13531 Admiral AR a/w 5/4/05 9:59 am Page 1 A year in focus Annual Report 2004 13531 Admiral AR a/w 5/4/05 9:59 am Page 2 CONTENTS Directors Alastair Lyons CBE (Non-executive Chairman) Henry Engelhardt (Chief Executive) Andrew Probert (Finance and IT Director) David Stevens (Chief Operating Officer) Manfred Aldag (Non-executive director) Martin Jackson (Non-executive director – appointed 19 August 2004) Keith James OBE (Non-executive director) John Sussens (Non-executive director – appointed 19 August 2004) Contents Resigning during 2004 (both 7 September): Owen Clarke Our brands PAGE 01 Pratt Thompson Financial highlights PAGE 02 Company Secretary Stuart Clarke Chairman's statement PAGE 03-04 Registered Office Chief Executive's statement PAGE 05-10 Capital Tower Auditor Actuarial advisors Financial review PAGE 11-19 KPMG Audit Plc Greyfriars Road Ernst & Young Marlborough House Cardiff CF10 3AZ 1 More Place Corporate governance PAGE 20-27 Fitzalan Court London SE1 2AF Remuneration report PAGE 28-30 Cardiff CF24 0TE Corporate responsibility PAGE 31-34 Bankers Lloyds TSB Bank Plc Bank of Scotland The Admiral Group plc Board PAGE 35-36 City Office Corporate Banking Bailey Drive 55 Temple Row Directors’ report PAGE 37-38 Gillingham Business Park Birmingham B2 LS Independent auditor’s report PAGE 39 Kent ME08 0LS Joint Corporate Brokers Consolidated profit and loss account PAGE 41-42 Merrill Lynch International Citigroup Financial Markets Consolidated balance sheet PAGE 43-44 2 King Edward Street UK Equity Limited London EC1A 1HQ Citigroup Centre Company balance sheet PAGE 45 33 Canada Square London E14 5LB Consolidated cash flow statement PAGE 46 PAGE 47-49 Registrar Solicitor Accounting policies Capita IRG Plc Norton Rose Notes to the financial statements PAGE 50-67 The Registry Kempson House 34 Beckenham Road Camomile Street Consolidated financial summary PAGE 68 Beckenham London EC3A 7AN Kent BR3 4TU Notice of Annual General Meeting PAGE 69-72 13531 Admiral AR a/w 5/4/05 9:59 am Page 4 PAGES 01 02 Our brands Financial highlights 1 The Group’s first brand, set up in 1993 – mainly targeting those who traditionally pay higher than PROFIT BEFORE TAX ADJUSTED GROUP CORE PROFITS average premiums, including drivers under-35 and those living in big cities. www.admiral.com 2004 £101.0m 2004 £100.6m 2003 £57.2m 2003 £77.2m Bell was set up in 1997 – its main target market being drivers with zero or low no claims bonus. www.bell.co.uk Confused.com is an intelligent, automated car insurance shopper. Customers input their details once, GROUP TURNOVER2 CLOSING ACTIVE CUSTOMERS and receive quotes from major car insurance websites. www.confused.com 2004 £548.0m 2004 1,041,000 Diamond was created for women in response to a need in the market place for insurance specifically 2003 £427.3m 2003 808,000 for young women drivers, which is not only good value, but also as hassle free as possible. www.diamond.co.uk elephant.co.uk is the Group’s main online car insurance service. Elephant passes on cost savings ADJUSTED COMBINED RATIOS3 ADJUSTED EARNINGS PER SHARE4 generated by being an online brand to customers in the form of lower premiums. www.elephant.co.uk 2004 82.0% 2004 26.9p Gladiator Commercial is the Group’s commercial vehicle insurance broker that was launched in 2003 67.7% 2003 15.2p April 1998. The company acts on behalf of several of the largest commercial vehicle insurers in the UK www.gladiator.com www.admiralgroup.co.uk 1. Refer to page 19 in the financial review 2. Group turnover includes total premiums, gross other income plus allocated investment return. Total premiums comprise gross motor insurance premiums written by the Group, before co-insurance and reinsurance 3. 2003 figure adjusted for non-recurring Lloyd’s charges 4. 2004 EPS adjusted for exceptional tax credit on ESOT share award. Refer to note 20 13531 Admiral AR a/w 5/4/05 9:59 am Page 6 CHAIRMAN’S STATEMENT CHAIRMAN’S STATEMENT PAGES 03 04 Chairman’s statement a distinctive culture of openness, our executive team gives me confidence also established a senior executive share representing 3.1 pence per share is based informality, team work and delegation of in our Board’s ability to chart an effective plan under which awards are determined on a 45% pay-out ratio, the actual responsibility made possible by strategy for Admiral and identify correctly according to growth in Group earnings amount paid reflecting our listing part excellent management information and the resources we require to implement per share. way through the financial year. The effective control systems. this strategy. second special element of 6.2 pence per The Group is well capitalised with a share reflects the abnormally low tax Our listing brought with it significant Admiral’s strategy is clear and proven approach to reserving, and with charge in 2004. We shall maintain a changes to our Board. Owen Clarke and straightforward – to continue to grow our solvency ratios in both the UK and policy of reviewing our available free Pratt Thompson, who respectively had share of the direct private motor market, Gibraltar, which carry an appropriate cash to determine whether or not the represented the interests of Barclays Company is able to pay further special Private Equity and XL, stepped down as “We are pleased to be able to propose a final dividends from time to time in addition non-executive directors. Our thanks to dividend for 2004 of 9.3p per share.” to a consistent normal pay-out ratio. them for many years of active Alastair Lyons, Admiral Group plc Chairman involvement and sound advice and maximising the value derived from each margin over minimum solvency statutory In conclusion, I am very confident in As one recent report on the ever value of business written and its support. In their place we have been customer relationship. Along the way we requirements. Our business model is Admiral’s ability to pass the test of changing role of the Chairman put it, the profitability. During 2004 we have joined by Martin Jackson and John will identify profitable opportunities to strongly cash generative, with year-end clarity of strategy, quality of prime job of the Chairman is to run the secured our 1 millionth customer, written Sussens. Martin brings a wealth of exploit the knowledge, skills and non-regulated cash balances increasing management, and adequacy of resources Board, not the organisation: that is the £470m total premiums and achieved pre- experience of financial management in resources attaching to our core business. from £30m to £50m. In addition relief for to continue consistently to create value job of the Chief Executive. It is for the tax profits of £101m, with an outstanding the insurance sector, having, as Finance As an example, Confused, the intelligent the cost of the ESOT distribution at for all our shareholders. Board, led by the Chairman, to ensure 82.0% combined ratio. The sustained Director, taken Friends Provident through automated car insurance shopper that we listing created an abnormally low tax that the Company has strategies, quality growth in franchise and profitability that demutualisation. We are delighted to set up in 2000, last year handled 1.4 charge in the 2004 accounts which will of management, and all the resources – Admiral’s distinctive business model has have him as Chairman of our Audit million quotes. reduce Admiral’s tax payment in 2005. financial, human, technology – to create Our continued successful development Consistent with our principle of wealth on a consistent basis. At the “Our philosophy is to give people the reflects not only the quality of our returning excess cash to our same time, the Chairman has to ensure Alastair Lyons executive directors but also the strength shareholders we are, therefore, pleased that the business is run with value and opportunity to develop to their full potential.” Chairman in depth of Admiral’s management and its to be able to propose a two-part final integrity, not only meeting governance 18 March 2005 whole team. Our philosophy is to give dividend for 2004. The first element, codes but also the expectations of made possible underpinned the high Committee. John’s significant exposure people the opportunity to develop to customers, employees, suppliers and point of 2004 – the Company’s highly to the quoted sector, having served for their full potential, and ongoing alignment wider stakeholders. successful listing in a difficult market for many years as Managing Director of of interest between staff and new issues, valuing the business at £711m, Misys and now also as a non-executive This is a remit that I am very happy to shareholders is one of our core principles. some 12 years after it was first conceived director of Cookson, makes him well embrace as Chairman. I shall, therefore, We were, therefore, delighted that so by the senior executive team that leads qualified to be our Senior Independent leave it to Henry Engelhardt, our Chief many of our staff – 1,418 out of a total of it today. Director and Chairman of our Executive, to review in detail the 1,616 – were able to participate in the Remuneration Committee. My thanks achievements of the Group during an It was hugely satisfying to follow this distribution of shares on listing as a also to Manfred Aldag and Keith James exceptional year and shall content success by winning Business of the Year consequence of our Employee Share for their continuing contributions during myself with the headlines. at the 2004 National Business Awards, a Ownership Trust (ESOT). As this ceased at much deserved reflection of our listing a year which made exceptional demands In every year since I became Chairman in listing we have established a replacement positioning – “Admiral is different”.