incepting in the relevant underwriting
year.
Written/Earned An insurance policy can be written in one calendar year
basis but earned over a subsequent calendar year.
Responsibility statement of the directors in respect of the
half-yearly financial report
We confirm that to the best of our knowledge:
--
-- the condensed set of financial statements has been prepared in
accordance with UK-adopted IAS 34 Interim Financial Reporting;
-- the interim management report includes a fair review of the
information required by:
1. DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication
of important events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial
statements; and a description of the principal risks and uncertainties
for the remaining six months of the year; and
2. DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position
or performance of the entity during that period; and any changes in the
related party transactions described in the last annual report that could
do so.
By order of the Board,
Geraint Jones
Chief Financial Officer
9 August 2022
INDEPENT REVIEW REPORT TO ADMIRAL GROUP PLC
Conclusion
We have been engaged by the group to review the condensed
consolidated set of financial statements in the half-yearly
financial report for the six months ended 30 June 2022 which
comprises the condensed consolidated income statement, condensed
consolidated statement of comprehensive income, condensed
consolidated statement of financial position, the condensed
consolidated statement of changes in equity, the condensed
consolidated cash flow statement and related notes 1 to 14.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2022 is not prepared, in all material respects, in accordance
with United Kingdom adopted International Accounting Standard 34
and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council for use in the
United Kingdom (ISRE (UK) 2410). A review of interim financial
information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with United Kingdom adopted
international accounting standards. The condensed set of financial
statements included in this half-yearly financial report has been
prepared in accordance with United Kingdom adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
Conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410; however future events or conditions
may cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the group's ability to continue as a
going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly financial report, we are
responsible for expressing to the group a conclusion on the
condensed set of financial statements in the half-yearly financial
report. Our conclusion, including our Conclusion Relating to Going
Concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
ISRE (UK) 2410. Our work has been undertaken so that we might state
to the company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company, for our review work, for this
report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
9 August 2022
(END) Dow Jones Newswires
August 10, 2022 02:00 ET (06:00 GMT)
Copyright (c) 2022 Dow Jones & Company, Inc.
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