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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Admiral Group Plc | LSE:ADM | London | Ordinary Share | GB00B02J6398 | ORD 0.1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 25.00 | 0.92% | 2,735.00 | 2,732.00 | 2,734.00 | 2,737.00 | 2,688.00 | 2,706.00 | 405,422 | 16:35:27 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Ins Agents,brokers & Service | 742.2M | 338M | 1.1146 | 24.50 | 8.28B |
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Admiral Group plc results for the six months ended 30 June 2017
16 August 2017
2017 Interim Results Highlights
30 June 2017 30 June 2016 % change
Group's share of
profit before GBP195
tax(*1) million GBP193 million +1%
Group statutory GBP193
profit before tax million GBP190 million +2%
Earnings per share 57.3 pence 55.9 pence +3%
51.0 p/share (62.9 p/share including additional capital
Interim dividend 56.0 p/share return) +10%
Return on equity(*1) 55% 50% +10%
GBP1.45
Group turnover(*1) billion GBP1.26 billion +15%
GBP0.55
Group net revenue billion GBP0.51 billion +8%
Group customers(*1) 5.46 million 4.82 million +13%
UK insurance
customers(*1) 4.34 million 3.90 million +11%
International car
insurance
customers(*1) 961,200 757,900 +27%
Group's share of GBP3.1
price comparison million
result(*1) profit GBP1.1 million loss
GBP2.4
Statutory price million
comparison result profit GBP4.8 million loss
Solvency ratio (post
dividend)(*1, 2) 214% 180% +19%
Over 9,000 staff each receive free shares worth a total of GBP1,800
under the employee share scheme based on the interim 2017 results
(*1) Alternative Performance Measures - refer to the end of the report
for definition and explanation.
(*2) Refer to capital structure and financial position section later in
the report for further information.
Comment from David Stevens, Group Chief Executive Officer
"The first half of 2017 saw Admiral ambitious in pursuit of both
immediate and longer-term growth opportunities.
"We've grown turnover and customer numbers in our existing businesses by
over 13% while also delivering a first half of important "firsts" - the
first loans originated on our new dedicated lending system, the first
cars sold on Confused.com http://Confused.com , the first vans directly
underwritten in the UK and Spain.
"Most of the adverse impact from the increase in the costs of large
injury claims, resulting from the change in the Ogden discount rate, was
captured in our 2016 second half result. However, some extra costs carry
into 2017. In these circumstances, we are happy to report a marginal
increase in profitability and to deliver a more material increase in the
underlying dividend."
Dividend
The Directors have declared an interim dividend of 56.0 pence per share,
representing a normal dividend of 37.9 pence per share and a special
dividend of 18.1 pence per share. The dividend will be paid on 6 October
2017. The ex-dividend date is 7 September 2017 and the record date is 8
September 2017.
Management presentation
Analysts and investors will be able to access the Admiral Group
management presentation which commences at 9.00 BST on Wednesday 16
August 2017 by dialling + 44 (0)20 3059 8125. A copy of the
presentation slides will be available at www.admiralgroup.co.uk
H1 2017 Group overview
Summary of the H1 2017 result
The Group has continued to grow strongly in the first six months of 2017
with turnover up 15% to GBP1.45 billion (H1 2016: GBP1.26 billion) and
net revenue 8% higher at GBP0.55 billion (H1 2016: GBP0.51 billion).
Customer numbers increased 13% to 5.46 million (30 June 2016: 4.82
million).
The Group's share of pre-tax profit increased to GBP194.5 million from
GBP193.3 million whilst statutory profit before tax increased to
GBP193.4 million (H1 2016: GBP189.5 million). Slightly higher UK
Insurance profit, a lower loss in the International Insurance segment
and an improved Price Comparison result were partially offset by higher
other Group charges and business development costs.
The Group's UK Insurance business (private car, household and van) grew
turnover by 11% to GBP1.14 billion (H1 2016: GBP1.03 billion) and
customer numbers increased by 11% to 4.3 million from 3.9 million.
UK Insurance profit before tax was slightly higher at GBP226.2 million
(H1 2016: GBP224.0 million) reflecting the adverse impact of the lower
Ogden discount rate on current period claims costs and profit commission,
as well as a number of other offsetting impacts. The UK results are
discussed in further detail below.
Outside the UK, Admiral's International Insurance businesses grew
combined turnover by 39% to GBP221.9 million (H1 2016: GBP159.2
million). Customer numbers also grew strongly by 27% to 961,200 (30
June 2016: 757,900). In aggregate the businesses reduced losses to
GBP10.1 million from GBP12.9 million mainly due to reduced losses in the
Group's US operation, Elephant Auto.
Finally, Admiral's Price Comparison businesses made a combined profit
(excluding minority interests' shares) of GBP3.1 million (H1 2016:
GBP1.1 million loss), mainly reflecting a reduced loss in the Group's US
Price Comparison business, Compare.com. Confused.com http://confused.com
in the UK continued to invest in its new focus on motor-related products
and services, with increased marketing costs leading to a reduced profit
of GBP4.5 million (H1 2016: GBP8.3 million). The international price
comparison businesses reported a reduced aggregate loss of GBP1.4
million (H1 2016: loss GBP9.4 million) with growing profit in the
European operations (GBP2.0 million, up from GBP0.7 million) offset by
the loss in Compare.com of GBP3.4 million (H1 2016: loss GBP10.1
million).
Earnings per share
Earnings per share increased by 3% to 57.3 pence (H1 2016: 55.9 pence),
the increase being broadly in line with the post-tax profit movements.
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 or buffers.
The Board has declared a total interim dividend of 56.0 pence per share
(GBP157 million), as follows:
-- 37.9 pence per share normal dividend based on the policy of distributing
65% of post-tax profits; and
-- A special dividend of 18.1 pence per share.
The total 2017 interim dividend is 10% ahead of 2016's interim (51.0
pence per share, excluding the return of surplus capital of 11.9 pence
per share that was paid with the 2016 interim). The payout ratio is 98%
(Interim 2016 excluding the return of surplus capital: 91%).
The Group's solvency position remains strong at 214% after accounting
for the interim dividend.
The payment date is 6 October 2017, ex-dividend date 7 September 2017
and record date 8 September 2017.
Investments and cash
Admiral's investment strategy was unchanged in 2017 and the Group
continued to invest in the same asset classes as previous years.
The Group's key objective in relation to investments is capital
preservation, with additional priorities including low volatility of
returns and high levels of liquidity. All objectives continue to be met.
The Group's Investment Committee performs regular reviews of its
investment strategy to ensure it continues to deliver the objectives.
Cash and investments analysis
GBPm 30 June 2015 30 June 2016 30 June 2017 31 Dec 2016
Fixed income and debt
securities 1,324.3 1,483.3 1,496.4 1,469.2
Money market funds
and other fair value
instruments 671.0 693.4 968.8 781.0
Cash deposits 247.5 178.7 130.0 170.0
Cash 216.0 295.4 348.6 326.6
Total 2,458.8 2,650.8 2,943.8 2,746.8
The credit quality of the underlying securities has not changed
significantly.
Investment and interest income in the first half of 2017 was GBP23.3
million, a decrease of GBP10.1 million on 2016 (GBP33.4 million). The
decrease is mainly due to the first half of 2016 benefiting from GBP9
million relating to movements in accruals relating to quota share
reinsurance arrangements. Excluding that impact, underlying income was
broadly flat in the period.
The underlying rate of return (excluding the reinsurance accrual) on the
Group's cash and investments was 1.2% (H1 2016: 1.4%).
Capital structure and financial position
Return on equity for the first half was 55%, up from 50% for the first
half of 2016. The increase is due to a combination of an increase in
post-tax profits and lower average equity.
A key feature of the business model is the extensive use of co- and
reinsurance across the Group. The Group's co-insurance and quota share
reinsurance arrangements for the UK Car insurance business are in place
until at least the end of 2018. In 2017 and 2018, the Group's net share
is 22%.
Similar long term arrangements are in place in the Group's International
Insurance operations and other UK Insurance businesses.
The Group continues to manage its capital to ensure that all entities
within the Group are able to continue as going concerns and that
regulated entities comfortably meet regulatory capital requirements.
Surplus capital within subsidiaries is paid up to the Group holding
company in the form of dividends.
The Group's regulatory capital is based on the Solvency II Standard
Formula, with a capital add-on to reflect recognised limitations in the
Standard Formula with respect to Admiral's business (predominantly in
respect of profit commission arrangements in co- and reinsurance
agreements and risks arising from claims including Periodic Payment
Order (PPO) claims).
The Group continues to develop its partial internal model to form the
basis of future capital requirements. Due to an extension in model
scope the regulatory application for approval is now expected in late
2018.
The majority of the Group's capital requirement is derived from its
European insurance operations, Admiral Insurance (Gibraltar) Limited
(AIGL) and Admiral Insurance Company Limited (AICL). The estimated (and
unaudited) Solvency II position for the Group at the date of this report
was as follows:
Group capital position
Group GBPbn
Eligible Own Funds (pre 2017 interim dividend) 1.19
2017 interim dividend 0.16
Eligible Own Funds (post 2017 interim dividend) 1.03
Solvency II capital requirement 0.48
Surplus over regulatory capital requirement 0.55
Solvency ratio (post dividend)(*1) 214%
*1 Solvency ratio calculated on a volatility adjusted basis.
The Group's capital includes GBP200 million ten year dated subordinated
bonds. The rate of interest is fixed at 5.5% and the bonds mature in
July 2024. The bonds qualify as tier two capital under the Solvency II
regulatory regime.
Estimated sensitivities to the current Group solvency ratio are
presented in the table below. These sensitivities cover the two most
material risk types, insurance risk and market risk, and within these
risks cover the most significant elements of the risk profile. Aside
from the catastrophe events, estimated sensitivities have not been
calibrated to individual return periods.
Solvency ratio sensitivities
UK Car - incurred loss ratio +5% -26%
UK Car - 1 in 200 catastrophe event -2%
UK Household - 1 in 200 catastrophe event -3%
Interest rate - yield curve down 50 bps -10%
Credit spreads widen 100 bps -4%
Currency - 25% movement in euro and US dollar -3%
ASHE - long term inflation assumption up 0.5% -4%
Taxation
The tax charge reported in the Consolidated Income Statement is GBP31.5
million (H1 2016: GBP36.2 million), which equates to 16.3% (H1 2016:
19.1%) of profit before tax. The lower effective rate of taxation
compared to the prior period results from lower losses in the Group's US
businesses leading to a lower level of unrecognised deferred tax asset.
The Group's results are presented in the following sections as UK
Insurance, International Car Insurance and Price Comparison.
UK Insurance
GBPm 30 June 2015 30 June 2016 30 June 2017 31 Dec 2016
Turnover(*1) 881.8 1,028.5 1,144.1 2,063.1
Total premiums
written(*1) 802.3 933.6 1,022.6 1,862.6
Net insurance premium
revenue 193.6 218.2 241.0 454.4
Underwriting
profit(*1) 99.5 95.4 105.7 109.2
Profit commission and
other income 120.4 128.6 120.5 229.3
UK Insurance profit
before tax 219.9 224.0 226.2 338.5
*1 Alternative Performance Measures - refer to the end of this report
for definition and explanation
Split of UK Insurance profit before tax
GBPm 30 June 2015 30 June 2016 30 June 2017 31 Dec 2016
Car 219.2 222.8 224.2 335.8
Household 0.7 1.2 1.6 2.7
Van - - 0.4 -
UK Insurance profit 219.9 224.0 226.2 338.5
Key performance indicators
30 June 2015 30 June 2016 30 June 2017 31 Dec 2016
Cars insured at
period end 3.18m 3.52m 3.77m 3.65m
Households insured at
period end 0.24m 0.38m 0.55m 0.47m
Vans insured at
period end - - 0.02m -
Total UK Insurance
customers 3.42m 3.90m 4.34m 4.12m
The key highlights for the UK Insurance business for H1 2017 were:
-- Generally favourable conditions in motor and household markets with rates
increasing (notably in Q2 in motor)
-- Improved competitiveness at new business and strong customer retention
helped turnover increase by 11% to GBP1.14 billion (H1 2016: GBP1.03
billion) and customer numbers move 11% higher to 4.34 million (30 June
2016: 3.90 million)
-- UK Insurance profitability was slightly ahead of H1 2016 at GBP226.2
million (H1 2016: GBP224.0 million) with modest improvements in the Car
and Household results and the first small profit from Van insurance
-- Significant releases from booked Car Insurance reserves, though less
substantial on Admiral's original net share than H1 2016 (partly
resulting from a cautious approach to loss ratio projections at 30 June
2017)
-- A reduced (though still significant and prudent) level of relative
reserve margin strength in car insurance reserves (partly due to
increased confidence over the impact of the change in Ogden rate to
-0.75%)
-- A further increase in Household Insurance profit, though the total
remains small in the context of the overall result, reflecting the
continued substantial growth of the business and also a cautious approach
to setting and releasing claims reserves and hence profit recognition
UK Car Insurance
GBPm 30 June 2015 30 June 2016 30 June 2017 31 Dec 2016
Turnover(*1) 857.9 993.2 1,082.9 1,987.0
Total premiums
written(*1) 779.0 899.7 966.7 1,789.3
Net insurance premium
revenue 188.9 210.7 229.7 437.4
Investment income 6.3 24.5 15.8 39.3
Net insurance claims (69.3) (108.9) (108.4) (304.7)
Net insurance
expenses (26.2) (30.1) (30.6) (61.0)
Underwriting
profit(*1) 99.7 96.2 106.5 111.0
Profit commission 44.2 41.7 28.8 52.7
Underwriting profit
plus profit
commission 143.9 137.9 135.3 163.7
Net other income 63.3 69.6 66.5 138.6
Instalment income 12.0 15.3 22.4 33.5
UK Car Insurance
profit before tax 219.2 222.8 224.2 335.8
*1 Alternative Performance Measures - refer to the end of this report
for definition and explanation
Split of underwriting profit
GBPm 30 June 2015 30 June 2016 30 June 2017 31 Dec 2016
Car insurance 91.5 85.5 99.7 93.6
Additional products 8.2 10.7 6.8 17.4
Underwriting profit 99.7 96.2 106.5 111.0
Key performance indicators
30 June 2015 30 June 2016 30 June 2017 31 Dec 2016
Reported Car loss
ratio(*1,*2) 58.2% 56.9% 66.5% 73.3%
Reported Car expense
ratio(*1,*3) 17.4% 18.1% 16.4% 17.5%
Reported Car combined
ratio(*1) 75.6% 75.0% 82.9% 90.8%
Written basis Car
expense ratio 16.2% 17.0% 15.8% 16.5%
Reported total
combined
ratio(*1,*4) 73.1% 72.0% 81.3% 87.5%
Claims reserve GBP50.0m GBP55.9m GBP44.9m GBP58.3m
releases - original
net share(*1,*5)
Claims reserve GBP42.6m GBP12.8m GBP47.4m GBP17.1m
releases - commuted
reinsurance(*1,*6)
Total claims reserve GBP92.6m GBP68.7m GBP92.3m GBP75.4m
releases
Other Revenue per GBP64 GBP64 GBP61 GBP62
vehicle
*1 Alternative Performance Measures - refer to the end of this report
for definition and explanation
*2 Car loss ratio adjusted to exclude impact of reserve releases on
commuted reinsurance contracts. Reconciliation in note 12b.
*3 Car expense ratio is calculated by including claims handling
expenses that are reported within claims costs in the income statement.
Reconciliation in note 12c.
*4 Reported total combined ratio includes additional products
underwritten by Admiral.
*5 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.
*6 Commuted reinsurance shows releases on the proportion of the
account that was originally ceded under quota share reinsurance
contracts but has since been commuted and hence reported through
underwriting and not profit commission.
The UK Car Insurance business benefited from continued success in
attracting and retaining customers in the competitive UK market and this,
together with higher average premiums, contributed to an increase in
turnover of 9% to GBP1.08 billion (30 June 2016: GBP0.99 billion). The
number of vehicles insured also grew by 7% to 3.77 million (30 June
2016: 3.52 million) with volumes improving in the second quarter.
The UK market saw sustained rate increases during 2016 which have
continued into the first six months of 2017, particularly in the second
quarter following the change in Ogden discount rate referred to below.
Admiral increased its rates in December 2016 in advance of the Ogden
change and has continued to do so throughout the first half.
Whilst the business continued to grow in top line terms, UK Car
Insurance profit was broadly flat at GBP224.2 million compared to
GBP222.8 million for H1 2016, although the combined ratio was higher at
82.9% (H1 2016: 75.0%). Despite a number of offsetting items impacting
the results, the main driver of the small increase in profitability is
stable projected ultimate loss ratios during the first half of 2017 and
resulting lower reserve releases than would have been the case had the
projections improved materially as discussed further below. The main
items affecting the results were:
-- The higher premium revenue was offset by a slightly higher current year
loss ratio (shown in the table below) and therefore higher net claims
costs;
-- Lower reserve releases on Admiral's original net share (approximately
GBP15 million adverse impact) impacted by Ogden and discussed below;
-- Higher reserve releases on the portion of reserves originally reinsured
but since commuted (approximately GBP35 million positive impact) also
discussed below, leading to higher aggregate net reserve releases across
original net and commuted shares.
-- Lower profit commission income (GBP12 million adverse impact) resulting
from lower reserve releases (again Ogden impacted);
-- Lower investment return (GBP9 million adverse impact) as explained in the
Investments and Cash section above.
Combined ratio and underwriting results
UK Car combined ratio 30 June 2015 30 June 2016 30 June 2017 31 Dec 2016
Current year loss
ratio, excluding
releases 86.8% 85.9% 87.5% 87.7%
Reserve releases -
original net share 28.5% 29.0% 21.0% 14.4%
Loss ratio net of
releases - original
net share(*1) 58.3% 56.9% 66.5% 73.3%
Expense ratio 17.4% 18.1% 16.4% 17.5%
Combined ratio -
original net
share(*1) 75.7% 75.0% 82.9% 90.8%
*1 Ratios calculated on original net share use the proportion of the
portfolio that Admiral wrote on a net basis at the start of the
underwriting year in question.
Change in UK discount rate ('Ogden')
On 27 February 2017, the UK Government announced the outcome of the
review of the discount rate (referred to as the Ogden discount rate)
used for calculating the value of lump sum personal injury compensation.
The new rate is minus 0.75% and applies to all unsettled and new claims
from 20 March 2017.
The estimated cost to Admiral, net of tax and reinsurance is
approximately GBP150 million and is unchanged compared to six months
earlier. The majority of impact, in respect of premiums earned up to
the date of change (GBP105 million pre-tax, GBP87 million post-tax), was
recognised in the form of reduced 2016 profits (resulting from a higher
booked 2016 year loss ratio and a significantly reduced level of reserve
release in the second half of 2016). The balance, along with the impact
on business written but unearned at the date of change, will be
recognised in the form of lower reserve releases and profit commission
in the current period and subsequent two to four financial years as the
affected claims settle.
The UK Car Insurance actuarial best estimates reflect the new rate
whilst the booked reserves in the financial statements continue to
include a prudent and significant margin above the best estimates in
line with the Group's reserving approach.
A consultation on the discount rate is due to conclude imminently and
the Group looks forward to reviewing its conclusions when they are
reported.
The reported UK Car combined ratio increased to 82.9% from 75.0% (both
figures exclude the impact of reserve releases from commuted reinsurance
contracts). The main reason for the increase is a lower reserve release
in the current period. The levels of releases in the first halves of
2015 and 2016 were above the long-term average for Admiral and were
boosted by significant improvements in projected ultimate claims costs
during those periods.
In the first half of 2017, projected ultimate claims costs on 2016 and
prior accident years have remained stable and therefore not led to such
high releases in 2017 to date. The stable projected ultimate loss
ratios are based on the new Ogden discount rate of -0.75% and are
cautiously calculated for the most recent accident years. The
projections assume no improvement or further deterioration in discount
rate that might result from the ongoing consultation.
Note 5c (ii) to the financial statements analyses reserve releases in
the period.
The slight increase in the current period loss ratio (87.5% v 85.9%) is
partly due to Ogden and also the cautious booked position for the
current year.
Although its relative size has decreased since the end of 2016 (when the
impact of the Ogden change had yet to be reflected in the case reserves
and hence a higher margin was appropriate), the financial statements
continue to include a significant and prudent margin above the projected
ultimate claims outcomes.
The reported expense ratio improved to 16.4% from 18.1% mainly
reflecting the change in net retained share in the current period. The
written basis expense ratio also decreased to 15.8% from 17.0%,
reflecting the growth in written premium in the period.
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 booked
loss ratios on Admiral's retained underwriting.
For H1 2017 profit commission revenue totals GBP28.8 million, down from
GBP41.7 million in H1 2016. The decrease results from less substantial
improvements in booked loss ratios on prior years than was the case in
H1 2016 which in turn was largely due to the Ogden impact referred to
above.
If reserve releases from business that was originally ceded under quota
share reinsurance contracts that have since been commuted, are added to
profit commission, the total for the first six months of 2017 would be
GBP76.2 million compared to GBP54.5 million in H1 2016. This increase is
a result of the comparative figure being adversely affected by the
impact (GBP31 million) of the 2014 underwriting year commutation which
was completed in the first half of 2016. No quota share contracts were
commuted in the first half of 2017 as a result of the change in discount
rate, although the ultimate projections of all years continue to show
profitable outcomes.
Note 5b to the financial statements analyses profit commission income by
underwriting year.
Other Revenue
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 are:
-- 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 fees and referral income
-- Interest charged to customers paying for cover in instalments
Contribution from Other Revenue (net of costs) increased by 5% to
GBP88.9 million (H1 2016: GBP84.9 million). Whilst there were a number
of smaller offsetting changes within the total, the main reason for the
increase is the growth in the portfolio in the year.
Other revenue was equivalent to GBP61 per vehicle (gross of costs; H1
2016: GBP64). The decrease reflects a change in allocation of reinsurer
vehicle commission (the change effectively reallocates revenue to profit
commission) offset by an increase in optional legal cover. Net Other
Revenue (after deducting costs) per vehicle was GBP52 (H1 2016: GBP56).
UK Car Insurance Other Revenue - analysis of contribution:
30 30 30
June June June 31 Dec
GBPm 2015 2016 2017 2016
Contribution from additional products and fees 84.6 90.7 94.3 185.7
Contribution from additional products underwritten
by Admiral(*1) 8.2 10.7 6.8 17.4
Instalment income 12.0 15.3 22.4 33.5
Other revenue 104.8 116.7 123.5 236.6
Internal costs (21.3) (21.1) (27.8) (47.1)
Net other revenue 83.5 95.6 95.7 189.5
Other revenue per vehicle(*2) GBP64 GBP64 GBP61 GBP62
Other revenue per vehicle net of internal costs GBP55 GBP56 GBP52 GBP54
*1 Included in underwriting profit in income statement but
re-allocated to Other Revenue for purpose of KPIs.
*2 Other revenue (before internal costs) divided by average active
vehicles, rolling 12 month basis.
Instalment income
Instalment income reflects amounts charged to customers paying for cover
in instalments. During the first half of 2017 Admiral earned GBP22.4
million from instalment income, up 46% on the prior period (H1 2016:
GBP15.3 million). The main reason for this increase is a change to the
co-insurance arrangements resulting in all instalment income from 2017
underwriting year onwards being retained by Admiral. Other factors
affecting the increase are increases in average premium and customer
numbers.
Additional products underwritten by Admiral
Alongside the main motor insurance policy, there are a number of other
products underwritten by Admiral that are provided to customers such as
personal injury insurance, breakdown cover and car hire cover.
Contribution from these products underwritten by Admiral during the
first half of 2017 was GBP6.8 million (H1 2016: GBP10.7 million). This
is included in underwriting profit in the income statement, but
reallocated to Other Revenue for the purpose of management key
performance indicators.
UK Household Insurance
GBPm 30 June 2015 30 June 2016 30 June 2017 31 Dec 2016
Turnover(*1) 23.9 35.3 48.3 76.1
Total premiums
written(*1) 23.3 33.9 43.7 73.3
Underwriting loss(*1) (0.2) (0.9) (0.6) (1.8)
Profit commission and
other income 0.9 2.1 2.2 4.5
UK Household
insurance profit
before tax 0.7 1.2 1.6 2.7
*1 Alternative Performance Measures - refer to the end of this report
for definition and explanation
Key performance indicators
30 June 2015 30 June 2016 30 June 2017 31 Dec 2016
Reported household
loss ratio 68.1% 74.7% 68.7% 76.5%
Reported household
expense ratio 36.2% 37.3% 36.8% 34.1%
Reported household
combined ratio 104.3% 112.0% 105.5% 110.6%
Households insured at
period end 239,000 381,800 548,200 468,700
The UK Household Insurance business continued its record of strong
growth with the number of properties insured increasing by 44% to
548,200 (30 June 2016: 381,800). Turnover increased by 37% to GBP48.3
million (H1 2016: GBP35.3 million) and profit increased to GBP1.6
million (H1 2016: GBP1.2 million).
Both loss and expense ratios improved in the first half with the expense
ratio continuing to significantly outperform the market.
During May 2017, the Group ceased operating its commercial vehicle
insurance broker and started underwriting van insurance direct through
two brands, Gladiator and Admiral Van. Admiral offers van insurance and
associated products, typically to small businesses, via telephone and
the internet, including price comparison websites.
International Car Insurance
GBPm 30 June 2015 30 June 2016 30 June 2017 31 Dec 2016
Turnover(*1) 110.3 159.2 221.9 365.9
Total premiums
written(*1) 101.0 142.9 197.2 331.3
Net insurance premium
revenue 29.7 39.4 58.2 91.3
Investment income - 0.2 0.2 0.4
Net insurance claims (25.4) (32.7) (47.3) (75.5)
Net insurance
expenses (18.9) (24.6) (28.1) (46.2)
Underwriting
result(*1) (14.6) (17.7) (17.0) (30.0)
Net other income 3.4 4.8 6.9 10.6
International Car
Insurance result (11.2) (12.9) (10.1) (19.4)
Key performance indicators
30 June 2015 30 June 2016 30 June 2017 31 Dec 2016
Loss ratio(*2) 82% 80% 78% 76%
Expense ratio(*2) 55% 51% 45% 49%
Combined ratio(*3) 137% 131% 123% 125%
Combined ratio, net
of Other
revenue(*4) 126% 118% 112% 113%
Vehicles insured at
period end 631,700 757,900 961,200 864,200
*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 H1 2017: 130%; H1 2016: 145%; H1 2015: 149%.
*4 Combined ratio, net of Other Revenue is calculated on Admiral's
net share of premiums and includes Other Revenue. Including the impact
of reinsurer caps the reported combined ratio, net of Other Revenue
would be H1 2017: 118%; H1 2016: 133%; H1 2015: 138%.
Geographical analysis(*1)
30 June 2017 Spain Italy France US Total
Vehicles insured at period end 208,100 462,500 112,500 178,100 961,200
Turnover (GBPm) 31.2 76.3 28.7 85.7 221.9
31 Dec 2016 Spain Italy France US Total
Vehicles insured at period end 189,200 415,500 91,500 168,000 864,200
Turnover (GBPm) 49.8 118.2 38.3 159.6 365.9
30 June 2016 Spain Italy France US Total
Vehicles insured at period end 169,850 362,250 75,400 150,400 757,900
Turnover (GBPm) 22.9 54.7 17.1 64.5 159.2
*1 Alternative Performance Measures - refer to the end of this report
for definition and explanation
Admiral's international insurance businesses continued to grow
materially, adding over 200,000 customers over the year since 30 June
2016, growth of 27%. Turnover grew by nearly 40% to GBP221.9 million (H1
2016: GBP159.2 million). Turnover and customers in these businesses
represent 16% (H1 2016: 16%) and 18% (30 June 2016: 13%) of the Group
totals respectively.
A significant improvement in the Elephant Auto results contributed to
the combined ratio net of other revenue improving to 112% from 118%.
ConTe also saw continued positive development of back year reserves.
The combined loss for the international insurance businesses improved to
GBP10.1 million for the first six months of 2017 (H1 2016: GBP12.9
million). The improved result at Elephant and further profit from ConTe
were partly offset by losses in Spain and France due to the strong
growth in those businesses.
The expense ratio has improved to 45% (H1 2016: 51%) though remains high
in comparison to Admiral's UK business due to the acquisition costs
associated with the strong growth and also the continued need to build
scale.
The European insurance operations in Spain, Italy and France insured
783,100 vehicles at 30 June 2017 - 29% higher than a year earlier (30
June 2016: 607,500). Turnover was up 44% at GBP136.2 million (H1 2016:
GBP94.7 million). The consolidated result of the European operations was
a loss of GBP5.0 million (H1 2016: GBP2.1 million) with a small profit
in Italy offset by investment in growth in Spain and France. The growth
in Spain and France also impacted on the combined ratio net of other
revenue (excluding the impact of reinsurer caps) which increased to 105%
from 99%.
Admiral Seguros (Spain) which launched in 2006 operates under two main
brands, Balumba and Qualitas Auto. Admiral Seguros focused on growth
during the first six months of 2017 and at 30 June 2017 the business
insured over 200,000 customers, 23% higher than at 30 June 2016.
The Group's largest international operation is ConTe in Italy, which
insured 462,500 vehicles at 30 June 2017, 28% higher than a year
earlier. ConTe was launched in 2008 and in the first six months of 2017
continued to experience positive development in the projected ultimate
outcomes of most underwriting years allowing further reserve releases in
H1 2017 and another reported profit.
Admiral's youngest and smallest international insurance business is
L'olivier assurance auto, which launched in 2010 in France. L'olivier
insured 112,500 vehicles at 30 June 2017, up almost 50% on the prior
year and has focused on growth and accelerating brand development during
the year.
In the USA, Admiral underwrites motor insurance in six states (Virginia,
Maryland, Illinois, Texas, Indiana and Tennessee) through its Elephant
Auto business, which launched at the end of 2009. At 30 June 2017
Elephant Auto insured over 178,000 vehicles, up 18% year-on-year.
Turnover for the first half was GBP85.7 million, up 33% on the prior
period (H1 2016: GBP64.5 million).
Elephant's loss in the period was GBP5.1 million, a significant
reduction on the H1 2016 loss of GBP10.8 million. Elephant improved
both key operating ratios (the loss ratio showing significant
improvement) despite the continued strong growth, whilst the current
period result was also less impacted by severe weather experience
compared to the first half of 2016. The combined ratio net of other
revenue improved to 119% from 143%.
Price Comparison
GBPm 30 June 2015 30 June 2016 30 June 2017 31 Dec 2016
Revenue
Car insurance price
comparison 42.6 48.6 55.2 97.7
Other 12.6 15.4 17.3 31.5
Total Revenue 55.2 64.0 72.5 129.2
Expenses (63.8) (68.8) (70.1) (132.1)
(Loss)/profit before
tax (8.6) (4.8) 2.4 (2.9)
Confused.com profit 4.8 8.3 4.5 16.1
International price
comparison result (13.4) (13.1) (2.1) (19.0)
(8.6) (4.8) 2.4 (2.9)
Group's share of
(loss)/profit before
tax (*1)
Confused.com profit 4.8 8.3 4.5 16.1
International price
comparison result (8.8) (9.4) (1.4) (13.4)
(4.0) (1.1) 3.1 2.7
*1 Alternative Performance Measure - refer to the end of this report
for definition and explanation
UK Price Comparison - Confused.com
In 2016 Confused.com started to differentiate itself by focussing on
saving drivers time and money. A new marketing campaign and range of
new products have contributed to an improvement in brand awareness and
increase in income from motor-related products. However, this was, as
expected, offset by a fall in income from non-motor products such as
home and life insurance.
Confused.com turnover remained broadly stable at GBP44.9 million (H1
2016: GBP44.0 million). The high level of competition in the price
comparison market, new marketing campaign and product development
required a higher level of investment and contributed to lower profits
in the period of GBP4.5 million (H1 2016: GBP8.3 million).
International Price Comparison
Admiral operates three price comparison businesses outside the UK: in
Spain (Rastreator), France (LeLynx) and the US (Compare.com). Admiral
Group owns 75% of Rastreator and 71% of Compare.com.
The combined revenue from the European operations increased by almost a
third to GBP22.0 million (H1 2016: GBP16.7 million), reflecting
continued growth in traffic and quotes provided to customers and
improved conversion rates. Both Rastreator and LeLynx continue to enjoy
strong brand recognition in their respective markets.
The Group's share of the combined result for Rastreator and LeLynx was a
profit of GBP2.0 million (H1 2016: GBP0.7 million), the increase
reflecting ongoing strong performance from Rastreator which continues to
build on its multi-product strategy covering insurance, telephony and
utilities amongst other product lines, and an improved result from
Lelynx. Statutory profit before tax increased to GBP2.7 million (H1
2016: GBP1.2 million).
In the US, Compare.com had a successful first half, exceeding its target
of 'marketing break-even' (revenue minus marketing expenses) in selected
states by achieving that nationally. The business delivered substantial
improvements in its main key performance indicators, including reduced
cost per quote and sale metrics while at the same time growing quote and
sales volumes.
As a result, Admiral's share of Compare.com's loss reduced significantly
to GBP3.4 million before tax (H1 2016: GBP10.1 million) whilst statutory
loss before tax decreased to GBP4.8 million (H1 2016: GBP14.2 million).
Compare.com's plans for the remainder of 2017 and beyond include
continuing to scale marketing activity while further enhancing
conversion. Guidance for the full year 2017 loss for Compare.com
(Admiral Group's share) is reduced to be in the range of $10-15 million.
The combined result for International Price Comparison was therefore a
loss of GBP1.4 million (H1 2016: loss GBP9.4 million) - the profit from
the European operations offset by investment in Compare.com. Statutory
loss before tax was GBP2.1 million (H1 2016: loss GBP13.1 million).
Preminen, the Group's newest price comparison venture continues to
explore the potential of price comparison in new markets overseas, in
partnership with Mapfre.
Other Group items
GBPm 30 June 2015 30 June 2016 30 June 2017 31 Dec 2016
Other interest and
investment income 3.3 8.7 7.3 13.4
UK Commercial van
broking 1.0 0.8 0.7 2.0
Share scheme charges (11.9) (14.7) (16.9) (31.9)
Business development
costs (0.5) (2.2) (5.9) (5.8)
Other central
overheads (4.7) (3.8) (3.9) (4.1)
Finance charges (5.5) (5.6) (5.6) (11.4)
Other interest and investment income of GBP7.3 million (30 June 2016:
GBP8.7 million) includes GBP5.4 million (H1 2016: GBPNil) of realised
gains on investments held by the Group parent company and unrealised
losses of GBP1.1million (H1 2016: GBP5.5 million unrealised gains) in
respect of forward foreign exchange contracts.
Share scheme charges relate to the Group's two employee share schemes
(refer to note 8 to the financial statements). The increase in the
charge is due to an increase in the number of awards reflecting the
increasing Group headcount.
Business development costs include costs associated with potential new
ventures, including investment in Admiral Loans (see below) and
Preminen.
Finance charges of GBP5.6 million (30 June 2016: GBP5.6 million) mainly
represent interest on the GBP200 million subordinated notes issued in
July 2014 (refer to note 6 to the financial statements).
Admiral Loans
During the first half of 2017, the Group successfully rolled out the
first release of its new technology platform for Admiral Loans. The
business currently distributes unsecured personal loans through the
price comparison channel and also direct to consumers via the Admiral
website.
Initial trials have returned encouraging results and consistent with
other new business launches, the Group will employ a test and learn
approach and expects advances to customers to remain insignificant in
the context of the Group balance sheet during 2017. The Group expects
the business to make small losses in its early phase mostly as a result
of high fixed costs relative to the current scale of the business.
Principal Risks and Uncertainties
Admiral has performed a robust assessment of the principal risks facing
the Group, including those which would threaten its business model,
future performance, liquidity and solvency. The result of this
assessment is that the principal risks and uncertainties are consistent
with those reported in the Group's 2016 Annual Report and Accounts,
pages 40-43.
UK Exit from the European Union ('Brexit')
The precise timetable for and details of the implementation of the
Brexit referendum decision continue to remain unclear at the date of
this report.
Brexit brings risks to the Group including:
-- The potential for market volatility, particularly in interest and
exchange rates
-- the potential for the uncertainty or the emerging terms of exit to
trigger or exacerbate less favourable economic conditions in the UK and
other countries in which Admiral operates (though it is worth noting that
car insurance has tended to be resilient to economic downturns)
-- potential changes to or withdrawal of the right of UK financial services
firms to trade in Europe without the need for locally regulated entities
('passporting')
-- potential changes to the rules relating to the free movement of people
between the UK and the remaining EU member states
The Group continues to develop its plans to be able to deal with the
withdrawal of passporting, should this transpire and, recognising that
other issues may emerge over time, will continue to closely monitor
developments over the coming months and years.
At present, the Group does not foresee a material adverse impact on day
to day operations (including customers or staff), nor does it expect the
costs associated with any Group restructure to be material in the
context of the Group.
Regulatory update
Admiral's businesses operate in numerous regulated markets across the
world. Rules and legislation continue to develop and Admiral works
closely with all of its regulators on these matters.
In particular during 2017 Admiral has worked closely with the FCA on
renewal transparency, governance and information security and with the
PRA on internal model development and the impact of the new Ogden
discount rate.
Ongoing legislative and regulatory matters include:
Issue Notes
Change in the Ogden discount rate and ongoing consultation
over its future (new rate effective March 2017, consultation -- Significant impact on costs of lump sum claims with
ongoing) future loss element and the impact on PPO propensity
rates
-- Continued uncertainty over outcome of consultation
process
-- Refer to UK Insurance commentary above
Government measures to reduce whiplash claims costs -- The Civil Liability bill aims to reduce the frequency
(expected 2018) and cost of small injury claims in the motor market
General Data Protection Regulation ('GDPR') and the -- Widespread changes to data and privacy laws
UK Data Protection Bill (effective May 2018)
FCA rules on enhanced transparency in insurance renewals
(effective April 2017) -- New rules from the FCA requiring disclosure of prior
year price on renewal documentation
Insurance Intermediation Directive ('IDD') (to be
implemented in the UK in 2018) -- Updated rules governing distribution of insurance
products by insurers and intermediaries
FCA Senior Management and Certification Regime (SM&CR)
(expected to come into effect during 2018) -- New rules on how individuals working in financial
services are regulated
-- Will replace the current FCA Approved Persons regime
Disclaimer on forward-looking statements
Certain statements made in this announcement are forward-looking
statements. Such statements are based on current expectations and
assumptions and are subject to a number of known and unknown risks and
uncertainties that may cause actual events or results to differ
materially from any expected future events or results expressed or
implied in these forward-looking statements.
Persons receiving this announcement should not place undue reliance on
forward-looking statements. Unless otherwise required by applicable law,
regulation or accounting standard, the Group does not undertake to
update or revise any forward-looking statements, whether as a result of
new information, future developments or otherwise.
Condensed consolidated income statement (unaudited)
6
months
ended: Year ended:
31
30 June 30 June December
2017 2016 2016
Note: GBPm GBPm GBPm
Insurance premium revenue 796.6 635.8 1,353.6
Insurance premium ceded to reinsurers (495.3) (376.1) (804.8)
Net insurance premium revenue 5 301.3 259.7 548.8
Other revenue 7 196.0 176.2 360.6
Profit commission 5 30.0 42.2 54.3
Investment and interest income 6 23.3 33.4 53.1
Net revenue 550.6 511.5 1016.8
Insurance claims and claims handling expenses (612.7) (400.0) (1,103.8)
Insurance claims and claims handling expenses recoverable
from reinsurers 447.8 251.6 709.2
Net insurance claims (164.9) (148.4) (394.6)
Operating expenses and share scheme charges 8 (359.5) (316.9) (648.8)
Operating expenses and share scheme charges recoverable
from co- and reinsurers 8 172.8 148.9 316.4
Net operating expenses and share scheme charges (186.7) (168.0) (332.4)
Total expenses (351.6) (316.4) (727.0)
Operating profit 199.0 195.1 289.8
Finance costs 6 (5.6) (5.6) (11.4)
Profit before tax 193.4 189.5 278.4
Taxation expense 9 (31.5) (36.2) (64.3)
Profit after tax 161.9 153.3 214.1
Profit after tax attributable to:
Equity holders of the parent 163.2 157.4 222.2
Non-controlling interests (1.3) (4.1) (8.1)
161.9 153.3 214.1
Earnings per share:
Basic 11 57.3p 55.9p 78.7p
Diluted 11 57.2p 55.8p 78.5p
Dividends declared and paid (total) 11 143.7 175.4 349.8
Dividends declared and paid (per share) 11 50.5p 63.4p 126.3p
Condensed consolidated statement of comprehensive income (unaudited)
6 months ended: Year ended:
30 June 2017 30 June 2016 31 December 2016
GBPm GBPm GBPm
Profit for the period 161.9 153.3 214.1
Other comprehensive income
Items that are or may be reclassified to profit or
loss
Movements in fair value reserve 17.5 20.9 30.3
Deferred tax charge in relation to movement in fair
value reserve (4.1) - (0.5)
Exchange differences on translation of foreign
operations (4.0) 12.1 21.2
Other comprehensive income for the period, net of
income tax 9.4 33.0 51.0
Total comprehensive income for the period 171.3 186.3 265.1
Total comprehensive income for the period attributable
to:
Equity holders of the parent 172.8 189.2 271.3
Non-controlling interests (1.5) (2.9) (6.2)
171.3 186.3 265.1
Condensed consolidated statement of financial position (unaudited)
As at:
31
30 June 30 June December
2017 2016 2016
Note: GBPm GBPm GBPm
ASSETS
Property and equipment 10 31.4 33.9 32.0
Intangible assets 10 158.3 156.2 162.3
Deferred income tax 9 6.3 25.4 8.4
Reinsurance assets 5 1,460.9 914.1 1,126.4
Insurance and other receivables 6, 10 965.0 697.4 784.9
Financial investments 6 2,595.2 2,355.4 2,420.2
Cash and cash equivalents 6 348.6 295.4 326.6
Total assets 5,565.7 4,477.8 4,860.8
EQUITY
Share capital 11 0.3 0.3 0.3
Share premium account 13.1 13.1 13.1
Fair value reserve 41.5 19.2 28.1
Foreign exchange reserve 19.9 15.3 23.7
Retained profit and loss 545.7 600.6 505.7
Total equity attributable to equity holders of the
parent 620.5 648.5 570.9
Non-controlling interests 9.3 14.1 10.8
Total equity 629.8 662.6 581.7
LIABILITIES
Insurance contracts 5 3,054.1 2,484.2 2,749.5
Subordinated and other financial liabilities 6 223.9 223.9 224.0
Trade and other payables 6, 10 1,635.9 1,070.8 1,292.2
Current tax liabilities 22.0 36.3 13.4
Total liabilities 4,935.9 3,815.2 4,279.1
Total equity and total liabilities 5,565.7 4,477.8 4,860.8
Condensed consolidated cash flow statement (unaudited)
Year
6 months ended: ended:
31
30 June 30 June December
2017 2016 2016
Note: GBPm GBPm GBPm
Profit after tax 161.9 153.3 214.1
Adjustments for non-cash items:
- Depreciation 10 5.0 5.2 10.5
- Amortisation of software 10 7.3 5.5 12.6
- Other gains and losses - 1.2 -
- Share scheme charges 18.7 14.2 33.2
- Investment and interest income 6 (23.3) (33.4) (53.1)
- Finance costs 6 5.6 5.6 11.4
- Taxation expense 9 31.5 36.2 64.3
Change in gross insurance contract liabilities 304.6 189.2 454.5
Change in reinsurance assets (334.5) (35.4) (247.7)
Change in insurance and other receivables (177.8) (164.7) (254.6)
Change in trade and other payables, including tax
and social security 343.7 56.8 279.9
Cash flows from operating activities, before movements
in investments 342.7 233.7 525.1
Purchases of financial instruments (347.8) (142.7) (646.6)
Proceeds on disposal/ maturity of financial instruments 206.1 157.0 616.9
Interest and investment income received 4.6 5.6 11.6
Cash flows from operating activities, net of movements
in investments 205.6 253.6 507.0
Taxation payments (21.9) (36.6) (76.4)
Taxation receipts - 1.1 1.8
Net cash flow from operating activities 183.7 218.1 432.4
Cash flows from investing activities:
Purchases of property, equipment and software (9.7) (17.3) (31.6)
Net cash used in investing activities (9.7) (17.3) (31.6)
Cash flows from financing activities:
Non-controlling interest capital contribution - (0.2) (0.2)
Proceeds on issue of financial liabilities - - -
Finance costs paid (5.6) (5.5) (11.3)
Repayment of finance lease liabilities 0.1 (1.7) (3.4)
Equity dividends paid 11 (143.7) (175.4) (349.8)
Net cash used in financing activities (149.2) (182.8) (364.7)
Net increase in cash and cash equivalents 24.8 18.0 36.1
Cash and cash equivalents at 1 January 326.6 265.3 265.3
Effects of changes in foreign exchange rates (2.8) 12.1 25.2
Cash and cash equivalents at end of period 6 348.6 295.4 326.6
Condensed consolidated statement of changes in equity (unaudited)
Attributable to the owners of the company
Retained
Share Fair Foreign profit
Share premium value exchange and Total
capital account reserve reserve loss Total NCI(*1) equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January 2016 0.3 13.1 (1.7) 4.4 599.6 615.7 17.2 632.9
Profit for the period - - - - 157.4 157.4 (4.1) 153.3
Other comprehensive income
Movements in fair value reserve - - 20.9 - - 20.9 - 20.9
Currency translation differences - - - 10.9 - 10.9 1.2 12.1
Total comprehensive income for the period - - 20.9 10.9 157.4 189.2 (2.9) 186.3
Transactions with equity-holders
Dividends - - - - (175.4) (175.4) - (175.4)
Share scheme credit - - - - 14.2 14.2 - 14.2
Deferred tax credit on share scheme credit - - - - 4.8 4.8 - 4.8
Contributions by NCIs - - - - - - (0.2) (0.2)
Total transactions with equity-holders - - - - (156.4) (156.4) (0.2) (156.6)
As at 30 June 2016 0.3 13.1 19.2 15.3 600.6 648.5 14.1 662.6
At 1 January 2016 0.3 13.1 (1.7) 4.4 599.6 615.7 17.2 632.9
Profit for the period - - - - 222.2 222.2 (8.1) 214.1
Other comprehensive income
Movements in fair value reserve - - 30.3 - - 30.3 - 30.3
Deferred tax charge in relation to movement in fair
value reserve - - (0.5) - - (0.5) - (0.5)
Currency translation differences - - - 19.3 - 19.3 1.9 21.2
Total comprehensive income for the period - - 29.8 19.3 222.2 271.3 (6.2) 265.1
Transactions with equity-holders
Dividends - - - - (349.8) (349.8) - (349.8)
Share scheme credit - - - - 33.2 33.2 - 33.2
Deferred tax credit on share scheme credit - - - - 0.5 0.5 - 0.5
Contributions by NCIs - - - - - - (0.2) (0.2)
Changes in ownership interests without a change in
control - - - - - - - -
Total transactions with equity-holders - - - - (316.1) (316.1) (0.2) (316.3)
As at 31 December 2016 0.3 13.1 28.1 23.7 505.7 570.9 10.8 581.7
Attributable to the owners of the company
Retained
Share Fair Foreign profit
Share premium value exchange and Total
capital account reserve reserve loss Total NCI(*1) equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January 2017 0.3 13.1 28.1 23.7 505.7 570.9 10.8 581.7
Profit for the period - - - - 163.2 163.2 (1.3) 161.9
Other comprehensive income
Movements in fair value reserve - - 17.5 - - 17.5 - 17.5
Deferred tax charge in relation to movement in fair
value reserve - - (4.1) - - (4.1) - (4.1)
Currency translation differences - - - (3.8) - (3.8) (0.2) (4.0)
Total comprehensive income for the period - - 13.4 (3.8) 163.2 172.8 (1.5) 171.3
Transactions with equity-holders
Dividends - - - - (143.7) (143.7) - (143.7)
Share scheme credit - - - - 18.7 18.7 - 18.7
Deferred tax credit on share scheme credit - - - - 1.8 1.8 - 1.8
Total transactions with equity-holders - - - - (123.2) (123.2) - (123.2)
As at 30 June 2017 0.3 13.1 41.5 19.9 545.7 620.5 9.3 629.8
[*1] Non-controlling interests
Notes to the financial statements (unaudited)
1. General information
Admiral Group plc is a Company incorporated in the United Kingdom and
registered in England and Wales. Its registered office is at Ty Admiral,
David Street, Cardiff CF10 2EH and its shares are listed on the London
Stock Exchange.
The condensed interim financial statements comprise the results and
balances of the Company and its subsidiaries (the Group) for the
six-month period ended 30 June 2017 and the comparative periods for the
six-months ended 30 June 2016 and the year ended 31 December 2016. This
condensed set of financial statements has been prepared in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU.
As required by the FCA's Disclosure and Transparency Rules, the
condensed set of financial statements has been prepared applying the
accounting policies and presentation that were applied in the
preparation of the Company's published consolidated financial statements
for the year ended 31 December 2016.
The financial statements of the Company's subsidiaries are consolidated
in the Group financial statements. In accordance with IAS 24,
transactions or balances between Group companies that have been
eliminated on consolidation are not reported as related party
transactions.
The comparative figures for the financial year ended 31 December 2016
are not the Company's statutory accounts for that financial year. Those
accounts have been reported on by the Company's auditors and delivered
to the registrar of companies. The report of the auditors was:
1. unqualified;
2. did not include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report; and
3. did not contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
The accounts have been prepared on a going concern basis. In
considering the appropriateness of this assumption, the Board have
reviewed the Group's projections for the next twelve months and beyond.
Further information is given in the Basis of preparation below.
2. Basis of preparation
The condensed set of interim financial statements have been prepared
applying the accounting policies and presentation that were applied in
the preparation of the Company's published consolidated financial
statements for the year ended 31 December 2016. A number of other IFRS
and interpretations have been endorsed by the EU in the period to 30
June 2017 and although they have been adopted by the Group, none of them
has had a material impact on the Group's financial statements.
The Group's assessment of the impact of standards that have yet to be
adopted remains consistent with that reported on page 93 of the Group's
2016 Annual Report.
The accounts have been prepared on a going concern basis. In considering
this requirement, the Directors have taken into account the following:
-- The Group's projections for the next 12 months and beyond, in particular
the profit forecasts, regulatory capital surpluses and levels and sources
of liquidity.
-- The risks included on the Group's risk register that could impact on the
Group's financial performance, levels of liquidity and solvency over the
next 12 months.
-- The risks on the Group's risk register that could be a threat to the
Group's business model and capital adequacy.
The Group's business activities, together with the factors likely to
affect its future development, performance and position are set out in
the Strategic Report in the 2016 Annual Report. An update to the Group's
principal risks and uncertainties since the 2016 year end is included in
the review preceding these financial statements. In addition, the
Governance report in the 2016 Annual Report includes the Directors'
statement on the viability of the Group over a three year period.
Following consideration of the above, the Directors have reasonable
expectation that the Group has adequate resources to continue in
operation for the foreseeable future, a period not less than 12 months
from the date of this report, and that it is therefore appropriate to
adopt the going concern basis in preparing the financial statements.
The accounting policies set out in the notes to the financial statements
have, unless otherwise stated, been applied consistently to all periods
presented in these Group financial statements.
The financial statements are prepared on the historical cost basis,
except for the revaluation of financial assets classified as fair value
through profit or loss or as 'available for sale'. The Group and Company
financial statements are presented in pounds sterling, rounded to the
nearest GBP0.1 million.
Subsidiaries are entities controlled by the Group. The Group controls an
entity when it is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those
returns through its power over the entity. In assessing control, the
Group takes into consideration potential voting rights that are
currently exercisable. The acquisition date is the date on which control
is transferred to the acquirer. The financial statements of subsidiaries
are included in the consolidated financial statements from the date that
control commences until the date that control ceases. Losses applicable
to the non-controlling interests in a subsidiary are allocated to the
non-controlling interests even if doing so causes the non-controlling
interests to have a deficit balance.
The preparation of financial statements requires management to make
judgements, estimates and assumptions that affect the application of
policies and reported amounts of assets and liabilities, income and
expenses. The estimates and associated assumptions are based on
historical experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis
of making the judgements about carrying values of assets and liabilities
that are not readily apparent from other sources.
The estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the period in
which the estimate is reviewed if this revision affects only that period,
or in the period of the revision and future periods if the revision
affects both current and future periods. To the extent that a change in
an accounting estimate gives rise to changes in assets and liabilities,
it is recognised by adjusting the carrying amount of the related asset
or liability in the period of the change.
3. Critical accounting judgements and estimates
The Group's 2016 Annual Report provides full details of significant
judgements and estimates used in the application of the Group's
accounting policies. There have been no additional critical judgements
or estimates applied in the period. Note 5 below provides further
information as to the changes in the estimates with respect to the
calculation of insurance reserves.
4. Operating segments
The Group has four reportable segments; UK Insurance, International Car
Insurance, Price Comparison and Other, as set out on page 96 of the
Group's 2016 Annual Report. During the period, the Group launched a UK
Van Insurance product that is included within the UK Insurance segment.
The results from the Group's commercial van broker Gladiator continue to
be presented within the 'Other' segment.
Segment revenues and results for the 6 months ended 30 June 2016 have
been represented to include UK Household Insurance within the UK
insurance segment in order to align with the reportable segments noted
above.
Segment income, results and other information
An analysis of the Group's revenue and results for the period ended 30
June 2017, by reportable segment, are shown below. The accounting
policies of the reportable segments are consistent with those presented
in the notes to the 2016 Group financial statements.
30 June 2017
International
UK Car Price Segment
Insurance Insurance Comparison Other Eliminations(*2) total
GBPm GBPm GBPm GBPm GBPm GBPm
Turnover(*1) 1,144.1 221.9 72.5 7.2 (10.5) 1,435.2
Net insurance
premium
revenue 241.0 60.3 - 0.0 - 301.3
Other revenue
and profit
commission 148.7 8.1 72.5 7.2 (10.5) 226.0
Investment and
interest
income 15.8 0.2 - - - 16.0
Net revenue 405.5 68.6 72.5 7.2 (10.5) 543.3
Net insurance
claims (116.5) (48.4) - - - (164.9)
Expenses (62.8) (30.3) (70.1) (6.5) 10.5 (159.2)
Segment profit /
(loss) before
tax 226.2 (10.1) 2.4 0.7 - 219.2
Other central revenue and expenses, including share
scheme charges (27.5)
Interest and investment
income 7.3
Finance costs (5.6)
Consolidated profit before
tax 193.4
Taxation
expense (31.5)
Consolidated profit after
tax 161.9
[*1] Turnover is an Alternative Performance Measure and consists of
total premiums written (including co-insurers share) and Other revenue.
Refer to note 12 for further information.
[*2] Eliminations are in respect of the intra-group trading between the
Group's price comparison and UK and International car insurance
entities.
Revenue and results for the corresponding reportable segments for the
period ended 30 June 2016 are shown below.
Represented
30 June 2016
International
UK Car Price Segment
Insurance Insurance Comparison Other Eliminations(*2) total
GBPm GBPm GBPm GBPm GBPm GBPm
Turnover(*1) 1,028.5 159.2 64.0 9.0 (9.8) 1,250.9
Net insurance
premium
revenue 218.2 41.3 - 0.2 - 259.7
Other revenue
and profit
commission 150.1 5.6 64.0 8.5 (9.8) 218.4
Investment and
interest
income 24.5 0.2 - - - 24.7
Net revenue 392.8 47.1 64.0 8.7 (9.8) 502.8
Net insurance
claims (114.5) (33.7) - (0.2) - (148.4)
Expenses (54.3) (26.3) (68.8) (7.7) 9.8 (147.3)
Segment profit /
(loss) before
tax 224.0 (12.9) (4.8) 0.8 - 207.1
Other central revenue and expenses, including share
scheme charges (20.7)
Interest and investment income 8.7
Finance costs (5.6)
Consolidated profit before
tax 189.5
Taxation expense (36.2)
Consolidated profit after
tax 153.3
Revenue and results for the corresponding reportable segments for the
year ended 31 December 2016 are shown below.
31 December 2016
International
UK Car Price Segment
Insurance Insurance Comparison Other Eliminations(*2) total
GBPm GBPm GBPm GBPm GBPm GBPm
Turnover(*1) 2,063.1 365.9 129.2 17.6 (20.8) 2,555.0
Net insurance
premium
revenue 454.4 94.3 - 0.1 - 548.8
Other revenue
and profit
commission 277.2 12.6 129.2 16.7 (20.8) 414.9
Investment and
interest
income 39.3 0.4 - - - 39.7
Net revenue 770.9 107.3 129.2 16.8 (20.8) 1,003.4
Net insurance
claims (317.9) (76.5) - (0.2) - (394.6)
Expenses (114.5) (50.2) (132.1) (14.7) 20.8 (290.7)
Segment profit /
(loss) before
tax 338.5 (19.4) (2.9) 1.9 - 318.1
Other central revenue and expenses, including share
scheme charges (41.7)
Interest and investment
income 13.4
Finance costs (11.4)
Consolidated profit before
tax 278.4
Taxation expense (64.3)
Consolidated profit after
tax 214.1
Segment revenues
The UK and International Car Insurance reportable segments derive all
insurance premium income from external policyholders. Revenue within
these segments is not derived from an individual policyholder that
represents 10% or more of the Group's total revenue.
The total of Price Comparison revenues from transactions with other
reportable segments is GBP10.5 million (H1 2016: GBP9.8 million, FY
2016: GBP20.8 million) which has been eliminated on consolidation.
There are no other transactions between reportable segments.
Revenues from external customers for products and services is consistent
with the split of reportable segment revenues as shown above.
Information about geographical locations
All material revenues from external customers, and net assets attributed
to a foreign country relating to car insurance are shown within the
International Car Insurance reportable segment shown above. The revenue
and results of the three International Price Comparison businesses;
Rastreator, LeLynx and compare.com are not yet material enough to be
presented as a separate segment.
Segment assets and liabilities
The segment assets and liabilities at 30 June 2017, 30 June 2016 and 31
December 2016 are as follows:
As at 30 June 2017
International
UK Car Price
InsuranceGBPm InsuranceGBPm ComparisonGBPm OtherGBPm EliminationsGBPm TotalGBPm
Property and
equipment 25.6 4.4 1.4 - - 31.4
Intangible
assets 69.8 23.3 1.6 63.6 - 158.3
Reinsurance
assets 1,192.6 268.1 - 0.2 - 1,460.9
Insurance and
other
receivables 897.5 142.1 23.1 (31.0) (66.7) 965.0
Financial
investments 2,323.6 49.7 7.7 - - 2,381.0
Cash and cash
equivalents 196.9 98.6 30.1 6.1 - 331.7
Reportable
segment
assets 4,706.0 586.2 63.9 38.9 (66.7) 5,328.3
Insurance
contract
liabilities 2,632.2 421.5 - 0.4 - 3,054.1
Trade and
other
payables 1,492.5 124.5 13.1 5.8 - 1,635.9
Reportable
segment
liabilities 4,124.7 546.0 13.1 6.2 - 4,690.0
Reportable
segment net
assets 581.3 40.2 50.8 32.7 (66.7) 638.3
Unallocated
assets and
liabilities (8.5)
Consolidated
net assets 629.8
As at 30 June 2016
International
UK Car Price
InsuranceGBPm InsuranceGBPm ComparisonGBPm OtherGBPm EliminationsGBPm TotalGBPm
Property and
equipment 29.2 3.4 1.3 - - 33.9
Intangible
assets 72.8 17.7 2.0 63.7 - 156.2
Reinsurance
assets 710.9 202.9 - 0.3 - 914.1
Insurance and
other
receivables 651.9 58.5 36.9 (50.0) 0.1 697.4
Financial
investments 2,075.9 58.1 - - - 2,134.0
Cash and cash
equivalents 131.7 102.3 43.1 9.2 - 286.3
Reportable
segment
assets 3,672.4 442.9 83.3 23.2 0.1 4,221.9
Insurance
contract
liabilities 2,154.3 324.9 - 5.0 - 2,484.2
Trade and
other
payables 961.9 78.0 15.0 15.9 - 1,070.8
Reportable
segment
liabilities 3,116.2 402.9 15.0 20.9 - 3,555.0
Reportable
segment net
assets 556.2 40.0 68.3 2.3 0.1 666.9
Unallocated
assets and
liabilities (4.3)
Consolidated
net assets 662.6
As at 31 December 2016
International
UK Car Price
InsuranceGBPm InsuranceGBPm ComparisonGBPm OtherGBPm EliminationsGBPm TotalGBPm
Property and
equipment 26.8 4.0 1.2 - - 32.0
Intangible
assets 73.8 23.0 1.8 63.7 - 162.3
Reinsurance
assets 881.4 244.7 - 0.3 - 1,126.4
Insurance and
other
receivables 890.3 132.8 14.8 (185.6) (67.4) 784.9
Financial
investments 2,145.0 45.6 12.2 - - 2,202.8
Cash and cash
equivalents 178.0 100.6 33.0 8.0 - 319.6
Reportable
segment
assets 4,195.3 550.7 63.0 (113.6) (67.4) 4,628.0
Insurance
contract
liabilities 2,359.9 385.4 - 4.2 - 2,749.5
Trade and
other
payables 1,147.7 122.1 11.3 11.1 - 1,292.2
Reportable
segment
liabilities 3,507.6 507.5 11.3 15.3 - 4,041.7
Reportable
segment net
assets 687.7 43.2 51.7 (128.9) (67.4) 586.3
Unallocated
assets and
liabilities (4.6)
Consolidated
net assets 581.7
Unallocated assets and liabilities consist of other central assets and
liabilities, plus deferred and current corporation tax balances. These
assets and liabilities are not regularly reviewed by the Board of
Directors in the reportable segment format.
There is an asymmetrical allocation of assets and income to the
reportable segments, in that the interest earned on cash and cash
equivalent assets deployed in the UK Insurance, Price Comparison and
International Car Insurance segments is not allocated in arriving at
segment profits. This is consistent with regular reporting to the Board
of Directors.
Eliminations represent inter-segment funding and balances included in
insurance and other receivables.
5. Premium, Claims and Profit Commissions
5a. Net insurance premium revenue
30 June 2017 30 June 2016 31 December 2016
GBPm GBPm GBPm
Total insurance premiums
including co-insurance 1,219.8 1,076.5 2,193.9
Group gross written premiums 928.7 717.8 1,482.0
Outwards reinsurance premiums (627.0) (425.2) (883.6)
Net insurance premiums written 301.7 292.6 598.4
Change in gross unearned premium
provision (132.1) (82.3) (128.4)
Change in reinsurers' share of
unearned premium provision 131.7 49.4 78.8
Net insurance premium revenue 301.3 259.7 548.8
The Group's share of its insurance business was underwritten by Admiral
Insurance (Gibraltar) Limited, Admiral Insurance Company Limited and
Elephant Insurance Company. All contracts are short-term in duration,
lasting for 12 months or less.
5b. Profit commission
UK Car Insurance: 30 June 2017 30 June 2016 31 December 2016
GBPm GBPm GBPm
Underwriting year:
2011 & prior 10.7 5.1 16.7
2012 10.9 14.8 9.6
2013 7.2 21.8 26.4
2014 - - -
2015 - - -
2016 - - -
2017 - - -
Total profit commission (UK Car) 28.8 41.7 52.7
UK Household Insurance: 30 June 2017 30 June 2016 31 December 2016
GBPm GBPm GBPm
Underwriting year:
2015 0.6 0.5 0.7
2016 0.6 - 0.9
Total profit commission (UK
Household) 1.2 0.5 1.6
5c. Reinsurance assets and insurance contract liabilities
(i) Analysis of recognised amounts:
30 June 2017 30 June 2016 31 December 2016
GBPm GBPm GBPm
Gross:
Claims outstanding(*1) 2,202.3 1,819.9 2,030.8
Unearned premium provision 851.8 664.3 718.7
Total gross insurance
liabilities 3,054.1 2,484.2 2,749.5
Recoverable from reinsurers:
Claims outstanding 905.2 523.9 701.6
Unearned premium provision 555.7 390.2 424.8
Total reinsurers' share of
insurance liabilities 1,460.9 914.1 1,126.4
Net:
Claims outstanding(*2) 1,297.1 1,296.0 1,329.2
Unearned premium provision 296.1 274.1 293.9
Total insurance liabilities -
net 1,593.2 1,570.1 1,623.1
[*1] Gross claims outstanding at 30 June 2017 is presented
before the deduction of salvage and subrogation recoveries totalling
GBP43.5 million (H1 2016: GBP30.4 million, FY 2016: GBP37.7 million).
[*2] Admiral typically commutes quota share reinsurance contracts in
its UK Car Insurance business 24-36 months following the start of the
underwriting year. After commutation, claims outstanding from these
contracts are included in Admiral's net claims outstanding balance.
Refer to Note (iii) below.
(ii) Analysis of gross and net claims reserve releases:
The following table analyses the impact of movements in prior year
claims provisions on a gross and net basis. This data is presented on
an underwriting year basis.
30 June 2017 30 June 2016 31 December 2016
Gross GBPm GBPm GBPm
Underwriting year:
2012 & prior 47.7 34.8 41.7
2013 20.4 42.4 49.3
2014 17.0 47.0 42.8
2015 9.8 9.2 1.9
2016 7.4 - -
Total gross release (UK
Insurance) 102.3 133.4 135.7
Total gross release
(International Car Insurance) 11.7 9.2 21.0
Total gross release 114.0 142.6 156.7
30 June 2017 30 June 2016 31 December 2016
Net GBPm GBPm GBPm
Underwriting year:
2012 & prior 47.7 34.8 41.7
2013 20.4 42.4 49.3
2014 17.0 (12.3) (16.4)
2015 4.1 3.8 0.8
2016 3.1 - -
Total net release (UK Insurance) 92.3 68.7 75.4
Total net release (International
Car Insurance) 5.2 4.4 9.9
Total net release 97.5 73.1 85.3
Releases on Admiral's original
net share 44.9 55.9 58.3
Releases on commuted quota share
reinsurance contracts 47.4 12.8 17.1
Total net release (UK Insurance)
as above 92.3 68.7 75.4
Releases on commuted quota share contracts are analysed by underwriting
year as follows:
30 31
June 30 June December
2017 2016 2016
GBPm GBPm GBPm
Underwriting year:
2011 & prior 11.9 3.9 11.3
2012 13.7 16.0 11.3
2013 11.9 24.7 28.8
2014 9.9 (31.8) (34.3)
Total releases on commuted quota share reinsurance
contracts 47.4 12.8 17.1
31 December: 30 June
UK Car Insurance loss ratio development 2012 2013 2014 2015 2016 2017
Underwriting year (UK car only)
2012 84% 78% 73% 66% 64% 62%
2013 - 85% 82% 76% 70% 68%
2014 - - 92% 89% 84% 82%
2015 - - - 87% 87% 86%
2016 - - - - 88% 87%
(iii) Reconciliation of movement in claims provision:
30 June 2017
Gross Reinsurance Net
GBPm GBPm GBPm
Claims provision at 1 January 2017 2,030.8 (701.6) 1,329.2
Claims incurred (excluding releases) 709.3 (452.3) 257.0
Reserve releases (114.0) 16.5 (97.5)
Movement in claims provision due to commutation - - -
Claims paid and other movements (423.8) 232.2 (191.6)
Claims provision at 30 June 2017 2,202.3 (905.2) 1,297.1
30 June 2016
Gross Reinsurance Net
GBPm GBPm GBPm
Claims provision at 1 January 2016 1,725.0 (544.8) 1,180.2
Claims incurred (excluding releases) 603.2 (387.3) 215.9
Reserve releases (142.6) 69.5 (73.1)
Movement in claims provision due to commutation - 186.2 186.2
Claims paid and other movements (365.7) 152.5 (213.2)
Claims provision at 30 June 2016 1,819.9 (523.9) 1,296.0
31 December 2016
Gross Reinsurance Net
GBPm GBPm GBPm
Claims provision at 1 January 2016 1,725.0 (544.8) 1,180.2
Claims incurred (excluding releases) 1,233.4 (764.8) 468.6
Reserve releases (156.7) 71.4 (85.3)
Movement in claims provision due to commutation - 186.2 186.2
Claims paid and other movements (770.9) 350.4 (420.5)
Claims provision at 31 December 2016 2,030.8 (701.6) 1,329.2
(iv) Reconciliation of movement in net unearned premium provision:
Gross Reinsurance Net
GBPm GBPm GBPm
Unearned premium provision 1 January 2017 718.7 (424.8) 293.9
Written in the period 928.7 (627.0) 301.7
Earned in the period (795.6) 496.1 (299.5)
Unearned premium provision at 30 June 2017 851.8 (555.7) 296.1
Gross Reinsurance Net
GBPm GBPm GBPm
Unearned premium provision at 1 January 2016 570.0 (333.9) 236.1
Written in the period 717.8 (425.2) 292.6
Earned in the period (623.5) 368.9 (254.6)
Unearned premium provision at 30 June 2016 664.3 (390.2) 274.1
Gross Reinsurance Net
GBPm GBPm GBPm
Unearned premium provision at 1 January 2016 570.0 (333.9) 236.1
Written in the period 1,482.0 (883.6) 598.4
Earned in the period (1,333.3) 792.7 (540.6)
Unearned premium provision at 31 December
2016 718.7 (424.8) 293.9
6. Investments
6a. Investment and interest income
30 30 31
June June December
2017 2016 2016
GBPm GBPm GBPm
Investment income:
Investment return on assets classified as FVTPL 0.9 1.6 2.9
Interest income on available for sale debt securities 13.4 11.5 23.4
Interest income on term deposits with credit
institutions 1.9 2.5 4.7
Interest income on government gilt assets 2.6 2.6 5.4
Net realised gains: Realised gains on sale of gilt
assets 5.4 - -
Net unrealised gains/ (losses):
Unrealised (losses)/ gains on forward contracts (1.1) 5.5 6.5
Net investment return 23.1 23.7 42.9
Release of accrual for reinsurers' share of investment
returns - 9.2 9.2
23.1 32.9 52.1
Interest receivable on cash and cash equivalents 0.2 0.5 1.0
Total investment and interest income 23.3 33.4 53.1
6b. Finance costs
30 June 2017 30 June 2016 31 December 2016
GBPm GBPm GBPm
Interest payable 5.6 5.6 11.4
Total finance costs 5.6 5.6 11.4
6c. Financial assets and liabilities
The Group's financial instruments can be analysed as follows:
Restated(*1) 30 June Restated(*1) 31
30 June 2017 2016 December 2016
GBPm GBPm GBPm
Investments held at fair value through profit and
loss:
Money market funds 965.2 693.4 776.3
Derivative financial instruments 3.6 - 4.7
Investments classified as
available for sale:
Available for sale debt
securities 1,321.8 1,285.5 1,271.8
Available for sale government
gilts 174.6 - -
Investments classified as held to
maturity:
Government gilts - 197.8 197.4
Loans and receivables
Deposits with credit institutions 130.0 178.7 170.0
Total financial investments 2,595.2 2,355.4 2,420.2
Insurance and other receivables:
Insurance receivables 740.7 551.6 606.6
Trade and other receivables 224.3 145.8 178.3
Cash and cash equivalents 348.6 295.4 326.6
Total financial assets 3,908.8 3,348.2 3,531.7
30 June 2017 30 June 2016 31 December 2016
GBPm GBPm GBPm
Financial liabilities:
Subordinated notes 203.9 203.9 204.0
Other borrowings 20.0 20.0 20.0
Trade and other payables 1,635.9 1,070.8 1,292.2
Total financial liabilities 1,859.8 1,294.7 1,516.2
[*1] 2016 comparatives have been restated to present term deposits held
with credit institutions as loans and receivables, as this is considered
to be a more appropriate classification of these assets.
All investments held at fair value at the end of the period are invested
in AAA-rated money market liquidity funds.
The measurement of these investments is based on active quoted market
values (level one).
Available for sale assets include holdings in fixed income and other
debt securities, and government gilts. These are held at fair value with
interest income recognised in the income statement and unrealised
movements in fair value taken through other comprehensive income.
Government gilts have been reclassified during the period from 'Held to
Maturity' to 'Available for Sale' in line with IAS 39 following the
disposal of a portion of the holding.
The fair value of the holding of UK government gilts at 30 June 2017 is
GBP174.6 million (H1 2016: GBP233.2 million, FY 2016: GBP225.4 million).
The fair value of subordinated notes (level one valuation) at 30 June
2017 is GBP223.4 million (H1 2016: GBP199.0 million, FY 2016: GBP212.9
million).
Term deposits are held with well rated institutions and as such the fair
value of these investments is considered to approximate to the carrying
value as impairment of the capital is not expected. The carrying value
of term deposits is GBP130.0 million (H1 2016: GBP178.7 million, FY
2016: GBP170.0 million).
Insurance and other receivables are also valued at amortised cost in the
Condensed consolidated statement of financial position. This carrying
value is a reasonable approximation of fair value.
6d. Cash and cash equivalents
30 June 2017 30 June 2016 31 December 2016
GBPm GBPm GBPm
Cash at bank and in hand 348.6 295.4 326.4
Short-term deposits - - 0.2
Total cash and cash equivalents 348.6 295.4 326.6
Cash and cash equivalents includes cash in hand, deposits held at call
with banks, and other short term deposits with original maturities of
three months or less.
7. Other Revenue
7a. Contribution from additional products and fees and other
revenue
30 June 2017 30 June 2016 31 December 2016
GBPm GBPm GBPm
Contribution from additional
products and fees 103.0 96.8 199.0
Price Comparison revenue(*1) 62.0 54.2 108.4
Other revenue 31.0 25.2 53.2
Total other revenue 196.0 176.2 360.6
[*1] Price comparison revenue excludes GBP10.5 million (H1 2016: GBP9.8
million, FY 2016: GBP20.8 million) of income from other Group companies.
8. Expenses
8a. Operating expenses and share scheme charges
30 June 2017
Recoverable
from co-
and
Gross reinsurers Net
GBPm GBPm GBPm
Acquisition of insurance contracts(*1) 72.5 (58.6) 13.9
Administration and other marketing costs (insurance
contracts) 143.2 (103.9) 39.3
Insurance contract expenses 215.7 (162.5) 53.2
Administration and other marketing costs (Other) 116.4 - 116.4
Share scheme charges 27.4 (10.3) 17.1
Total expenses and share scheme charges 359.5 (172.8) 186.7
30 June 2016
Recoverable
from co-
and
Gross reinsurers Net
GBPm GBPm GBPm
Acquisition of insurance contracts 44.1 (34.2) 9.9
Administration and other marketing costs (insurance
contracts) 144.3 (105.6) 38.7
Insurance contract expenses 188.4 (139.8) 48.6
Administration and other marketing costs (Other) 104.7 - 104.7
Share scheme charges 23.8 (9.1) 14.7
Total expenses and share scheme charges 316.9 (148.9) 168.0
31 December 2016
Recoverable
from co-
and
Gross reinsurers Net
GBPm GBPm GBPm
Acquisition of insurance contracts(*1) 98.0 (75.4) 22.6
Administration and other marketing costs (insurance
contracts) 293.9 (222.6) 71.3
Insurance contract expenses 391.9 (298.0) 93.9
Administration and other marketing costs (Other) 206.6 - 206.6
Share scheme charges 50.3 (18.4) 31.9
Total expenses and share scheme charges 648.8 (316.4) 332.4
[*1] Acquisition of insurance contracts expense excludes GBP10.5
million (H1 2016: GBP9.8 million, FY 2016: GBP20.8 million) of price
comparison fees from other Group companies.
The GBP39.3 million (H1 2016: GBP38.7 million, FY 2016: GBP71.3 million)
administration and marketing costs allocated to insurance contracts is
principally made up of salary costs.
Analysis of other administration and other marketing costs
30 June 2017 30 June 2016 31 December 2016
GBPm GBPm GBPm
Expenses relating to additional
products and fees 29.4 22.3 49.9
Price Comparison operating
expenses 70.1 68.8 132.1
Other expenses 16.9 13.6 24.6
Total 116.4 104.7 206.6
Refer to note 12 for a reconciliation between insurance contract
expenses and the reported expense ratio.
8b. Staff share schemes
Analysis of share scheme costs (per income statement):
30 June 2017 30 June 2016 31 December 2016
GBPm GBPm GBPm
Share Incentive Plan (SIP)
charge 5.6 5.1 9.9
Discretionary Free Share Scheme
(DFSS) charge 11.5 9.6 22.0
Total share scheme charges 17.1 14.7 31.9
The share scheme charges reported above are net of the co- and
reinsurers share of the cost and therefore differ from the gross charge
reported in the gross credit to reserves reported in the consolidated
statement of changes in equity (H1 2017: GBP18.7 million, H1 2016:
GBP14.2 million, FY 2016: GBP33.2 million).
The consolidated cash flow statement also shows the gross charge in the
reconciliation between 'profit after tax' and 'cash flows from operating
activities'. The co-insurance share of the charge is included in the
'change in trade and other payables' line.
9. Taxation
9a. Taxation
30 30 31
June June December
2017 2016 2016
GBPm GBPm GBPm
UK Corporation tax
Current charge at 19.25% (2016: 20.0%) 31.6 36.5 53.2
(Over) provision relating to prior periods - corporation
tax - - (1.0)
Current tax charge 31.6 36.5 52.2
Deferred tax
Current period deferred taxation movement (0.1) (0.3) 7.2
Under provision relating to prior periods - deferred
tax - - 4.9
Total tax charge per income statement 31.5 36.2 64.3
Factors affecting the total tax charge are:
30 June 2017 30 June 2016 31 December 2016
GBPm GBPm GBPm
Profit before taxation 193.4 189.5 278.4
Corporation tax thereon at
19.25% (2016: 20.0%) 37.2 37.9 55.7
Expenses and provisions not
deductible for tax purposes 0.5 - 0.8
Non-taxable income (2.8) (4.5) (7.2)
Impact of change in UK tax rate
on deferred tax balances - - -
Adjustments relating to prior
periods - - 3.2
Impact of different overseas tax
rates (5.9) (5.5) (7.0)
Unrecognised deferred tax 3.5 8.8 18.9
Other differences (1.0) (0.5) (0.1)
Tax charge for the period as
above 31.5 36.2 64.3
9b. Deferred income tax asset
Tax
treatment Carried
of share Capital forward Other
Analysis of deferred tax asset schemes allowances losses differences Total
GBPm GBPm GBPm GBPm GBPm
Balance brought forward at 1 January 2016 7.1 2.7 9.9 0.9 20.6
Tax treatment of share scheme charges through income
or expense 0.5 - - - 0.5
Tax treatment of share scheme charges through reserves 4.8 - - - 4.8
Capital allowances - (0.5) - - (0.5)
Carried forward losses - - - - -
Other difference - - - - -
Balance carried forward 30 June 2016 12.4 2.2 9.9 0.9 25.4
Balance brought forward at 1 January 2016 7.1 2.7 9.9 0.9 20.6
Tax treatment of share scheme charges through income
or expense (1.9) - - - (1.9)
Tax treatment of share scheme charges through reserves 0.5 - - - 0.5
Capital allowances - (5.1) - - (5.1)
Carried forward losses - - (5.0) - (5.0)
Other difference - - - (0.7) (0.7)
Balance carried forward 31 December 2016 5.7 (2.4) 4.9 0.2 8.4
Tax treatment of share scheme charges through income
or expense 1.5 - - - 1.5
Tax treatment of share scheme charges through reserves 1.9 - - - 1.9
Capital allowances - (1.7) - - (1.7)
Carried forward losses - - - - -
Other difference - - - (3.8) (3.8)
Balance carried forward 30 June 2017 9.1 (4.1) 4.9 (3.6) 6.3
The UK corporation tax rate reduced from 20% to 19% on 1 April 2017. The
average effective rate of tax for 2017 is 19.25% (2016: 20.0%). A
further reduction to the main rate of corporation tax to 17% (effective
from 1 April 2020) was enacted on 15 September 2016. This will reduce
the Group's future current tax charge accordingly. The deferred tax
asset at 30 June 2017 has been calculated based on the rate at which
each timing difference is most likely to reverse.
The deferred tax asset relating to carried forward losses of GBP4.9
million relates to losses incurred in the Group's US price comparison
business compare.com, and is calculated at the local US rate of tax
(35%). The recognised asset has been limited to the amount supported by
forecast cash flows over the next five years. The forecasts and
underlying assumptions have been reviewed and approved by the Board. In
addition, the forecasts have been stressed for both revenue and profit
reductions and the asset remains recoverable under the stressed
scenarios.
At 30 June 2017 the Group had unused tax losses amounting to GBP152.6
million (H1 2016: GBP114.6 million, FY 2016: GBP142.7 million), relating
to the Group's US businesses Elephant Auto and compare.com, for which no
deferred tax asset has been recognised.
10. Other assets and other liabilities
10a. Property and equipment
Furniture
Leasehold Computer Office and
improvements equipment equipment fittings Total
GBPm GBPm GBPm GBPm GBPm
Cost
At 1 January
2016 25.7 47.8 15.2 8.2 96.9
Additions 0.5 2.6 0.3 0.4 3.8
Disposals - - (0.2) - (0.2)
Foreign
exchange
movement 0.4 0.5 0.6 0.2 1.7
At 30 June
2016 26.6 50.9 15.9 8.8 102.2
Depreciation
At 1 January
2016 10.0 33.4 12.6 6.0 62.0
Charge for
the year 0.8 3.6 0.5 0.3 5.2
Disposals - - (0.1) - (0.1)
Foreign
exchange
movement 0.2 0.4 0.5 0.1 1.2
At 30 June
2016 11.0 37.4 13.5 6.4 68.3
Net book
amount
At 30 June
2016 15.6 13.5 2.4 2.4 33.9
Cost
At 1 January
2016 25.7 47.8 15.2 8.2 96.9
Additions 1.3 3.4 1.1 0.8 6.6
Disposals - - (0.2) - (0.2)
Foreign
exchange
movement 0.6 0.9 0.9 0.4 2.8
At 31
December
2016 27.6 52.1 17.0 9.4 106.1
Depreciation
At 1 January
2016 10.0 33.4 12.6 6.0 62.0
Charge for
the year 2.0 6.5 1.0 1.0 10.5
Disposals - - (0.1) - (0.1)
Foreign
exchange
movement 0.4 0.6 0.6 0.1 1.7
At 31
December
2016 12.4 40.5 14.1 7.1 74.1
Net book
amount
At 31
December
2016 15.2 11.6 2.9 2.3 32.0
Cost
At 1 January
2017 27.6 52.1 17.0 9.4 106.1
Additions 1.0 2.0 1.5 0.2 4.7
Disposals (0.2) - - - (0.2)
Foreign
exchange
movement - (0.1) 0.1 - -
At 30 June
2017 28.4 54.0 18.6 9.6 110.6
Depreciation
At 1 January
2017 12.4 40.5 14.1 7.1 74.1
Charge for
the year 1.3 2.5 0.5 0.7 5.0
Disposals - - - - -
Foreign
exchange
movement - - 0.1 - 0.1
At 30 June
2017 13.7 43.0 14.7 7.8 79.2
Net book
amount
At 30 June
2017 14.7 11.0 3.9 1.8 31.4
10b. Intangible assets
Deferred acquisition
Goodwill costs Software Total
GBPm GBPm GBPm GBPm
Carrying amount:
At 1 January 2016 62.3 16.6 63.4 142.3
Additions - 23.2 14.1 37.3
Amortisation charge - (19.7) (5.5) (25.2)
Disposals - - (0.1) (0.1)
Foreign exchange movement - 0.9 1.0 1.9
At 30 June 2016 62.3 21.0 72.9 156.2
At 1 January 2016 62.3 16.6 63.4 142.3
Additions - 48.5 24.6 73.1
Amortisation charge - (43.2) (12.6) (55.8)
Disposals - - (0.3) (0.3)
Foreign exchange movement - 1.5 1.5 3.0
At 31 December 2016 62.3 23.4 76.6 162.3
Additions - 22.4 5.0 27.4
Amortisation charge - (24.5) (7.3) (31.8)
Disposals - - - -
Foreign exchange movement - (0.2) 0.6 0.4
At 30 June 2017 62.3 21.1 74.9 158.3
Goodwill relates to the acquisition of Group subsidiary EUI Limited
(formerly Admiral Insurance Services Limited) in November 1999. It is
allocated solely to the UK Car Insurance segment. The amortisation of
this asset ceased on transition to IFRS on 1 January 2004. All annual
impairment reviews since the transition date have indicated that the
estimated recoverable value of the asset is greater than the carrying
amount and therefore no impairment losses have been recognised. Refer to
the accounting policy for goodwill in the 2016 financial statements for
further information.
10c. Insurance and other receivables
30 June 2017 30 June 2016 31 December 2016
GBPm GBPm GBPm
Insurance receivables(*1) 740.7 551.6 606.6
Trade receivables 212.7 141.4 172.4
Prepayments and accrued income 11.6 4.4 5.9
Total insurance and other
receivables 965.0 697.4 784.9
[*1] Insurance receivables at 30 June 2017 includes GBP43.5
million in respect of salvage and subrogation recoveries (H1 2016:
GBP30.4 million, FY 2016: GBP37.7 million).
10d. Trade and other payables
30 June 2017 30 June 2016 31 December 2016
GBPm GBPm GBPm
Trade payables 24.4 23.9 35.6
Amounts owed to co-insurers 225.2 208.8 247.5
Amounts owed to reinsurers 958.6 537.2 690.5
Finance leases due within 12
months - 1.8 0.1
Other taxation and social
security liabilities 67.1 43.1 40.1
Other payables 176.6 130.5 112.4
Accruals and deferred income 184.0 125.5 166.0
Total trade and other payables 1,635.9 1,070.8 1,292.2
Of amounts owed to reinsurers, GBP860.1 million (H1 2016: GBP500.2
million, FY 2016: GBP610.1 million) is held under funds withheld
arrangements.
11. Share capital
11a. Dividends
Dividends were declared and paid as follows.
30 June 2017 30 June 2016 31 December 2016
GBPm GBPm GBPm
March 2016 (63.4 pence per
share, paid June 2016) - 175.4 175.4
August 2016 (62.9 pence per
share, paid October 2016) - - 174.4
March 2017 (50.5 pence per
share, paid June 2017) 143.7 - -
Total dividends 143.7 175.4 349.8
The dividend declared in March 2016 represented the final dividend paid
in respect of the 2015 financial year (August 2016 - interim dividend
for 2016). The dividend declared in March 2017 was the final dividend
paid in respect of the 2016 financial year.
An interim dividend of 56.0 pence per share (GBP157 million) has been
declared in respect of the 2017 financial year.
11b. Earnings per share
30 June 30 June 31 December
2017 2016 2016
Profit for the period after taxation attributable
to equity share-holders (GBPm) 163.2 157.4 222.2
Weighted average number of shares - basic 284,587,560 281,806,787 282,419,324
Unadjusted earnings per share - basic 57.3p 55.9p 78.7p
Weighted average number of shares - diluted 285,144,904 282,194,592 283,033,681
Unadjusted earnings per share - diluted 57.2p 55.8p 78.5p
The difference between the basic and diluted number of shares at the end
the period (being 557,344; H1 2016: 387,805, FY 2016: 614,357) relates
to awards committed, but not yet issued under the Group's share schemes.
11c. Share capital
30 June 2017 30 June 2016 31 December 2016
GBPm GBPm GBPm
Authorised:
500,000,000 ordinary shares of
0.1p 0.5 0.5 0.5
Issued, called up and fully
paid:
281,967,266 ordinary shares of
0.1p - 0.3 -
284,352,270 ordinary shares of
0.1p - - 0.3
284,782,447 ordinary shares of
0.1p 0.3 - -
0.3 0.3 0.3
During the first half of 2017 430,177 (H1 2016: 379,313) new ordinary
shares of 0.1p were issued to the trusts administering the Group's share
schemes.
430,177 (H1 2016: 379,313) of these were issued to the Admiral Group
Share Incentive Plan Trust for the purposes of this share scheme to give
a closing number at H1 2017 of 9,375,099 (H1 2016: 8,559,918). These
shares are entitled to receive dividends.
No shares (H1 2016: nil) were issued to the Admiral Group Employee
Benefit Trust for the purposes of the Discretionary Free Share Scheme to
give a closing number at H1 2017 of 16,811,948 (H1 2016: 14,811,948).
The Trustees have waived the right to dividend payments, other than to
the extent of 0.001p per share, unless and to the extent otherwise
directed by the Company from time to time.
The number of shares in issue at flotation was 258,595,400.
11d. Objectives, policies and procedures for managing capital
The Group manages its capital to ensure that all entities within the
Group are able to continue as going concerns and also to ensure that
regulated entities comfortably meet regulatory requirements. Excess
capital above these levels within subsidiaries is paid up to the Group
holding company in the form of dividends on a regular basis.
The Group's dividend policy is to pay 65% of post-tax profits as a
normal dividend and to pay a further special dividend comprising
earnings not required to be held in the Group for solvency or buffers.
Refer to the financial review for further information about the Group's
capital structure and financial position.
11e. Related party transactions
Details relating to the remuneration and shareholdings of key management
personnel are set out in the Directors' Remuneration Report within the
Group's 2016 Annual Report. Key management personnel are able to obtain
discounted motor insurance at the same rates as all other Group staff,
typically at a reduction of 15%.
The Board considers that Executive and Non-Executive Directors of
Admiral Group plc are key management personnel. Aggregate compensation
for the Executive and Non-Executive Directors is disclosed in the
Directors' Remuneration Report in the 2016 Annual Report.
12. Reconciliations
The following tables reconcile significant KPIs and alternative
performance measures included in the financial review above to items
included in the financial statements.
12a. Reconciliation of turnover to reported total premiums written
and Other revenue as per the financial statements
31
30 June 30 June December
2017 2016 2016
GBPm GBPm GBPm
Total Premiums Written before co-insurance arrangements
per note 5a of financial statements 1,219.8 1,076.5 2,193.9
Other revenue per note 7a of financial statements 196.0 176.2 360.6
1,415.8 1,252.7 2,554.5
UK vehicle commission(*1) (0.6) (12.5) (20.9)
Other(*2) 20.0 10.7 21.4
Turnover as per note 4 of financial statements 1,435.2 1,250.9 2,555.0
Intra-group income elimination(*3) 10.5 9.8 20.8
Total turnover 1,445.7 1,260.7 2,575.8
[*1] During 2012 Admiral ceased earning other revenue from
the sale of legal protection policies. At the same point, the Group
began charging its panel of co- and reinsurers a vehicle commission. The
substance of these changes meant that the total premiums written
increased by the amount of revenue that was previously earned from the
sale of legal protection policies. The vehicle commission included
within Other revenue is therefore eliminated from the Turnover measure
to avoid double-counting.
[*2] Other reconciling items represent co-insurer and
reinsurer shares of Other revenue in the Group's International Car
Insurance businesses.
[*3] Intra-group income elimination relates to price
comparison income earned in the Group from other Group companies.
12b. Reconciliation of claims incurred to reported loss ratio,
excluding releases on commuted reinsurance
30 June 2017 30 June 2016 31 December 2016
UK Car Group UK Car Group UK Car Group
GBPm GBPm GBPm GBPm GBPm GBPm
Net insurance claims 100.5 164.9 102.4 148.4 290.1 394.5
Net claims handling
expenses (5.2) (5.4) (5.5) (5.6) (11.0) (11.2)
Reinsurer cap impact - (2.0) - (1.3) - (6.4)
Reserve releases on
commuted reinsurance 47.4 47.4 12.8 12.8 17.1 17.1
Other adjustment(*1) - (1.2) - (1.0) - (1.0)
Adjusted net claims 142.7 203.7 109.7 153.3 296.2 393.0
Net insurance premium
revenue 214.4 301.3 192.9 259.7 404.3 548.8
Other adjustment(*1) - (2.1) - (1.9) - (3.0)
Adjusted net insurance
premium revenue 214.4 299.2 192.9 257.8 404.3 545.8
Reported loss ratio 66.5% 68.1% 56.9% 59.5% 73.3% 72.0%
[*1] Other adjustments relate to additional products
underwritten in the Group's international car insurance businesses. The
contribution from these products is reported as ancillary income and as
such the amounts are excluded for the purpose of calculation of loss and
expense ratios.
12c. Reconciliation of expenses related to insurance contracts to
reported expense ratio
30 June 2017 30 June 2016 31 December 2016
UK Car Group UK Car Group UK Car Group
GBPm GBPm GBPm GBPm GBPm GBPm
Net insurance expenses 23.4 53.2 22.6 48.6 46.2 94.0
Net claims handling
expenses 5.2 5.4 5.5 5.6 11.0 11.2
Reinsurer cap impacts - (1.7) - (4.5) - (1.5)
Intra-group expenses
elimination(*1) 6.6 10.5 6.9 9.8 13.7 20.8
Other adjustment(*2) - (1.0) - (0.9) - (2.0)
Adjusted net expenses 35.2 66.4 35.0 58.6 70.9 122.5
Net insurance premium
revenue 214.4 301.3 192.9 259.7 404.3 548.8
Other adjustment(*2) - (2.1) - (1.9) - (3.0)
Adjusted net insurance
premium revenue 214.4 299.2 192.9 257.8 404.3 545.8
Reported expense ratio 16.4% 22.2% 18.1% 22.7% 17.5% 22.4%
[*1] The intra-group expenses elimination amount relates to
aggregator fees charged by the Group's price comparison entities to
other Group companies.
[*2] Other adjustments relate to additional products underwritten in
the Group's international car insurance businesses. The contribution
from these products is reported as ancillary income and as such the
amounts are excluded for the purpose of calculation of loss and expense
ratios.
12d. Reconciliation of reported profit before tax to adjusted
profit before tax
30 30 31
June June December
2017 2016 2016
GBPm GBPm GBPm
Reported profit before tax per the condensed consolidated
income statement 193.4 189.5 274.8
Non-controlling interest share of profit before tax 1.1 3.8 5.9
Group's share of profit before tax 194.5 193.3 284.3
13. Statutory information
The financial information set out above does not constitute the
company's statutory accounts. Statutory accounts for 2016 have been
delivered to the registrar of companies, and those for 2017 will be
delivered in due course. The auditors have reported on those accounts;
their reports were (i) unqualified, (ii) did not include a reference to
any matters to which the auditors drew attention by way of emphasis
without qualifying their report and (iii) did not contain a statement
under section 498 (2) or (3) of the Companies Act 2006.
Glossary
Alternative Performance Measures
Throughout this report, the Group uses a number of Alternative
Performance Measures (APMs); measures that are not required or commonly
reported under International Financial Reporting Standards, the
Generally Accepted Accounting Principles (GAAP) under which the Group
prepares its financial statements.
These APMs are used by the Group, alongside GAAP measures, for both
internal performance analysis and to help shareholders and other users
of the Group's financial statements to better understand the Group's
performance in the period in comparison to previous periods and the
Group's competitors.
The table below defines and explains the primary APMs used in this
report. Financial APMs are usually derived from financial statement
items and are calculated using consistent accounting policies to those
applied in the financial statements, unless otherwise stated. Non
financial KPIs incorporate information that cannot be derived from the
financial statements but provide further insight into the performance
and financial position of the Group.
APMs may not necessarily be defined in a consistent manner to similar
APMs used by the Group's competitors. They should be considered as a
supplement rather than a substitute for GAAP measures.
Turnover Turnover is defined as total premiums written (as
below) and other revenue. It is reconciled to financial
statement line items in note 12a to the financial
statements.
This measure has been presented by the Group in every
financial report since it became a listed Group in
2004. It reflects the total value of the revenue generated
by the Group and analysis of this measure over time
provides a clear indication of the growth in this
revenue.
The measure was developed as a result of the Group's
business model. The core UK Car insurance business
has historically shared a significant proportion of
the risks with Munich Re, a third party insurance
Group, through a co-insurance arrangement, with the
arrangement subsequently being replicated in some
of the Group's international insurance operations.
Premiums and claims accruing to the external co-insurer
are not reflected in the Group's income statement
and therefore presentation of this metric enables
users of the financial reports to see the scale of
the Group's insurance operations in a way not possible
from taking the income statement in isolation.
Total Premiums Total premiums written are the premiums written within
Written the Group, including co-insurance. It is reconciled
to financial statement line items in note 12a to the
financial statements.
This measure has been presented by the Group in every
financial report since it became a listed Group in
2004. It reflects the total premiums written by the
Group's insurance intermediaries and analysis of this
measure over time provides a clear indication of the
growth in premiums, irrespective of how co-insurance
agreements have changed over time.
The reasons for presenting this measure are consistent
with that for the Turnover APM noted above.
Group's share of Group's share of profit before tax represents profit
Profit before before tax, excluding the impact of Non-controlling
Tax Interests. It is reconciled to statutory profit before
tax in note 12d to the financial statements.
This measure is useful in presenting the limit of
the Group's exposure to the expenditure incurred in
starting up new businesses and demonstrates the 'test-and-learn'
strategy employed by the Group to expansion into new
territories.
In 2016, Group's share of Profit before Tax is presented
on a 'Pre Ogden' and a 'Post Ogden basis. 'Pre Ogden'
represents the Group's share of profit before tax
before the impact of the reduction in the UK Ogden
discount rate confirmed by the Lord Chancellor in
February 2017.
Underwriting For each insurance business an underwriting result
result (profit is presented showing the segment result prior to the
or loss) inclusion of profit commission, other income contribution
and instalment income. It demonstrates the insurance
result, i.e. premium revenue and investment income
less claims incurred and insurance expenses.
Loss 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
12b to the accounts and explanation is as follows.
UK reported car insurance loss ratio: Within the UK
insurance segment we separately present motor ratios,
i.e. excluding the underwriting of other products
that supplement the car insurance policy. The motor
ratio is adjusted to i) exclude the impact of reserve
releases on commuted reinsurance contracts and ii)
exclude claims handling costs that are reported within
claims costs in the income statement.
International insurance loss ratio: As for the UK
motor loss ratio, the international insurance loss
ratios presented exclude the underwriting of other
products that supplement the car insurance policy.
The motor ratio is adjusted to exclude the claims
element of the impact of reinsurer caps as inclusion
of the impact of the capping of reinsurer claims costs
would distort the underlying performance of the business.
Group loss ratios: Group loss ratios are reported
on a consistent basis as the UK and international
ratios noted above. Adjustments are made to i) exclude
the impact of reserve releases on commuted reinsurance
contracts, ii) exclude claims handling costs that
are reported within claims costs in the income statement
and iii) exclude the claims element of the impact
of international reinsurer caps.
Expense 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
12c to the accounts and explanation is as follows.
UK reported car expense ratio: Within the UK insurance
segment we separately present motor ratios, i.e. excluding
the underwriting of other products that supplement
the car insurance policy. The motor ratio is adjusted
to i) include claims handling costs that are reported
within claims costs in the income statement and ii)
include intra-group aggregator fees charged by the
UK price comparison business to the UK insurance business.
International insurance expense ratio: As for the
UK car loss ratio, the international insurance expense
ratios presented exclude the underwriting of other
products that supplement the car insurance policy.
The car ratio is adjusted to i) exclude the expense
element of the impact of reinsurer caps as inclusion
of the impact of the capping of reinsurer expenses
would distort the underlying performance of the business
and ii) include intra-group aggregator fees charged
by the overseas price 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 price comparison
businesses to the Group's insurance businesses and
iii) exclude the expense element of the impact of
international 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 12b and 12c.
Return on Equity Return on equity is calculated as profit after tax
for the period attributable to equity holders of the
Group divided by the average total equity attributable
to equity holders of the Group in the year. This average
is determined by dividing the opening and closing
positions for the year by two.
The relevant figures for this calculation can be found
within the Consolidated Statement of Changes in Equity.
Group Customers Group customer numbers are the total number of car,
household and van policyholders within the Group.
This measure has been presented by the Group in every
Annual Report since it became a listed Group in 2004.
It reflects the size of the Group's customer base
and analysis of this measure over time provides a
clear indication of the growth. It is also a useful
indicator of the growing significance to the Group
of the different lines of business and geographic
regions.
Effective Tax Effective tax rate is defined as the approximate tax
Rate rate derived from dividing the Group's profit before
tax by the tax charge going through the income statement.
It is a measure historically presented by the Group
and enables users to see how the tax cost incurred
by the Group compares over time and to current corporation
tax rates.
Additional Terminology
There are many other terms used in this report that are specific to the
Group or the markets in which it operates. These are defined as follows:
Accident year The year in which an accident occurs, also referred
to as the earned basis.
Actuarial best The probability-weighted average of all future claims
estimate and cost scenarios calculated using historical data,
actuarial methods and judgement.
ASHE 'Annual Survey of Hours and Earnings' - a statistical
index that is typically used for calculation inflation
of annual payment amounts under Periodic Payment Order
(PPO) claims settlements.
Claims A monetary amount set aside for the future payment
reserves 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.
Insurance The tendency for the insurance market to swing between
market cycle highs and lows of profitability over time, with the
potential to influence premium rates (also known as
the "underwriting cycle").
Net claims The cost of claims incurred in the period, less any
claims costs recovered under reinsurance contracts.
It includes both claims payments and movements in
claims reserves.
Net insurance Also referred to as net earned premium. The element
premium of premium, less reinsurance premium, earned in the
revenue period.
Ogden discount The discount rate used in calculation of personal
rate injury claims settlements. The rate is set by the
Lord Chancellor, the most recent rate of minus 0.75%
being announced on 27 February 2017.
Periodic A compensation award as part of a claims settlement
Payment Order that involves making a series of annual payments to
(PPO) a claimant over their remaining life to cover the
costs of the care they will require.
Premium A series of payments are made by the policyholder,
typically monthly or annually, for part of or all
of the duration of the contract. Written premium refers
to the total amount the policyholder has contracted
for, whereas earned premium refers to the recognition
of this premium over the life of the contract.
Profit A clause found in some reinsurance and coinsurance
commission 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).
Ultimate loss The projected ratio for a particular accident year
ratio or underwriting year, often used in the calculation
of underwriting profit and profit commission.
Underwriting The year in which the latest policy term was incepted.
year
Underwriting Also referred to as the written basis. Claims incurred
year basis are allocated to the calendar year in which the policy
was underwritten. Underwriting year basis results
are calculated on the whole account (including co-insurance
and reinsurance shares) and include all premiums,
claims, expenses incurred and other revenue (for example
instalment income and commission income relating to
the sale of products that are ancillary to the main
insurance policy) relating to policies incepting in
the relevant underwriting year.
Written/Earned A policy can be written in one calendar year but earned
basis over a subsequent calendar year.
Responsibility statement of the directors in respect of the half-yearly
financial report
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU;
-- the interim management report includes a fair review of the information
required by:
a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first six
months of the financial year and their impact on the condensed set of
financial statements; and a description of the principal risks and
uncertainties for the remaining six months of the year; and
b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related
party transactions that have taken place in the first six months of the
current financial year and that have materially affected the financial
position or performance of the entity during that period; and any
changes in the related party transactions described in the last annual
report that could do so.
By order of the Board,
Geraint Jones
Chief Financial Officer
15 August 2017
INDEPENT REVIEW REPORT TO ADMIRAL GROUP PLC
We have been engaged by the company to review the condensed set of
financial statements in the half-yearly financial report for the six
months ended 30 June 2017 which comprises the condensed consolidated
income statement, the condensed consolidated statement of comprehensive
income, the condensed consolidated statement of financial position, the
condensed consolidated cash flow statement, the condensed consolidated
statement of changes in equity and related notes 1 to 13. We have read
the other information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the Independent
Auditor of the Entity" issued by the Auditing Practices Board. Our work
has been undertaken so that we might state to the company those matters
we are required to state to it in an independent review report and for
no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company, for
our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing
the half-yearly financial report in accordance with the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union. Our responsibility Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority. Deloitte LLP Statutory Auditor London, United Kingdom 15 August 2017 This announcement is distributed by Nasdaq Corporate Solutions on behalf of Nasdaq Corporate Solutions clients. The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein. Source: Admiral Group PLC via Globenewswire http://www.admiralgroup.co.uk
(END) Dow Jones Newswires
August 16, 2017 02:00 ET (06:00 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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