TIDMADM
8 March 2023
Admiral Group plc reports resilient 2022 full year results
against a backdrop of high inflation
2022 Results Highlights
% change % change
2022 2021 2019 vs. 2021 vs. 2019
Group Profit before tax(1) (2)
(3) GBP469.0m GBP769.0m GBP505.1m -39% -7%
Earnings per share(123) 124.3p 212.2p 143.7p -41% -14%
Full year dividend per share 112.0p 187.0p 140.0p -40% -20%
Special dividends per share from
sale of Penguin Portals comparison
businesses 45.0p 92.0p - - -
Return on equity(123) 35% 56% 52% -21pts -17pts
Group turnover(13) GBP3.68bn GBP3.51bn GBP3.30bn +5% +12%
Group net revenue(1) GBP1.49bn GBP1.55bn GBP1.21bn -4% +23%
Group customers(3) 9.28m 8.36m 6.98m +11% +33%
UK insurance customers(3) 6.96m 6.44m 5.48m +8% +27%
International motor insurance
customers(3) 2.04m 1.81m 1.42m +13% +44%
Admiral Money gross loans balances GBP0.89bn GBP0.61bn GBP0.48bn +46% +85%
Solvency ratio (post dividend)(3) 180% 195% 190% -15pts -10pts
Around 10,000 employees each receive free shares awards worth up
to GBP3,600 under the employee share scheme based on the full year
2022 results.
Comment from Milena Mondini de Focatiis, Group Chief Executive
Officer:
"I am proud of the agility and adaptability that Admiral
demonstrated in 2022 as it increased its customer base by 11% and
delivered profits of GBP469 million against the backdrop of a
challenging market environment.
"We have yet again shown focus and discipline, reacting quickly
to emerging trends -- we implemented price increases ahead of
others in response to higher inflation whilst maintaining a
conservative approach to reserving and capital management.
"We continued to make progress on our diversification strategy
with Admiral Money making its first profit, continued growth across
the Group particularly in new products, and growing new
partnerships and distribution channels in international insurance
which now has over two million customers.
"We are aware that this has also been a challenging year for our
customers and our people and looking after them is our core
purpose. We continue to invest in our data and technology
capabilities to be sure that we serve our customers better. I would
like to thank all my colleagues across the Group for their hard
work and dedication.
"And today we continue to be well-positioned for when the market
improves given the combination of our proven competencies in
underwriting and distribution, our willingness to innovate and to
test-and-learn, and our commitment to people."
Comment from Annette Court, Group Chair:
"I am honoured to be leading the Admiral Board as the Group
enters its 30(th) year and am proud of how it has led the market in
taking strong action in response to external conditions, focusing
on long-term value creation.
"As previously announced, I will step down as Chair at our AGM
in April, and I leave with a mix of pride and deep fondness for
this very special company. Admiral is a company that has always
been fast to adapt and has a proven track record of navigating the
cycle. It remains focused on evolving its existing competences
whilst creating sustainable businesses for the future.
"I am delighted that Mike Rogers will take on the role of Chair
and wish the Board, Milena and the whole leadership team every
success for the future."
Final dividend
The Board has proposed a final dividend of 52.0 pence per share
(2021: 72.0 pence per share, plus 46.0 pence per share special
dividend from the sale of Penguin Portals) representing a normal
dividend (65% of post-tax profits) of 37.5 pence per share and a
special dividend of 14.5 pence per share. The dividend will be paid
on 2 June 2023. The ex-dividend date is 4 May 2023 and the record
date is 5 May 2023.
Management presentation
Analysts and investors will be able to access the Admiral Group
management presentation which commences at 8:15am GMT on Wednesday
8th March by registering on the Admiral website at
https://admiralgroup.co.uk/2022-full-year-results. A copy of the
presentation slides will also be available on the website.
Investors and Analysts: Admiral Group plc
Marisja Kocznur marisja.kocznur@admiralgroup.co.uk
Media: Admiral Group plc
Addy Frederick +44 (0) 7436 035615
Media: FTI Consulting
Edward Berry +44 (0) 20 3727 1046
Tom Blackwell +44 (0) 20 3727 1051
Chair Statement
I am honoured to be leading the Board of Admiral as the Group
enters its 30(th) year - happy birthday Admiral! As previously
announced, I will step down as Chair at the AGM in April 2023
having served 11 years on the Board, with six of those as Chair. I
leave with a mix of pride and deep fondness for this very special
company which I believe remains one of the FTSE 100's best kept
secrets.
This year has, once again, been challenging for the sector due
to the macro-economic environment. The Ukrainian-Russian war
impacted energy costs, high inflation led to higher claims costs
and, in the UK, the market adjusted to the FCA's pricing
reforms.
As a result, Admiral has reported lower Group profit of GBP469
million with turnover of GBP3.68 billion. This is driven by UK
Motor insurance profitability. Admiral has led the market in taking
strong pricing action to combat claims cost inflation and continues
to focus on long-term value creation.
Despite the challenging backdrop, our customer numbers are up
11% to 9.28 million and our solvency remains strong at 180%. The UK
Motor insurance marketplace is cyclical and we believe we are now
close to the bottom of this cycle. Admiral has a proven track
record of quickly adapting to navigate the cycle and remains
focused on continuously evolving its existing competences while
creating sustainable businesses for the future.
Looking back
Admiral is a special business with a distinctive culture. Our
purpose - To help more people to look after their future. Always
striving for better together - underpins everything we do and
ensures that we strive to do the right thing in consideration of
all our stakeholders.
I am immensely proud to have been part of Admiral's success
story. It has been a hugely enjoyable and rewarding experience.
During my time on the Board I have experienced the transition of
CEOs from Henry to David, and then to Milena - all have strong
entrepreneurial leadership skills, passion for the Admiral culture,
and a focus on building on our competitive advantages whilst
evolving the strategy within the emerging landscape.
I'm often asked what has been key to Admiral's success and,
essentially, I believe it's a lot of small things that have never
changed and make a big difference:
-- Delivering for our customers -- Admiral remains focused on 'the customer,
the customer, the customer' and during my time on the Board, customer
numbers have grown from 3.6 million in 2012 to 9.3 million in 2022 -- a
testament to our customer-centric approach.
-- Admiral's relentless focus on the fundamentals of risk selection, pricing
discipline, claims effectiveness and expense efficiency underpinned by a
healthy obsession with data and analysis and a low-risk approach.
-- Admiral's agility, innovation and culture of continuous improvement
through a test-and-learn approach has ensured that it creates products
and services that truly meet customers' evolving needs. After all, it was
Admiral that launched the first car insurance comparison site, the first
10-month policy, and accelerated the adoption of multicar and multicover.
-- Admiral's commitment to doing the right thing and strong conviction and
ethical foundation means it's perhaps unsurprising that we were the only
insurer in the UK to issue a GBP110 million Stay-At-Home refund for UK
customers during the Covid pandemic and we established a GBP6 million
Covid Fund to support impacted communities.
-- Admiral's culture -- this drives all of the above. We believe that
'people who like what they do, do it better'. We are always looking for
new ways to add value and have consistently been recognised as a great
place to work for over 11,000 colleagues. A key foundation stone of
Admiral that has been continuously reinforced as the company has grown is
that everyone matters regardless of their role. This is demonstrated by
the fact that all colleagues4 receive shares in the company every year.
Evolution
Although elements remain constant, Admiral continues to grow and
evolve, with a key pillar of the strategy being diversification. We
are making great progress in most operations, and have now built,
amongst others:
-- A significant UK household business which is growing strongly and now
serves 1.6 million customers
-- Admiral Money, our UK loans business which has achieved a small profit in
its fifth year and is taking a suitably prudent approach to increasing
its book
-- Sizeable and growing businesses in Europe
-- Admiral Pioneer, a business that builds on our traditional test-and-learn
approach to focus on diversification through new business areas
-- A business in the US, which is a challenging market, and for which we are
considering options
Almost half of our customers are now from non-UK motor insurance
business.
Dividend
Our proposed final dividend of 52.0 pence per share brings
dividends for the year to 112.0p per share, a full-year pay-out of
90% against a backdrop of after-tax profits (from continuing
operations) 36% lower than last year. The final dividend of 52.0
pence per share comprises a normal dividend of 37.5 pence per share
and a special dividend of 14.5 pence per share. The Group has
delivered a Total Shareholder Return (TSR) of 259% over the last 10
years.
People
Once again Admiral was recognised as a Great Place to Work in
2022, including being awarded 19(th) best workplace in Europe and
fourth best workplace in the UK. We also received an award for
being in the Best Companies list for 20 consecutive years and
received awards for diversity and wellbeing. These accolades help
to position us as a destination employer which is crucial in the
current competitive market for talent.
Having our people as shareholders remains a distinctive element
of Admiral's incentive schemes. These are designed to ensure that
decisions support long-term value growth, that the right behaviours
are rewarded and that our people's interests are aligned with those
of shareholders. We believe that, over the long-term, share price
appreciation depends on delivering great outcomes for our
customers.
Customers
Admiral's purpose is to help people to look after their future
and the business has really lived by its purpose during the year,
ensuring that Admiral has been there for its customers when they
need us most.
The UK business has invested in technology that reduces the time
it takes to settle motor claims -- hopefully removing a pain-point
during what can be a stressful time for customers.
In response to the cost-of-living crisis, our teams have looked
at ways to help and support insurance and loans customers who are
financially vulnerable.
2022 saw extreme weather from flash floods, to forest fires and
a freeze event. Admiral colleagues chose to take a proactive
approach, identifying customers in the impacted areas and
contacting them to understand how we could support them. These are
just a few examples of the little things that the business does
that can make a big difference for customers, and that make me
proud to be a part of Admiral.
The Board in 2022
The Board recognises the need for a strong corporate governance
framework and supporting processes across the Group and believes
that good governance, with the tone set from the top, is a key
factor in delivering sustainable business performance and creating
value for all the Group's stakeholders.
The Board has been able to resume meeting in person this year as
well as visits to colleagues overseas. I have visited our overseas
locations along with one or more fellow non-executive directors
(NEDs) and we also attended Employee Consultation Group (ECG)
meetings. These allowed us to keep contact with our people and
directly hear their views and the challenges they face. The Admiral
culture still shines through.
Jean Park stepped down in January 2023 after having served nine
years on the Board and chairing the Group Risk Committee. She has
also been a member of the Remuneration and Nominations and
Governance Committees and acted as the Senior Independent Director.
We will miss her unstinting support and wise counsel. I would like
to thank her on behalf of the whole Board for her huge
contribution.
Our focus areas for the Board remain to:
-- Continue to build on the remarkably special Admiral culture and in so
doing putting our people, customers and wider impact on the community at
the heart of what we do
-- Continue our long-term trajectory of growth, profitability and innovation
-- Invest in the development and growth of our people
-- Ensure excellent governance and the highest standards
-- Focus on all aspects of ESG
Our role in society -- doing the right thing
Admiral takes its role in society very seriously and has an
active approach to Corporate Responsibility which focuses on all
our stakeholders and the wider impact we have (more information in
the Sustainability Report on the Admiral website). We are proud to
be Wales' only FTSE 100 headquartered company. We employ over 7,500
people in South Wales and our people play an active part in the
communities in which we operate. We carefully consider our impact
on the community and environment, including factors such as the
green credentials of our buildings, raising funds for multiple
charities, and the impact of climate change across the
business.
As previously announced, the Group's ambition is to be net zero
by 2040 and to be net zero across our operations for scope 1 and 2
emissions by 2030. The business verifies its carbon emissions for
our current operations using a third party and these were
subsequently offset to become carbon neutral. We will apply for
approval of our Science Based Targets in 2023. Our aim is to be an
economically strong and responsible business over the long-term,
guided by a clear purpose, to make a positive and significant
impact not just on our customers and our people, but on the economy
and society.
New Chair
I am delighted that Mike Rogers will take on the role of the new
Chair of Admiral(5) . He has a great track record and significant
experience which will benefit Admiral in its next exciting phase of
evolution - and demonstrates a great understanding of the Group's
culture.
I am confident that the current Board and new Chair are
well-equipped with the skills and knowledge to continue to build
and strengthen Admiral and build a sustainable business in the long
term while retaining Admiral's distinctive culture.
Thank you
I have thoroughly enjoyed every year I have been part of
Admiral. I am grateful to our shareholders for their support as I
stayed on as Chair to ensure a successful transition to Milena as
Group CEO.
I would like to thank Admiral's customers for putting their
trust in us and our colleagues for their dedication in ensuring
that we are there for customers when they need us most.
I wish Mike, Milena and the whole leadership team every success
for the future and I will be cheering Admiral on from the side
lines.
I feel privileged to have been part of this special company.
Thank you for your support.
Annette Court
Group Chair
7 March 2023
Group Chief Executive Officer's Review
2022 was another year of navigating stormy waters and, once
again, we've adapted well and shown ourselves to be disciplined and
agile as we increased our customer base by 11% to 9.28 million
while delivering profits of GBP469 million(6) .
We've not been immune to the changes in external conditions
including the implementation of the FCA's pricing reforms,
increased claims frequency post Covid, supply chain challenges,
adverse weather and high levels of inflation which had a very big
impact on our business, particularly on the cost of claims. At
times, over the last 12 months, it has felt similar to sailing in
the middle of a storm: knowing the desired destination but with the
challenge of recognising when to steer into the winds that try to
blow us off course - whilst never losing focus on where we're
going.
The cyclical nature of insurance is not new. We were quicker
than most to react to the changing market conditions and
implemented price increases ahead of others in response to higher
inflation. Although the premium increases impacted our rate of
growth in the short term, we continued prioritising sustainable
growth over chasing unprofitable volumes.
This discipline resulted, for our insurance business in the UK,
in delivering a profit of GBP616 million, above 2019 pre-pandemic
levels and it will put us on a strong footing when the cycle
turns.
The international markets were also under pressure with very low
market average premiums in Italy and Spain. The US experienced more
adverse market conditions than others. Although Elephant quickly
put in place aggressive remedies, such as premium increases in
excess of 25% in 2022 and a drastic reduction in advertising spend,
the business registered a disappointingly high loss of GBP49
million(7) . Elephant remains an efficient operation with a strong
team delivering great service to its customers - who voted it as
one of the Best insurance companies in US among over 3,300 brands.
We are continuing to assess the options for Elephant to reach its
full potential in such a huge market.
Despite the headwinds, we were definitely not blown off course
in 2022. To the contrary, we made substantial progress against our
long-term objectives and continued to deliver on new initiatives
that will help us to emerge from this period stronger than ever
before. We're developing new capabilities, especially in data and
technology, to enhance our customer experience. For example, we
launched a new claims management system which will reduce
settlement time for many UK motor customers and have established a
Data Academy to accelerate our evolution into an even more
digital-first and data driven organisation.
We believe that our diversification strategy is key to
increasing our resilience over the long term, as well as to
improving the engagement and experience for our customers, and by
leveraging our strengths, we will deliver more value to our
shareholders. Over the past year, Admiral Money, our UK Loans
business, delivered its first profit in its fifth year, we launched
Pet insurance and we developed new partnerships and distribution
channels in international insurance.
In the UK specifically we are experiencing strong customer
growth in the Household, Loans and Travel businesses that increased
their turnover by 31% to GBP350 million combined in 2022. We now
also count two million customers across our international
businesses, up by 13%.
We are aware that this has been a challenging year also for our
customers and our people, and looking after them is our core
purpose. We continue to do our best to support customers and we
have a team dedicated to supporting those more financially
vulnerable ones. For our colleagues, we've responded by reviewing
and making permanent adjustments to colleagues' salaries as needed
and providing a range of additional benefits and support.
We always talk about the team, the team, the team because our
ability to deliver is due to our all-hands-on deck approach. We now
have over 11,000 colleagues whose dedication and hard work make
this all possible and I'm always so proud to see the team's efforts
recognised externally. This year we've received a range of awards
across all our businesses and geographies. We continue to rank as
one of the Best Multinational Workplaces for the 20(th) consecutive
year by the Great Place to Work Institute and were named a
Diversity Leader by the Financial Times.
Having a positive impact on our wider society is also central to
our ethos. We are progressing well with our net zero goal and
reduced our scope 1 and 2 emissions(8) by 32% year on year. We
refocussed a large part of our effort to sustain the communities in
which we operate on the theme of "employability" which aligns
closely with our purpose to "help more people to look after their
future". We feel lucky to be part of the Admiral family that is
such a great place to work, and we would like to contribute to make
the world a good place to work for more people.
Speaking about the Admiral family, I am very sad to say goodbye
to Annette Court who has been our Board Chair since 2017. I'll
always be personally grateful to Annette for the invaluable help in
the transition between David and myself, and for her wise counsel
and warm support at every step of my Admiral journey. And, on
behalf of all my colleagues, I would like to thank Annette for her
considerable contribution to the Board, her strong commitment to
Admiral and its people, and the guidance and support she has always
generously offered to the wider management team over the last 11
years, while embedding the Admiral culture at her very heart. I
wish Annette all the best for her future.
I look forward to working with Mike Rogers over the coming years
as incoming Chair(9) and I'm confident his breadth of experience in
financial services and beyond will add great value to Admiral.
Finally, I would really like to thank all my colleagues across
the Group for their hard work over the last year. I look forward to
working together in 2023 -- and crucially celebrating Admiral's
30(th) birthday. This is a great opportunity for us to reflect on
the amazing journey the Group has been on over the last three
decades and the strong foundations we laid out for the next 30
years of growth.
Milena Mondini de Focatiis
Group Chief Executive Officer
7 March 2023
Group Chief Financial Officer's Review
With the impact of the pandemic fading, spiking inflation across
our markets was the big story for Admiral in 2022.
This had a number of impacts around the Group, but most
important was probably the notable increase in average claims
costs, especially to damage claims. We back ourselves to manage
insurance cycles effectively -- quickly identifying and responding
to trends -- and we increased prices significantly during the year,
especially in the UK and US, to counteract the inflation. In the UK
particularly, our rates appear to have moved materially more than
competitors (until the last quarter maybe), and hence we stopped
growing in UK motor in H2. Loss ratios were adversely impacted
despite the rate increases.
We noted when reporting our half year results in August 2022
that 2019 is a better comparison to the 2022 figures, rather than
the exceptional 2020 and 2021 years which were distorted by the
huge positive impact of the pandemic on claims costs and
profitability. My review of the results therefore looks also at
2019, the last pre-pandemic full year:
Change Change
GBPm 2022 2021 2019 v 2021 v 2019
UK Insurance 616 894 598 (278) +18
Europe Insurance (5) 1 9 (6) (14)
US Insurance (49) (13) (10) (36) (39)
Admiral Money 2 (6) (8) +8 +10
Admiral Pioneer (16) (10) - (6) (16)
Share scheme cost (52) (63) (49) +11 (3)
Other costs (27) (34) (35) +7 +8
Continuing operations pre-tax
profit* 469 769 505 (300) (36)
Restructure cost - (56) - +56 -
Continuing operations profit
after restructure cost 469 713 505 (244) (36)
==== ==== ==== ======= =======
2022 was undeniably a challenging year, though with one or two
exceptions, the Group result was pretty pleasing. There are lots of
moving parts in the comparisons of course (which are discussed in
detail later in this report), but there are a few stand-out
observations:
Looking first at the UK Insurance result, we unsurprisingly see
a big fall against 2021 but a small increase v 2019. Maybe it goes
without saying, but the reduction from 2021 is very predominantly
motor insurance related and is mainly due to the combination of a)
the unwind of the positive covid related impacts and b) the higher
inflation in 2022. Those effects led to higher current year claims
and lower profit commission.
The UK Household result was also impacted by much higher than
usual severe weather-related claims (seen across the market),
significantly moving the result from a profit of GBP21 million to a
loss of GBP6 million. If we adjust both years to take out the
impact of severe weather and subsidence claims, profit would have
been broadly flat at around GBP25 million.
Comparing back to 2019, UK profit and turnover were modestly
higher in 2022, though the increase in customer numbers is much
higher at nearer 30%. There are various offsetting movements that
result in the higher profit, including the worse weather in 2022,
but also stronger back year reserve movements and associated profit
commission in 2022 compared to more positive current year claims in
2019.
In UK motor, at the end of 2022 we have reduced the size of the
margin in the booked reserves (though it wasn't a significant
driver of profit), in part because some of what we hold that margin
for has manifested in the best estimate reserves (in terms of
higher inflation). Our philosophy regarding reserving remains
sacrosanct and the closing margin position remains very cautious --
around a 95(th) percentile position -- which is aligned with the
top end of the accounting policy range we expect to adopt under
IFRS17 from 2023. If there are no big shocks in claims development
moving forward, we expect significant reserve releases to feature
as an important part of profit.
Moving now to Europe, where despite the higher claims inflation
and continued strong growth (+15% in customer numbers, over EUR600m
turnover), the result was only modestly lower at a loss of GBP5
million vs a profit of GBP1 million in 2022 (GBP9m profit in 2019).
The combined EU motor result was only very slightly negative
(higher loss ratios, investing in expanding distribution in Spain
were notable drivers), and we continued to invest in expanding the
product line (particularly Household in France and Pet in Italy).
Given the backdrop, I think it's a decent result for what continues
to become a more material part of the Group.
A disappointing change in 2022 though was the Elephant result in
the US, which was a bit under GBP40 million worse than both
comparative years. The US auto insurance market experienced severe
increases in the cost of claims during the year, and despite
substantial rate increases, Elephant's loss ratio was adversely
impacted (85% in 2022 v 73% and 82% in 2021 and 2019 respectively).
The H2 result was worse than H1, as the rate increases take their
time to impact the results and claims costs continued to inflate.
Many or even most of Elephant's competitors appear to have fared
much worse. As my colleagues have noted, we're assessing the best
way forward for Elephant, and in the meantime the focus of the team
is on materially improving the combined ratio and significantly
reducing the loss.
And finally, returning back to the UK -- Admiral Money delivered
its first full year profit -- small at the minute admittedly but
given the economic situation, it's a fine result the team should be
very proud of, and we believe it's the first of many, hopefully
growing, positive results. We remain prudently provided for
expected credit losses. We continue also to invest in growing new
businesses under the Admiral Pioneer umbrella -- notably Veygo
(flexible short term car insurance) and Toolbox by Admiral
(business insurance for tradespeople) both of which are making very
nice progress. Hopefully exciting times ahead for those
businesses.
Investments and investment income
Another feature of 2022 was volatility in financial markets,
particularly in terms of higher interest rates (three year UK gilt
up from 0.7% to 3.6%) and wider spreads on corporate bonds (UK
investment grade spreads up 80bps). Admiral's investment strategy
(unchanged for a while) is reasonably cautious and is focussed on
matching asset and liability duration (average life of the assets
and claims liabilities is around three years), currency and to some
extent inflation. The portfolio is of high credit quality, and we
hold very prudent levels of liquid assets. There are appropriate
ESG targets in place and we've committed to a net zero portfolio by
2040 at the latest.
Notwithstanding the above, the portfolio is subject to valuation
changes from spreads and rate movements (the latter is well matched
to changes in the values of claims liabilities). Movements in
unrealised losses in 2022 were GBP256m, though values recovered
notably in the last months of the year and into early 2023. As
rates moved up in the year and maturing assets and cash inflows
were invested, the level of return increased (average return in
2022 of 1.6% vs 1.1% in 2021). If rates remain higher than their
long-term lows for the foreseeable future then we will earn higher
investment income (for context, each additional 100bps of return =
GBP35m in additional investment income).
IFRS17
Big change is coming from 2023 with the new IFRS17 insurance
accounting standard finally coming into effect. Our team has worked
extremely hard to get us ready for the new standard which will
introduce big differences in accounting and presentation.
We held a market briefing in November 2022 on the key impacts
for Admiral (slides and webcast on our corporate website and worth
a look) and to reiterate those key messages are:
-- No change on Admiral's strategy or the ultimate profitability of our
businesses
-- No change on dividend policy or expectations
-- Admiral will use the simplified approach, though there may be some
impacts on timing of profit recognition
-- We will continue to be very prudent in claims reserving
It'll be interesting to see if the adoption of the standard
leads to improved transparency and comparability. I'd like to close
by very sincerely thanking the IFRS17 project team for their work
over the past few years -- nice work team!
Geraint Jones
Group Chief Financial Officer
7 March 2023
2022 Group Overview
% change % change
GBPm 2022 2021 2019 vs. 2021 vs. 2019
------------------------------------------- ------ ------- ------ --------- ---------
Group Turnover (GBPbn) *1*2*3 3.68 3.51 3.30 +5% +12%
Underwriting result including investment
income*1*2 143.3 347.0 238.0 -59% -40%
Profit commission 170.9 304.5 114.9 -44% +49%
Net other revenue and expenses *1 166.7 129.4 164.7 +29% +1%
Operating profit 480.9 780.9 517.6 -38% -7%
Group profit before tax *3 469.0 769.0 505.1 -39% -7%
Group profit before tax, including
restructure cost 469.0 713.5 505.1 -34% -7%
Analysis of profit:
UK Insurance 615.9 894.0 597.9 -31% +3%
-------------------------------------------
International Insurance (53.8) (11.6) (0.9) nm nm
International Insurance -- European
Motor (1.6) 4.8 9.0 nm nm
International Insurance -- US Motor (48.9) (13.0) (9.6) nm nm
International Insurance -- Other (3.3) (3.4) (0.3) nm nm
------------------------------------------- ---------
Admiral Money 2.1 (5.5) (8.4) nm nm
Other (95.2) (107.9) (83.5) -12% +14%
-------------------------------------------
Group profit before tax*3 469.0 769.0 505.1 -39% -7%
------------------------------------------- ------- ------ --------- ---------
Key metrics:
------------------------------------------- ------ ------- ------ --------- ---------
Group loss ratio*1*4 72.0% 58.5% 64.9% +14pts +7pts
------------------------------------------- ------ ------- ------ --------- ---------
Group expense ratio*1*4 29.7% 26.7% 23.7% +3pts +6pts
------------------------------------------- ------ ------- ------ --------- ---------
Group combined ratio*1*4 101.7% 85.2% 88.6% +17pts +13pts
------------------------------------------- ------ ------- ------ --------- ---------
Customer numbers (million) 9.28 8.36 6.98 11% 33%
------------------------------------------- ------ ------- ------ --------- ---------
Earnings per share*3 124.3p 212.2p 143.7p -41% -14%
------------------------------------------- ------ ------- ------ --------- ---------
Dividends per share*5 112.0p 187.0p 140.0p -40% -20%
------------------------------------------- ------ ------- ------ --------- ---------
Special dividends from sale of Penguin
Portals 45.0p 92.0p -- -- --
------------------------------------------- ------ ------- ------ --------- ---------
Return on Equity*1*3 35% 56% 52% -21pts -17pts
------------------------------------------- ------ ------- ------ --------- ---------
Solvency Ratio*1 180% 195% 190% -15pts -10pts
------------------------------------------- ------ ------- ------ --------- ---------
(*) (1) Alternative Performance Measures -- refer to the end of
this report for definition and explanation
(*) (2) Underwriting profit including investment income includes
prior period claims reserve releases on business originally
reinsured but subsequently commuted. Excluding these releases, the
2022 underwriting result is a loss of GBP45.6 million (2021: profit
of GBP157.8 million, 2019: profit of GBP116.3 million)
(*) (3) Group Turnover, Group Profit before tax, Earnings per
share, Return on equity presented on a continuing operations basis.
2021 Group profit before tax, Earnings per share and Return on
equity exclude the impact of the GBP55.5 million UK Insurance
restructure cost
(*) (4) See note 14 for a reconciliation of Turnover and
reported loss and expense ratios to the financial statements.
Ratios exclude the impact of the UK Insurance restructure cost in
2021
(*) (5) The 2019 dividend of 140.0 pence per share includes the
deferred special element of the 2019 final dividend of 20.7 pence
per share that was paid alongside the interim 2020 dividend.
Group highlights
The Group delivered a solid set of results in 2022 within the
context of macroeconomic uncertainty and the highest level of
inflation in decades. In response, the business increased prices
and rates where applicable, but the impact of these changes will
take time to earn through in the underlying result. This is within
a context of two outlier years of elevated Group profits in 2020
and 2021, as a result of Covid and other factors. Hence,
comparisons include both the 2021 year impacted by Covid, but also
the 2019 pre-Covid year.
Highlights of the Group's results for 2022 are as follows:
-- Businesses across the Group grew strongly in 2022 with turnover up 5% and
customer numbers up 11% year-on-year:
-- The UK Motor business grew in the first half of the year primarily
driven by growth in renewals customers, although this growth
reversed in the second half as Admiral maintained pricing
discipline, increasing prices ahead of the market. Overall Motor
customers and turnover were down 1% compared to 2021
-- UK Household continued to grow customer numbers strongly (+20%),
which alongside a notable contribution from UK Travel led to
overall UK Insurance customer growth of 8%
-- Outside the UK, International Insurance customers increased by 14%,
and turnover by 15%
-- Group profit before tax for the year was GBP469 million, 39% lower than
the exceptional result for 2021 and 7% lower than 2019:
-- UK Motor insurance profit was GBP623 million -- lower than 2021
(GBP872 million, excluding restructure cost), as a result of both
an increase in claims frequencies post the low levels during the
pandemic and the impact of claims inflation, but GBP31 million
higher than 2019 (GBP592 million)
-- UK Household was impacted by a number of severe weather events in
2022 resulting in a loss of GBP6 million (2021: GBP21 million
profit), with the severe weather profit impact of GBP32 million
(2021: GBP4 million)
-- International Insurance business combined result was GBP42 million
lower than 2021:
-- This was primarily driven by elevated market-wide claims
inflation in the US, with a GBP49 million loss, GBP36
million worse than 2021 (loss of GBP13 million)
-- The EU Motor result was also lower with a small loss of
GBP2 million compared to a profit of GBP5 million in 2021;
also impacted by claims inflation, continued competitive
market conditions in Italy and Spain placing pressure on
premiums and investment in channel diversification
-- Admiral Money reported its first profit of GBP2 million (2021:
GBP6 million loss); within the context of macroeconomic
uncertainty the business continued a prudent approach to growth,
maintaining favourable default experience and tightening lending
criteria
-- Other Group items decreased to GBP95 million (2021: GBP108 million),
impacted by lower share scheme costs and higher investment income at the
parent company level, partially offset by a larger investment in Admiral
Pioneer
Economic uncertainty, Covid-19, and the cost of living
crisis
Macro-economic uncertainty and high levels of inflation impacted
the market and the Group's performance in 2022. In Motor insurance,
elevated used car prices continued to drive inflation, which
together with higher repair costs, longer repair timescales and
higher projections of future wage inflation, contributed to
significantly higher claims inflation across the countries in which
Admiral operates. Admiral took a disciplined approach to preserve
underwriting margin, increasing prices in all businesses, which
impacted growth. The impacts of these price changes are expected to
continue to flow through into 2023. In Household insurance, severe
weather events had a large impact on results in both the UK and
Europe. Admiral continues to take a long term approach to the
business, maintaining pricing discipline and a prudent approach to
reserving for insurance claims.
Within the context of an uncertain macroeconomic outlook and
increasing interest rates, Admiral Money took a prudent approach to
growth and risk selection, tightening underwriting criteria and
raising prices. Provisions for credit losses remain appropriately
prudent, though no significant increase in the level of arrears and
defaults has been seen to date.
Admiral remained committed to supporting customers, people and
communities during a challenging 2022. This included a continued
focus on customer service. From an employee perspective, Admiral
continued to adapt and embrace hybrid working for employees and
supported colleagues as part of the cost of living crisis through
increased salaries and other support measures. From a community
perspective, the business renewed the community fund strategy to
focus on supporting employability, investing in new projects and
created more opportunities for colleagues to get involved.
Earnings per share
Earnings per share (EPS) for 2022, is 124.3 pence (2021: 212.2
pence). The relative reduction compared to 2021 is in line with the
fall in pre-tax profit noted above. 2022 EPS is 14% below the 2019
comparative, a larger reduction than the change in pre-tax profit
due to a higher effective tax rate in 2022 compared to 2019 (in
turn primarily related to the much higher loss in the US during
2022, against which no deferred tax is recognised).
Return on equity
The Group's return on equity was 35% in 2022, 21 percentage
points lower than 2021 and 17 points lower than 2019. This is the
result of a significant growth in the average equity since 2019,
supporting the Group's larger businesses, together with lower
earnings in 2022 as noted above.
Dividends
The Group's dividend policy is to pay 65% of post-tax profits as
a normal dividend and to pay a further special dividend comprising
earnings not required to be held in the Group for solvency capital
requirements including appropriate headroom above the regulatory
minimum in line with internal risk appetite.
The Board has proposed a final dividend of 52.0 pence per share
(approximately GBP155 million), split as follows:
-- 37.5 pence per share normal dividend; plus
-- A special dividend of 14.5 pence per share
The 2022 final dividend reflects a pay-out ratio of 91% of
earnings per share for the second half. 52.0 pence per share is 28%
lower than the final 2021 dividend of 72.0 pence per share
(excluding the 46.0 pence special dividend from the sale of Penguin
Portals businesses) with the movement being broadly in line with
the reduction in post-tax profits.
Following the two payments of 46.0 pence per share alongside
interim and final dividends in 2021, a further special dividend of
45.0 pence per share was paid with the 2022 interim dividend,
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. The total amount returned to
shareholders from the three payments was just over GBP400
million.
The total 2022 financial year dividend, including the third
special dividend from the Penguin Portals disposal, is 157.0 pence
per share, approximately GBP465 million. Excluding the Penguin
Portals special dividend, the total 2022 financial year dividend is
112.0 pence per share, reflecting a pay-out ratio of 90% (2021 and
2019 pay-outs 88% and 94% respectively).
The final dividend will be paid on 2 June 2023, the ex-dividend
date is 4 May 2023 and the record date is 5 May 2023.
The Group's results are presented in the following sections
as:
-- UK Insurance -- including UK Motor (Car and Van), Household, Travel and
Pet
-- International Insurance -- including L'olivier (France), Admiral Seguros
(Spain), ConTe (Italy) and Elephant (US)
-- Admiral Money
-- Other -- including Admiral Pioneer (New ventures)
-- Group Capital Structure and Financial Position
UK Insurance Review -- Cristina Nestares, CEO UK Insurance
It's been another interesting year and one that's brought some
new challenges to contend with. We have navigated our way through
by remaining focused, keeping our customers central in our decision
making and continuing to find ways to make a difference, but we've
also faced some unique circumstances with not only industry but
economy-wide impacts.
We successfully implemented the new FCA pricing reform at the
start of 2022, with the market adjusting in line with our
expectations. Shortly after, the UK experienced the largest spike
in inflation in 40 years following the start of the war in Ukraine
and alongside this, a severe supply and demand post-pandemic
shortage significantly impacted claims inflation for insurers.
Global supply chain shortages of car spare parts, subsequent delays
to car repairs, limited availability of new cars and labour
shortages have all led to higher damage repair and second-hand car
costs, with inflation at double digits The impact of these
conditions has been felt industry-wide and despite Admiral's scale
advantages providing some protection against these challenges,
inevitably, higher claims costs and our prudent reserving
philosophy have led to a higher 2022 loss ratio compared to recent
years.
At Admiral we've responded to inflationary pressures by
maintaining pricing discipline, increasing prices in Motor
insurance by more than 20% since March. Our decision to accelerate
rate increases earlier than the market led to a reduction in
competitiveness and a contraction in our new business market share.
However, this is consistent with our position on growth; only
growing when conditions are supportive. We strongly believe this is
the right approach for the long-term sustainability of the
business. Although customer loyalty and strong retention has helped
to sustain the size of our motor book, we ended the year with our
customer base broadly flat year-on-year.
Despite the challenging trading environment, we remain committed
to improving the customer experience and have continued to invest
in new capabilities enabling customers to access more services via
digital channels. We've also advanced our multi-product proposition
and improved business resilience by improving the structure of our
repair network. In support of our UK diversification strategy, we
have continued to invest in our home pricing and data analytics
capabilities, improved customer journeys to make it easier to
access Admiral's multi-product offering and the discounts this
affords customers, and we launched a new Pet insurance proposition.
In Motor, our tiered product range offers customers more choice and
we've grown our electric vehicle proposition by more than 60% as
well as investing further in pricing and data and analytics
capabilities.
It was great to see our Household insurance business proudly
celebrate its tenth year in 2022 and our book grew by 20%, ending
the year with 1.6 million policies (growing from 1.3 million in
2021). Notwithstanding this pleasing growth, the Household business
was not immune to the inflationary pressures already referenced and
also had to contend with several weather events during the year
including storm Eunice, a long dry summer leading to an increase in
subsidence claims and freezing conditions in the winter months --
all of which have affected current year financial results.
Sustaining competitive advantage by fostering a strong culture,
focusing on core values, and caring for our people is a consistent
and important thread throughout our history. And in 2022, as the
cost-of-living crisis began to materialise, in addition to
colleagues' annual pay reviews, we gave two permanent salary
increases to our more junior colleagues and provided winter weather
payments to help them with their energy bills, making a positive
difference for a large proportion of our colleague population. In
celebration of the strength of our culture and people engagement,
we also received some external recognition and we're delighted that
our UK business was named the second Best Big Company to Work For
in the UK and received a special award as Best Big Company for
Wellbeing at the Best Companies Awards 2022. We remain committed to
being there for our colleagues, just as they are committed to being
there for our customers when they need us most.
2022 has certainly been one of the most significant and
challenging years the insurance industry has navigated in recent
decades but I'm incredibly proud that throughout, we have not lost
sight of what makes us Admiral. Remaining consistent with our core
values, leveraging our strengths in pricing and claims, continuing
to invest in new capabilities for the long-term success of the
business and looking after our people will all be remembered as
stand out positives for the year. A big thanks to our team for
their support, commitment, and hard work!
UK Insurance financial performance
GBPm 2022 2021 2020 2019
------------------------------------------------------ ------- ------- ------- -------
Turnover(*1) 2,784.3 2,751.7 2,672.0 2,635.0
------------------------------------------------------ ------- ------- ------- -------
Total premiums written 2,489.7 2,453.2 2,373.3 2,321.7
------------------------------------------------------ ------- ------- ------- -------
Net insurance premium revenue 628.8 612.6 539.7 533.2
------------------------------------------------------ ------- ------- ------- -------
Underwriting profit including investment income(*1) 247.1 394.9 346.5 257.4
------------------------------------------------------ ------- ------- ------- -------
Profit commission and other income 368.8 499.1 351.8 340.5
------------------------------------------------------ ------- ------- ------- -------
UK Insurance profit before tax 615.9 894.0 698.3 597.9
------------------------------------------------------ ------- ------- ------- -------
Restructure cost -- (54.0) -- --
------------------------------------------------------ ------- ------- ------- -------
UK Insurance profit before tax, including restructure
cost 615.9 840.0 698.3 597.9
------------------------------------------------------ ------- ------- ------- -------
(*1) Alternative Performance Measures -- refer to note 14 at the
end of this report for definition and explanation
Split of UK Insurance profit before tax
GBPm 2022 2021 2020 2019
------------------------------- ----- ----- ----- -----
Motor 622.6 871.7 683.6 592.0
------------------------------- ----- ----- ----- -----
Household (6.3) 21.3 15.4 7.5
------------------------------- ----- ----- ----- -----
Travel & Pet (0.4) 1.0 (0.7) (1.6)
------------------------------- ----- ----- ----- -----
UK Insurance profit before tax 615.9 894.0 698.3 597.9
------------------------------- ----- ----- ----- -----
Key performance indicators
2022 2021 2020 2019
-------------------------------------- ----- ----- ----- -----
Vehicles insured at year end(*1) 4.94m 4.97m 4.75m 4.37m
-------------------------------------- ----- ----- ----- -----
Households insured at year end(*1) 1.58m 1.32m 1.16m 1.01m
-------------------------------------- ----- ----- ----- -----
Travel & Pet policies at year end(*1) 0.44m 0.15m 0.07m 0.09m
-------------------------------------- ----- ----- ----- -----
Total UK Insurance customers(*1) 6.96m 6.44m 5.98m 5.47m
-------------------------------------- ----- ----- ----- -----
(*) (1) Alternative Performance Measures -- refer to the end of
the report for definition and explanation.
Key highlights for the UK insurance business for 2022:
-- Closing UK Insurance customers of just under 7 million, 8% higher than
the end of 2021 and 27% higher than the end of 2019, with significant
contributions from UK Household and Travel and the UK motor book slightly
lower during 2022
-- Strong UK Motor profit of GBP623 million, down from the elevated profit
of GBP872 million in 2021, but higher than the 2019 pre- pandemic profit
of GBP592 million
-- A loss of GBP6.3 million for UK Household primarily driven by weather
events; excluding the severe weather impact of GBP31.6 million, profit
was GBP25.3 million
UK Motor Insurance financial review
GBPm 2022 2021 2020 2019
------------------------------------------ ------- ------- ------- -------
Turnover(*1) 2,493.0 2,522.5 2,473.8 2,455.3
------------------------------------------ ------- ------- ------- -------
Total premiums written(*1) 2,217.9 2,244.3 2,193.0 2,158.5
------------------------------------------ ------- ------- ------- -------
Net insurance premium revenue 471.0 496.5 451.4 452.6
------- -------
Investment income(*2) 35.0 40.8 50.8 30.4
------------------------------------------ ------- ------- ------- -------
Net insurance claims (159.8) (86.1) (97.1) (164.7)
------------------------------------------ ------- ------- ------- -------
Net insurance expenses (126.1) (95.6) (77.2) (74.7)
------------------------------------------ ------- ------- ------- -------
Underwriting profit including investment
income(*3) 220.1 355.6 327.9 243.6
------------------------------------------ ------- ------- ------- -------
Profit commission 170.2 290.6 124.7 112.2
------------------------------------------ ------- ------- ------- -------
Underwriting profit and profit commission 390.3 646.2 452.6 355.8
------------------------------------------ ------- ------- ------- -------
Net other revenue(*4) 232.3 225.5 231.0 236.2
------------------------------------------ ------- ------- ------- -------
UK Motor Insurance profit before tax 622.6 871.7 683.6 592.0
------------------------------------------ ------- ------- ------- -------
Restructure cost -- (49.6) -- --
------------------------------------------ ------- ------- ------- -------
UK Motor insurance profit including
restructure cost 622.6 822.1 683.6 592.0
------------------------------------------ ------- ------- ------- -------
*1 Alternative Performance Measures -- refer to the end of this
report for definition and explanation
*2 Investment income includes GBP2.2 million of intra-group
interest (2021: GBP2.7 million; 2020: GBP2.9 million; 2019: GBP2.8
million)
*3 Underwriting profit excludes contribution from underwritten
ancillaries (included in net other revenue)
*4 Net other revenue includes instalment income and contribution
from underwritten ancillaries and is analysed later in the
report.
Key performance indicators
GBPm 2022 2021 2020 2019
------------------------------------------------------- --------- --------- --------- ---------
Reported Motor loss ratio(*) (1,*) (2) 71.5% 53.0% 49.2% 60.7%
------------------------------------------------------- --------- --------- --------- ---------
Reported Motor expense ratio(*) (1,*) (3) 21.8% 19.7% 19.8% 19.1%
------------------------------------------------------- --------- --------- --------- ---------
Reported Motor combined ratio(*1) 93.3% 72.7% 69.0% 79.8%
------------------------------------------------------- --------- --------- --------- ---------
Written basis Motor expense ratio(*1) 20.1% 19.9% 18.8% 18.5%
------------------------------------------------------- --------- --------- --------- ---------
Reported loss ratio before releases(*1) 97.8% 78.8% 72.3% 87.6%
------------------------------------------------------- --------- --------- --------- ---------
Claims reserve releases -- original net share(*) (1,*)
(4) GBP124.0m GBP128.1m GBP104.3m GBP121.7m
------------------------------------------------------- --------- --------- --------- ---------
Claims reserve releases -- commuted reinsurance(*)
(1,*) (5) GBP189.1m GBP189.2m GBP137.3m GBP121.7m
------------------------------------------------------- --------- --------- --------- ---------
Total claims reserve releases(*1) GBP313.1m GBP317.3m GBP241.6m GBP243.4m
------------------------------------------------------- --------- --------- --------- ---------
Other Revenue per vehicle(*1) GBP58 GBP59 GBP61 GBP66
------------------------------------------------------- --------- --------- --------- ---------
Vehicles insured at year end(*1) 4.94m 4.97m 4.75m 4.37m
------------------------------------------------------- --------- --------- --------- ---------
*1 Alternative Performance Measures -- refer to the end of this
report for definition and explanation
*2 Motor loss ratio adjusted to exclude impact of reserve releases on commuted reinsurance contracts. Reconciliation in note 13b.
*3 Motor expense ratio is calculated by including claims handling expenses that are reported within claims costs in the income statement. The impact of reinsurer caps is excluded. Reconciliation in note 13c.
*4 Original net share shows reserve releases on the proportion of the portfolio that Admiral wrote on a net basis at the start of the underwriting year in question.
*5 Commuted reinsurance shows releases, net of loss on commutation, on the proportion of the account that was originally ceded under quota share reinsurance contracts but has since been commuted and hence reported in underwriting profit rather than profit commission.
UK Motor profit decreased by 29% to GBP622.6 million (2021:
GBP871.7 million) with the reported combined ratio increasing to
93.3% (2021: 72.7%), reflecting a higher current year loss ratio
(excluding prior year releases) as a result of higher claims
inflation as well as an increase in claims frequency compared to
the low levels during the pandemic. Profit commission was lower
than 2021, also due to the lower current year profitability. Both
2020 and 2021 are considered exceptional periods, delivering much
lower loss ratios than in previous years as a result of
Covid-related factors.
Market prices increased in the first half of the year in
response to the FCA reforms; Admiral remained well positioned and
saw an increase in retention. From a claims perspective, claims
frequency gradually increased over the course of the year although
still remains lower than pre-pandemic levels. Global inflation and
factors such as a supply constraints for new cars leading to
significant inflation in used car values and hence total loss
claims, and car parts, resulted in much higher claims inflation
from Q2 onwards which continued through the remainder of the
year.
Admiral increased rates ahead of the market, by over 20% during
the year in response to the elevated claims inflation, maintaining
pricing discipline and prioritising underwriting profitability over
growth. This impacted Admiral's pricing competitiveness compared to
the market and hence impacted the growth of the book, which
resulted in a lower number of vehicles insured at the end of the
year, compared with the start (2022: 4.94 million; 2021: 4.97
million). Turnover was relatively flat at GBP2.49 billion (2021:
GBP2.52 billion), as a result of lower average premiums in the Car
insurance business. This reflected the lower growth of the book as
well as the effects of the FCA reform, and a competitive market
environment, in particular as the profile of the book moved towards
lower risk, renewals customers.
The results were impacted by a number of factors:
Underwriting Profit and Profit Commission
-- Net insurance premium revenue decreased by 5% to GBP471.0 million (2021:
GBP496.5 million), reflecting lower growth in new business and a lower
average premium impacted by the FCA reform which resulted in a shift in
mix towards the renewals book (generally lower average premiums), and a
lag in the earning of rate increases made in the second, third and fourth
quarters of the year.
-- Investment income was lower at GBP35.0 million (2021: GBP40.8 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
portfolio that is ceded through quota share reinsurance (GBP20.0 million
reduction; 2021: GBP1.6 million reduction). Refer to the Investment
Income section later in the report for further information.
-- There are a number of trends impacting UK motor claims in 2022 which
resulted in the increase in reported loss ratio (53.0% in 2021 to 71.5%
in 2022):
Reported Motor Loss Ratio
Impact
of claims
reserve
Reported releases
loss ratio - original Reported
before releases net share Loss Ratio
2021 78.8% -25.8% 53.0%
Change in current period loss
ratio +19.0% +19.0%
Change in claims reserve releases
-- original net share -0.5% -0.5%
-----------------------------------
2022 97.8% -26.3% 71.5%
----------------------------------- ---------------- ----------- -----------
-- The current period loss ratio increased by 19.0% which is the result of:
-- Higher than usual levels of claims inflation, particularly in
relation to damage claims (further detail follows below).
-- 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 2021.
-- Slightly lower average premium in the period following a shift in
portfolio mix towards renewals business.
-- Prior period releases were relatively flat when compared with 2021 at
around 26%:
-- Admiral continues to see favourable development in best estimate
reserves, particularly 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 remains significant
and prudent - it is estimated to sit around the 95th percentile
confidence level, a reduction from the end of 2021 (contributing
to the prior period reserve release) and consistent with the top
end of the percentile range the Group expects to set for reserving
under IFRS 17.
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 showed an increase in average
ultimate claims cost in the first half of 2022 compared to 2021 of
around 11%, and this remained similar for the second half of the
year as claims inflation persisted.
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 impact of the current inflation spike on bodily
injury claims is highly uncertain. Admiral has not observed
material changes in inflation for bodily injury claims settled in
2022 when compared to 2021. However, given the longer-tailed nature
of these claims, a conservative 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
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, 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.
-- Reserve releases from commuted reinsurance and profit commission were
notably lower in 2022 than in 2021, with a combined total of GBP359.3
million (2021: GBP479.8 million), as follows:
Reserve releases
-- commuted
GBPm reinsurance Profit commission Total
2021 189.2 290.6 479.8
Change in commuted releases -0.1 -0.1
Change in profit commission -120.4 -120.4
-----------------------------
2022 189.1 170.2 359.3
----------------------------- ---------------- ----------------- ------
-- Releases on reserves originally reinsured but since commuted were flat at
GBP189.1 million (2021: GBP189.2 million), a higher level than seen in
years prior to 2021. Underwriting years 2018 -- 2020 made a significant
contribution, consistent with the releases on the original net share,
reflecting the larger than usual movements in loss ratios for those
underwriting years.
-- Profit commission was significantly lower at GBP170.2 million (2021:
GBP290.6 million). This is the result of the higher current period loss
ratio, meaning that no profit commission is recognised on the 2021 or
2022 underwriting years, compared to the unusually high GBP150 million
recognised on the 2020 underwriting year in 2021. Further information on
the Group's co-insurance and reinsurance arrangements is provided later
in this report.
-- The reported earned expense ratio was higher at 21.8% in 2022 (2021:
19.7%) with the written basis ratio at around 20%. The higher earned
basis ratio primarily results from the lower average premiums noted
above. As a result of movements in the underlying earned expense ratio,
net insurance expenses also included a higher proportion of costs
incurred as a result of quota share reinsurance expense caps (GBP32.6
million vs GBP10.1 million in 2021) relating to the 2021 and 2022
underwriting years. The caps will result in an increased level of profit
commission on these underwriting years in the future should they be
profitable on an ultimate basis.
Other Revenue and Instalment Income
UK Motor Insurance Other Revenue -- analysis of
contribution:
GBPm 2022 2021 2020 2019
-------------------------------------------------------- ------ ------ ------ ------
Contribution from additional products & fees, including
those underwritten by Admiral(*) (1) 207.4 200.8 203.4 217.6
Instalment income 91.3 100.2 100.9 83.9
Other revenue 298.7 301.0 304.3 301.5
Internal costs(*) (2) (66.4) (75.5) (73.3) (65.3)
Net other revenue 232.3 225.5 231.0 236.2
-------------------------------------------------------- ------ ------ ------ ------
Other revenue per vehicle(*) (3) GBP58 GBP59 GBP61 GBP66
-------------------------------------------------------- ------ ------ ------ ------
Other revenue per vehicle net of internal costs GBP48 GBP47 GBP50 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
Admiral generates other revenue from a portfolio of insurance
products that complement the core car insurance product, and also
fees generated over the life of the policy.
The most material contributors to net other revenue continue to
be:
-- Profit earned from Motor policy upgrade products underwritten by Admiral,
including breakdown, car hire and personal injury covers
-- Revenue from other insurance products, not underwritten by Admiral
-- Fees such as administration and cancellation fees
-- Interest charged to customers paying for cover in instalments
Overall contribution (other revenue net of costs plus instalment
income) was broadly consistent at GBP232.3 million (2021: GBP225.5
million).
Other revenue per vehicle was GBP58 (gross of costs; 2021:
GBP59), with Net Other Revenue (after deducting costs) per vehicle
at GBP48 (2021: GBP47), both largely consistent with 2021.
UK Household Insurance financial performance
GBPm 2022 2021 2020 2019
----------------------------------------------------------- ------ ----- ----- -----
Turnover(*1) 255.4 218.8 193.8 171.3
----------------------------------------------------------- ------ ----- ----- -----
Total premiums written(*1) 235.9 198.5 175.9 154.9
----------------------------------------------------------- ------ ----- ----- -----
Net insurance premium revenue 55.6 49.1 43.2 37.2
------
Underwriting (loss)/profit (*2) (13.2) 3.9 2.5 0.7
----------------------------------------------------------- ------ ----- ----- -----
Profit commission and other income 6.9 17.4 12.9 6.8
----------------------------------------------------------- ------ ----- ----- -----
UK Household insurance (loss)/profit (6.3) 21.3 15.4 7.5
----------------------------------------------------------- ------ ----- ----- -----
Restructure cost -- (4.4) -- --
----------------------------------------------------------- ------ ----- ----- -----
UK Household insurance (loss)/profit including restructure
cost (6.3) 16.9 15.4 7.5
----------------------------------------------------------- ------ ----- ----- -----
*1 Alternative Performance Measures -- refer to the end of this
report for definition and explanation
*2 Underwriting profit/(loss) excluding contribution from
underwritten ancillaries
Key performance indicators
2022 2021 2020 2019
-------------------------------------------------------- ------ ----- ----- -----
Reported Household loss ratio(*1) 91.2% 63.3% 64.8% 69.1%
-------------------------------------------------------- ------ ----- ----- -----
Reported Household expense ratio(*1) 33.5% 30.3% 29.4% 28.9%
-------------------------------------------------------- ------ ----- ----- -----
Reported Household combined ratio(*1) 124.7% 93.6% 94.2% 98.0%
-------------------------------------------------------- ------ ----- ----- -----
Impact of severe weather and subsidence (loss ratio)(*)
(1) 32.0% 2.2% 5.3% --
-------------------------------------------------------- ------ ----- ----- -----
Impact of severe weather and subsidence (GBPm)(*)
(1) 31.6 3.8 4.8 --
-------------------------------------------------------- ------ ----- ----- -----
Households insured at year end(*1) 1.58m 1.32m 1.16m 1.01m
-------------------------------------------------------- ------ ----- ----- -----
(*1) Alternative Performance Measures -- refer to the end of this report for definition and explanation
The household book continued to grow in 2022, with the number of
households increasing by 20% to 1.58 million (2021: 1.32 million)
and turnover increasing by 17% to GBP255.4 million (2021: GBP218.8
million). The continued level of growth, within a competitive
market environment, was in part driven by continued growth in the
multicover proposition as well as in the price comparison
channel.
Average market premiums were lower in the first half of the year
as a result of the FCA reforms, and retention increased for Admiral
and the market. Admiral increased rates, particularly in the second
half of the year in response to higher claims inflation.
The reported loss ratio for the period was impacted by severe
weather and subsidence events and as a result was higher at 91.2%
(2021:63.3%). The weather events included storms during the first
half of the year and subsidence and freeze events in the second
half, with the freeze event contributing roughly half of the 32pt
impact. Excluding the impact of the severe weather events, the
reported loss ratio was 59.2% (2021: 61.1%). Releases from prior
year loss ratios reduced the reported loss ratio by 1.9pts (2021:
3.7pts).
The combined ratio of 124.7% (2021: 93.6%) resulted in a net
underwriting loss of GBP13.2 million (2021: GBP3.9 million profit),
in part offset by profit commission and other income of GBP6.9
million (2021: GBP17.4 million), lower than the prior year as a
result of the impact of weather events on profit commission. This
resulted in a GBP6.3 million loss (2021: GBP21.3 million profit,
excluding restructure cost). Excluding the impact of the weather
events, the Household result was a profit of GBP25.3 million (2021:
GBP25.1 million). The expense ratio was also slightly higher at
33.5% (2021: 30.3%) as a result of investment in technology,
including a new claims management system.
International Insurance
International Insurance -- Costantino Moretti -- CEO,
International Insurance
In 2022 we continued to strengthen the business fundamentals and
preserve scale while we weathered the storm of turbulent market
conditions. In each of our businesses, inflation caused by the
tail-wind effects of the pandemic and the Ukrainian-Russian war,
increased costs of repair and replacement, driving claims severity
up throughout the year.
We're proud that we continued to grow despite new vehicle
shopping declining across Europe in 2022, thanks in large part to
continued investment in channel and product diversification by each
business to sustain value creation for our shareholders. In Admiral
Seguros and ConTe, intermediary sales grew to represent 30% and 12%
of new business sales respectively, while in L'olivier efforts in
improving direct acquisition contributed to customer growth of
10%.
Loss ratio results in Europe are mainly a product of higher
claims severity inflation in each country. As costs continued to
rise throughout the year, declining or stagnant premiums,
especially in Italy, exacerbated loss ratios. This increase in
market loss ratios was partially counterbalanced by our prudent
approach that led us to increase prices ahead of the market. This
was in addition to investments in growth and technology in each of
our European businesses. These elements led to a combined result
that is close to breakeven for European Motor insurance with a
small loss of GBP1.6 million. We are confident that the investments
we've made in Europe in diversification, digitisation and
infrastructure have set us on the right footing for profitable
growth when market conditions improve and more scale is gained,
particularly in France and Spain.
In the US, we saw the same severity inflation trend in 2022 as
we did in Europe, but to an even greater extent with, for example,
repair costs up 21% since 2020(10) . The Elephant team has taken
several actions to curb adverse loss ratio outcomes and protect the
bottom line, including drastic base-rate increases, reducing
exposure to any unprofitable footprint and withdrawal from the
direct to consumer (expensive) channel. However, these actions are
not immediate fixes, and thus we see a disappointing result in the
US. We are committed to improving results in the US in the short
term, and anticipate the actions taken in 2022 will help alleviate
loss ratio pressure, to significantly improve the bottom line
result in the near future.
We are proud of the businesses we've built internationally, and
the quality of products and service that we offer customers in
those markets, with several industry awards being won by our
businesses. While 2022 was a challenging year, we believe we've set
our businesses on the right footing to deliver long-term value to
the Group by establishing a diversified set of channels and
products, digitising the customer experience to meet them where and
when they need it, and modernising our tech-stack to enable
efficient scaling.
France -- Pascal Gonzalvez -- CEO, L'olivier
Over the last three years, the L'olivier portfolio has increased
by 85%, making us one of the fastest growing motor insurers in the
French market. In the same period, we also diversified our products
and deployed an ambitious digitalisation strategy.
L'olivier managed to achieve these results in one of the
toughest market environments in decades, with car sales dropping to
record lows, while high inflation suddenly reappeared. Add to that
a couple of historical hailstorms, and you get yourself one very
challenging year, to which L'olivier responded by taking a
protective approach toward margins, leading to a slightly slower
pace of growth.
Our continuous progress in digitisation translated into faster
and better service for our customers and increased efficiency. In
addition to operational excellence, this led us to win, for the
second year in a row, the award for "best customer service of the
year" in the non-life insurance category(11) and we maintained a
level of Net Promoter Score (NPS)(12) far higher than market
average for insurance.
Despite the challenging market environment, L'olivier's team has
been delivering continuous improvements and quality to its
customers, which proves its ability to navigate uncertain
conditions and continue to create value.
Italy -- Antonio Bagetta -- CEO, ConTe
In 2022 ConTe managed to deliver earned profit for the ninth
year in a row. We ended the year with 973,000 happy customers,
resulting in double-digit growth (+14%).
Sustainable growth is our main objective: in H2 we raised our
prices materially to protect 2022 profitability and to prepare a
robust baseline for 2023. As a result, we grew, we kept the loss
ratio under control and we limited average premium reduction.
Market average premium is still under pressure due to the lower
number of new car registrations and lower claims frequency (when
compared to pre-Covid).
In this context, we built on the Admiral DNA of a cost-conscious
culture - we limited investments in marketing but were still able
to maintain top brand awareness as a result of new TV
advertisements and a partnership with the Italian national football
team.
We also continued to improve our digital offering for customers
which has resulted in improved internal efficiencies, together with
an improved customer experience where 50% of customers now choose
to complete transactions online. We are the one of the most
appreciated brands among direct insurance companies -- voted best
on Google and Trustpilot.
Overall, we kept a strong culture of focus and cost control in
2022 but we continued to invest materially in our long-term
strategic objectives: data and analytics, as well as channel
diversification. All of this has been possible thanks to our
people. We are proud to have achieved the 4th Great Place to Work
Italy ranking, thanks to our innovative, flexible hybrid model and
wellbeing initiatives.
Spain -- Sarah Harris -- CEO, Admiral Seguros
In the context of global uncertainty, the Admiral Seguros team
remained focused on a few key things - we continued growing much
faster than the market, we signed the first Admiral Group
bancassurance agreement with ING in Spain, and we continued to
invest in business transformation. We were also proud to be named
#2 Best Place to Work in Spain for our size.
In 2022 our customer base grew 18% in a slow-growth market
driven by our multi-channel strategy and by better retention and
conversion in main sales channels. Growth was achieved whilst we
increased prices in reaction to higher inflation. In June we signed
a long-term distribution agreement with ING for auto insurance
after a competitive tender process in Spain. The partnership is a
recognition of our excellent customer experience and
capabilities.
As part of the Admiral 2.0 strategy, we continued to invest in
business transformation. We adopted Scaled Agile and started a
refresh of key parts of our technology stack that will be key for
our future.
In the meantime, we worked to embed our core loss ratio
capabilities into newer channels and continued to innovate in
digital processes to provide a better customer experience.
Our 2022 actions have required investment which have impacted
the short-term results for the business, but we are confident we've
made the right choices for long-term value-creation. In 2023 we
will continue our path towards sustainable scale in our motor
business. We strive to do this whilst improving efficiency,
building competitive advantage across all channels, and fostering a
culture that thrives in the hybrid world and is customer obsessed.
We are proud of what we have achieved so far and excited about what
2023 has in store.
US -- Alberto Schiavon -- CEO, Elephant
Persistently high claims inflation was the main theme for the US
Auto Insurance Industry during 2022 and greatly impacted Elephant's
short term strategic priorities. As a response to these market
challenges, Elephant took decisive action including substantial
base rate increases (+25% in multiple phases in 2022), significant
reductions in advertising spend and slowing growth to protect the
bottom line. We are confident these changes are sufficient to
offset the claims severity trend we've seen: Elephant's relative
base rate increases surpassed many key competitors in H2, and the
loss ratio gap with the market continues to trend positively.
As Elephant saw the impacts of claims frequency normalising to
near pre-pandemic levels, the business experienced a record high
increase in overall repair costs impacting claims severity,
increasing 8% versus the market increase of around 11%(13) . As we
wait for the rate actions to earn through, the 2022 overall loss to
Admiral was GBP48.9 million(14) .
Elephant's actions to slow growth as we weather the market cycle
resulted in a 1% reduction in policies in-force since H1. To
further achieve the scale needed and control the high cost of
acquisition, we have focused our acquisition efforts towards higher
retaining customers and expanded distribution towards independent
agencies. Vehicles-per-policy increased from 1.5 to 1.8, helping to
maximise the yield on our marketing spend.
As we move into 2023, we will continue to protect the bottom
line and optimise customer lifetime value and expect to see our
actions become more visible in our earned results.
While 2022 was a challenging year, Elephant was recognised on
the Forbes list of America's Best Insurance Companies 2023.
Elephant was one of only 35 carriers out of 3,300 evaluated to make
the list, providing confidence that the investments we've made in
serving our customers over the years haven't gone unnoticed. This
is certainly a solid recognition from our customers that our staff
delivers great service at every stage of the policy. I remain
incredibly grateful for their tremendous hard work, resilience, and
positive attitude.
International Insurance Review
International Insurance financial performance
GBPm 2022 2021 2020 2019
------------------------------------------ ------- ------- ------- -------
Turnover(*1) 795.9 690.3 648.8 623.6
------------------------------------------ ------- ------- ------- -------
Total premiums written(*1) 720.5 623.8 584.0 562.6
------------------------------------------ ------- ------- ------- -------
Net insurance premium revenue 241.8 221.0 204.2 168.6
------------------------------------------ ------- ------- ------- -------
Investment income 2.3 0.5 -- 1.5
------------------------------------------ ------- ------- ------- -------
Net insurance claims (220.3) (170.8) (139.3) (137.2)
------------------------------------------ ------- ------- ------- -------
Net insurance expenses (115.1) (91.7) (78.8) (53.0)
------------------------------------------ ------- ------- ------- -------
Underwriting result including investment
income(*1) (91.3) (41.0) (13.9) (20.1)
------------------------------------------ ------- ------- ------- -------
Net other revenue 37.5 29.4 22.7 19.2
------------------------------------------ ------- ------- ------- -------
International Insurance result (53.8) (11.6) 8.8 (0.9)
------------------------------------------ ------- ------- ------- -------
Key performance indicators
Reported Loss ratio(*2) 80.9% 73.7% 64.3% 76.8%
----------------------------------------- ------ ------ ------ ------
Expense ratio(*2) 44.5% 44.8% 43.9% 37.6%
----------------------------------------- ------ ------ ------ ------
Combined ratio(*3) 125.4% 118.5% 108.2% 114.4%
----------------------------------------- ------ ------ ------ ------
Combined ratio, net of Other Revenue(*4) 110.1% 106.3% 97.9% 103.7%
----------------------------------------- ------ ------ ------ ------
Vehicles insured at period end 2.04m 1.81m 1.60m 1.42m
------
(*1) Alternative Performance Measures -- refer to the end of this report for definition and explanation.
(*2) Loss ratios and expense ratios have been adjusted to remove the impact of reinsurer caps so the underlying performance of the business is transparent.
(*3) Combined ratio is calculated on Admiral's net share of premiums and excludes other revenue. It excludes the impact of reinsurer caps. Including the impact of reinsurer caps the reported combined ratio would be 2022: 139%; 2021: 119%; 2020: 107%; 2019: 113%.
(*4) Combined ratio, net of other revenue is calculated on Admiral's net share of premiums and includes Other Revenue. Including the impact of reinsurer caps the reported combined ratio, net of other revenue would be 2022: 123%; 2021: 107%; 2020: 96%; 2019: 102%.
International Motor Insurance - Geographical analysis
2022 Spain Italy France US Total
----------------------------------- ----- ----- ------ ----- -----
Vehicles insured at period end (m) 0.43 0.97 0.40 0.24 2.04
Turnover*(1) (GBPm) 104.6 227.9 190.4 268.5 791.4
2021 Spain Italy France US Total
----------------------------------- ----- ----- ------ ----- -----
Vehicles insured at period end (m) 0.37 0.85 0.36 0.23 1.81
Turnover*(1) (GBPm) 88.5 212.7 173.4 213.4 688.0
(*1) Alternative Performance Measures -- refer to the end of this report for definition and explanation
Split of International Insurance result
GBPm 2022 2021 2020 2019
------------------------------- ------ ------ ----- -----
European Motor (1.6) 4.8 15.3 9.0
------------------------------- ------ ------ ----- -----
US Motor (48.9) (13.0) (4.8) (9.6)
------------------------------- ------ ------ ----- -----
Other (3.3) (3.4) (1.7) (0.3)
------------------------------- ------ ------ ----- -----
International Insurance result (53.8) (11.6) 8.8 (0.9)
------------------------------- ------ ------ ----- -----
Admiral has several insurance businesses outside the UK: Spain
(Admiral Seguros), Italy (ConTe), France (L'olivier) and the US
(Elephant Auto).
The key features of the International Insurance results are:
-- Positive growth trajectory continued in 2022 within competitive markets,
with customer numbers increasing by 13% to 2.04 million (2021: 1.81
million) and combined turnover rising by 15% to GBP795.9 million (2021:
GBP690.3 million)
-- An aggregate loss of GBP53.8 million (2021: GBP11.6 million loss),
consisting of a loss in the European Motor insurance businesses of GBP1.6
million (2021: GBP4.8 million profit) and a deterioration in Elephant
Auto's result (increased loss from GBP13.0 million to GBP48.9 million
year-on-year)
-- A higher combined ratio (net of other revenue) of 110.1% (2021: 106.3%),
primarily the result of a higher reported loss ratio across the European
and US motor businesses driven by higher claims inflation across all
markets as well as premium pressure in the Spanish and Italian markets
-- An investment of GBP3.3 million (2021: GBP3.4 million) for new product
development primarily related to the new French home insurance business
and several product tests in Italy
European Motor Insurance
Admiral's European insurance operations in Spain, Italy, and
France insured 1.80 million vehicles at 31 December 2022, 14% more
than the previous year (31 December 2022: 1.58 million). Turnover
increased by 10% to GBP522.9 million (2021: GBP474.6 million). The
combined European Motor result reflected a net loss of GBP1.6
million (2021: GBP4.8 million), with profitability in Italy offset
by more challenging outcomes because of competitive market
pressures in France and Spain.
The European combined ratio net of other revenue (excluding the
impact of reinsurer caps) increased to 104% from 99%, primarily
driven by lower average premiums and higher claims inflation. In
addition, these businesses continued to focus on improving core
fundamentals, whilst investing in the future of the business
through expansion into new diversification opportunities and
distribution channels, particularly the intermediary channel and
partnership opportunities, to enhance future growth prospects.
ConTe in Italy saw a profitable year with improved customer
retention despite a highly competitive market resulting in
continued premium pressure. Vehicles insured increased by 14% to
0.97 million (31 December 2021: 0.85 million), with the business
continuing to invest in growth through innovation and distribution
expansion.
Admiral Seguros (Spain) saw continued growth, with an 18%
increase in customer numbers to over 0.43 million (2021: 0.37
million). This was largely driven by growth in the intermediary
channel and improved retention, although overall results were
impacted by strong inflation in the market. The business also
invested in strengthening existing distribution channels, exploring
growth through new partnerships, and progressing in its agile
transformation.
L'olivier Assurance (France) continued to grow strongly in 2022
and remains one of the fastest growing Motor insurers in the French
market. The customer base increased by 11% to 0.40 million (2021:
0.36 million). L'olivier targeted growth via the direct channel,
and maintained high customer satisfaction through continuous
digital service and efficiency improvements. The result was
negatively impacted by high inflation and several hail events in H1
that had an estimated GBP2 million impact.
US Motor Insurance
In the US, Admiral underwrites motor insurance in eight states
through its Elephant Auto business. Elephant insured 0.24m vehicles
at the end of 2022, 4% higher than 2021 (2021: 0.23m) and turnover
increased to GBP268.5 million (2021: GBP213.4 million).
The business reported a higher loss of GBP48.9 million (2021:
GBP13.0 million loss) largely due to a surge in claims severity
inflation across the US market. To mitigate the impact of higher
inflation, Elephant raised base rates materially, by more than 25%,
and prioritised higher customer lifetime value over new sales
growth. In particular, the composition of the book shifted towards
higher quality, multi-vehicle policies. Targeted expansion in the
agency and partnership channels also provided mechanisms by which
the business can continue to scale efficiently. Changes in
reinsurance agreements from the 2022 underwriting year (primarily
driven by capital efficiency considerations) resulted in increase
in the Admiral net share of losses compared to 2021.
Admiral Money
Scott Cargill -- CEO, Admiral Money
2022 has been a difficult and complex year for many businesses
in the UK, however it has been a very positive and pleasing year
for Admiral Money. We have continued our philosophy of safe,
efficient growth and despite all the external economic challenges
we delivered our first full year profit.
Admiral Money plays an increasingly important role in the
consumer lending market. Since launching in 2017 we are proud to
have provided more than 250,000 customers with over two billion
pounds of loans.
Our personal loans and car finance book is up 46% from GBP0.61
billion and now stands at GBP0.89 billion, our second consecutive
year of 45%+ growth and our cost-income ratio continues to improve,
falling to 49.7% in 2022. We anticipate this will continue to fall
as we approach scale. We retain a firm focus on prime lending and
are seeing increasing proof that UK customers are showing a
preference for our guaranteed rate proposition, valuing the
certainty and transparency it offers. Our 2022 NPS score of 71 and
Trust Pilot score of 4.6 is further evidence our exceptional
customer propositions and service commitment is setting us apart in
the consumer lending market.
UK inflation and the subsequent cost of living pressure it
creates has been front of mind since 2021. We made early decisive
moves to increase the hurdles in our affordability models to ensure
that after assessing our customers, we are lending responsibly, and
they can sustain the loan through any reasonable stress. To date
customer payment performance remains positive with low arrears and
defaults in line with expectations.
Our first full year profit of GBP2.1 million for 2022, compared
to a loss of GBP5.5 million in 2021, is an important milestone for
the business. We've achieved this whilst continuing to retain
appropriate prudence in our credit loss provision with coverage of
7.2% on the book which includes post model adjustments of GBP11.3
million.
Progress in building our capabilities in 2022 has been strong.
The continued adoption of open banking has improved our decision
making and onboarding journey. Enhancing our self-service
functionality now results in 80% of customer transactions being
processed digitally and new machine learning models are used to
support decision making across the business.
We also continued to make pleasing progress on integrating more
closely with the UK insurance business to offer loans to these
customers, with almost double the amount of new business to Admiral
Insurance customers in 2022 compared to 2021. In addition, we were
again winners of the Moneyfacts Consumer Awards best car finance
provider of the year award.
Looking to 2023, we enter with strong momentum. We expect to
benefit from our strong position in a growing market as we see a
continued shift to comparison and credit score marketplaces. I
expect to see continued growth in our loan balances towards the
GBP950 million to GBP1.1 billion range during 2023, assuming
current economic conditions. Combined with a tightly controlled
cost base, we should see further improved economics in the coming
years.
I am optimistic for 2023 and confident in the team's ability to
execute on our business plan. Admiral built successful businesses
by doing the common things uncommonly well and Admiral Money enters
2023 in good shape to achieve the same success in UK lending.
I'd like to finish by thanking our customers and all of my
colleagues and wish everyone the best for 2023.
Admiral Money Financial Performance
GBPm 2022 2021 2020 2019
--------------------------------------------------------- ------ ------ ------ ------
Net income 58.7 36.6 36.8 30.8
Interest expense(*1) (14.1) (8.8) (10.1) (9.1)
Net interest income 44.6 27.8 26.7 21.7
Other income 0.3 1.1 2.1 1.9
Total income 44.9 28.9 28.8 23.6
Movement in expected credit loss provision and write-off
of Loans (20.6) (10.7) (25.8) (14.3)
Expenses (22.2) (23.7) (16.8) (17.7)
Admiral Money profit/(loss) before tax 2.1 (5.5) (13.8) (8.4)
--------------------------------------------------------- ------ ------ ------ ------
(*) (1) Includes GBP1.5 million intra-group interest expense
(2021: GBP2.7 million; 2020: GBP2.9 million; 2019: GBP2.8
million)
Admiral Money distributes and underwrites unsecured personal
loans and car finance products for UK consumers through price
comparison, credit scoring applications and direct channels. The
proposition is focused on offering guaranteed rates to provide
customers transparency and certainty.
Admiral Money recorded a pre-tax profit of GBP2.1 million in
2022 (improved from GBP5.5 million loss in 2021), the first full
year profit in the history of the business.
Gross loan balances grew strongly, up 46% to GBP0.89 billion
(2021: GBP0.61 billion), with a GBP63.7 million (2021: GBP50.2
million) credit loss provision, leading to a net loans balance of
GBP0.82 billion (2021: GBP0.56 billion). This increase in portfolio
led to a 60% increase in net interest income to GBP44.6 million
(2021 GBP27.8 million).
Admiral Money continued to carefully manage affordability and
credit criteria for new lending in 2022 to reflect the higher
interest rate and elevated inflation environment. At the same time
interest rates on new loans were increased to reflect the rising
cost of our funding. These measures will help ensure sustainable
financial performance into the future.
The credit loss charge increased to GBP20.6 million (2021:
GBP10.7 million), driven by the significant increase in the
portfolio during the year. Overall, an appropriately prudent
approach has been taken to calculating the credit loss provision,
including post model adjustments for cost of living, mortgage
increases and forecast uncertainty, reflecting the level of
uncertainty in the current economic environment. For further
information, refer to note 7 in the financial statements.
Admiral Money is funded through a combination of internal and
external funding sources. The external funding is secured against
certain loans via 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
Other Group items financial review
GBPm 2022 2021 2020 2019
--------------------------------------------- ------ ------- ------ ------
Share scheme charges, excluding restructure
costs(*1) (51.7) (63.3) (50.9) (49.0)
Other central overheads (16.3) (19.8) (22.9) (20.0)
Finance charges(*) (2) (12.1) (11.4) (12.1) (11.3)
Admiral Pioneer (15.6) (10.2) (0.8) --
Other business development costs (10.9) (7.2) (3.3) (9.3)
Other interest and investment return 11.4 4.0 4.9 6.1
Other Group items (95.2) (107.9) (85.1) (83.5)
--------------------------------------------- ------ ------- ------ ------
(*1) Share scheme charges exclude restructuring costs of GBP1.5m
recognised in 2021
(*) (2) Includes GBP0.7 million intra-group interest expense
(2021: GBPnil; 2020: GBPnil; 2019: GBPnil)
Share scheme charges relate to the Group's two employee share
schemes (refer to note 9 to the financial statements). Charges
decreased by GBP11.6 million (excluding discontinued operations) in
2022, to GBP51.7 million. This was more in line with previous years
when excluding the elevated level in 2021 which was linked to a
higher share price and higher bonus pay-outs due to higher
dividends.
Other central overheads were lower at GBP16.3 million, and
include the cost of a number of major Group projects such as
preparation for the significant new insurance accounting standard,
IFRS 17 and the development of the internal model.
Finance charges of GBP12.1 million (2021: GBP11.4 million)
primarily represent interest on the GBP200 million subordinated
notes issued in July 2014.
Admiral Pioneer, launched in 2020 to focus on new product
diversification opportunities, made a loss of GBP15.6 million in
2022 (2021: GBP10.2 million). The business continued to invest in
growing the Veygo short term car insurance business, as well as
investing in new products such as tool insurance in the UK (Toolbox
by Admiral).
Other business development costs reported a higher loss of
GBP10.9 million (2021: GBP7.2 million), which included a smaller
loss from Compare.com of GBP2.8 million (2021: loss of GBP3.5
million) offset by increased investment in new ventures.
Other interest and investment income increased to GBP11.4
million in 2022 (2021: GBP4.0 million), as a result of higher
government bond yields and a GBP4.7 million gain arising from the
sale of government bonds in the period (2021: nil).
Group Capital Structure and Financial Position
The Group continues to manage its capital to ensure that all
entities are able to continue as going concerns and that regulated
entities comfortably meet regulatory capital requirements. Surplus
capital within subsidiaries is paid up to the Group holding company
in the form of dividends.
The Group's regulatory capital is based on the Solvency II
Standard Formula, with a capital add-on to reflect recognised
limitations in the Standard Formula with respect to Admiral's
business, predominantly in respect of profit commission
arrangements in co- and reinsurance agreements.
The Group continues to develop its partial internal model to
form the basis of future capital requirements. As previously noted,
the expected timescale for formal application has been extended as
a result of a decision by the Board to review certain aspects of
the model. In the interim period before submission, the current
capital add-on basis will continue to be used to calculate the
regulatory capital requirement.
The estimated and unaudited regulatory Solvency II position for
the Group at the date of this report is as follows:
Group capital position (estimated and unaudited)
2022 2021 2020
Group GBPbn GBPbn GBPbn
------------------------------------------- ------ ------ ------
Eligible Own Funds (post dividend) (*) (1) 1.20 1.36 1.47
Solvency II capital requirement(*2) 0.66 0.70 0.79
Surplus over capital requirement 0.54 0.66 0.68
------------------------------------------- ------ ------ ------
Solvency ratio (post dividend)(*) (3) 180% 195% 187%
------------------------------------------- ------ ------ ------
(*) (1) 2021 own funds included a deduction for the third
tranche of the Penguin Portals dividend that was paid alongside the
2022 interim dividend in October 2022
(*2) Solvency capital requirement includes updated capital
add-on which is subject to regulatory approval.
(*) (3) Solvency ratio calculated on a volatility adjusted
basis.
The Group's solvency ratio remains strong at 180%. The solvency
ratio reduced by 15 percentage points since the end of 2021,
primarily due to a reduction in Own Funds of approximately GBP160
million as a result of lower generation of economic capital.
Widening credit spreads impacted the Own Funds during the first
half of the year, with the impact partially reversing during the
second half.
The Solvency Capital Requirement includes an updated capital
add-on which remains subject to regulatory approval. The solvency
ratio based on the previously approved capital add-on, that is
calculated at the balance sheet date rather than the date of this
report, and will be submitted to the regulator within the Q4
Quantitative Reporting Template (QRT) is as follows:
Regulatory solvency ratio (estimated and unaudited) 2022 2021 2020
---------------------------------------------------- ----- ---- ----
Solvency ratio as reported above 180% 195% 187%
Change in valuation date (11%) (5%) (5%)
Other (including impact of updated, unapproved
capital add-on) (19%) (9%) 24%
Solvency ratio (QRT basis) 150% 181% 206%
---------------------------------------------------- ----- ---- ----
The Group's capital includes GBP200 million ten year dated
subordinated bonds. The rate of interest is fixed at 5.5% and the
bonds mature in July 2024. The bonds qualify as tier two capital
under the Solvency II regulatory regime.
Solvency ratio sensitivities (estimated and unaudited)
Estimated sensitivities to the current Group solvency ratio are
presented in the table below. These sensitivities cover the two
most material risk types, insurance risk and market risk, and
within these risks cover the most significant elements of the risk
profile. Aside from the catastrophe events, estimated sensitivities
have not been calibrated to individual return periods.
2022 2021 2020
UK Motor -- incurred loss ratio +5% -11% -9% -10%
UK Motor -- 1 in 200 catastrophe event -1% -1% -1%
UK Household -- 1 in 200 catastrophe event -4% -3% -2%
Interest rate -- yield curve up 100 bps -2% +5% +7%
Interest rate -- yield curve down 100 bps +2% -5% -7%
Credit spreads widen 100 bps -9% -9% -6%
Currency -- 25% adverse movement in euro and US
dollar vs sterling -3% -3% -3%
ASHE -- long term inflation assumption up 0.5% -3% -5% -3%
Loans -- severe peak unemployment scenario(*) (1) -1% -1% -1%
(*) (1) Refer to note 7 to the financial statements for further
information on the 'severe' scenario.
The change in interest rate sensitivity reflects both the
Group's continued focus on asset-liability matching and the change
in impact of interest rate movements on the solvency capital
requirement in higher yield environments.
Taxation
The tax charge reported in the consolidated income statement is
GBP97.2 million (2021: GBP130.2 million), equating to 20.7% of
pre-tax profit (2021: 18.2%). The increase in the effective tax
charge is primarily the result of the higher loss in the US
insurance business for which no deferred tax asset is
recognised.
Investments and cash
Investment strategy
Admiral Group's investment strategy focuses on capital
preservation and low volatility of returns. The business follows an
asset liability matching strategy to control interest rate,
inflation and currency risk. A prudent level of liquidity is held
and the investment portfolio has a high-quality credit profile. In
2022, the focus remained on asset liability matching, and flows
were invested into high quality assets to take advantage of rising
risk-free rates, whilst being cautious on the credit outlook. The
Group holds a range of government bonds, corporate bonds,
alternative and private credit assets, alongside liquid holdings in
cash and money market funds.
In line with our investment approach, the aim is to reduce the
Environmental, Social, and Governance (ESG) related risks in our
portfolio whilst continuing to achieve sustainable long-term
returns. In 2022, the portfolio weighted average ESG score had an
MSCI A rating.
Investment income
GBPm 2022 2021 2020
------------------------------------------ ------ ----- -----
Investment return 64.6 46.9 47.8
Movement on accruals held for insurer
funds withheld (20.0) (1.6) 12.9
Movement in provision for expected credit
losses 1.8 (2.6) (7.8)
Total 46.4 42.7 52.9
------------------------------------------ ------ ----- -----
Net investment income for 2022 was GBP46.4 million (2021:
GBP42.7 million). Investment income in 2022 was adversely impacted
by investment income adjustments related to UK motor quota share
reinsurance arrangements of GBP20.0 million (2021: GBP1.6 million).
Provisions for expected credit losses developed favourably, leading
to a GBP1.8 million release of provisions (2021: GBP2.6 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 GBP64.6 million in H1 2022 (compared to GBP46.9 million in
2021). The annualised rate of return was higher at 1.6% (2021:
1.1%), mainly as a result of higher reinvestment yields as interest
rates rose throughout the year.
The increase in yields and widening of credit spreads in 2022
resulted in a reduction in the market value of the portfolio of
GBP255.6 million (2021: GBP50.1 million reduction). That movement
is 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 31 December 2022 was GBP3,705.8 million (31 December
2021: GBP4,115.3 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 final tranche of the Penguin Portals
disposal proceeds to shareholders.
Cash and investments analysis
GBPm 2022 2021 2020
---------------------------------------- ------- ------- -------
Fixed income and debt securities 2,372.7 2,594.3 2,101.3
Money market funds and other fair value
instruments 934.7 1,063.0 1,339.3
Cash deposits 101.4 85.3 65.4
Cash 297.0 372.7 351.7
Total(*1) 3,705.8 4,115.3 3,857.7
---------------------------------------- ------- ------- -------
*1 Total Cash and Investments include GBP198.2 million (2021:
GBP147.0 million; 2020: GBP74.8 million) of Level 3 investments.
Refer to note 6e in the financial statements for further
information
Cash flow
GBPm 2022 2021 2020
----------------------------------------------- ------- ------- -------
Operating cash flow, before movements
in investments 367.3 637.8 959.8
Transfers to financial investments 189.0 (266.5) (176.0)
Operating cash flow 556.3 371.3 783.8
Tax payments (91.2) (126.7) (175.0)
Investing cash flows (capital expenditure) (101.0) (69.2) (43.1)
Financing cash flows (692.8) (750.7) (454.3)
Loans funding through special purpose
entity 267.8 185.9 (46.2)
Net contributions from non-controlling
interests -- -- 2.4
Foreign currency translation impact (14.8) (5.3) 2.4
Net proceeds from sale of Comparison
entities -- 457.0 --
Cash included in the disposal of Comparison
entities -- (41.3) --
Net cash movement (75.7) 21.0 70.0
----------------------------------------------- ------- ------- -------
Unrealised (losses)/ gains on investments (255.6) (47.3) 40.7
Movement in accrued interest 113.2 17.4 54.8
Net increase in cash and financial investments (407.1) 257.6 341.5
----------------------------------------------- ------- ------- -------
The main items contributing to the operating cash inflow are as
follows:
GBPm 2022 2021 2020
------------------------------------------------ ------- ------- -----
Profit after tax 371.8 996.7 527.8
Change in net insurance liabilities 39.6 40.8 94.8
Net change in trade receivables and liabilities 68.2 (65.3) 65.3
Change in loans and advances to customers (280.6) (205.2) 77.3
Non-cash income statement items 71.1 (261.7) 84.8
Taxation expense 97.2 132.5 109.8
Operating cash flow, before movements
in investments 367.3 637.8 959.8
------------------------------------------------ ------- ------- -----
The net decrease in cash and investments in the year is GBP407.1
million (2021: GBP257.6 million increase). The main drivers include
the unrealised losses on investments as a result of interest rate
and credit spread movements as noted above, and dividend payments
to shareholders (including the two final tranches of the Penguin
Portals special dividend).
Co-insurance and reinsurance
Admiral makes significant use of proportional risk sharing
agreements, where insurers outside the Group underwrite a majority
of the risk generated, either through co-insurance or quota share
reinsurance contracts. These arrangements include profit commission
terms which allow Admiral to retain a significant portion of the
profit generated.
Although the primary focus and disclosure is in relation to the
UK Motor insurance book, similar longer-term arrangements are in
place in the Group's international insurance operations and the UK
Household and Van businesses.
UK Motor Insurance
Munich Re and its subsidiary entity, Great Lakes, currently
underwrites 40% of the UK Motor business. From 2022, 20% of this
total is on a co-insurance basis (via Great Lakes) and will extend
to 2029. The remaining 20% is on a quota share reinsurance basis
and these arrangements now extend to 2026.
The Group also has other quota share reinsurance arrangements
confirmed to at least 2024, covering 38% of the business
written.
The nature of the co-insurance proportion underwritten by Munich
Re (via Great Lakes) in the UK is such that 20% of all Motor
premium and claims for the 2022 year accrue directly to Great Lakes
and are not reflected in the Group's financial statements.
Similarly, Great Lakes reimburses the Group for its proportional
share of expenses incurred in acquiring and administering this
business.
The quota share reinsurance arrangements result in all Motor
premiums, claims and expenses that are ceded to reinsurers being
included in the Group's financial statements. These quota share
agreements operate on a funds withheld basis and include certain
features such as expense caps and an allocation of investment
income earned on the funds held by Admiral on behalf of the
reinsurers. These features result in higher profit commission
should the underwriting year reach profitability.
Admiral tends to commute its UK Car Insurance quota share
reinsurance contracts 36 months after inception of an underwriting
year, assuming there is sufficient confidence in the profitability
of the business covered by the reinsurance contract.
After an underwriting year is commuted, movements in financial
statement loss ratios result in reserve releases (or strengthening
if the loss ratios were to increase) rather than reduced or
increased profit commission.
In 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.
Refer to note 5c. of the financial statements for further
analysis of reserve releases on business originally reinsured but
subsequently commuted.
UK Household Insurance
The Group's Household business is supported by long-term
proportional reinsurance arrangements covering 70% of the risk,
that run to at least 2024. In addition, the Group has
non-proportional reinsurance to cover the risk of catastrophes
stemming from weather events.
International Car Insurance
In both 2021 and 2022 Admiral retained 35% (Italy), 30% (France)
and 30% (Spain) of the underwriting risk in each country
respectively. In the USA, 40% (2021: 45%) of the risk was retained
within the Group.
Excess of loss reinsurance
The Group also purchases excess of loss reinsurance to provide
protection against large claims and reviews this cover annually.
The excess of loss cover remained similar to prior years with cover
starting at GBP10 million. Rates increased within the context of
increasing market rates as a result of higher inflation. The
household insurance book excess of loss reinsurance also saw an
increase in rates, for the same relative level of cover.
Profit commission
Admiral is potentially able to earn material amounts of profit
commission revenue from co- and reinsurance partners, depending on
the profitability of the insurance business underwritten by the
partner. Revenue is recognised in the income statement in line with
the financial statement loss ratios on Admiral's retained
underwriting.
Note 5b to the financial statements analyses profit commission
income by business, type of contract and by underwriting year.
Principal Risks and Uncertainties
The Group's 2022 Annual Report will contain an analysis of the
Principal Risks and Uncertainties identified in the Group's
Enterprise Risk Management Framework, along with the impacts of
those risks and actions taken to mitigate them.
Disclaimer on forward-looking statements
Certain statements made in this announcement are forward-looking
statements. Such statements are based on current expectations and
assumptions and are subject to a number of known and unknown risks
and uncertainties that may cause actual events or results to differ
materially from any expected future events or results expressed or
implied in these forward-looking statements.
Persons receiving this announcement should not place undue
reliance on forward-looking statements. Unless otherwise required
by applicable law, regulation or accounting standard, the Group
does not undertake to update or revise any forward-looking
statements, whether as a result of new information, future
developments or otherwise.
Consolidated Income Statement
For the year ended 31 December 2022
Year ended
31 December 31 December
2022 2021
Continuing operations Note GBPm GBPm
Insurance premium revenue 2,705.4 2,492.3
Insurance premium ceded to reinsurers (1,794.4) (1,637.3)
Net insurance premium revenue 5 911.0 855.0
Other revenue 8 318.8 314.8
Profit commission 5 170.9 304.5
Interest income 7 58.7 36.6
Interest expense 7 (12.6) (6.1)
Net interest income from loans 46.1 30.5
Investment return -- interest income at effective
interest rate 6 52.3 40.6
Investment return - other 6 12.3 6.2
Investment return recoverable from co- and reinsurers 6 (20.0) (1.6)
Net revenue 1,491.4 1,550.0
Insurance claims and claims handling expenses 5 (2,081.4) (1,506.8)
Insurance claims and claims handling expenses recoverable
from reinsurers 1,575.3 1,174.5
Net insurance claims 5 (506.1) (332.3)
Operating expenses and share scheme charges 9 (924.8) (970.1)
Operating expenses and share scheme charges recoverable
from co- and reinsurers 9 439.3 491.1
Expected credit losses 6,9 (18.9) (13.3)
Net operating expenses and share scheme charges (504.4) (492.3)
Total expenses (1,010.5) (824.6)
Operating profit 480.9 725.4
Finance costs 6 (13.4) (13.7)
Finance costs recoverable from co- and reinsurers 6 1.5 1.8
Net finance costs (11.9) (11.9)
Profit before tax from continuing operations 469.0 713.5
Taxation expense 10 (97.2) (130.2)
Profit after tax from continuing operations 371.8 583.3
---------------------------------------------------------- ---- ----------- -----------
Profit before tax from discontinued operations -- 11.3
Gain on disposal -- 404.4
Taxation expense -- (2.3)
Profit after tax from discontinued operations 13 -- 413.4
---------------------------------------------------------- ---- ----------- -----------
Profit after tax from continuing and discontinued
operations 371.8 996.7
---------------------------------------------------------- ---- ----------- -----------
Profit after tax attributable to:
Equity holders of the parent 373.0 997.9
Non-controlling interests (NCI) (1.2) (1.2)
371.8 996.7
---------------------------------------------------------- ---- ----------- -----------
Earnings per share -- from continuing operations
Basic 12 124.3p 196.7p
Diluted 12 123.7p 196.1p
---------------------------------------------------------- ---- ----------- -----------
Earnings per share - from continuing and discontinued
operations
---------------------------------------------------------- ---- ----------- -----------
Basic 12 124.3p 335.5p
---------------------------------------------------------- ---- ----------- -----------
Diluted 12 123.7p 334.5p
---------------------------------------------------------- ---- ----------- -----------
Dividends declared and paid (total) 12 658.3 720.9
Dividends declared and paid (per share) 12 223.0p 247.0p
-----------
Consolidated statement of comprehensive income
For the year ended 31 December 2022
Year ended
31 December 31 December
2022 2021
Note GBPm GBPm
----------- -----------
Profit for the period -- from continuing and discontinued
operations 371.8 996.7
Other comprehensive income
Items that are or may be reclassified to profit or
loss
Movements in fair value reserve (255.6) (50.1)
Deferred tax charge in relation to movement in fair
value reserve 10 13.0 1.4
Exchange differences on translation of foreign operations 6.9 (10.4)
Movement in hedging reserve 25.1 6.6
Deferred tax charge in relation to movement in hedging
reserve (7.0) --
Other comprehensive income for the period, net of
income tax (217.6) (52.5)
---------------------------------------------------------- ----- ----------- -----------
Total comprehensive income for the period 154.2 944.2
---------------------------------------------------------- ----- ----------- -----------
Total comprehensive income for the period attributable
to:
Equity holders of the parent 155.3 945.7
Non-controlling interests (1.1) (1.5)
154.2 944.2
---------------------------------------------------------- ----- ----------- -----------
Consolidated statement of financial position
As at 31 December 2022
As at
31 December 31 December
2022 2021
Note GBPm GBPm
----------- -------------
ASSETS
Property and equipment 11 89.8 103.2
Intangible assets 11 248.3 179.9
Deferred income tax 10 18.5 9.3
Corporation tax asset 10 -- 10.6
Reinsurance assets 5 2,714.0 2,176.1
Loans and advances to customers 7 823.9 556.8
Insurance and other receivables 6 1,335.8 1,208.5
Financial investments 6 3,411.2 3,742.6
Cash and cash equivalents 6 297.0 372.7
Total assets 8,938.5 8,359.7
--------------------------------------------------- ----- ----------- -----------
EQUITY
Share capital 12 0.3 0.3
Share premium account 13.1 13.1
Other reserves 12 (173.7) 44.0
Retained earnings 1,114.5 1,348.8
Total equity attributable to equity holders of the
parent 954.2 1,406.2
--------------------------------------------------- ----- ----------- -----------
Non-controlling interests 1.2 2.3
--------------------------------------------------- ----- ----------- -----------
Total equity 955.4 1,408.5
--------------------------------------------------- ----- ----------- -----------
LIABILITIES
Insurance contract liabilities 5 4,792.5 4,215.0
Subordinated and other financial liabilities 6 939.1 670.9
Trade and other payables 6, 11 2,158.0 1,960.0
Lease liabilities 6 88.5 105.3
Corporation tax liability 10 5.0 --
Total liabilities 7,983.1 6,951.2
--------------------------------------------------- ----- ----------- -----------
Total equity and total liabilities 8,938.5 8,359.7
--------------------------------------------------- ----- ----------- -----------
The accompanying notes form part of these financial
statements.
These financial statements were approved by the Board of
Directors on 7 March 2023 and were signed on its behalf by:
Geraint Jones
Chief Financial Officer
Admiral Group plc
Company Number: 03849958
Consolidated cash flow statement
For the year ended 31 December 2022
Year ended
31 December 31 December
2022 2021
Note GBPm GBPm
----------- -----------
Profit after tax -- from continuing and discontinued
operations 371.8 996.7
Adjustments for non-cash items:
-- Depreciation of property, plant and equipment and
right-of-use assets 11 18.2 23.6
-- Impairment/Disposal of property, plant and equipment
and right-of-use assets 11 (1.2) 23.8
-- Amortisation and impairment of intangible assets 11 23.7 44.7
-- Gain on disposal of Comparison entities held for
sale 13 -- (404.4)
-- Movement in expected credit loss provision 6 11.7 13.3
-- Share scheme charges 9 57.3 65.2
-- Accrued interest income from loans and advances
to customers -- (0.8)
-- Interest expense on funding for loans and advances
to customers 12.6 6.1
-- Investment return 6 (64.6) (45.2)
-- Finance costs, including unwinding of discounts
on lease liabilities 13.4 12.0
-- Taxation expense 10 97.2 132.5
Change in gross insurance contract liabilities 5 577.5 133.7
Change in reinsurance assets 5 (537.9) (92.9)
Change in insurance and other receivables 6, 11 (129.8) (9.2)
Change in loans and advances to customers 7 (280.6) (205.2)
Change in trade and other payables, including tax
and social security 11 198.0 (56.1)
Cash flows from operating activities, before movements
in investments 367.3 637.8
Purchases of financial instruments (3,198.0) (3,710.2)
Proceeds on disposal/ maturity of financial instruments 3,328.3 3,397.1
Interest and investment income received 6 58.7 46.6
Cash flows from operating activities, net of movements
in investments 556.3 371.3
Taxation payments (91.2) (126.7)
Net cash flow from operating activities 465.1 244.6
Cash flows from investing activities:
Purchases of property, equipment and software 11 (98.6) (69.2)
Investment in associates (2.4) --
Proceeds from sale of Comparison entities -- 471.8
Net costs paid on sale of Comparison entities -- (14.8)
Net cash used in investing activities (101.0) 387.8
Cash flows from financing activities:
Proceeds on issue of loan backed securities 6 267.8 185.9
Finance costs paid, including interest expense paid
on funding for loans 6,7 (25.3) (20.2)
Repayment of lease liabilities 6 (9.2) (9.6)
Equity dividends paid 12 (658.3) (720.9)
Net cash used in financing activities (425.0) (564.8)
Net (decrease) / increase in cash and cash equivalents (60.9) 67.6
Cash and cash equivalents at 1 January 372.7 351.7
Cash and cash equivalents included in disposal of
comparison entities -- (41.3)
Effects of changes in foreign exchange rates (14.8) (5.3)
Cash and cash equivalents at 31 December 6 297.0 372.7
-------------------------------------------------------- ----- ----------- -----------
Consolidated statement of changes in equity
For the years ended 31 December 2021 and 2022
Attributable to the owners of the Company
Share Foreign Retained Non-
Share premium Fair value exchange profit controlling
capital account reserve Hedging reserve reserve and loss Total interests Total equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------- -------- ---------- ---------------- --------- --------- -------
Balance at 1 January 2021 0.3 13.1 85.4 (3.6) 13.1 1,004.4 1,112.7 10.7 1,123.4
Profit/(loss) for the period -- from continuing and
discontinued operations -- -- -- -- -- 997.9 997.9 (1.2) 996.7
Other comprehensive income
Movements in fair value reserve -- -- (50.1) -- -- -- (50.1) -- (50.1)
Deferred tax credit in relation to movement in fair
value reserve 10 -- -- 1.4 -- -- -- 1.4 -- 1.4
Movement in hedging reserve -- -- -- 6.6 -- -- 6.6 -- 6.6
Currency translation differences -- -- -- -- (10.1) -- (10.1) (0.3) (10.4)
Total comprehensive income for the period -- -- (48.7) 6.6 (10.1) 997.9 945.7 (1.5) 944.2
----------------------------------------------------- ----- -------- -------- ---------- ---------------- --------- --------- ------- ------------ ------------
Transactions with equity holders
Dividends 12 -- -- -- -- -- (720.9) (720.9) -- (720.9)
Share scheme credit 9 -- -- -- -- -- 63.1 63.1 -- 63.1
Deferred tax credit on share scheme credit 10 -- -- -- -- -- 6.0 6.0 -- 6.0
Transfer to gain on disposal of assets held for sale -- -- -- -- 1.3 (2.0) (0.7) 0.1 (0.6)
Change in ownership interests on sale of comparison -- -- -- -- -- -- -- (6.7) (6.7)
Change in ownership interests without a change in
control -- -- -- -- -- 0.3 0.3 (0.3) --
Total transactions with equity holders -- -- -- -- 1.3 (653.5) (652.2) (6.9) (659.1)
----------------------------------------------------- ----- -------- -------- ---------- ---------------- --------- --------- ------- ------------ ------------
As at 31 December 2021 0.3 13.1 36.7 3.0 4.3 1,348.8 1,406.2 2.3 1,408.5
----------------------------------------------------- ----- -------- -------- ---------- ---------------- --------- --------- ------- ------------ ------------
Consolidated statement of changes in equity (continued)
For the years ended 31 December 2021 and 2022
Attributable to the owners of the Company
Share Foreign Retained Non-
Share premium Fair value exchange profit controlling
capital account reserve Hedging reserve reserve and loss Total interests Total equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------- -------- ---------- ---------------- --------- --------- -------
Balance at 1 January 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 -- from continuing and
discontinued operations -- -- -- -- -- 373.0 373.0 (1.2) 371.8
Other comprehensive income
Movements in fair value reserve -- -- (255.6) -- -- -- (255.6) -- (255.6)
Deferred tax credit in relation to movement in fair
value reserve 10 -- -- 13.0 -- -- -- 13.0 -- 13.0
Movement in hedging reserve -- -- -- 25.1 -- -- 25.1 -- 25.1
Deferred tax charge in relation to movement in hedging
reserve -- -- -- (7.0) -- -- (7.0) -- (7.0)
Currency translation differences -- -- -- -- 6.8 -- 6.8 0.1 6.9
Total comprehensive income for the period -- -- (242.6) 18.1 6.8 373.0 155.3 (1.1) 154.2
------------------------------------------------------- ----- -------- -------- ---------- ---------------- --------- --------- ------- ------------ ------------
Transactions with equity holders
Dividends 12 -- -- -- -- -- (658.3) (658.3) -- (658.3)
Share scheme credit 9 -- -- -- -- -- 57.3 57.3 -- 57.3
Deferred tax charge on share scheme credit 10 -- -- -- -- -- (6.3) (6.3) -- (6.3)
Change in ownership interests without a change in
control -- -- -- -- -- -- -- -- --
Total transactions with equity holders -- -- -- -- -- (607.3) (607.3) -- (607.3)
------------------------------------------------------- ----- -------- -------- ---------- ---------------- --------- --------- ------- ------------ ------------
As at 31 December 2022 0.3 13.1 (205.9) 21.1 11.1 1,114.5 954.2 1.2 955.4
------------------------------------------------------- ----- -------- -------- ---------- ---------------- --------- --------- ------- ------------ ------------
Notes to the financial statements
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 consolidated financial statements have been prepared and
approved by the Directors in accordance with United Kingdom adopted
international accounting standards in conformity with the
requirements of the Companies Act 2006. The Company has elected to
prepare its parent company financial statements in accordance with
Financial Reporting Standard 101 Reduced Disclosure Framework (FRS
101).
2. Basis of preparation
The consolidated financial statements have been prepared on a
Going Concern basis. In making this assessment, the Directors' have
considered in detail the impact of the pandemic on the Group's
financial position and performance, including the projection of the
Group's profits, regulatory capital surpluses and sources of
liquidity for the next 12 months and beyond.
The following areas were focused on as part of this review:
-- The Group's profit projections, including:
-- Changes in premium rates and projected policy volumes across the
Group's insurance businesses, including early indications of the
impact of the FCA general insurance pricing reform which came into
effect at the start of 2022
-- Potential impacts on the cost of settling claims across all
insurance businesses, including the impact of inflationary
pressures
-- Projected trends in other revenue generated by the Group's
insurance business from fees and the sale of ancillary products
-- Projected contributions to profit from businesses other than the
UK Car insurance business
-- Expected trends in unemployment in the context of credit risks and
the growth of the Group's Loans business
-- The 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 of
the factors noted above
-- The results of business plan scenarios and stress tests on the projected
profitability, solvency and liquidity positions including the impact of
severe downside scenarios that assume severe adverse economic, credit and
trading stresses
-- The regulatory environment, in particular focusing on regulatory guidance
issued by the Group's regulators and ongoing communications between
management and regulators
-- A review of the Company's principal risks and uncertainties and the
assessment of emerging risks
Following consideration of the above, the Directors have
reasonable expectation that the Group has adequate resources to
continue in operation for the foreseeable future, a period of not
less than 12 months from the date of this report, and that it is
therefore appropriate to adopt the going concern basis in preparing
the financial statements.
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 Group and Company financial statements
are presented in pounds sterling, rounded to the nearest GBP0.1
million.
Adoption of new and revised standards
The Group has adopted the following IFRSs and interpretations
during the year, which have been issued and endorsed:
-- Amendments to IFRS 3 Reference to the Conceptual Framework (effective 1
January 2022)
-- Amendments to IAS 16 Property, Plant and Equipment -- Proceeds before
Intended Use (effective 1 January 2022)
-- Amendments to IAS 37 Onerous Contracts -- Cost of Fulfilling a Contract
(effective 1 January 2022)
-- Annual Improvements to IFRS Standards 2018-2020 Cycle: Amendments to IFRS
1 First-time Adoption of International Financial Reporting Standards,
IFRS 9 Financial Instruments, IFRS 16 Leases (effective 1 January 2022)
IFRS 17: Accounting for Insurance contracts
IFRS 17 Insurance Contracts, as issued by the IASB and endorsed
by the UK Endorsement Board on 16 May 2022, is a replacement for
IFRS 4 Insurance Contracts, effective for annual periods beginning
on or after 1 January 2023, with a transition balance sheet date of
1 January 2022.
The adoption of IFRS 17 does not change the classification of
the Group's insurance contracts. However, IFRS 17 establishes
specific principles for the recognition, measurement, presentation
and disclosure of insurance contracts issued and reinsurance
contracts held by the Group.
Applying IFRS 17 to the Group's contracts, the scope of the
standard is aligned to IFRS 4, with insurance liabilities comprised
of the Liability for Remaining Coverage ('LRC'), and the Liability
for Incurred Claims ('LIC'). Reinsurance assets are comprised of
the Asset for Remaining Coverage ('ARC') and Asset for Incurred
Claims ('AIC').
IFRS 17 outlines a general model, which is simplified if certain
criteria are met by measuring the liability for remaining coverage
using the premium allocation approach ('PAA').
Under IFRS 17, the Group's insurance contracts issued and
reinsurance contracts held are all eligible to be measured by
applying the PAA, given that:
-- The Group's insurance contracts issued have coverage periods of 6 to 12
months in duration and therefore automatically qualify for the PAA under
IFRS 17.53(b); and
-- Whilst the Group's reinsurance contracts have coverage periods which
extend beyond 12 months, modelling of these contracts shows that using
the PAA produces a measurement of the LRC which is not materially
different from the LRC produced using the general model. These contracts
are therefore eligible to be measured applying the PAA under IFRS
17.53(a).
The Group therefore intends to apply the PAA across all of its
insurance contracts issued and reinsurance contracts held.
Differences in measurement principles
The measurement principles of the PAA differ from the approach
used by the Group under IFRS 4 in the following key areas:
-- The measurement of insurance liabilities and reinsurance assets is
performed at a more granular level than IFRS 4, taking into account:
-- the type of risk and how it is managed (a "portfolio" of insurance
contracts);
-- the projected level of profitability; and
-- disaggregating the contracts into annual cohorts (i.e. each
"group" of contracts is considered by underwriting year for the
Group).
-- The measurement of the liability for incurred claims (claims outstanding
under IFRS 4, comprised of the best estimate of claims outstanding plus a
margin held above actuarial best estimates for adverse development) is
determined on a discounted probability-weighted expected value basis plus
an explicit risk adjustment for non-financial risk, which is separately
reported.
-- The measurement of the liability for remaining coverage reflects premiums
received less any deferred insurance acquisition cash flows (unless these
are expensed as incurred) and less amounts recognised in revenue for
insurance services provided. This corresponds to items reported under
IFRS 4 as the unearned premium reserve, less deferred acquisition costs
and insurance receivables.
-- Where facts and circumstances exist indicating that a group of contracts
may be onerous, the Group must assess whether an onerous loss component
should be recognised. The calculation of the onerous loss component
compares the fulfilment cashflows relating to the liability for remaining
coverage measured using the general model (including the risk adjustment
for non-financial risk) to the recognised liability for remaining
coverage, with any deficiency recognised as an onerous loss component.
-- The asset for remaining coverage reflects reinsurance premiums paid for
reinsurance held, less ceded earned reinsurance premiums. Ceded
reinsurance premiums under IFRS 17 are presented and earned net of any
ceded reinsurance expense recoveries, which were presented separately
under IFRS 4 and recognised in line with the timing of the gross expenses
incurred. In addition, the asset for remaining coverage is adjusted to
include a loss-recovery component to reflect the expected recovery of
onerous contract losses (on the underlying insurance contracts issued)
where such contracts reinsure onerous direct contracts.
-- The asset for incurred claims reflects the expected reinsurance
recoveries of claims related cashflows on a discounted, probability
weighted expected value basis, inclusive of the risk adjustment.
-- Under IFRS 17, income that is currently recognised immediately as
commission income on underwritten ancillary products is required to be
recognised over the life of the policy as insurance revenue. This is
because the commission income is not considered a separable component
under IFRS 17. As a result, part of the income that was recognised under
IFRS 4 at year end 2021 is deferred under IFRS 17.
Key accounting policy decisions
-- As set out above, both the Group's insurance and reinsurance contracts
have been deemed eligible for the PAA, and the Group is intending to
apply the PAA across all of its insurance and reinsurance contracts.
-- The application of the disaggregation requirements of IFRS 17 have
resulted in the Group determining its portfolios of insurance contracts
as being by country of issue and line of business.
-- The Group intends to take the option to expense its insurance acquisition
cashflows immediately (with all contracts eligible for this treatment,
given the coverage period of < 12 months), having previously deferred
these expenses under IFRS 4.
-- The Group will compute its discount yield curves using a risk-free rate,
plus an illiquidity premium reflective of the illiquidity of the
underlying claims. The illiquidity premium will be set by reference to
several illiquidity data points, principally using illiquidity on
internal asset information supplemented by quantitative analysis when
required.
-- The Group intends to implement the option to take the difference arising
from changes in the discount yield curve through Other Comprehensive
Income rather than the Income Statement, with insurance finance expenses
thereby only comprising the unwinding of discounting based on the
locked-in rate at the time the claims are incurred.
-- Although IFRS 17 requires a risk adjustment to be included in the
measurement of the liability for incurred claims, there is no prescribed
methodology or range. The Group has made an accounting policy decision to
base its risk adjustment on a confidence level approach, setting the risk
adjustment between the 85th and 95th percentile at an entity level basis,
based on Group risk appetite. At the date of transition, the Group
expects the risk adjustment to be at the upper end of the corridor.
Estimated impact of transition
The Group is in the advanced stages of implementing the
standard. The Group will be applying the standard using a fully
retrospective approach, and with its first reporting in 2023 will
restate the 2022 comparatives, including the opening Balance Sheet
under IFRS 17 as at 1 January 2022. The estimated impact on the
opening Balance sheet is expected to be in a reduction in the
Group's equity of between GBP100 million and GBP130 million. The
final impact within the range presented is dependent on the final
outcome of a small number of outstanding technical judgements in
respect of the calculation of the risk adjustment for non-financial
risk.
The key changes driving the estimated adverse impact on
transition are:
-- An adverse impact arising from the Group's accounting policy choice to
expense acquisition costs, which results in a write off of the Group's
gross deferred acquisition cost asset.
-- A reduction in quota share reinsurance assets as a result of the change
in timing in recognition of ceded quota share expense recoveries.
-- An adverse impact due to the deferral of revenue in relation to
underwritten ancillary products, which was previously recognised
immediately as commission income.
-- An offsetting favourable impact due to change in the Group's claims
liabilities, net of reinsurance, as a result of the requirements for the
liability and asset for incurred claims to be calculated using a
probability weighted, discounted best estimate plus risk adjustment for
non-financial risk.
-- The tax treatment of the transition impact follows the accounting
treatment, with no transitional relief available. The tax impact on
transition has been calculated at an entity level, based on the tax rates
that are expected to be in place in 2023, when the transition impacts
will be realised. Deferred tax assets in relation to carried forward
losses are recognised only to the extent that it is probable future
taxable profit will be available against which the assets can be utilised,
in accordance with the Group's accounting policy for taxation.
These estimates are based on accounting policies, assumptions,
judgements and estimation techniques that remain subject to change
until the Group finalises its interim financial statements for the
period ending 30 June 2023.
In addition to the impact on equity at transition, there are a
number of presentational changes that will result in a reduction in
insurance contract liabilities and reinsurance contract assets,
primarily as a result of these balances being offset by the related
insurance receivables and reinsurance receivables and payables.
The cash flows and underlying capital generation of our
businesses are not materially affected by IFRS 17, and we do not
expect the standard to have an impact on the Group's Solvency II
performance metrics.
3. Critical accounting judgements and estimates
In applying the Group's accounting policies as described in the
notes to the financial statements, the Directors are required to
make judgements (other than those involving estimations) that have
a significant impact on the amounts recognised and to make
estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
Full details of critical accounting judgements and key sources
of estimation uncertainty will be included in the Group's 2022
Annual Report.
4. Operating segments
The Group has four (five for financial year 2021 including
discontinued operations) reportable segments, as described below.
These segments represent the principal split of business that is
regularly reported to the Group's Board of Directors, which is
considered to be the Group's chief operating decision maker in line
with IFRS 8 Operating Segments.
UK Insurance
The segment consists of the underwriting of Motor insurance,
Household, Pet and, Travel insurance and other products that
supplement these insurance policies within the UK. It also includes
the generation of revenue from additional products and fees from
underwriting insurance in the UK. The Directors consider the
results of these activities to be reportable as one segment as the
activities carried out in generating the revenue are not
independent of each other and are performed as one business. This
mirrors the approach taken in management reporting.
International Insurance
The segment consists of the underwriting of car and home
insurance and the generation of revenue from additional products
and fees from underwriting car insurance outside of the UK. It
specifically covers the Group operations Admiral Seguros in Spain,
ConTe in Italy, L'olivier Assurance in France and Elephant Auto in
the US. None of these operations are reportable on an individual
basis, based on the threshold requirements in IFRS 8.
Admiral Money
The segment relates to the Admiral Money business launched in
2017, which provides unsecured personal loans and car finance
products in the UK, primarily through the comparison channel.
Other
The 'Other' segment is designed to be comprised of all other
operating segments that are not separately reported to the Group's
Board of Directors and do not meet the threshold requirements for
individual reporting. It includes Admiral Pioneer.
Discontinued operations -- 2021 Financial Year
On 29 December 2020 the Group announced its planned sale of the
majority of its comparison businesses. The sale was completed on 30
April 2021. The comparison operations are presented as discontinued
operations in 2021. The results for 2021 are reflective of the
profit on disposal and four months of trading prior to
disposal.
The segment relates to the comparison businesses disposed of
including: Confused.com in the UK, Rastreator in Spain, LeLynx in
France, and Preminen entities.
Taxes are not allocated across the segments and, as with the
corporate activities, are included in the reconciliation to the
consolidated income statement and consolidated statement of
financial position.
An analysis of the Group's revenue and results for the year
ended 31 December 2022, by reportable segment, is shown below. The
accounting policies of the reportable segments are materially
consistent with those presented in the notes to the financial
statements for the Group.
Year ended 31 December 2022
UK International Admiral Eliminations(*)
Insurance Insurance Money Other (4) Total
GBPm GBPm GBPm GBPm GBPm GBPm
---------- ------------- ------- ------ --------------- -------
Turnover(*1) 2,784.3 795.9 59.0 41.7 (0.3) 3,680.6
-------------------------- ---------- ------------- ------- ------ --------------- -------
Net insurance premium
revenue 628.8 251.7 -- 30.5 -- 911.0
Other Revenue and
profit commission 440.8 40.1 0.3 8.8 (0.3) 489.7
Net interest income -- -- 44.6 -- 1.5 46.1
Investment return(*2) 35.0 2.3 -- (0.1) (2.2) 35.0
Net revenue 1,104.6 294.1 44.9 39.2 (1.0) 1,481.8
Net insurance claims (260.4) (227.3) -- (18.4) -- (506.1)
Expenses (228.3) (120.6) (42.8) (40.0) 0.3 (431.4)
Segment profit/(loss)
before tax 615.9 (53.8) 2.1 (19.2) (0.7) 544.3
-------------------------- ---------- ------------- ------- ------ --------------- -------
Other central revenue and expenses,
including share scheme charges (75.3)
Investment and interest
income 11.4
Finance costs(*3) (11.4)
Consolidated profit
before tax 469.0
Taxation expense (97.2)
Consolidated profit
after tax 371.8
-------------------------- ---------- ------------- ------- ------ --------------- -------
Other segment items:
-- Intangible and
tangible asset additions 122.2 44.7 2.3 13.6 -- 182.8
-- Depreciation
and amortisation 63.9 50.4 1.0 7.6 -- 122.9
Revenue and results for the corresponding reportable segments
for the year ended 31 December 2021 are shown below.
Year ended 31 December 2021
UK International Admiral Discontinued Eliminations(*) Total
Insurance Insurance Money Other operations (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 -- -- -- -- 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 (*) (5) 713.5 1,129.2
Taxation expense (130.2) (132.5)
Consolidated profit
after tax 583.3 996.7
---------------------- ---------- ------------- ------- ------ ------------ --------------- ------------- -------
Other segment items:
-- Intangible and
tangible asset
additions 94.8 47.6 0.6 1.2 -- -- 144.2 144.2
-- Depreciation
and amortisation 65.5 44.5 0.7 0.2 -- -- 110.9 110.9
*1 Turnover is an Alternative Performance Measure presented before intra-group eliminations and consists of total premiums written (including co-insurers' share) and Other revenue. Refer to the glossary and note 14 for further information.
*2 Investment return is reported net of impairment on financial assets, in line with management reporting.
*3 GBP0.5 million (2021: GBP0.6 million) of IFRS 16 interest expense (being the Group's net share of IFRS 16 interest expense) included within Finance Costs in the Income Statement has been reallocated to individual segments within expenses, in line with management segmental reporting.
*4 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 GBP0.3 million (2021: GBP7.8 million) elimination of other revenue and profit commission, GBPnil (2021: GBP7.6 million) relates to discontinued operations, with the remaining GBP0.3 million (2021: GBP0.2 million) relating to compare.com. GBP1.5 million (2021: GBP2.7 million) of intra-group interest charges related to the UK Insurance and Admiral Money segment and GBP0.7 million (2021: GBPnil) related to UK Insurance and central finance costs have also been eliminated on consolidation.
*5 Profit before tax for the year ended 31 December 2021 above of GBP1,129.2 million includes profit before tax from continuing operations (GBP713.5 million) and discontinued operations (GBP415.7 million, including GBP0.4 million of central expenses).
5. Premium, Claims and Profit Commissions
5a. Net insurance premium revenue
31 December 31 December
2022 2021
GBPm GBPm
Total insurance premiums including co-insurers'
share(*1) 3,243.1 3,098.7
---------------------------------------------------- ----------- -----------
Group gross premiums written excluding co-insurance 2,849.7 2,513.6
Outwards reinsurance premiums (1,922.4) (1,643.0)
Net insurance premiums written 927.3 870.6
Change in gross unearned premium provision (144.3) (21.3)
Change in reinsurers' share of unearned premium
provision 128.0 5.7
Net insurance premium revenue 911.0 855.0
---------------------------------------------------- ----------- -----------
*1 Alternative Performance Measures -- refer to the end of the report for definition and explanation, and to note 14a for reconciliation to group gross premiums written.
The Group's share of its insurance business was underwritten by
Admiral Insurance (Gibraltar) Limited, Admiral Insurance Company
Limited, Admiral Europe Compania Seguros ('AECS') and Elephant
Insurance Company. The vast majority of contracts are short term in
duration, lasting for between 6 and 12 months.
5b. Profit commission
31 December 31 December
2022 2021
GBPm GBPm
Underwriting year (UK Motor only)
2017 and prior 54.4 94.4
2018 35.8 18.6
2019 31.5 27.6
2020 48.5 150.0
2021 -- --
2022 -- --
Total UK Motor profit commission(*1) 170.2 290.6
---------------------------------------------------- ----------- -----------
Total UK Household and International profit
commission(*1) 0.7 13.9
Total profit commission 170.9 304.5
---------------------------------------------------- ----------- -----------
*1 From the total UK motor profit commission of GBP170.2 million (2021: GBP290.6 million), GBP130.4 million (2021: GBP162.9 million) relates to co-insurance arrangements and GBP39.8 million (2021: GBP127.7 million) to reinsurance arrangements. The UK Household and International profit commission relates solely to reinsurance arrangements.
Sensitivities of the recognition of profit commission to
movements in the booked loss ratio are shown in note 5c(i).
5c. Reinsurance assets and insurance contract liabilities
(i) Sensitivity of recgonised amounts to changes in assumptions
The following table sets out the impact on equity and post-tax
profit or loss at 31 December 2022 that would result from a 1%, 3%
and 5% increase and decrease in the UK Car Insurance loss ratios
used for each underwriting year for which material amounts remain
outstanding. This includes the impact on profit commission of the
respective changes in booked loss ratios, which are also shown
separately below.
Total impact on Income Statement (including profit
commission) Underwriting year
2019 2020 2021 2022
------ ------ ------ -----
Booked loss ratio 67% 61% 89% 102%
Impact of 1% deterioration in booked loss ratio
(GBPm) (15.5) (16.4) (3.7) (1.9)
Impact of 3% deterioration in booked loss ratio
(GBPm) (46.2) (49.2) (11.0) (5.6)
Impact of 5% deterioration in booked loss ratio
(GBPm) (76.4) (82.0) (18.3) (9.3)
Impact of 1% improvement in booked loss ratio
(GBPm) 15.5 16.4 3.7 1.9
Impact of 3% improvement in booked loss ratio
(GBPm) 46.6 49.2 11.0 5.6
Impact of 5% improvement in booked loss ratio
(GBPm) 77.6 82.0 18.3 9.3
As above, the impact is stated net of reinsurance and includes
the change in net insurance claims along with the associated profit
commission movements that result from changes in loss ratios. The
figures are stated net of tax at the current rate.
The following table sets out the impact on equity and post-tax
profit or loss at 31 December 2022 that would result from a 1%, 3%
and 5% increase and decrease in the UK Car Insurance loss ratios
used for each underwriting year for which material amounts remain
outstanding, on profit commission only.
Impact on profit commission only Underwriting year
2019 2020 2021 2022
------ ------ ---- ----
Booked loss ratio 67% 61% 89% 102%
Impact of 1% deterioration in booked loss ratio
(GBPm) (5.6) (8.0) - -
Impact of 3% deterioration in booked loss ratio
(GBPm) (16.5) (23.9) - -
Impact of 5% deterioration in booked loss ratio
(GBPm) (26.8) (39.8) - -
Impact of 1% improvement in booked loss ratio
(GBPm) 5.6 8.0 - -
Impact of 3% improvement in booked loss ratio
(GBPm) 16.8 23.9 - -
Impact of 5% improvement in booked loss ratio
(GBPm) 28.0 39.8 - -
Sensitivities to key assumptions in the best estimate reserves
have not been presented, given the significant and prudent margin
held above best estimate reserves and the co- and reinsurance
arrangements that are also considered when determining the net
impact on the income statement. The underwriting year sensitivities
presented above are considered to provide relevant and transparent
information on the changes to key inputs to the financial
statements. Sensitivities exclude any impact on climate given the
assessment of low short term risk.
(ii) Analysis of recognised amounts:
31 December 31 December
2022 2021
GBPm GBPm
Gross
Claims outstanding(*1) 3,456.1 3,045.0
Unearned premium provision 1,336.4 1,170.0
Total gross insurance liabilities 4,792.5 4,215.0
------------------------------------------------- ----------- -----------
Recoverable from reinsurers
Claims outstanding 1,807.5 1,415.7
Unearned premium provision 906.5 760.4
Total reinsurers' share of insurance liabilities 2,714.0 2,176.1
Net
Claims outstanding(*2) 1,648.6 1,629.3
Unearned premium provision 429.9 409.6
Total insurance liabilities -- net 2,078.5 2,038.9
------------------------------------------------- ----------- -----------
*1 Gross claims outstanding at 31 December 2022 is presented before the deduction of salvage and subrogation recoveries totalling GBP125.9 million (2021: GBP87.6 million).
*2 Admiral typically commutes quota share reinsurance contracts in its UK Car Insurance business 36 months following the start of the underwriting year. After commutation, claims outstanding from these contracts are included in Admiral's net claims outstanding balance. Refer to note (v) below.
(iii) Analysis of claims incurred
The following tables illustrate the development of gross and net
UK Insurance and International Insurance claims incurred for the
past ten financial periods, including the impact of re-estimation
of claims provisions at the end of each financial year. The first
table shows actual gross claims incurred and the second shows
actual net claims incurred. Figures are presented on an
underwriting year basis.
Financial year ended 31 December
Analysis of
claims incurred 2013 2014 2015 2016 2017 2018 2019 2020 2021(*1) 2022 Total
(gross amounts) GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------- ------- ------- --------- --------- --------- --------- --------- --------- --------- ----------
Underwriting
year (UK insurance)
2013 and prior (680.7) (196.3) 181.3 56.2 125.3 92.9 33.7 30 31.7 15.1 (310.8)
2014 -- (438.2) (347.1) 25.6 17.1 52.0 15.7 22.5 19.0 13.6 (619.8)
2015 -- -- (428.4) (411.2) 21.7 53.3 58.0 34.0 25.8 18.9 (627.9)
2016 -- -- -- (529.4) (463.7) 82.1 54.8 46.1 50.3 41.0 (718.8)
2017 -- -- -- -- (691.8) (615.0) 123.1 79.5 82.5 37.5 (984.2)
2018 -- -- -- -- -- (818.8) (546.9) 52.8 80.3 104.3 (1,128.3)
2019 -- -- -- -- -- -- (812.4) (476.2) 89.8 71.1 (1,127.7)
2020 -- -- -- -- -- -- -- (697.4) (519.5) 95.2 (1,121.7)
2021 -- -- -- -- -- -- -- -- (864.5) (749.6) (1,614.1)
2022 -- -- -- -- -- -- -- -- -- (1,089.0) (1,089.0)
UK Insurance
gross claims
incurred (680.7) (634.5) (594.2) (858.8) (991.4) (1,153.5) (1,074.0) (908.7) (1,004.6) (1,441.9) (9,342.3)
Underwriting
year (International
Insurance)(*)
(1)
2013 and prior (120.8) (46.3) 11.2 18.3 7.7 10.6 4.4 (0.2) 0.8 0.2 (114.1)
2014 -- (85.2) (65.5) 4.4 5.8 5.5 2.0 (0.4) 0.5 (0.3) (133.2)
2015 -- -- (92.6) (101.6) 7.7 3.1 0.1 (0.1) 0.1 0.1 (183.2)
2016 -- -- -- (138.9) (125.3) 11.7 6.9 3.6 1.4 0.9 (239.7)
2017 -- -- -- -- (174.1) (147.3) 16.5 8.6 5.0 (0.4) (291.7)
2018 -- -- -- -- -- (204.9) (165.7) 20.1 6.2 2.8 (341.5)
2019 -- -- -- -- -- -- (293.8) (141.2) 13.3 9.1 (412.6)
2020 -- -- -- -- -- -- -- (233.6) (160.6) 19.6 (374.6)
2021 -- -- -- -- -- -- -- -- (284.5) (225.5) (510.0)
2022 -- -- -- -- -- -- -- -- -- (353.6) (353.6)
International
Insurance gross
claims incurred (120.8) (131.5) (146.9) (217.8) (278.2) (321.3) (429.6) (343.2) (417.8) (547.1) (2,954.2)
--------------------- ------- ------- ------- --------- --------- --------- --------- --------- --------- --------- ----------
Other gross
claims incurred (2.2) (7.1) (5.4) (0.1) (3.6) (1.1) -- -- (18.4) (16.6) (54.5)
Claims handling
costs (22.9) (21.4) (22.6) (27.1) (35.5) (37.9) (64.5) (66.7) (66.0) (75.8) (440.4)
Total gross
claims incurred (826.6) (794.5) (769.1) (1,103.8) (1,308.7) (1,513.8) (1,568.1) (1,318.6) (1,506.8) (2,081.4) (12,791.4)
--------------------- ------- ------- ------- --------- --------- --------- --------- --------- --------- --------- ----------
Financial year ended 31 December
Analysis of
claims incurred 2013 2014 2015 2016 2017 2018 2019 2020 2021(*1) 2022 Total
(net amounts) GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------- ------- ------- ------- ------- ------- ------- ------- -------- ------- ---------
Underwriting
year (UK Insurance)
2013 and prior (242.3) (5.8) 165.2 91.1 133.1 85.2 26.5 25.3 29.4 14.2 321.9
2014 -- (187.0) (144.1) (16.4) 25.3 38.4 17.2 18.6 13.6 11.3 (223.1)
2015 -- -- (182.1) (162.0) (2.6) 42.6 48.2 26.1 27.8 15.0 (187)
2016 -- -- -- (219.4) (180.7) 48.1 50.7 46.6 41.8 33.5 (179.4)
2017 -- -- -- -- (214.3) (182.9) 77.8 67.1 72.6 35.0 (144.7)
2018 -- -- -- -- -- (261.0) (165.2) 40.6 62.3 98.0 (225.3)
2019 -- -- -- -- -- -- (258.1) (142.5) 56.9 53.5 (290.2)
2020 -- -- -- -- -- -- -- (218.5) (157.8) 52.5 (323.8)
2021 -- -- -- -- -- -- -- -- (277.2) (231.0) (508.2)
2022 -- -- -- -- -- -- -- -- -- (327.9) (327.9)
UK Insurance
net claims incurred (242.3) (192.8) (161.0) (306.7) (239.2) (229.6) (202.9) (136.7) (130.6) (245.9) (2,087.7)
Underwriting
year (International
Insurance)
2013 and prior (49.1) (18.9) 5.1 9.2 3.1 5.3 2.1 -- 0.3 0.2 (42.7)
2014 -- (31.6) (23.3) 1.8 1.8 2.2 0.8 (0.1) 0.2 (0.1) (48.3)
2015 -- -- (33.4) (39.6) 5.1 1.3 1.3 -- 0.1 -- (65.2)
2016 -- -- -- (47.9) (43.5) 6.3 2.4 1.5 0.6 0.3 (80.3)
2017 -- -- -- -- (60.7) (51.5) 5.5 3.2 2.3 0.1 (101.1)
2018 -- -- -- -- -- (71.2) (58.4) 7.8 2.7 0.9 (118.2)
2019 -- -- -- -- -- -- (89.6) (50.1) 4.9 2.2 (132.6)
2020 -- -- -- -- -- -- -- (95.4) (64.0) 5.3 (154.1)
2021 -- -- -- -- -- -- -- -- (114.3) (88.0) (202.3)
2022 -- -- -- -- -- -- -- -- -- (133.9) (133.9)
International
Insurance net
claims incurred (49.1) (50.5) (51.6) (76.5) (94.2) (107.6) (135.9) (133.1) (167.2) (213.0) (1,078.7)
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- -------- ------- ---------
Other net claims
incurred (2.1) (6.9) (5.4) (0.2) (2.6) (1.1) -- -- (11.6) (18.0) (47.9)
Claims handling
costs (9.5) (8.9) (9.4) (11.2) (11.1) (11.8) (20.5) (23.4) (22.9) (29.2) (157.9)
Total net claims
incurred (303.0) (259.1) (227.4) (394.6) (347.1) (350.1) (359.3) (293.2) (332.3) (506.1) (3,372.2)
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- -------- ------- ---------
*1 Financial Year 2021 has been restated to disclose gross claims and net claims incurred in relation to the other segment and net claims in relation to a classification between UK Insurance and International Insurance.
The table below shows the development of UK Car Insurance loss
ratios for the past six financial periods, presented on an
underwriting year basis.
Financial year ended 31 December
UK Car Insurance loss ratio
development 2017 2018 2019 2020 2021 2022
------ ------ ----- ----- ----- -----
Underwriting year (UK Car only)
2017 87% 83% 75% 70% 65% 62%
2018 -- 92% 81% 78% 73% 67%
2019 -- -- 92% 76% 72% 67%
2020 -- -- -- 72% 66% 61%
2021 -- -- -- -- 90% 89%
2022 -- -- -- -- -- 102%
(iv) Analysis of net claims reserve releases:
The following table analyses the impact of movements in prior
year claims provisions on net basis. Figures are presented on an
underwriting year basis.
Financial year ended 31 December
2017 2018 2019 2020 2021 2022
Net GBPm GBPm GBPm GBPm GBPm GBPm
----- ----- ----- ----- ----- -----
Underwriting year (UK Motor Insurance)
2017 and prior 165.9 221.0 217.6 183.9 184.9 108.2
2018 -- -- 25.8 40.7 61.9 97.2
2019 -- -- -- 17.0 54.6 52.7
2020 -- -- -- -- 15.9 51.4
2021 -- -- -- -- -- 3.6
Total net release (UK Motor Insurance) 165.9 221.0 243.4 241.6 317.3 313.1
---------------------------------------------------------- ----- ----- ----- ----- ----- -----
Total net release (UK Household Insurance) 0.5 1.4 2.5 2.8 2.5 1.6
---------------------------------------------------------- ----- ----- ----- ----- ----- -----
Total net release (UK Travel Insurance) -- -- -- -- 2.2 0.4
---------------------------------------------------------- ----- ----- ----- ----- ----- -----
Total net release (International Insurance) 9.5 13.5 14.4 18.6 16.4 15.8
---------------------------------------------------------- ----- ----- ----- ----- ----- -----
Total net release (Other Insurance) -- -- -- -- -- 3.3
---------------------------------------------------------- ----- ----- ----- ----- ----- -----
Total net release 175.9 235.9 260.3 263.0 338.4 334.2
---------------------------------------------------------- ----- ----- ----- ----- ----- -----
Analysis of net releases on UK Motor Insurance:
--Releases on original Admiral net share (UK motor) 92.1 111.4 121.7 104.3 128.1 124.0
-- Releases on commuted quota share reinsurance contracts
(UK motor) 73.8 109.6 121.7 137.3 189.2 189.1
Total UK Motor net release as above 165.9 221.0 243.4 241.6 317.3 313.1
---------------------------------------------------------- ----- ----- ----- ----- ----- -----
Admiral typically commutes quota share reinsurance contracts in
its UK Car Insurance business 24 or 36 months following the start
of the underwriting year. After commutation, any changes in claims
costs on the commuted proportion of the business are reflected
within claims costs and are separately analysed here. Releases on
the share of business originally reinsured but since commuted are
analysed by underwriting year as follows:
Financial year ended 31 December
2017 2018 2019 2020 2021 2022
GBPm GBPm GBPm GBPm GBPm GBPm
----- ----- ----- ----- ----- -----
Underwriting year
2017 and prior 73.8 109.6 121.7 113.9 116.4 66.0
2018 -- -- -- 23.4 43.5 66.5
2019 -- -- -- -- 29.3 31.4
2020 -- -- -- -- -- 25.2
Total releases on commuted quota share reinsurance
contracts (UK motor) 73.8 109.6 121.7 137.3 189.2 189.1
--------------------------------------------------- ----- ----- ----- ----- ----- -----
(v) Reconciliation of movement in claims outstanding
31 December 2022
Gross Reinsurance Net
GBPm GBPm GBPm
--------- ----------- -------
Claims outstanding at start of period 3,045.0 (1,415.7) 1,629.3
Claims incurred (excluding claims handling costs and
releases) 2,443.0 (1,631.9) 811.1
Reserve releases (437.3) 103.1 (334.2)
Movement in claims outstanding due to commutation -- 194.1 194.1
Claims paid and other movements (1,594.6) 942.9 (651.7)
Claims outstanding at end of period 3,456.1 (1,807.5) 1,648.6
----------------------------------------------------- --------- ----------- -------
31 December 2021
Gross Reinsurance Net
GBPm GBPm GBPm
--------- ----------- -------
Claims outstanding 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 outstanding due to commutation -- 318.4 318.4
Claims paid and other movements (1,315.8) 716.7 (599.1)
Claims outstanding at end of period 3,045.0 (1,415.7) 1,629.3
----------------------------------------------------- --------- ----------- -------
(vi) Reconciliation of movement in unearned premium
31 December 2022
Gross Reinsurance Net
GBPm GBPm GBPm
--------- ----------- -------
Unearned premium provision at start of period 1,170.0 (760.4) 409.6
Written in the period 2,849.7 (1,922.4) 927.3
Earned in the period (2,705.4) 1,794.4 (911.0)
Translation differences 22.1 (18.1) 4.0
Unearned premium provision at end of period 1,336.4 (906.5) 429.9
--------------------------------------------- --------- ----------- -------
31 December 2021
Gross Reinsurance Net
GBPm GBPm GBPm
--------- ----------- -------
Unearned premium provision at start of period 1,161.4 (763.9) 397.5
Written in the period 2,513.6 (1,643.0) 870.6
Earned in the period (2,492.3) 1,637.3 (855.0)
Translation differences (12.7) 9.2 (3.5)
Unearned premium provision at end of period 1,170.0 (760.4) 409.6
--------------------------------------------- --------- ----------- -------
6. Investment income and finance costs
6a. Investment return
31 December 31 December
2022 2021
GBPm GBPm
At At
EIR Other Total EIR Other Total
---------------------------------- ---- ----
Investment return
On assets classified as FVTPL -- 8.4 8.4 -- 3.6 3.6
On assets classified as
FVOCI(*1*3) 50.3 2.3 52.6 40.0 2.3 42.3
On assets classified as amortised
costs(*1) 2.0 -- 2.0 0.6 -- 0.6
Net unrealised losses
Unrealised gains on forward
contracts -- 0.5 0.5 -- -- --
Share of associate profit/
loss -- (0.1) (0.1) -- -- --
Accrual for reinsurers' share
of investment return -- (20.0) (20.0) -- (1.6) (1.6)
Interest receivable on cash
and cash equivalents(*1) -- 1.2 1.2 -- 0.3 0.3
Total investment and interest
income (*2) 52.3 (7.7) 44.6 40.6 4.6 45.2
---------------------------------- ---- ------- ------ ---- ----- -------
*1 Interest received during the year was GBP58.7 million (2021: GBP46.6 million)
*2 Total investment return excludes GBP2.2 million of intra-group interest (2021: GBP2.7 million)
*3 Realised gains on sales of debt securities classified as FVOCI are GBP2.2 million (2021: GBP2.3 million)
6b. Financial assets and liabilities
The Group's financial instruments can be analysed as
follows:
31 December 31 December
2022 2021
Continuing operations GBPm GBPm
Financial investments measured at FVTPL
Money market funds 706.5 868.0
Other funds 188.8 187.6
Derivative financial instruments 33.0 5.2
Equity Investments (designated FVTPL) 6.4 2.2
Investment in Associate 2.4 --
937.1 1,063.0
Financial investments classified as FVOCI
Corporate debt securities 1,701.2 2,101.0
Government debt securities 479.8 348.5
Private debt securities 166.6 125.5
2,347.6 2,575.0
Equity investments (designated FVOCI) 25.1 19.3
2,372.7 2,594.3
Financial assets measured at amortised cost
Deposits with credit institutions 101.4 85.3
Total financial investments 3,411.2 3,742.6
--------------------------------------------------- ----------- -----------
Other financial assets
Insurance receivables(*) (2) 1,009.5 956.6
Trade and other receivables (measured at amortised
cost) 326.3 251.9
Insurance and other receivables 1,335.8 1,208.5
Loans and advances to customers (note 7) 823.9 556.8
Cash and cash equivalents 297.0 372.7
Total financial assets 5,867.9 5,880.6
--------------------------------------------------- ----------- -----------
Financial liabilities
Subordinated notes 204.4 204.4
Loan backed securities 714.7 446.5
Other borrowings 20.0 20.0
Subordinated and other financial liabilities 939.1 670.9
Trade and other payables(*1) 2,158.0 1,960.0
Lease liabilities 88.5 105.3
Total financial liabilities 3,185.6 2,736.2
--------------------------------------------------- ----------- -----------
*1 Trade and other payables total balance of GBP2,158.0 million (2021: GBP1,960.0 million) above includes GBP1,807.6 million (2021: GBP1,528.4 million) in relation to tax and social security, deferred income and reinsurer balances that are outside the scope of IFRS 9.
*2 Insurance receivables are treated under IFRS4.
The table below shows how the financial assets held at fair
value have been measured using the fair value hierarchy:
31 December
31 December 2022 2021
FVTPL FVOCI FVTPL FVOCI
GBPm GBPm GBPm GBPm
Level one (quoted prices
in active markets) 900.2 2,180.9 1,060.8 2,449.5
Level two (use of observable
inputs) 28.1 -- -- --
Level three (use of significant
unobservable inputs) 6.4(*1) 191.8 2.2(*1) 144.8
Total 934.7 2,372.7 1,063.0 2,594.3
-------------------------------- -------- -------- ------- -------
*1 Gains through the Income Statement are recognised within Investment return. See note 6b for further information.
Level three investments consist of debt securities and equity
investments. Debt securities are comprised primarily of investments
in debt funds which are valued at the proportion of the Group's
holding of the Net Asset Value (NAV) reported by the investment
vehicle. In addition, there is a small allocation of privately
placed bonds which do not trade on active markets, these are valued
using discounted cash-flow models designed to appropriately reflect
the credit and illiquidity of these instruments. The key
unobservable input across private debt securities is the discount
rate which is based on the credit performance of the assets.
Equity securities are primarily 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:
31 December 2022
Equity Securities Debt Securities Total
Level Three Investments GBPm GBPm GBPm
Balance as at 1 January 2022 21.5 125.5 147.0
Gains / (losses) recognised
in IS 1.8 3.9 5.7
Gains / (losses) recognised
in OCI 1.1 (9.6) (8.5)
Purchases 9.4 74.4 83.8
Disposals (2.5) (27.6) (30.1)
Translation differences 0.3 -- 0.3
Balance as at 31 December
2022 31.6 166.6 198.2
----------------------------- ----------------- --------------- ------
The amortised cost carrying amount of receivables is a
reasonable approximation of fair value.
The fair value of subordinated notes (level one valuation based
on quoted prices in active markets) at 31 December 2022 is GBP196.4
million (2021: GBP217.1 million).
7. Loans and Advances to Customers
31 December 31 December
2022 2021
GBPm GBPm
Loans and advances to customers -- gross carrying
amount 887.6 607.0
Loans and advances to customers -- provision (63.7) (50.2)
Total net loans and advances to customers 823.9 556.8
-------------------------------------------------- ----------- -----------
Loans and advances to customers are comprised of the
following:
31 December 31 December
2022 2021
GBPm GBPm
Unsecured personal loans 856.0 566.9
Finance leases 31.6 40.1
Total loans and advances to customers, gross 887.6 607.0
--------------------------------------------- ----------- -----------
Forward-looking information
Under IFRS 9 the provision must reflect an unbiased and
probability-weighted amount that is determined by evaluating a
range of possible outcomes. The means by which the Group has
determined this is to run scenario analysis.
Management judgment has been used to define the weighting and
severity of the different scenarios based on available data.
The key economic driver of credit losses from the scenarios is
the likelihood of a customer entering hardship through
unemployment. Unemployment forecasts include a risk grade split of
Probability of Default (PD) based on the correlation between
grade-level default rates observed relative to the change in
unemployment rates in the previous downturn, adjusted for the
unemployment forecast expected in the current economic
environment.
The scenario weighting assumptions used are detailed below,
along with the unemployment rate assumed in each scenario at 31
December 2022.
31 December 31 December
2022 2021
Scenario peak 31 December Scenario peak 31 December
Unemployment 2022 Unemployment 2021
rate Weighting rate Weighting
Base 4.8% 40% 4.3% 40%
Upturn 3.5% 10% 4.0% 10%
Downturn 6.0% 40% 6.3% 30%
--------- -------------- ----------- -------------- -----------
Severe 7.9% 10% 6.6% 20%
--------- -------------- ----------- -------------- -----------
The economic scenarios and forecasts have been updated in
conjunction with a third party economics provider. The probability
weightings reflect the view that there is a probability of 90%
attached to recessionary outcomes.
Sensitivities to key areas of estimation uncertainty
31 December 31 December
31 December 2022 31 December 2021
2022 Sensitivity 2021 Sensitivity
Weighting GBPm Weighting GBPm
Base 40% (1.3) 40% (2.5)
Upturn 10% (6.9) 10% (9.7)
Downturn 40% 1.4 30% 6.9
--------- ----------- ------------ ----------- ------------
Severe 10% 5.7 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. At 31 December
2022 the implied weighted peak unemployment rate is 5.5%: the table
shows that in a downturn scenario with a 6.0% peak unemployment
rate the provision would increase by GBP1.4 million, whilst the
upturn would reduce the provision by GBP6.9 million, base case
reduce by GBP1.3 million and severe increase the provision by
GBP5.7 million.
Stage 1 assets represent 82% of the total loan assets; 0.1%
increase in the stage 1 PD, i.e. from 2.4% to 2.5% would result in
a GBP0.7 million increase in ECL.
Post Model Adjustments (PMAs)
31 December 31 December
2022 2021
Post Model Adjustments GBPm GBPm
Model performance 3.9 2.0
Inflation 4.0 2.5
Economic scenarios 0.9 4.6
Mortgage contagion 2.5 --
11.3 9.1
----------------------- ----------- -----------
PMAs are calculated using management judgement and analysis. The
key categories of PMAs are as follows:
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 higher 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.
Mortgage contagion
Captures the risk that as mortgage rates rise, customers may
experience payment shocks when their standard variable or fixed
term mortgages come to an end, and may have to prioritise mortgage
payments over other debts.
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 31 December 2022 and comparative periods
is as follows:
31 December 31 December
2022 2021
Stage Stage
Stage 1 2 3
12- month Lifetime Lifetime
ECL ECL ECL Total Total
GBPm GBPm GBPm GBPm GBPm
Credit Grade(*)
(1)
Higher 506.4 94.0 -- 600.4 405.1
Medium 176.0 24.0 -- 200.0 141.9
Lower 46.0 7.2 -- 53.2 32.0
Credit
impaired -- -- 34.0 34.0 28.0
Gross carrying
amount 728.4 125.2 34.0 887.6 607.0
------------------ ---------- --------- --------- ----------- -----------
Expected
credit loss
allowance (13.4) (23.5) (26.2) (63.1) (49.9)
Other loss
allowance(*)
(2) (0.6) -- -- (0.6) (0.3)
Carrying amount 714.4 101.7 7.8 823.9 556.8
------------------ ---------- --------- --------- ----------- -----------
*1 Credit grade is the internal credit banding given to a customer at origination. This is based on external credit rating information.
*2 Other loss allowance covers losses due to a reduction in current or future vehicle value or costs associated with recovery and sale of vehicles and those as a result of changes in the performance of the EIR asset.
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 GBP489.7 million (2021: GBP678.9
million) represents total other revenue and profit commission and
is disaggregated into the segments included in note 4.
Year ended 31 December 2022
UK International Admiral
Insurance Insurance Money Other Total
GBPm GBPm GBPm GBPm GBPm
Major products / service
line
Instalment income 93.0 5.9 -- -- 98.9
Fee and commission revenue 149.9 33.8 0.3 -- 184.0
Revenue from law firm 15.8 -- -- -- 15.8
Comparison(*1) -- -- -- 8.3 8.3
Other 11.6 -- -- 0.2 11.8
Total other revenue 270.3 39.7 0.3 8.5 318.8
Profit commission 170.5 0.4 -- -- 170.9
Total other revenue and
profit commission 440.8 40.1 0.3 8.5 489.7
---------------------------- ---------- ------------- ------- ----- -----
Timing of revenue
recognition
Point in time 289.9 33.8 0.3 8.5 332.5
Over time 17.8 -- -- -- 17.8
Revenue outside the scope
of IFRS 15 133.1 6.3 -- -- 139.4
440.8 40.1 0.3 8.5 489.7
---------------------------- ---------- ------------- ------- ----- -----
Year ended 31 December 2021
International Admiral Total Discontinued
UK Insurance Insurance Money Other (continuing) (Comparison) 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 firms 25.0 -- -- -- 25.0 -- 25.0
Comparison(*1) -- -- -- 5.3 5.3 59.6 64.9
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 GBP0.3 million (31 December 2021: GBP7.8 million) of income from other Group companies, including GBPnil million (2021: GBP7.5 million) from discontinued operations.
9. Expenses
31 December 2022
Recoverable
from co- and
Gross reinsurers Net
Continuing operations GBPm GBPm GBPm
Acquisition of insurance contracts (*1) 178.8 (98.1) 80.7
Administration and other marketing costs (insurance
contracts) 530.5 (313.6) 216.9
Insurance contract expenses 709.3 (411.7) 297.6
Administration and other marketing costs (other) 136.2 -- 136.2
Share scheme charges 79.3 (27.6) 51.7
Movement in expected credit loss provision 18.9 -- 18.9
Total expenses and share scheme charges -- continuing
operations 943.7 (439.3) 504.4
------------------------------------------------------ ----- ------------- -----
31 December 2021
Recoverable
from co- and
Gross reinsurers Net
Continuing operations GBPm GBPm GBPm
Acquisition of insurance contracts(*1) 179.5 (113.0) 66.5
Administration and other marketing costs (insurance
contracts) 540.0 (343.8) 196.2
Insurance contract expenses 719.5 (456.8) 262.7
Administration and other marketing costs (other) 151.5 -- 151.5
Share scheme charges 99.1 (34.3) 64.8
Movement in expected credit loss provision 13.3 -- 13.3
Total expenses and share scheme charges -- continuing
operations 983.4 (491.1) 492.3
------------------------------------------------------ ----- ------------- -----
*1 Acquisition of insurance contracts expense excludes GBP0.3 million (2021: GBP0.3 million) of aggregator fees from other Group companies.
Analysis of other administration and other marketing costs:
31
December 31 December
2022 2021
Continuing operations GBPm GBPm
Expenses relating to additional
products and fees 74.5 91.9
Loans expenses (excluding movement
on ECL provision) 22.2 23.7
Other expenses 39.5 35.9
Total 136.2 151.5
------------------------------------ --------- ------------
1. Taxation
31 December 31 December
2022 2021
Continuing operations GBPm GBPm
Current tax
Corporation tax on profits for the year 107.6 129.2
(Over)/under-provision relating to prior periods (0.9) 4.2
Current tax charge 106.7 133.4
Deferred tax
Current period deferred taxation movement (10.2) (1.5)
(Over)/under-provision relating to prior periods 0.7 (1.7)
Total tax charge per consolidated income statement 97.2 130.2
--------------------------------------------------- ----------- -----------
Factors affecting the total tax charge are:
31 December 31 December
2022 2021
Continuing operations GBPm GBPm
Profit before tax 469.0 713.5
---------------------------------------------------- ----------- -----------
Corporation tax thereon at effective UK corporation
tax rate of 19.0% (2020: 19.0%) 89.1 135.6
Expenses and provisions not deductible for tax
purposes 2.3 2.2
Non-taxable income (8.7) (8.3)
Impact of change in UK tax rate on deferred tax
balances (2.2) (3.6)
Adjustments relating to prior periods (0.2) 2.5
Impact of different overseas tax rates 4.5 (1.4)
Unrecognised deferred tax 12.4 3.2
Total tax charge for the period as above 97.2 130.2
---------------------------------------------------- ----------- -----------
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 -- 69.4 36.8 21.8 128.0
Amortisation
charge -- (68.0) (18.1) (1.2) (87.3)
Disposals -- -- -- -- --
Impairment -- -- (25.4) -- (25.4)
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 -- 82.9 83.4 5.2 171.5
Amortisation
charge -- (81.0) (18.3) (5.4) (104.7)
Disposals -- -- -- -- --
Impairment -- -- -- -- --
Foreign exchange
movement & other -- 0.6 6.9 (5.9) 1.6
At 31 December
2022 62.3 30.7 136.4 18.9 248.3
------------------ -------- ------------ -------------- --------- -------
11b. Trade and other payables
31 December 31 December
2022 2021
GBPm GBPm
Trade payables 30.0 39.8
Amounts owed to co-insurers 109.5 161.9
Amounts owed to reinsurers 1,513.7 1,274.9
Other taxation and social security liabilities 90.2 71.7
Other payables 96.2 112.4
Accruals and deferred income (see below) 318.4 299.3
Total trade and other payables 2,158.0 1,960.0
----------------------------------------------- ----------- -----------
Of amounts owed to reinsurers (recognised under IFRS 4),
GBP1,389.4 million (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 some of the tax
authorities in the other countries in which it operates. 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 provision has been made in these financial
statements in relation to the matters noted above.
The Group is, from time to time, subject to threatened or actual
litigation and/or legal and/or regulatory disputes, investigations
or similar actions both in the UK and overseas. All potentially
material matters are assessed, with the assistance of external
advisers if appropriate, and in cases where it is concluded that it
is more likely than not that a payment will be made, a provision is
established to reflect the best estimate of the liability. In some
cases it will not be possible to form a view, for example if the
facts are unclear or because further time is needed to properly
assess the merits of the case. No provisions are held in relation
to such matters. In these circumstances, specific disclosure of a
contingent liability will be made where material.
The Directors do not consider that the final outcome of any such
current case will have a material adverse effect on the Group's
financial position, operations or cash flows, and no material
provisions are currently held in relation to such matters.
A number of the Group's contractual arrangements with reinsurers
include features that, in certain scenarios, allow for reinsurers
to recover losses incurred to date. The overall impact of such
scenarios would not lead to an overall net economic outflow from
the Group.
12. Dividends, Earnings and Share Capital
12a. Dividends
Dividends were proposed, approved and paid as follows.
31 December 31 December
2022 2021
GBPm GBPm
Proposed March 2021 (86.0 pence per share approved
April 2021 and paid June 2021) -- 250.8
Declared August 2021 (161.0 pence per share paid
October 2021) -- 470.1
Proposed March 2022 (118.0 pence per share, approved
April 2022 and paid June 2022) 348.1 --
Declared August 2022 (105.0 pence per share, paid
October 2022) 310.2 --
Total dividends 658.3 720.9
----------------------------------------------------- ----------- -----------
The dividends proposed in March (approved in April) represent
the final dividends paid in respect of the 2020 and 2021 financial
years. The dividends declared in August are interim distributions
in respect of 2021 and 2022.
A 2022 final dividend of 52.0 pence per share (approximately
GBP155 million) has been proposed. Refer to the Chair's Statement
and financial narrative for further detail.
12b. Earnings per share
31 December 31 December
2022 2021
GBPm GBPm
Profit for the financial year after taxation
attributable to equity shareholders --
continuing operations 373.0 585.0
--------------------------------------------- ----------- -----------
Profit for the financial year after taxation
attributable to equity shareholders --
discontinued operations -- 412.9
--------------------------------------------- ----------- -----------
Profit for the financial year after taxation
attributable to equity shareholders --
continuing and discontinued operations 373.0 997.9
--------------------------------------------- ----------- -----------
Weighted average number of shares -- basic 300,207,330 297,480,041
--------------------------------------------- ----------- -----------
Unadjusted earnings per share -- basic
-- continuing operations 124.3p 196.7p
--------------------------------------------- ----------- -----------
Unadjusted earnings per share -- basic
-- discontinued operations -- 138.8p
--------------------------------------------- ----------- -----------
Unadjusted earnings per share -- basic
-- continuing and discontinued operations 124.3p 335.5p
--------------------------------------------- ----------- -----------
Weighted average number of shares -- diluted 301,543,390 298,351,248
--------------------------------------------- ----------- -----------
Unadjusted earnings per share -- diluted 123.7p 196.1p
-- continuing operations
--------------------------------------------- ----------- -----------
Unadjusted earnings per share -- diluted -- 138.4p
-- discontinued operations
--------------------------------------------- ----------- -----------
Unadjusted earnings per share -- diluted 123.7p 334.5p
-- continuing and discontinued operations
--------------------------------------------- ----------- -----------
The difference between the basic and diluted number of shares at
the end of 2022 (being 1,336,060 2021: 871,207) relates to awards
committed, but not yet issued under the Group's share schemes.
12c. Share capital
31 December 31 December
2022 2021
GBPm GBPm
Authorised
500,000,000 ordinary shares of 0.1 pence 0.5 0.5
Issued, called up and fully paid
302,837,726 ordinary shares of 0.1 pence 0.3 --
299,554,720 ordinary shares of 0.1 pence -- 0.3
0.3 0.3
----------------------------------------- ----------- -----------
12d. Objectives, policies and procedures for managing capital
Solvency ratio (unaudited)
At the date of this report, the Group's regulatory solvency
ratio, calculated using a capital add-on that has not been subject
to regulatory approval, is 180% (2021: 195%). This includes the
recognition of the 2022 final dividend of 52.0 pence per share
(2021: 118.0 pence per share).
The Group's 2022 Solvency and Financial Condition Report (SFCR)
will, when published, disclose a solvency ratio that is calculated
at the balance sheet date rather than the date of this report,
using the capital add-on that was most recently subject to
regulatory approval. The estimated and unaudited SFCR solvency
ratio is 150%, with the reconciliation between this ratio and the
180% noted above being as follows:
31 December 31 December
2022 2021
GBPm GBPm
Regulatory Solvency ratio (Unaudited)
Solvency Ratio reported in the Annual Report 180% 195%
Change in valuation date (11%) (5%)
Other (including impact of updated, unapproved capital
add-on) (19%) (9%)
Solvency Ratio to be reported in the SFCR 150% 181%
------------------------------------------------------- ----------- -----------
12e. Related party transactions
The Board considers that only the Executive and Non-Executive
Directors of Admiral Group plc are key management personnel.
A summary of the remuneration of key management personnel is as
follows, with further detail relating to the remuneration and
shareholdings of key management personnel set out in the Directors'
Remuneration Report.
Key management personnel received short term employee benefits
in the year of GBP3,058,170 (2021: GBP3,077,686), post-employment
benefits of GBP30,000 (2021: GBP30,643) and share based payments of
GBP1,561,768 (2021: GBP2,149,734). Key management personnel are
able to obtain discounted motor insurance at the same rates as all
other Group staff, typically at a reduction of 15%.
12f. Post balance sheet events
No events have occurred since the reporting date that materially
impact these financial statements.
On 5 March 2023, the Group reached an agreement with Insurify,
Inc. ("Insurify") whereby, Insurify will purchase 100% of the
shares of Inspop USA, LLC ("Compare") from the Group and Compare's
minority shareholders, in return for a minority shareholding in
Insurify.
The total transaction value, including amounts attributable to
minority shareholders is immaterial based on an assessment of the
fair value of shares in Insurify and related options to be received
as consideration, as at the date of the agreement. The Group will
not receive any cash consideration. As at 31 December 2022, the net
assets of Compare and the carrying value of the Group parent
company's investment in Compare net of impairment provisions, were
both GBPnil.
The transaction is expected to complete during the first half of
2023 and is subject to regulatory approval.
13. Reconciliations
The following tables reconcile significant key performance
indicators and non-GAAP measures included in the Strategic Report
to items included in the financial statements.
13a. Reconciliation of continuing operations turnover to reported gross premiums written and other revenue as per the financial statements
31 December 31 December
2022 2021
GBPm GBPm
Gross premiums written after co-insurance per note
5a of financial statements 2,849.7 2,513.6
Premiums underwritten through co-insurance
arrangements 393.4 585.1
Total premiums written 3,243.1 3,098.7
Other Revenue (*1) 318.8 314.8
Admiral Loans interest income 58.7 36.6
3,620.6 3,450.1
Other(*2) 60.0 57.2
Turnover as per note 4 of financial statements(*1) 3,680.6 3,507.3
Intra-group income elimination(*3) 0.3 0.2
Total turnover -- continuing operations (*1) 3,680.9 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 in the Group from other Group companies
13b. Reconciliation of claims incurred to reported loss ratio,
excluding releases on commuted reinsurance
Int.
UK Motor UK Home Ins Other Group
December 2022 GBPm GBPm GBPm GBPm GBPm
Net insurance claims
(note 5) 159.8 51.8 220.3 74.2 506.1
Deduct claims handling
costs (12.0) (1.7) (14.3) (1.2) (29.2)
Prior year release/strengthening
-- net original share 124.0 1.1 15.8 3.7 144.6
Prior year release/strengthening
-- commuted share 189.1 0.5 -- -- 189.6
Impact of reinsurer
caps -- -- (10.5) -- (10.5)
Impact of weather events -- (17.8) -- -- (17.8)
Attritional current
period claims 460.9 33.9 211.3 76.7 782.8
-------- ------- ------ ----- -------
Net insurance premium
revenue 471.0 55.6 241.8 142.6 911.0
Loss ratio -- current
period attritional 97.8% 61.1% 87.4% -- 85.9%
Loss ratio -- current
period weather events -- 32.0% -- -- 2.0%
Loss ratio -- prior
year release/strengthening
(net original share) (26.3%) (1.9%) (6.5%) -- (15.9%)
Loss ratio -- reported 71.5% 91.2% 80.9% -- 72.0%
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
UK Motor UK Home Int. Ins Other Group
December 2022 GBPm GBPm GBPm GBPm GBPm
Net insurance expenses
(note 9) 125.7 17.0 114.8 40.1 297.6
Claims handling costs 12.0 1.7 14.3 1.2 29.2
Intra-group expenses elimination(*)
(1) -- -- 0.3 -- 0.3
Impact of co- and reinsurers
recoveries(*2) (35.6) -- (21.7) -- (57.3)
Net IFRS 16 finance costs 0.4 -- -- -- 0.4
Adjusted net insurance
expenses 102.5 18.7 107.7 41.3 270.2
-------- ------- -------- ----- ------
Net insurance premium
revenue 471.0 55.6 241.8 142.6 911.0
Expense ratio -- reported 21.8% 33.5% 44.5% -- 29.7%
UK Motor UK Home Int. Ins Other Group
December 2021 GBPm GBPm GBPm GBPm GBPm
Net insurance expenses
(note 9) 136.7 17.9 91.3 16.8 262.7
Restructure Costs(*) (3) (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 business, Compare.com to other Group companies: given the re-presentation of other comparison businesses to discontinued operations, those expenses are now included in net insurance expenses in note 9, as acquisition costs.
*2 Impact of co- and reinsurers recoveries relates to the impact of reinsurer caps and ceding commissions
*3 For the year ended 31 December 2021, restructure costs of GBP8.0 million relate to ancillary costs. Total restructure costs incurred for the year ended 31 December 2021 within UK insurance are GBP54.0 million.
Consolidated financial summary (unaudited)
Basis of preparation
The figures below are as stated in the Group financial
statements preceding this financial summary and issued previously.
Only selected lines from the income statement and balance sheet
have been included.
Income statement
2022 2021 2020 2019(*1) 2018
GBPm GBPm GBPm GBPm GBPm
Total premiums 3243.1 3,098.7 2,957.2 2,938.6 2,766.4
--------------------------------------------------- ------- ------- ------- -------- -------
Net insurance premium revenue 911.0 855.0 751.6 709.4 671.8
Other Revenue 364.9 345.3 359.0 348.8 460.6
Profit commission 170.9 304.5 134.0 114.9 93.2
Investment and interest income 44.6 45.2 60.7 35.7 36.0
Net revenue 1,491.4 1,550.0 1,305.3 1,208.8 1,261.6
Net insurance claims (506.1) (332.3) (293.2) (359.3) (350.1)
Net expenses (504.4) (492.3) (391.6) (331.9) (424.0)
Operating profit 480.9 725.4 620.5 517.6 487.5
Net finance costs (11.9) (11.9) (12.3) (12.5) (11.3)
Profit before tax from continuing operations 469.0 713.5 608.2 505.1
Profit before tax from discontinued operations -- 415.7 29.4 17.5
Profit before tax from continuing and discontinued
operations 469.0 1,129.2 637.6 522.6 476.2
--------------------------------------------------- ------- ------- ------- -------- -------
*1 Re-presented from financial year 2019 to reflect discontinued operations
Balance sheet
2022 2021 2020(*1) 2019 2018
GBPm GBPm GBPm GBPm GBPm
Property and equipment 89.8 103.2 146.3 154.4 28.1
Intangible assets 248.3 179.9 167.9 160.3 162.0
Deferred income tax 18.5 9.3 3.3 -- 0.2
Corporation tax asset -- 10.6 17.9 -- --
Reinsurance assets 2,714.0 2,176.1 2,083.2 2,071.7 1,883.5
Insurance and other receivables 1,335.8 1,208.5 1,200.2 1,227.7 1,082.0
Loans and advances to customers 823.9 556.8 359.8 455.1 300.2
Financial investments 3,411.2 3,742.6 3,506.0 3,234.5 2,969.7
Cash and cash equivalents 297.0 372.7 351.7 281.7 376.8
Total assets 8,938.5 8,359.7 7,836.3 7,585.4 6,802.5
-------------------------------- ------- ------- -------- ------- -------
Equity 955.4 1,408.5 1,123.4 918.6 771.1
Insurance contracts 4,792.5 4,215.0 4,081.3 3,975.0 3,736.4
Subordinated and other financial
liabilities 939.1 670.9 488.6 530.1 444.2
Trade and other payables 2,158.0 1,960.0 2,016.1 1,975.9 1,801.5
Lease liabilities 88.5 105.3 126.9 137.1 --
Deferred income tax -- -- -- 0.4 --
Current tax liabilities 5.0 -- -- 48.3 49.3
Total equity and total
liabilities 8,938.5 8,359.7 7,836.3 7,585.4 6,802.5
-------------------------------- ------- ------- -------- ------- -------
*1 Balance sheet is shown on a total group basis (including discontinued operations)
Glossary
Alternative Performance Measures
Throughout this report, the Group uses a number of Alternative
Performance Measures (APMs); measures that are not required or
commonly reported under International Financial Reporting Standards
or 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 subject to
certain adjustments as explained in this glossary. Non-financial
KPIs incorporate information that cannot be derived from the
financial statements but provide further insight into the
performance and financial position of the Group.
APMs may not necessarily be defined in a consistent manner to
similar APMs used by the Group's competitors. They should be
considered as a supplement rather than a substitute for GAAP
measures.
Turnover Turnover is defined as total premiums written
(as below), other revenue and income from Admiral
Loans. It is reconciled to financial statement
line items in note 14a to the financial statements.
It has been redefined in the current period
to exclude revenue from discontinued operations.
This measure has been presented by the Group
in every Annual Report since it became a listed
Group in 2004. It reflects the total value
of the revenue generated by the Group and analysis
of this measure over time provides a clear
indication of the size and growth of the Group.
The measure was developed as a result of the
Group's business model. The UK Car insurance
business has historically shared a significant
proportion of the risks with Munich Re, a third-party
reinsurance Group, through a co-insurance arrangement,
with the arrangement subsequently being replicated
in some of the Group's international insurance
operations. Premiums and claims accruing to
the external co-insurer are not reflected in
the Group's income statement and therefore
presentation of this metric enables users of
the Annual Report to see the scale of the Group's
insurance operations in a way not possible
from taking the income statement in isolation.
---------------------- -------------------------------------------------------
Total Premiums Total premiums written are the total forecast
Written premiums, net of forecast cancellations written
in the underwriting year within the Group,
including co-insurance. It is reconciled to
financial statement line items in note 14a
to the financial statements.
This measure has been presented by the Group
in every Annual Report since it became a listed
Group in 2004. It reflects the total premiums
written by the Group's insurance intermediaries
and analysis of this measure over time provides
a clear indication of the growth in premiums,
irrespective of how co-insurance agreements
have changed over time.
The reasons for presenting this measure are
consistent with that for the Turnover APM noted
above.
As noted in the Turnover metric above, in 2020
a reduction of GBP97 million has been reflected
within 2020 total premiums written, to reflect
the "Stay at Home" premium rebate.
---------------------- -------------------------------------------------------
Group profit before Group profit before tax represents profit before
tax tax from continuing operations, excluding restructure
costs
---------------------- -------------------------------------------------------
Earnings per share, Earnings per share from continuing operations
continuing operations before restructure costs represents the profit
after tax attributable to equity shareholders
excluding restructure costs, divided by the
weighted average number of basic shares.
---------------------- -------------------------------------------------------
Underwriting result For each insurance business an underwriting
(profit or loss) result is presented showing the segment result
prior to the inclusion of profit commission,
other income contribution and instalment income.
It demonstrates the insurance result, i.e.
premium revenue and investment income on insurance
assets less claims incurred and insurance expenses.
---------------------- -------------------------------------------------------
Loss Ratio Reported loss ratios are expressed as a percentage
of claims incurred divided by net earned premiums.
There are a number of instances within the
Annual Report where adjustments are made to
this calculation in order to more clearly present
the underlying performance of the Group and
operating segments within the Group. The calculations
of these are presented within note 14b to the
accounts and explanation is as follows.
UK reported motor loss ratio: Within the UK
insurance segment the Group separately presents
motor ratios, i.e. excluding the underwriting
of other products that supplement the car insurance
policy. The motor ratio is adjusted to i) exclude
the impact of reserve releases on commuted
reinsurance contracts and ii) exclude claims
handling costs that are reported within claims
costs in the income statement.
International insurance loss ratio: As for
the UK Motor loss ratio, the international
insurance loss ratios presented exclude the
underwriting of other products that supplement
the car insurance policy. The motor ratio is
adjusted to exclude the claims element of the
impact of reinsurer caps as inclusion of the
impact of the capping of reinsurer claims costs
would distort the underlying performance of
the business.
Group loss ratios: Group loss ratios are reported
on a consistent basis as the UK and international
ratios noted above. Adjustments are made to
i) exclude the impact of reserve releases on
commuted reinsurance contracts, ii) exclude
claims handling costs that are reported within
claims costs in the income statement and iii)
exclude the claims element of the impact of
international reinsurer caps.
---------------------- -------------------------------------------------------
Expense Ratio Reported expense ratios are expressed as a
percentage of net operating expenses divided
by net earned premiums.
There are a number of instances within the
Annual Report where adjustments are made to
this calculation in order to more clearly present
the underlying performance of the Group and
operating segments within the Group. The calculations
of these are presented within note 14c to the
accounts and explanation is as follows.
UK reported motor expense ratio: Within the
UK insurance segment the Group separately presents
motor ratios, i.e. excluding the underwriting
of other products that supplement the car insurance
policy. The motor ratio is adjusted to i) include
claims handling costs that are reported within
claims costs in the income statement, ii) include
intra-group aggregator fees charged by the
UK comparison business to the UK insurance
business and iii) exclude the expense element
of the impact of reinsurer caps as inclusion
of the impact of the capping of reinsurer expenses
would distort the underlying performance of
the business, and iv) exclude restructure costs
International insurance expense ratio: As for
the UK Motor loss ratio, the international
insurance expense ratios presented exclude
the underwriting of other products that supplement
the car insurance policy. The motor ratio is
adjusted to i) exclude the expense element
of the impact of reinsurer caps as inclusion
of the impact of the capping of reinsurer expenses
would distort the underlying performance of
the business and ii) include intra-group aggregator
fees charged by the overseas comparison businesses
to the international insurance businesses.
Group expense ratios: Group expense ratios
are reported on a consistent basis as the UK
and international ratios noted above. Adjustments
are made to i) include claims handling costs
that are reported within claims costs in the
income statement, ii) include intra-group aggregator
fees charged by the Group's comparison businesses
to the Group's insurance businesses and iii)
exclude the expense element of the impact of
reinsurer caps.
---------------------- -------------------------------------------------------
Combined Ratio Reported combined ratios are the sum of the
loss and expense ratios as defined above. Explanation
of these figures is noted above and reconciliation
of the calculations are provided in notes 14b
and 14c.
---------------------- -------------------------------------------------------
Return on Equity Return on equity is calculated as profit after
tax from continuing operations, before restructure
costs, for the period attributable to equity
holders of the Group divided by the average
total equity attributable to equity holders
of the Group in the year excluding any net
assets related to discontinued operations,
including the exclusion of the net proceeds
from sale still to be distributed. This average
is determined by dividing the opening and closing
positions for the year by two. It has been
redefined in the current period to exclude
the impact of discontinued operations.
---------------------- -------------------------------------------------------
Group Customers Group customer numbers reflect the total number
of cars, households and vans on cover at the
end of the year, across the Group, and the
total number of travel insurance and loans
customers.
This measure has been presented by the Group
in every Annual Report since it became a listed
Group in 2004. It reflects the size of the
Group's customer base and analysis of this
measure over time provides a clear indication
of the growth. It is also a useful indicator
of the growing significance to the Group of
the different lines of business and geographic
regions.
---------------------- -------------------------------------------------------
Effective Tax Rate Effective tax rate is defined as the approximate
tax rate derived from dividing the Group's
profit before tax by the tax charge going through
the income statement. It is a measure historically
presented by the Group and enables users to
see how the tax cost incurred by the Group
compares over time and to current corporation
tax rates.
---------------------- -------------------------------------------------------
Additional Terminology
There are many other terms used in this report that are specific
to the Group or the markets in which it operates. These are defined
as follows:
Accident year The year in which an accident occurs, also referred
to as the earned basis.
----------------------- -------------------------------------------------------
Actuarial best The probability-weighted average of all future
estimate claims and cost scenarios calculated using historical
data, actuarial methods and judgement.
----------------------- -------------------------------------------------------
ASHE 'Annual Survey of Hours and Earnings' -- a statistical
index that is typically used for calculation
inflation of annual payment amounts under Periodic
Payment Order (PPO) claims settlements.
----------------------- -------------------------------------------------------
Claims reserves A monetary amount set aside for the future payment
of incurred claims that have not yet been settled,
thus representing a balance sheet liability.
----------------------- -------------------------------------------------------
Co-insurance An arrangement in which two or more insurance
companies agree to underwrite insurance business
on a specified portfolio in specified proportions.
Each co-insurer is directly liable to the policyholder
for their proportional share.
----------------------- -------------------------------------------------------
Commutation An agreement between a ceding insurer and the
reinsurer that provides for the valuation, payment,
and complete discharge of all obligations between
the parties under a particular reinsurance contract.
The Group typically commutes UK motor insurance
quota share contracts after 24-36 months from
the start of an underwriting year where it makes
economic sense to do so. Although an individual
underwriting year may be profitable, the margin
held in the financial statement claims reserves
may mean that an accounting loss on commutation
must be recognised at the point of commutation
of the reinsurance contracts. This loss on commutation
unwinds in future periods as the financial statement
loss ratios develop to ultimate.
----------------------- -------------------------------------------------------
Coverage period The period during which the entity provides
coverage for insured events. This period includes
the coverage that relates to all premiums within
the boundary of the insurance contract.
----------------------- -------------------------------------------------------
Liability for incurred The risk of a possible future change in one
claims ("LIC") or more of a specified interest rate, financial
instrument price, commodity price, currency
exchange rate, index of prices or rates, credit
rating or credit index or other variable, provided
in the case of a non-financial variable that
the variable is not specific to a party to the
contract
----------------------- -------------------------------------------------------
Liability for remaining An entity's obligation to investigate and pay
coverage ("LRC") valid claims under existing insurance contracts
for insured events that have not yet occurred
(i.e. the obligation that relates to the unexpired
portion of the coverage period).
----------------------- -------------------------------------------------------
Insurance market The tendency for the insurance market to swing
cycle between highs and lows of profitability over
time, with the potential to influence premium
rates (also known as the "underwriting cycle").
----------------------- -------------------------------------------------------
Net claims The cost of claims incurred in the period, less
any claims costs recovered via salvage and subrogation
arrangements or under reinsurance contracts.
It includes both claims payments and movements
in claims reserves.
----------------------- -------------------------------------------------------
Net insurance premium Also referred to as net earned premium. The
revenue element of premium, less reinsurance premium,
earned in the period.
----------------------- -------------------------------------------------------
Net promotor score NPS is currently measured based on a subset
of customer responding to a single question:
On a scale of 0-10 (10 being the best score),
how likely would you recommend our company to
a friend, family or colleague through phone,
online or email. Answers are then placed in
3 groups; Detractors: scores ranging from 0
to 6]; Passives/neutrals: scores ranging from
[7 to 8]; Promoters: scores ranging from [9
to 10] and the final NPS score is : % of promoters
- % of detractors
----------------------- -------------------------------------------------------
Ogden discount The discount rate used in calculation of personal
rate injury claims settlements in the UK.
----------------------- -------------------------------------------------------
Periodic Payment A compensation award as part of a claims settlement
Order (PPO) that involves making a series of annual payments
to a claimant over their remaining life to cover
the costs of the care they will require.
----------------------- -------------------------------------------------------
Premium A series of payments are made by the policyholder,
typically monthly or annually, for part of or
all of the duration of the contract. Written
premium refers to the total amount the policyholder
has contracted for, whereas earned premium refers
to the recognition of this premium over the
life of the contract.
----------------------- -------------------------------------------------------
Premium Allocation Under the PAA, the general measurement model
Approach ("PAA") may be simplified for certain contracts to measure
the liability for remaining coverage.
Generally, the PAA measures the liability for
remaining coverage as the amount of premiums
received net of acquisition cash flows paid,
less the amount of premiums and acquisition
cash flows that have been recognised in the
profit and loss over the expired portion of
the coverage period based on the passage of
time.
----------------------- -------------------------------------------------------
Profit commission A clause found in some reinsurance and coinsurance
agreements that provides for profit sharing.
----------------------- -------------------------------------------------------
Reinsurance Contractual arrangements whereby the Group transfers
part or all of the insurance risk accepted to
another insurer. This can be on a quota share
basis (a percentage share of premiums, claims
and expenses) or an excess of loss basis (full
reinsurance for claims over an agreed value).
----------------------- -------------------------------------------------------
Retrospective approach The method of transition to IFRS 17 meaning
(full -- IFRS 17) an entity shall at the transition date: identify,
recognise and measure each group of insurance
contracts as if IFRS 17 had always applied
----------------------- -------------------------------------------------------
Risk adjustment The compensation an entity requires for bearing
for non-financial the uncertainty about the amount and timing
risk of the cash flows that arises from non-financial
risk as the entity fulfils insurance contracts
----------------------- -------------------------------------------------------
Scaled Agile Scaled Agile is a framework that uses a set
of organisational and workflow patterns for
implementing agile practices at an enterprise
scale. Scaled agile at Admiral represents the
ability to drive agile at the team level whilst
applying the same sustainable principles of
the group.
----------------------- -------------------------------------------------------
Securitisation A process by which a group of assets, usually
loans, is aggregated into a pool, which is used
to back the issuance of new securities. A company
transfer assets to a special purpose entity
(SPE) which then issues securities backed by
the assets.
----------------------- -------------------------------------------------------
Special Purpose An entity that is created to accomplish a narrow
Entity (SPE) and well-defined objective. There are specific
restrictions or limited around ongoing activities.
The Group uses an SPE set up under a securitisation
programme.
----------------------- -------------------------------------------------------
Ultimate loss ratio A projected actuarial best estimate loss ratio
for a particular accident year or underwriting
year.
----------------------- -------------------------------------------------------
Underwriting year The year in which an insurance policy was incepted.
----------------------- -------------------------------------------------------
Underwriting year Also referred to as the written basis. Claims
basis incurred are allocated to the calendar year
in which the policy was underwritten. Underwriting
year basis results are calculated on the whole
account (including co-insurance and reinsurance
shares) and include all premiums, claims, expenses
incurred and other revenue (for example instalment
income and commission income relating to the
sale of products that are ancillary to the main
insurance policy) relating to policies incepting
in the relevant underwriting year.
----------------------- -------------------------------------------------------
Written/Earned An insurance policy can be written in one calendar
basis year but earned over a subsequent calendar year.
----------------------- -------------------------------------------------------
(1) Group profit before tax, Earnings per share, Group turnover,
Group net revenue and Return on equity are presented on a
continuing operations basis
(2) Group profit before tax, Earnings per share and Return on
equity in 2021 exclude the impact of one-off restructure costs
totalling GBP55.5 million
(3) Alternative Performance Measures -- refer to the end of the
report for definition and explanation
(4) Employees participate in the Approved Share Incentive Plan
(SIP) after completing a minimum of 12 months' service
(5) Appointment subject to regulatory and shareholder
approval
(6) Group profit -- 2022: GBP469.0 million; 2021: GBP769 million
excluding restructure costs, 2019: GBP505.1 million
(7) Elephant loss -- 2022: GBP48.9 million loss; 2021: GBP13.0
million
(8) Location based emissions.
(9) Appointment subject to regulatory and shareholder
approval
(10) Data source: CCC; for 2022 data only available YoY up to Q3
2022
(11) Awarded by ESCDA (Elu Service Client De l'Année)
https://escda.fr/
(12) Based on analysis by L'observatoire des Parcours Clients by
PMP and Skeepers
(13) Data source: CCC; YoY to Q3 2022
(14) Elephant loss -- 2022: GBP48.9 million; 2021: GBP13.0
million
(END) Dow Jones Newswires
March 08, 2023 02:00 ET (07:00 GMT)
Copyright (c) 2023 Dow Jones & Company, Inc.
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