Annual Report 2018 VALUING OUR PEOPLE CUSTOMER FOCUS TEST and LEARN a GREAT PLACE to WORK CUSTOMER CARE PEOPLE WHO LIKE WHAT THEY DO
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Annual Report 2018 VALUING OUR PEOPLE CUSTOMER FOCUS TEST AND LEARN A GREAT PLACE TO WORK CUSTOMER CARE PEOPLE WHO LIKE WHAT THEY DO Annual Report 2018 DO IT BETTER INNOVATION CUSTOMER SUPPORT CLEAR AND HONEST COMMUNICATION TEAMWORK Financial highlights Group’s share of profit before tax*1 (£million) Admiral offers car, van, £479.3m household and travel 2018 0% Ogden basis £479.3m insurance in the UK and 2018 -0.75% Ogden basis £413.3m the Group includes 2017*3 £405.4m 2016 £284.3m Confused.com, a leading Turnover*1 price comparison website. (£billion) Outside the UK, Admiral £3.28bn owns four insurance and 2018 £3.28bn several price comparison 2017*3 £2.96bn businesses. 2016 £2.58bn Contents Company Overview Corporate Governance Financial Statements 01 Financial Highlights 62 Introduction from the Chairman 113 Independent Auditor’s Report 02 Chairman’s Statement 64 Board of Directors 122 Consolidated Income Statement 06 Our Culture 66 Governance Report 123 Consolidated Statement of 74 The Audit Committee Comprehensive Income Strategic Report 80 The Group Risk Committee 124 Consolidated Statement of Financial Position 12 Group at a Glance 85 The Nomination and Governance 14 What We Do Committee 125 Consolidated Cash Flow Statement 16 Business Model 88 The Remuneration Committee 126 Consolidated Statement of Changes in Equity 18 How We Do It – Our Strategy 90 Directors’ Remuneration Policy 127 Notes to the Financial Statements 20 Chief Executive’s Statement 100 Annual Report on Remuneration 179 Parent Company Financial Statements 22 Q&A with David, Cristina, Milena 108 Directors’ Report and Geraint 182 Notes to the Parent Company Financial Statements 24 Chief Financial Officer’s Review 189 Consolidated financial summary (unaudited) 26 Group Financial Review 31 UK Insurance Review Additional Information 40 International Car Insurance Review 190 Glossary 44 Price Comparison Review 48 Other Group Items 51 Year in Pictures 52 Principal Risks and Uncertainties 58 Being a Responsible Business Admiral Group plc · Annual Report and Accounts 2018 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information Group’s statutory profit before tax Earnings per share Return on equity*1 (£million) (pence) (%) £476.2m 137.1p 56% 2018 0% Ogden basis £476.2m 2018 0% Ogden basis 137.1p 2018 56% *3 2018 -0.75% Ogden basis £410.2m 2018 -0.75% Ogden basis 118.2p 2017 55% 2017*3 £403.5m 2017*3 117.2p 2016 37% 2016 £278.4m 2016 78.7p Net revenue Customers*1 Full year dividend per share*4 (£billion) (million) (pence) £1.26bn 6.51m 126.0p 2018 £1.26bn 2018 6.51m 2018 126.0p 2017*3 £1.13bn 2017*3 5.73m 2017*3 114.0p 2016 £1.02bn 2016 5.15m 2016 102.5p Solvency ratio (post dividend)*2 194% (2017: 205%) *1 Alternative Performance Measures – refer to the Glossary for definition and explanation. *2 Unaudited: refer to capital structure and financial position section later in the report for further information. *3 The Group’s 2017 financial results were reported on an Ogden discount rate -0.75% basis. 2018 reported results reflect the impact of a change in assumption for the Ogden rate to 0%, with the equivalent results on a -0.75% (Pre-Ogden) basis also included above. Refer to Glossary for further information on the Ogden discount rate. *4 2018 dividend includes an additional dividend of 11 pence per share relating to the increase in post-tax profits from the change in Ogden discount rate assumption. Admiral Group has delivered another positive set of results in 2018: record turnover, profit, dividend, strong return on capital, strong solvency ratio and record customer numbers. People Customers Community Page 06 Page 08 Page 10 Admiral Group plc · Annual Report and Accounts 2018 01 Company Overview Chairman’s Statement “ On behalf of the Board I would like to thank everyone at Admiral for their continued hard work and contribution to the Group’s results in 2018.” I continue to be impressed by the impact on our 2018 profits. Excluding the year (profit of £4.1 million in 2017). energy, dedication and passion shown this our profits would have been slightly Turnover is now £146.0 million and by all of the 10,000 people at Admiral. up year on year. properties insured have increased by 31% to 0.87 million. Customers buy from Our focus on customer service, our The Group has continued to grow with us either using price comparison sites distinctive culture and our contribution turnover increasing by 11% to £3.28 (which continue to grow significantly), to the communities in which we operate billion. Customer numbers increased or directly and, increasingly, using our remain at our heart. This has resulted strongly by 14% to 6.5 million. MultiCover offering, building on the again in a positive set of financial results success of MultiCar. in 2018. The Group’s share of pre-tax profit increased by 18% to £479.3 million, Our Financial Services business Admiral is now 26 years old and over heavily impacted by the change in Ogden continues to grow in both Personal the years has become a much bigger rate (assumed 0%). Earnings per share Loans and Car Finance, with a loans and more diverse organisation through and return on equity increased by 17% balance at year end 2018 of £300 a strong track record of organic to 137.1 pence (1% increase to 118.2 million. We continue with our test growth. We remain true to our values pence excluding Ogden impact) and and learn approach. The early signs and approach which are as relevant one percentage point respectively. The are positive; we see the potential to now as they always have been. We Group’s solvency ratio remains robust at differentiate and expect this to be have a straightforward and highly 194% from (205% in 2017). an increasingly significant part of our focused strategy where we continue to business in future. concentrate on our core market of UK UK insurance continued to be dominated insurance while taking what we know by UK Motor where we grew the number We are continuing to invest in our to overseas markets where we are now of vehicles we insure by 9% to over 4 overseas insurance businesses, which seeing some encouraging results. At the million. We have seen some deterioration is bearing fruit with reduced losses same time, we are exploring how we can in the 2018 loss ratio; this has been overall and our European insurers make use of our core skills in other areas more than offset by favourable claims delivering overall profits as outlined at of insurance and in the personal loans development of past years, part of which our European investor day in September. and car finance markets in the UK. arises due to the change in the Ogden Turnover and customer numbers are discount rate. We have reduced our 2018 OVERVIEW continuing to grow materially by some growth in the second part of the year in 20% and 18% respectively and we now Admiral Group has delivered another line with our normal prudent approach have £0.5 billion of combined turnover positive set of results in 2018: record and focus on value rather than volume. and 1.2 million customers outside the turnover, profit, dividend, strong return UK. We remain optimistic in delivering on capital, strong solvency ratio and We continue to invest resource in improving our core skills in UK Motor significant long term profit for the record customer numbers. Yet again our Group. In particular, ConTe has seen results have been impacted by Ogden including investing in technology to improve our efficiency and the service significant growth, now insuring 580,000 (Personal Injury Discount Rate), this vehicles, and increased profits due to time in a positive way. Following Royal we provide to customers supporting the continuing shift to online servicing. loss ratio improvement. At Elephant Assent of the Civil Liability Bill in the Auto in the US we have refined the UK Parliament just before Christmas, Household insurance continues to grow strategy and are seeing positive loss the Group has applied a best estimate but the result has been impacted by ratio development as well as improved assumption for the Odgen rate at 0%, adverse weather and subsidence events customer loyalty. which has had a significant positive resulting in a loss of £3.0 million for 02 Admiral Group plc · Annual Report and Accounts 2018 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information As a result of Brexit, we have established • Claims management – consistent positive an insurance company and an insurance feedback from customers on the service intermediary business in Spain to support they receive. our European operations. • Controlled test and learn – organic growth with measured expansion steps. In our Price Comparison (PC) businesses, Confused in the UK increased revenue and • Shareholder returns – we believe in profits. In Confused, Rastreator and LeLynx, returning excess capital to shareholders. we continue to invest in a range of market Overall we believe that people who verticals which are growing well as well as like what they do, do it better. investing in delivering an improved customer experience. Our US comparison business, I have had the pleasure of visiting our Compare, has experienced challenging operations in the UK, France, Italy, Spain market conditions impacted by increased and the US along with other Non Executive competition for customer acquisition which Directors (“NED’s”). I have also attended pushed up marketing spend in 2018. This is the annual Staff General Meeting (with reflected in a £32.9 million impairment of approximately 6,000 people), our annual the carrying value of the Group’s investment.