ADMIRAL GROUP PLC Annual Report and Accounts 2013 ADMIRAL GROUP PLC ADMIRAL GROUP Annual Report and Accounts 2013 _x_ADM_ar13_Cover.indd 3 10/03/2014 11:25:53 ABOUT ADMIRAL ABOUT ADMIRAL GROUP The history of the Admiral Group is one of growth, profitability and innovation. Admiral launched in 1993 with just one brand, zero customers and 57 members of staff. The Company has grown to become one of the UK’s largest and most profitable car insurance providers, with over 11% market share and market-leading financial results. The Group also has operations in Spain, Italy, France and the USA, and in total insures 3.70 million customers. Admiral is one of the largest employers in South Wales and employs 7,000 people worldwide. Admiral Group’s strategy is simple: to continue to progress in the UK car insurance market whilst taking what we do well to new markets and products; keep doing what we’re doing and do it better year after year. HENRY ENGELHARDT RECEIVES ADMIRAL’S SUNDAY TIMES’ BEST 100 COMPANIES TO WORK FOR AWARD: Chief Executive’s Statement: pages 10 to 11 Admiral Group plc AnnualAnnual Report and Accounts 2013 _x_ADM_ar13_Cover.indd 4 11/03/2014 15:57:10 STRATEGIC CORPORATE FINANCIAL OTHER INTRODUCTION REPORT GOVERNANCE STATEMENTS INFORMATION FEATURED IN THIS REPORT Chairman’s Statement Chief Executive’s 1 Admiral’s progress in 2013 2 Statement Admiral’s Chairman, Alastair A good year for Admiral Lyons, discusses Admiral’s 2013 Henry Engelhardt, CEO, gives performance and explains what his perspective on 2013. makes Admiral different. More: pages 4 to 5 More: pages 10 to 11 Admiral’s business model Admiral’s performance 1 The Customer, The Customer, The Customer 3 How Admiral works 4 2013 fi nancial review 2 A GREAT Place to Work! A focus on customer service, 370.2 Admiral’s Chief Financial Offi cer, 3 P r o fi t F o c u s 344.6 employee satisfaction, risk 299.1 Kevin Chidwick, outlines the 265.5 4 Risk Aversion aversion, profi t and returning 215.8 2013 Group and divisional 5 Dividends dividends to shareholders. 09 10 11 12 13 results – UK Car Insurance, International Car Insurance, Price Comparison and Other Group Items. More: pages 12 to 13 More: pages 16 to 19 REPORT CONTENTS Introduction Corporate Governance IFC About Admiral 36 Chairman’s Introduction 02 Introduction 38 Board of Directors 04 Chairman’s Statement 40 Governance Report 46 Report of The Audit Committee Strategic Report 50 Report of The Group Risk Committee 06 Admiral’s Businesses 52 Report of The Nomination Committee 08 Admiral’s Operations 54 Report of The Remuneration Committee 10 Chief Executive’s Statement 55 Directors’ Remuneration Report 12 Business Model, Objectives and Strategy 65 Directors’ Report 14 Customers and Employees 16 Group Financial Review Financial Statements 20 UK Car Insurance Review 68 Independent Auditor’s Report 26 International Car Insurance Review 70 Consolidated Income Statement 30 Price Comparison Review 71 Consolidated Statement of Comprehensive Income 33 Other Group Items 72 Consolidated Statement of Financial Position 34 Principal Risks and Uncertainties 73 Consolidated Cash Flow Statement 74 Consolidated Statement of Changes in Equity 75 Notes to the Financial Statements 99 Parent Company Financial Statements 100 Notes to the Parent Company Financial Statements 102 Consolidated Financial Summary Other Information 103 Glossary 104 Directors And Advisers 105 Further Information Annual Report and Accounts 2013 Admiral Group plc 01 _x_ADM_ar13_front.indd 1 10/03/2014 11:23:38 INTRODUCTION [PULLOUTANOTHER TOGOOD BE SUPPLIED]YEAR “ 2013 was a good year for the Group with further increases in profit, customer numbers and dividends. Our UK Car Insurance business remains the main source of profits but pleasing contributions have also been made by our Price Comparison businesses in the UK, Spain and France.” Kevin Chidwick, Chief Financial Officer GROUP HIGHLIGHTS ANNUAL HIGHLIGHTS Group profit before tax up 7% Turnover £million Customers million at £370 million (2012: £345 million) £2,030m 3.7m Earnings per share up 10% at -8.4% +4.2% 3.7 104.6 pence (2012: 95.1 pence) 3.6 3.4 2,215 2,190 2,030 2.7 2.1 Final dividend of 50.6 pence 1,585 per share bringing the 2013 total 1,077 dividend to 99.5 pence per share 09 10 11 12 13 09 10 11 12 13 up 10% (2012: 90.6 pence per share) Return on capital of 58% (2012: 60%) Profit before tax £million Return on capital % £370.2m 58% Group turnover down 8% at +7.4% -3.3% 60 £2.03 billion (2012: £2.22 billion) 59 59 58 54 370.2 344.6 Group customers up 4% to 299.1 265.5 3.70 million (2012: 3.55 million) 215.8 09 10 11 12 13 09 10 11 12 13 International Car Insurance turnover up 15% to £188 million with customers up 18% to 515,300 (2012: £163 million Earnings per share pence Full-year dividend per share pence and 436,000 customers) 104.6p +10.0% 99.5p 7,000 staff to receive Free Shares +9.8% 99.5 104.6 95.1 worth £3,000 in the employee 90.6 81.9 75.6 68.1 share scheme 72.3 57.5 59.0 09 10 11 12 13 09 10 11 12 13 Staff satisfaction: I am happy Following a claim, I would at Admiral % renew with Admiral % 88% 91% 91 91 93 92 89 91 91 90 88 88 More business news: www.admiralgroup.co.uk/media/pressreleases/ 09 10 11 12 13 09 10 11 12 13 02 Admiral Group plc Annual Report and Accounts 2013 _x_ADM_ar13_front.indd 2 10/03/2014 11:23:38 STRATEGIC CORPORATE FINANCIAL OTHER INTRODUCTION REPORT GOVERNANCE STATEMENTS INFORMATION MAJOR ACHIEVEMENTS THIS YEAR 2013 was a busy year for Admiral Group. A few of the key moments are highlighted below: Happy Birthday Admiral Group In January 2013, Admiral celebrated its 20th birthday, in May, ConTe turned fi ve and December marked the fi rst birthday for Admiral’s new UK Household Insurance operation. The Customer, The Customer, The Customer Constantly innovating to meet customer needs, in 2013 Admiral launched a Price Comparison business in the USA, comparenow.com and two law fi rms in the UK, Admiral Law and BDE Law. For more information, see pages 25 and 31. Underwriting Arrangements A GREAT Place to Work! Sharing risk with reinsurance In surveys voted for by members partners is a key part of Admiral’s of staff, Admiral was placed: business model. Extensions to > 2nd in the Sunday Times agreements mean that Admiral 25 Best Big Companies to will be able to operate its Work For in 2014 capital-effi cient model to at least the end of 2016. For more > 2nd Best Large Workplace information, see page 23. in the UK and 2nd Best Multinational Workplace in Europe by the Great Place Corporate Responsibility to Work Institute, and Best received the award “Trust People who like what they do, Workplaces 2013 do it better, so we strive to ensure United Kingdom Champion” as one of the our staff enjoy coming to work. To few companies to have view Admiral Group’s Corporate appeared in the list every Best Responsibility (CR) Report, which Workplaces 2013 year since it began includes an introduction from Europe Chief Operating Offi cer, David Stevens, go to the Group’s corporate website. Read more on Admiral Group’s Corporate Responsibility (CR) strategy: www.admiralgroup.co.uk/ culture/csr/ Annual Report and Accounts 2013 Admiral Group plc 03 _x_ADM_ar13_front.indd 3 10/03/2014 11:23:47 CHAIRMAN’S STATEMENT WHAT MAKES ADMIRAL DIFFERENT ALASTAIR LYONS, CBE CHAIRMAN Our Business > Our Employees: we believe that if I am frequently asked what it is that makes people enjoy what they do, they do Admiral has achieved so much in its fi rst Admiral different. What is it that has made a better job – in 2013 Admiral was voted 20 years, here are a few highlights from it possible for this business to grow in the 2nd Best Large Workplace in the over the years: 10 years from a private company with a UK and the 2nd Best Multinational 3% share of the UK private car insurance market Workplace in the Great Place to Work and making pre-tax profi ts of £57 million in Institute awards; Admiral has been in 1993 2003 to a member of the FTSE-100, one of the Sunday Times 100 Best Companies Admiral launches in Cardiff with just the largest in the UK private car market, and to Work For in the UK every year the list one brand, zero insured vehicles and with profi ts of £370 million today? has been compiled 57 members of staff. My answer is that there is no one thing that > Focus: Admiral has spent 20 years refi ning if you lifted it out of Admiral and put it into how best to provide the service people a competitor would immediately transform look for from their car insurer, and the that company’s fortunes. Rather, there are a last 13 years developing Price Comparison, set of attributes that together make Admiral in particular for car insurance. It is only what it is, a combination that would be very with the advent of Admiral Household Insurance in the last year that we 2003 hard to replicate as you would need each and every element to come together to the have dedicated any material effort With a 3% share of the UK private car right degree and in the right way.