Admiral Group Annual Report 2014

FY2014 Annual Report · Admiral Group

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Admiral Group plc
Annual Report and Accounts 2014

ABOUT ADMIRAL GROUP

Admiral Group is one of the UK’s
largest and most profitable car
insurance providers, with over 11%
market share and market-leading
financial results.

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 Group now has operations
in Spain, Italy, France and the US, and has over four
million customers.

Admiral’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.

Admiral is one of the largest employers in South Wales
and has over 7,000 people worldwide.

Find out more about how people make
our businesses work from page 12

Chairman’s Statement
Alastair Lyons, CBE
From page 04

Admiral’s businesses
and operations
From page 06

Chief Executive’s Statement
Henry Engelhardt, CBE
From page 08

Stacey
Advanced MOJ handler

Introduction
IFC About Admiral Group
02
04 Chairman’s Statement

Introduction

Strategic report
06 Admiral’s businesses and operations
08 Chief Executive’s Statement
10 10 years from float
12 Admiral’s business model
14 Admiral’s strategy
16 Questions and Answers
18 Group Financial Review
22 UK Insurance Review
28
32 Price Comparison Review
35 Other Group Items
36 Principal risks and uncertainties

International Car Insurance Review

Corporate governance
40 Chairman’s introduction
41 Admiral’s governance framework
42 Board of Directors
44 Governance Report
49 Report of the Audit Committee
53 Report of the Group Risk Committee
56 Report of the Nomination Committee
58 Report of the Remuneration Committee
60 Directors’ Remuneration Report
73 Directors’ Report

Financial statements
76
Independent Auditor’s Report
78 Consolidated Income Statement
79 Consolidated Statement of Comprehensive Income
80 Consolidated Statement of Financial Position
81 Consolidated Cash Flow Statement
82 Consolidated Statement of Changes in Equity
83 Notes to the financial statements
111 Parent Company financial statements
112 Notes to the Parent Company financial statements
114 Consolidated financial summary

Other information
115 Glossary
116 Directors and advisors
117 Further information

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

OTHER INFORMATIONFINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTINTRODUCTIONINTRODUCTION

Another good year

2014 was another good year for the Admiral Group. The current
year result included an increase in profit from the UK Car Insurance
business and, encouragingly, a profit*1 from ConTe in Italy, which
brings to three (out of seven) the number of businesses outside
the UK that contribute positively to the Group’s result.”

Geraint Jones
Chief Financial Officer

Group highlights
@ Group profit before tax*2 4% lower at £356.5 million

Turnover (£million)

£1,971m

-3%

5
8
5
1

0
9
1
2

5
1
2
2

0
3
0
2

1
7
9
,
1

Customers (million)

4.1m

+9%

6
3

7
3

4
3

1
.
4

7
2

Profit before tax*1 (£million)

Return on equity (%)

£356.5m

-4%

52%

-10%

5
4
4
3

7
0
7
3

5
.
6
5
3

9
5

0
86
5

2
5

0
9
9
2

8
5
6
2

(2013: £370.7 million)

@ Earnings per share 2% lower at 103.0 pence

(2013: 104.6 pence)

@ Final dividend of 49.0 pence per share, bringing
the 2014 total dividend to 98.4 pence per share
down 1% (2013: 99.5 pence per share)

@ Return on equity of 52% (2013: 58%)

@ Group turnover*3 down 3% at £1.97 billion

(2013: £2.03 billion)

@ Group customers up 9% to 4.05 million

(2013: 3.70 million)

@ International car insurance turnover up 10% to
£206 million, with customers up 15% to 592,600
(2013: £188 million and 515,300 customers)

@ Over 7,000 staff to receive free shares worth
£3,000 in the employee share scheme

*1 Segment result, excludes share scheme charges. These charges are included

in the ‘Other’ segment

*2 Represents Group’s share of profit before tax after excluding Minority Interests

*3 Turnover is defined as total premiums written (including co-insurers’ share)

and Other Revenue (excluding vehicle commission)

Another busy year
Important moments in 2014:

June

July

Admiral named third best
workplace in Europe

Admiral announced a successful
inaugural bond offering of £200 million

ANNUAL REPORT AND ACCOUNTS 2014

WWW.ADMIRALGROUP.CO.UK

A Great Place to Work!
We pride ourselves on being a great place to work, and this is
reflected in the many awards we win. We are particularly proud
of these awards as they are voted for by staff.

Read more on
pages 53 to 55

*1 Roger Abravanel will not be seeking re-election at Admiral Group plc’s forthcoming Annual General

Meeting on 29 April 2015 and will be stepping down as a Non-Executive Director of Admiral Group plc
effective from that date

*2 Penny James was appointed to the Board on 1 January 2015 and joined the Audit Committee with effect

from that date

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTIONFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORTINTRODUCTIONBOARD OF DIRECTORS

Alastair Lyons, CBE (61)
Non-Executive Chairman,
appointed in July 2000

Henry Engelhardt, CBE (57)
Chief Executive Officer,
appointed in October 1999

Geraint Jones (38)
Chief Financial Officer,
appointed in August 2014

@ Non-Executive Chairman of the Towergate

@ Trustee of the Wales Millennium Centre (WMC)

@ Trustee of the Moondance Foundation

Henry is a founder Director of Admiral and was
recruited by the Brockbank Group in 1991 to set
up the Admiral business. Henry has an MBA from
INSEAD, a BA from the University of Michigan and
was awarded an honorary CBE in 2008 for services
to business in Wales.

Insurance Group

@ Non-Executive Chairman of Serco Group plc

@ Group Deputy Chairman of Bovis Homes Group plc

In his executive career Alastair has been Chief
Executive Officer (CEO) of the National Provident
Institution and of the National & Provincial Building
Society, Managing Director of the Insurance Division
of Abbey National plc and Director of Corporate
Projects at National Westminster Bank plc. He has
also been a Non-Executive Director of both the
Department for Transport (DfT) and the Department
for Work and Pensions (DWP), as well as of its
predecessor, the Department of Health and Social
Security (DHSS).

A Fellow of the Institute of Chartered Accountants,
he was awarded a CBE in the 2001 Birthday Honours
for services to social security.

Geraint is responsible for finance, actuarial, compliance
and investments. He joined Admiral in 2002 and
has since held a number of senior finance positions,
including Head of Finance, before being promoted
to Deputy Chief Financial Officer in January 2012.
A Fellow of the Institute of Chartered Accountants
in England and Wales, Geraint has also worked
as an external auditor at Ernst & Young and KPMG.

GRC

David Stevens, CBE (53)
Chief Operating Officer,
appointed in October 1999

@ Trustee of the Waterloo Foundation

David is a founder Director of Admiral and was recruited
in 1991 to set up the Admiral business. Prior to joining
Admiral David worked at McKinsey & Co, in the
Financial Interest Group, and Cadbury Schweppes
in the UK and the US. David has an MBA from
INSEAD and he was awarded a CBE in 2010 for
services to business and the community in Wales.

Roger Abravanel* (68)
Non-Executive Director,
appointed in March 2012

Manfred Aldag (64)
Non-Executive Director,
appointed in March 2003

@ Chief Executive Manager of Munich Re,
responsible for UK, Ireland, Netherlands,
Nordics, Baltics and Russia

Manfred graduated from University of Essen with
a degree in economics and business management.
Since 1981, Manfred has been working for Munich Re.

@ Non-Executive Director serving on, amongst
others, the Boards of: Teva Pharmaceutical
Industries Ltd, Banca Nazionale del Lavoro S.p.A.
and COFIDE S.p.A.

@ Board member of the Italian Institute of Technology

@ Chairman of the INSEAD Advisory Group in Italy

Roger has significant international consulting experience
having been with McKinsey and Co. from 1972 until his
retirement, as Director Emeritus, in 2006. Roger holds an
MBA from INSEAD. Roger has authored several books
and currently writes for an Italian daily newspaper.

* Roger Abravanel will not be seeking re-election

at Admiral Group plc’s forthcoming Annual
General Meeting on 29 April 2015 and will be
stepping down as a Non-Executive Director of
Admiral Group plc effective from that date.

ANNUAL REPORT AND ACCOUNTS 2014

WWW.ADMIRALGROUP.CO.UK

GRC

SID

Annette Court (52)
Non-Executive Director,
appointed in March 2012

Colin Holmes (49)
Non-Executive Director,
appointed in December 2010

Penny James (45)
Non-Executive Director,
appointed in January 2015

@ Non-Executive Director of Jardine Lloyd

@ Chairman of GO Outdoors Ltd

@ Director of Group Finance at Prudential plc

Thompson Group plc

@ Non-Executive Director of Foxtons plc

@ Non-Executive Director of Workshare

Between 2007 and 2010 Annette was CEO of Europe
General Insurance for Zurich Financial Services and a
member of the Group Executive Committee. Annette
is former CEO of the Direct Line Group (formerly known
as RBS Insurance). In this role Annette was also a
member of the RBS Group Executive Management
Committee. Annette has previously served as a member
on the Board of the Association of British Insurers (ABI).

Colin was formerly a member of the Executive
Committee of Tesco plc and during his 22 year career
at Tesco held a wide range of positions, including
UK Finance Director and CEO of Tesco Express.
Previously, Colin was a Non-Executive Director
of Bovis Homes Group plc, where he chaired the
Remuneration Committee. Colin is a Chartered
Management Accountant and a member of the
Institute’s Advisory Panel.

Between 2007 and 2011 Penny was Group Chief
Financial Officer of Omega Insurance Holdings.
Prior to this, Penny spent 12 years with Zurich
Financial Services where she held a number of
senior finance roles including Chief Financial
Officer of the UK General Insurance division
and a Director of Eagle Star Insurance. Penny
is a Member of the Institute of Chartered
Accountants in England and Wales.

GRC

Margaret Johnson, OBE (56)
Non-Executive Director,
appointed in September 2006

Lucy Kellaway (55)
Non-Executive Director,
appointed in September 2006

Jean Park (60)
Non-Executive Director,
appointed in January 2014

@ Group Chief Executive Officer of Leagas Delaney

@ Lucy is a management columnist

@ Non-Executive Director of Murray Income Trust plc

Margaret has worked for the international advertising
agency Leagas Delaney for the past 16 years. Margaret
was awarded an OBE in 2013 in recognition of her
services to the creative industries and her voluntary
work for charities.

on the Financial Times

In her 21 years at the Financial Times Lucy has been
an oil correspondent, a Lex columnist and Brussels
correspondent. Lucy has authored various books.

@ Non-Executive Director of the National House

Building Council

Jean was Group Chief Risk Officer at the Phoenix Group
from 2009 until June 2013, during which time she held
responsibility for the Group’s relationship with the
regulator and founded the Board Risk Committee.
Previously, she was Risk Management Director of
the Insurance and Investments division of Lloyds TSB
and, before that, Head of Compliance and Audit
at Scottish Widows. Jean is a Member of the
Institute of Chartered Accountants of Scotland.

Committee key

RC Remuneration Committee member

NC Nomination Committee member

Committee Chairman

AC Audit Committee member

GRC Group Risk Committee member

SID Senior Independent Director

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTIONFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORTINTRODUCTION

The Board is accountable
to shareholders for
setting and achieving
the Group’s strategic
objectives; for the
creation and delivery
of strong sustainable
financial and operational
performance; for
ensuring that in carrying
out its duties the Group’s
legal and regulatory
obligations are being
met; and for ensuring
that it operates within
appropriately established
risk parameters.”

GOVERNANCE REPORT

Leadership

The role of the Board
The Board is the principal decision-making
forum for the Group providing entrepreneurial
leadership, both directly and through its
Committees, and delegating authority to the
Executive team. The Board is responsible for
organising and directing the affairs of the Group
in a manner that is most likely to promote its
success for the benefit of its members as a whole.
The Board is accountable to shareholders for
setting and achieving the Group’s strategic
objectives; for the creation and delivery of
strong sustainable financial and operational
performance; for ensuring that in carrying
out its duties the Group’s legal and regulatory
obligations are being met; and for ensuring
that it operates within appropriately established
risk parameters. The Group’s UK regulated
entities are responsible to the Financial Conduct
Authority (FCA) and the Prudential Regulatory
Authority (PRA) for ensuring compliance with
the Group’s UK regulatory obligations and that
dealings with the FCA and PRA are handled
in a constructive, co-operative and transparent
manner. Similar provisions apply in respect of
the Group’s international businesses with regard
to the relevant regulatory authorities in those
overseas jurisdictions in which the Group
also operates.

The Board has adopted a formal schedule of
matters reserved for the Board’s consideration.
This is monitored by the Company Secretary
and reviewed by the Board on an annual basis.
Specific matters reserved for the Board
include the approval of:

@ The Group’s long term objectives and

corporate strategy.

@ Operating and capital budgets, financial
results, and any significant changes to
accounting practices or policies.

@ The Group’s capital structure.

@ Results and financial reporting.

@ The system of internal control and

risk management.

@ The Group’s overall risk appetite.

@ Changes to the structure, size and

composition of the Board, including
new appointments.

@ Succession plans for the Board and

senior management.

@ Dividend policy and proposals for

dividend payments.

@ Major acquisitions, disposals and other
transactions outside delegated limits.

@ The annual review of its own performance

and that of its Board Committees.

@ Annual review of the Group’s Board policies.

@ The review of the Group’s overall corporate

governance arrangements.

Board activity during 2014
At each scheduled meeting the Board receives
updates from the Chief Executive, Chief
Operating Officer and Chief Financial Officer
on the financial and operational performance
of the Group and any specific developments
in the areas of the business for which they are
directly responsible and of which the Board
should be aware. Items that are considered
on an annual basis are included in an annual
schedule of rolling agenda items to ensure
that they are considered at the appropriate
point in the financial and regulatory cycle.
Meetings are structured so as to allow for
consideration and debate of all matters.
Mindful of the need to ensure effective Director
succession through senior managers below
Board level having exposure to and gaining
experience of the operation of the Board, the
heads of the Group’s US, Italian and Spanish
direct insurance businesses (respectively
Kevin Chidwick, Milena Mondini and Cristina
Nestares) are invited to attend every Board
meeting and Board dinner, as was the Group’s
Deputy Chief Financial Officer, Geraint Jones,
until his appointment as Chief Financial Officer
in August 2014.

The Board met on seven occasions in 2014 with
six of these meetings being held over two days.
The Board also held an additional telephone
meeting to consider and respond to the formal
notification of the PRA’s Individual Capital
Guidance (ICG) with respect to the Group.
Unfortunately, given prior commitments, Manfred
Aldag and Roger Abravanel were unable to join
this telephone meeting.

In addition to the regular consideration of
financial and operating performance and risk
management and compliance, the Board
considered each of the Group’s businesses in
depth once during the year, receiving detailed
presentations from the businesses’ management
teams on their strategy, plans and performance.
The Board also considered specific presentations
on a variety of topics associated with the Group’s
strategy and development

The Chairman seeks to visit each of the
Group’s overseas operations every year and
Non-Executive Directors are invited to join either
him or the Chief Executive on one or more of
their overseas visits each year. In addition, the
Non-Executive Directors and the Chairman
met during the year without the Executive
Directors being present. In order to increase
their understanding of the operation of the
Group below Board level, the Non-Executive
Directors and the Chairman also attended a
dinner with members of the Group’s senior
management team without the Executive
Directors being present.

ANNUAL REPORT AND ACCOUNTS 2014

WWW.ADMIRALGROUP.CO.UK

Meetings and attendance
Directors are expected to attend all meetings of the Board and the Committees on which they
serve and to devote sufficient time to the Group to perform their duties. Where Directors are
unable to attend meetings they receive papers for that meeting giving them the opportunity to
raise any issues with the Chairman in advance of the meeting. The number of scheduled Board
meetings and Committee meetings of which they are a member attended by each Director
during 2014 is provided in the table below.

Total meetings held

Alastair Lyons
(Chairman)

Henry Engelhardt
(Chief Executive Officer)

Kevin Chidwick
(Chief Financial Officer)

Geraint Jones
(Chief Financial Officer)

David Stevens
(Chief Operating Officer)

Roger Abravanel

Manfred Aldag

Annette Court

Colin Holmes

Martin Jackson

Margaret Johnson

Lucy Kellaway

Jean Park

John Sussens

Audit
Committee
meetings

Scheduled
Board
meetings

5/5

2/2

3/3

Group Risk
Committee
meetings

Nomination
Committee
meetings

Remuneration
Committee
meetings

2/2

3/3

4/4

2/2

5/5

3/3

John Sussens and Martin Jackson stepped down
from the Board with effect from 9 April 2014.

Jean Park joined the Group Risk Committee
on appointment from 17 January 2014 and
attended all Group Risk Committee meetings
held after this time.

Lucy Kellaway joined the Group Risk Committee
from April 2014 and attended all Group Risk
Committee meetings after this time.

Annette Court took over as Chair of the
Remuneration Committee from April 2014
and attended all Remuneration Committee
meetings held after this time.

Kevin Chidwick stepped down as Group
Chief Financial Officer and was succeeded by
Geraint Jones with effect from 13 August 2014.
Both Kevin and Geraint attended all Board
meetings as required in their roles as CFO.

The Nomination Committee met formally
on one occasion in 2014 although members
of the Committee corresponded and met
informally on a number of occasions to
consider and meet with individuals that
the Committee had identified as possible
candidates to join the Board.

Agendas and papers are circulated to the Board
electronically in a timely and secure manner in
preparation for Board and Committee meetings.
The Board agenda is carefully structured by the
Chairman in consultation with the Company
Secretary and Chief Executive. These papers
are supplemented by information specifically
requested by the Directors from time to time.
All Board and Committee meetings during the
year were held in an open atmosphere conducive
to robust and constructive challenge and debate.
All Directors have, therefore, been able to bring
independent judgement to bear on issues such
as strategy, risk management, performance
and resources. Additional meetings are called
when required and there is contact between
meetings, where necessary, to progress the
Group’s business.

The Company Secretary
All the Directors have access to the advice
and services of the Company Secretary. He has
responsibility for ensuring that Board procedures
are followed and for advising the Board, through
the Chairman, on governance matters. The
Company Secretary provides updates to the
Board on regulatory and corporate governance
issues, new legislation and Directors’ duties
and obligations. The appointment and removal
of the Company Secretary is one of the matters
reserved for the Board.

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTIONFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORTINTRODUCTIONGOVERNANCE REPORT CONTINUED

Effectiveness

Our Board evaluation process

One-to-one meetings

Directors

Board attendees

Chairman

Review previous
recommendations

Assess progress
made

Raise new issues

Results of review

Board effectiveness
As the Board carried out an externally facilitated
evaluation of the Board last year, led by an
independent external consultant, this year
the Chairman led an internal Board evaluation
process. As well as considering the effectiveness
and performance of the Board, the objective
of the evaluation was to assess progress made
against the recommendations from the last
evaluation in order to continue the development
of the collective contribution of the Board
as a whole and also the effectiveness of each
individual Director. When considering the
evaluation process, the Chairman considered
feedback received from Directors after
one-to-one meetings held with him during
the year as to areas of focus to improve
Board effectiveness.

The evaluation process involved the Chairman
circulating to all Directors and Board attendees,
the recommendations from the 2013 Board
effectiveness review and inviting respondents
to assess progress made and comment on each
recommendation. Respondents were also
invited to raise any new issues of significance
that they felt had developed since the last
review a year ago and on which they believed
the Board should focus in the coming year.

The results of the review were presented by
the Chairman to the Board in January 2015.
Overall the review found that good progress
had been made against most recommendations,
that the Board continued to work effectively and
that each Director contributes and demonstrates
full commitment to his/her duties.

The particular areas identified by the Board
during the 2014 review where further progress
was required included:

@ Although good progress had been made by
the Chair of Risk to develop the appropriate
strategy to achieve the requisite balance and
focus between procedural and substantive
aspects of risk and to create the most
efficient and effective reporting materials,
it was felt that further work was needed
to embed fully the Group’s risk framework
within the organisation.

@ Focus on finding the right balance to ensure
that gaps in international experience were
addressed through greater competitive
analysis or contributions from external
experts such that the collective knowledge
of the Board does not become ‘UK centric’.

@ Reinforcement of the approach to create
a clear structure in presentation materials
that show the original forecast, the agreed
approach and any assumptions made at
the time and the bridge to the current
position showing changes to current
forecast and suggested approach.

@ Inviting external experts to present on
customers, competitors and/or societal
trends every one–two years to provoke
thinking and debate in advance of likely
changes in customer preferences or
competitor practices. It was felt that
although some progress had been made
there was still the opportunity through
external presentations to lift the perspective
of the Board, spending more time on the
strategic context for the business and less
on its routine operating activity.

The Chief Executive, to whom they report,
appraises annually the performance of the
individual Executive Directors. The Chairman,
taking into account the views of the other
Directors, reviews the performance of the
Chief Executive (who is also appraised by
an internal 360-degree feedback process).
The performance of the Chairman is reviewed
by the Board led by the Senior Independent
Director (SID). Following the latest review,
the SID considered and discussed with the
Chairman the comments and feedback that
had been received from the Directors as part
of the Chairman’s evaluation questionnaire,
and was able to confirm that the performance
of the Chairman continues to be effective and
that he continues to demonstrate appropriate
commitment to his role.

The roles of the Chairman
and Chief Executive
The Board has approved a statement that sets
out the clear division of responsibilities between
the Chairman and the Chief Executive. The
Chairman is primarily responsible for the
leadership and workings of the Board, setting
its agenda and monitoring its effectiveness.
The Chairman is not involved in the day-to-day
management of the business. Save for matters
reserved for decision by the Board, the Chief
Executive, with the support of the other
Executive Directors, is responsible for proposing
the strategy to be adopted by the Group; running
the business in accordance with the strategy
agreed by the Board; and implementing
specific Board decisions relating to the
operation of the Group. The statements
of division of responsibilities and matters
reserved for decision by the Board are
reviewed annually.

ANNUAL REPORT AND ACCOUNTS 2014

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Board balance and independence
The composition of the Board evolved during
the year as John Sussens and Martin Jackson
stepped down from the Board after nine years’
service. Careful consideration continues to be
given to Board structure and balance particularly
given another two Directors will reach nine years’
service in the next two years. In this context the
Group continues to monitor the need to refresh
Board and Committee membership in an orderly
manner so as to maintain the continuity of
Board process and the strength of personal
interaction which underlies the effectiveness
of the Board as a team. The Board remains
satisfied that it has the appropriate balance
of skills, experience, independence and
knowledge of the Group to enable it and
its Committees to discharge their duties
and responsibilities effectively, as required
by the Code.

The Board currently comprises 12 Directors,
the Chairman (who was independent on
appointment), three Executive Directors,
seven independent Non-Executive Directors,
and one Non-Executive Director, Manfred Aldag,
who is employed by a significant shareholder
and is not, therefore, considered independent.
There is no requirement that the significant
shareholder has representation on the Board
and, accordingly, Mr Aldag’s appointment is
subject to the same appointment and removal
process as the other Board Directors. As can
be seen from the Directors’ biographies on
pages 42 to 43, the Directors have a broad
range of skills and experience and can bring
independent judgement to bear on issues of
strategy, performance, resources and standards
of conduct which are integral to the success
of the Group.

In the context of two of the Non-Executive
Directors reaching their maximum term over
the next two years, the Nomination Committee
initiated the process of recruiting a Non-Executive
Director to ensure that the balance and
composition of the Board was maintained.
Appointments to the Board are the responsibility
of the Board as a whole, acting on the advice
and recommendations of the Nomination
Committee. Appointments are made on merit
and against objective criteria, having due regard
to the benefits of diversity, including gender.
Following a formal, rigorous and transparent
process implemented and led by the Nomination
Committee, the Board was delighted to appoint
Penny James as an independent Non-Executive
Director with effect from 1 January 2015. Penny
joined as a member of the Audit Committee
on appointment and will be subject to election
by shareholders at the forthcoming AGM.

The Board, having given thorough consideration
to the matter, considers seven of the
Non-Executive Directors to be independent
and is not aware of any relationships or
circumstances which are likely to affect,
or could appear to affect, the judgement
of any of them. It is the view of the Board that
the independent Non-Executive Directors
are of sufficient calibre and number that their
views carry significant weight in the Board’s
decision making.

Independent Non-Executive Directors are
currently appointed for fixed periods of three
years, subject to election by shareholders.
The initial three-year period may be extended
for two further three-year periods subject to
re-election by shareholders. Their letters of
appointment may be inspected at the Company’s
registered office or can be obtained on request
from the Company Secretary.

Although the Chairman has served in that role
since July 2000 the Board remains of the view
that he should continue in office. The Chairman,
along with all the Directors, seeks election by
shareholders annually.

The Chairman performs a number of other
non-executive roles outside the Group and
details of these are included in the Chairman’s
biography. The Board continues to be satisfied
that these other commitments are not such as
to interfere with the performance of his duties
within the Group and will not impact on his
ability to allocate sufficient time to discharge
effectively his responsibilities to the Group.

John Sussens stepped down as the Senior
Independent Non-Executive Director (SID)
in April 2014 and was succeeded by Colin
Holmes, who has the requisite knowledge and
experience gained through his Board tenure
and Chairmanship of the Audit Committee.
He is available to shareholders if they have
concerns that contact through the normal
channels of Chairman, Chief Executive or
Chief Financial Officer has failed to resolve
or for which such contact is inappropriate.
He is also responsible for leading the Board’s
discussion on the Chairman’s performance
and the appointment of a new Chairman,
as and when appropriate. From April 2014,
Annette Court replaced John Sussens as
Chair of the Remuneration Committee
and Jean Park replaced Martin Jackson
as Chair of the Group Risk Committee.

Roger Abravanel will not be seeking re-election
at the forthcoming AGM and will step down
from the Board on 29 April 2015.

In accordance with the requirement under
the Code for annual election of Directors,
all Directors, except for Roger Abravanel,
will be submitting themselves for re-election
by shareholders at the forthcoming AGM.
The Board is satisfied that all are properly
qualified for their reappointment by virtue of
their skills and experience and their contribution
to the Board and its Committees.

The Directors are given access to independent
professional advice at the Group’s expense,
should they deem it necessary to carry out
their responsibilities.

Current length of service as a Non-Executive Director at 31 December 2014
The table below details the length of service of the Chairman and each of the Non-Executive Directors and illustrates the balance of experience
and fresh perspectives.

Director

Date of appointment

Current length of service as a Non-Executive Director at 31 December 2014

Alastair Lyons (Chairman)

1 July 2000

Manfred Aldag

Margaret Johnson

Lucy Kellaway

Colin Holmes

Roger Abravanel

Annette Court

Jean Park

Penny James

13 March 2003

4 September 2006

3 December 2010

6 March 2012

21 March 2012

17 January 2014

4 yrs 1 mth

2 yrs 10 mths

2 yrs 9 mths

11 mths

1 January 2015

n/a

14 yrs 6 mths

11 yrs 9 mths

8 yrs 4 mths

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTIONFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORTINTRODUCTIONGOVERNANCE REPORT CONTINUED

Effectiveness continued

Professional development
On appointment, Directors take part in
a comprehensive induction programme
whereby they receive financial and operational
information about the Group; details concerning
their responsibilities and duties; as well as
an introduction to the Group’s governance,
regulatory and control environment.

This induction is supplemented by visits to
the Group’s head office in Cardiff and overseas
offices, and meetings with members of the senior
management team and their departments.
Development and training of Directors is an
ongoing process. Throughout their period
in office the Directors are regularly updated
on the Group’s business; legal matters
concerning their role and duties; the competitive
environments in which the Group operates;
and any other significant changes affecting
the Group and the industry of which it is a
part. All Board members are also encouraged
to attend relevant training courses at the
Company’s expense.

The Board receives presentations from senior
managers within the Group on a regular basis
and Non-Executive Directors are encouraged
to make informal visits to different parts of the
Group to meet with local management.

Engagement with shareholders
The Company attaches considerable importance
to communications with shareholders and
engages with them regularly. Open and
frequent dialogue with investors enables
them to understand fully the Group’s strategy,
objectives and governance. The Investor
Relations team has day-to-day primary
responsibility for managing communications
with institutional shareholders through a
combination of briefings to analysts and
institutional shareholders, both at the half year
and full year results. A number of analysts
and investors visited the Group’s Cardiff office
during the year to meet with the Executive
Directors and senior management in order
to get a better understanding of how the
Group operates and how it intends to achieve
its strategic and operational objectives. Senior
Executives from the Group’s overseas businesses
also visit the UK in order to present to, and
meet with, analysts and investors. Site visits
and individual discussions with the Executive
Directors are also arranged throughout the
year with individual shareholders.

In addition the Chairman had individual meetings
during the year with major shareholders and
reported to the Board on issues raised with him.

This is supplemented by feedback to the
Board on meetings between management and
investors. In addition, the Investor Relations
team produces a quarterly Investor Relations

Report that is circulated to the Board for their
consideration. The Report contains an analysis
of share price performance; a summary of analyst
reports received during the month and of
meetings that have been held with investors
and analysts; together with details of any
significant changes to the shareholders’ register.

The Senior Independent Director has specific
responsibility to be available to investors who
have any issues or concerns, and in cases where
contact with the Chairman, Chief Executive
and Chief Financial Officer has either failed
to resolve their concerns, or for where such
contact is inappropriate. No such concerns
have been raised in the year under review.

All shareholders are invited to attend the
Company’s Annual General Meeting (AGM).
The Chairs of the Audit, Remuneration,
Nomination and Group Risk Committees attend
the AGM along with the other Directors and are
available to answer shareholders’ questions
on the activities of the Committees they chair.
Shareholders are also invited to ask questions
during the meeting and have an opportunity
to meet with Directors after the formal business
of the meeting has been concluded. Details of
proxy voting by shareholders, including votes
withheld, are made available on request and
are placed on the Company’s website following
the meeting.

The Group maintains a corporate
website (www.admiralgroup.co.uk)
containing a wide range of information
of interest to institutional and private
investors. The major shareholders of
the Company are listed on page 74.

Conflicts of interest
In compliance with the requirements of the
Companies Act 2006 regarding Directors’ duties
in relation to conflicts of interest, the Group’s
Articles of Association allow the Board to
authorise potential conflicts of interest that may
arise and to impose such limits as it thinks fit.
The Company has put in place procedures to
deal with conflicts of interest. These procedures
include each Board member completing,
annually, a conflict of interest questionnaire
that sets out any situation in which they,
or their connected persons have, or could
have, a direct or indirect interest that could
conflict with the interests of the Company.
Any current directorships that they, or their
connected persons hold, any advisory roles
or trusteeships held, together with any
companies in which they hold more than 1%
of the issued share capital are also disclosed.
These procedures were reviewed by the Board
in November 2014 and it was concluded that
they continued to operate effectively.

The Company attaches
considerable importance
to communications
with shareholders and
engages with them
regularly. Open and
frequent dialogue
with investors enables
them to understand
fully the Group’s
strategy, objectives
and governance.”

Board Committees
The Board has delegated authority to a number
of permanent Committees to deal with matters
in accordance with written Terms of Reference.
The principal Committees of the Board – Audit,
Remuneration, Group Risk and Nomination
– all comply fully with the requirements of
the Code.

All Committees are chaired by an independent
Director, except the Nomination Committee
which is chaired by the Chairman of the Board,
and comprise a majority of independent
Directors. Appointments to the Committees
are made on the recommendation of the
Nomination Committee and are for a period
of up to three years, which may be extended
for two further three-year periods, provided
the Director remains independent. The
Committees are constituted with written
Terms of Reference that are reviewed annually
to ensure that they remain appropriate and
reflect any changes in good practice and
governance. These Terms of Reference are
available on request from the Company
Secretary and can also be found on the
Company’s website: www.admiralgroup.co.uk.
Directors are fully informed of all Committee
matters by the Committee Chairs reporting
on the proceedings of their Committee at
the subsequent Board meeting. Copies of
Committee minutes are also distributed to
the Board. Committees are authorised to
obtain outside legal or other independent
professional advice if they consider it
necessary. The Chair of each Committee
attends the Annual General Meeting to
respond to any shareholder questions that
might be raised on the Committee’s activities.

ANNUAL REPORT AND ACCOUNTS 2014

WWW.ADMIRALGROUP.CO.UK

INTRODUCTION

STRATEGIC REPORT
STRATEGIC REPORT

CORPORATE GOVERNANCE

FINANCIAL STATEMENTS

OTHER INFORMATION
OTHER INFORMATION

REPORT OF THE AUDIT COMMITTEE

Statement from Colin Holmes

The key areas of focus have been to provide support
to the Board in its oversight of financial reporting
and the control environment across the Group.”

Colin Holmes
Chairman of the Audit Committee

Dear Shareholder,
I’m pleased to provide an update on the main activities of Admiral’s Audit
Committee during 2014.

The key areas of focus for the Committee during the year have been to provide
support to the Board in its oversight of financial reporting and the control
environment across the Group. The setting of insurance claims reserves continues
to be a key accounting judgement in the Group’s financial statements, and the
Committee placed considerable focus on reviewing the recommendations of
management and discussing the key reserving judgements with the Group’s
independent actuaries and external auditor. In addition, the Committee continued
to monitor the appropriateness of the Group’s system of risk management and
internal controls as well as the robustness of the Internal and External Audit processes.

The Committee studied a number of key control issues, highlighted through
a range of different sources including the risk register, Internal Audit and the
Committee’s previous work. In each case the Committee found the responses
and action plans from management appropriate to the issues raised. With the
planned implementation in 2015 of a new IT system in the UK business the
Committee received regular updates from the project’s manager, ensuring that
the impact of implementation issues were being fully considered and mitigated
against. The Committee also reviewed with the Head of IT the plans of the
business to ensure that IT security issues are being appropriately managed.

The growing materiality of the Group’s international businesses has been a key
focus of the Committee, with presentations from the key CEOs and an improved
oversight of the businesses’ audit activities. Also during the year the Group
issued its first public bond, with the Committee reviewing the accuracy and
completeness of the financial information being provided as part of the prospectus.

Finally as previously communicated the Group plans to tender the External
Audit of the Group to coincide with the rotation of the current KPMG audit
partner. In preparation for the tender process the Committee has spent time
considering how it will manage this process to ensure the Group continues
to have a strong External Audit team into the future.

The Committee continues to provide strong oversight of the Group and I would
like to thank all those who have made this possible. In particular I would like to
thank my two colleagues, Margaret Johnson and Annette Court, for their invaluable
contribution over the last year, and equally to welcome Penny James to the
Committee following her appointment to the Board in January.

I hope you find the above summary, and the more detailed report, both useful
and informative.

The Audit Committee’s primary
responsibilities are to:
@ Monitor the integrity of the Group’s
financial statements and any formal
announcement relating to the Group’s
financial performance, reviewing any
significant financial reporting
judgements that they contain.

@ Keep under review the effectiveness
of the Group’s internal financial
controls, internal control and risk
management systems.

@ Review the Group’s procedures
for handling allegations from
whistleblowers and for detecting fraud.

@ Monitor and assess the role

and effectiveness of the Group’s
Internal Audit functions in the
context of the Group’s overall
internal control and risk
management systems.

@ Consider and make recommendations
to the Board, to be put to shareholders
for their approval at the AGM,
in relation to the appointment,
reappointment and removal of
the Group’s external auditor.

@ Review the external auditor’s

independence and objectivity
and the effectiveness of the
audit process.

@ Review the policy on the engagement
of the external auditor to provide
non-audit services, considering
the relevant regulatory guidance
regarding the provision of non-audit
services by the external auditor.

Colin Holmes
Chairman of the Audit Committee
4 March 2015

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

INTRODUCTIONREPORT OF THE AUDIT COMMITTEE CONTINUED

Summary of key activities during 2014
During the year the Committee reviewed the following:
@ The Annual Report and interim results.

@ Reports from the Internal Audit departments within the Group on the effectiveness of the Group’s risk management
and internal control procedures, details of key audit findings and actions taken by management to manage and
reduce the impact of the risks identified.

@ Reports from the external auditor on the principal findings from its review of the Group’s systems and controls, and

on the key accounting and audit issues and conclusions on the half and full year reporting.

@ Reports from the Chair of the Group Risk Committee on the principal risks faced by the Group and the work

undertaken by the Committee to ensure risk is appropriately managed.

@ Presentations from independent actuaries to assist the Committee in concluding on the adequacy of the

Group’s reserves.

@ Reports from the external auditor on the proposed audit scope, fees, audit findings, and auditor independence.

@ The proposed Internal Audit plans for both the UK and international businesses.

@ Performance and effectiveness of the Internal Audit departments including review of the results of the external

effectiveness review of Internal Audit.

@ Significant findings from Internal Audit including management responses to the conclusions set out in the reports.

@ Reports from the CEO and Internal Auditors of the significant international businesses.

@ The effectiveness of the Group’s Whistleblowing Policy, which sets out the arrangements for raising and handling

allegations from whistleblowers.

@ The effectiveness of the procedures for detecting fraud.

@ The Committee also received presentations and discussions on a range of important issues including: IT Security;
the Group’s Excess of Loss arrangements; Periodic Payment Order (PPO) identification; reserving and the impact
on the Group of the introduction of the Gender Directive in the context of considering whether any portfolio
shifts could lead to material changes in claims development patterns and impact the appropriateness of claims
estimation at the year end.

@ The plans and governance of the project to implement a new IT system for the UK business in 2015.

@ The accuracy and completeness of the financial information contained within the prospectus for the Group’s public

bond issue.

@ The pre-planning work to facilitate a smooth and effective tender of the External Audit work.

@ Its own Terms of Reference.

@ Its own effectiveness.

ANNUAL REPORT AND ACCOUNTS 2014

WWW.ADMIRALGROUP.CO.UK

Membership

Audit Committee attendance (6 meetings)

Colin Holmes

Margaret Johnson

Annette Court

Chairman

Member

Did not attend

Membership of the Committee at the end of
the year was: Colin Holmes (Chair), Margaret
Johnson and Annette Court, with Penny James
joining the Committee with effect from her
appointment as a Non-Executive Director on
1 January 2015. Composition of the Committee
is well balanced, with Committee members
having a broad range of financial and business
experience such that they are able to effectively
analyse, challenge and debate the issues that
fall within the Committee’s remit.

The Company Secretary acts as Secretary to the
Committee. The Committee meets at least four
times per year and has an agenda linked to
events in the Group’s financial calendar and
other important issues that arise throughout
the year which fall for consideration by the
Committee under its remit.

The Board considers that the members of the
Committee have the appropriate competence
and experience necessary to contribute
meaningfully to the Committee’s deliberations
and further considers that Colin Holmes (Chair),
as a Chartered Management Accountant,
has appropriate recent and relevant financial
experience having previously been the UK
Finance Director for Tesco plc. Penny James
is currently Director of Group Finance at
Prudential plc.

The Committee is kept up to date with
changes to Accounting Standards and relevant
developments in financial reporting, company
law and the various regulatory frameworks
through presentations from the Group’s
external auditor, Chief Financial Officer and
Company Secretary. In addition, members
attend relevant seminars and conferences
provided by external bodies. The Terms of
Reference of the Audit Committee include
all the matters required under the Code.

Other individuals such as the Chief Financial
Officer, the Chief Operating Officer, the Chief
Executive Officer, the Chairman of the Board,
the Director of Risk, Compliance and Internal
Audit, and representatives of different parts of
the Group may be invited to attend all or part
of any meeting as and when appropriate. The
external auditor was invited to attend all of the
Committee’s meetings held in 2014, excepting
those agenda items when its own performance
was to be reviewed and provision of non-audit
services discussed. In addition, a number of
private meetings were held between members
of the Committee and the auditor.

Significant issues considered
by the Committee
After discussion with both management and
the external auditor, the Audit Committee
determined that the key risks of misstatement
of the Group’s financial statements related to:
insurance liabilities; profit commissions; and
both co-insurance and reinsurance contracts.

These issues were discussed with management
during the year and with the auditor at the
time the Committee reviewed and agreed the
auditor’s Group audit plan, when the auditor
reviewed the interim financial statements in
August 2014 and also at the conclusion of the
audit of these full year financial statements.

Insurance liabilities
The Audit Committee considered the provision
for claims outstanding comprising provisions
for the estimated cost of settling all claims
incurred but unpaid as at the balance sheet
date, whether reported or not. The Board
has approved a Reserving Policy that sets
out the methodology by which management
sets reserves in the financial statements. The
approach is to ensure that an appropriate margin
is provided above actuarial best estimates
to allow for uncertainty and volatility.

The Committee held separate meetings with
the Group’s external actuaries at which there
was challenge and debate of the methodology
used and best estimates developed by the
external actuaries and recommended for
adoption by management. At these meetings
management provided further information
on the reserving levels proposed and were
challenged by the Committee as to their
adequacy and level of prudency. In particular,
the Committee reviewed the process for
identifying and grading cases which potentially
would settle as Payment Protection Orders
(PPO). The Committee was satisfied that PPOs
were being appropriately identified and
reserved for.

The Committee also discussed the Reserving
Letter sent to insurance CEOs by the Prudential
Regulatory Authority (PRA) which set out the
PRA’s reserving expectations for firms; their
approach to reviewing firms’ reserving processes
and reserve levels; and forthcoming Solvency II
requirements. The Committee discussed and
approved a response with management that
reiterated the Group’s strong reserving processes
and methodology set out in the Group’s
Reserving Policy and the clear process by
which the matters raised in the PRA’s letter
could be addressed.

Whilst acknowledging that the setting of
reserves to cover future claims is a complex
and judgemental area and having had the
opportunity at the separate meetings referred
to above to consider and question the
recommended best estimates, the Committee
is satisfied that an appropriate process has
been followed and that there has been scrutiny,
challenge and debate to give confidence that
the reserving levels set provide an appropriate
margin above best estimates and allowed for
a level of prudency.

The Committee also received an update from
the auditor regarding the procedures used to
test management’s methodology in setting
best estimates and considered the auditor’s
assertion that they had challenged the reserving
approach taken by management and considered
compliance with current accounting standards.
Based on this and the reserving process, the
Committee was satisfied with the Group’s
approach to setting reserves.

Profit commission
The Committee considered the impact on profit
commission income of future changes in claims
reserves as the recognition of this income is
dependent on the loss ratio booked in the
financial statements and cash receivable is
dependent on actuarial projections of ultimate
loss ratios. The Committee remained satisfied
that profit commission was correctly accounted
for by the Group and was in accordance with the
contractual arrangements that were in place.

Co-insurance and reinsurance
The Group has in place a number of proportional
risk sharing agreements, where insurers outside
the Group underwrite a majority of the risk
generated, either through co-insurance or
reinsurance contracts. There is judgement
involved in the assessment of whether significant
risk has transferred which impacts on the
appropriate accounting.

In particular, the Committee considered the
accounting treatment of the caps contained in
the Group’s international quota share reinsurance
contracts that limited the losses of the reinsurer
when certain combined ratio and/or expense
ratio limits had been breached. The Committee
discussed the accounting options available
to account for these cap accruals and had
challenged management as to the merit of the
accounting options available. The Committee
accepted the view of management that the
most appropriate presentation was to allocate
the impact of expense ratio caps to insurance
expenses and to split the impact of combined
ratio caps between insurance expenses and
insurance claims.

The Committee considered key accounting
judgements as part of its review and approval
of Group financial statements at interim and
year end meetings. The Committee received
reporting from the Group Finance team that
supported key accounting estimates and
judgements and this formed the basis for the
Committee’s discussion. Risk transfer was
considered on a periodic basis or more
frequently in the case of changes to contractual
arrangements. In the light of the information
received by the Committee, the Committee
considered that the appropriate risk transfer
had taken place.

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTIONFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORTINTRODUCTIONREPORT OF THE AUDIT COMMITTEE CONTINUED

Recognition of intra-group trading
The Committee considered and reviewed an
unadjusted difference, reported by the external
auditor, relating to intra-group trading which had
not been eliminated on consolidation.

Management confirmed to the Committee that
the auditor continued to report an unadjusted
difference in relation to intra-group trading
between the Group’s insurance and price
comparison operations. Management had
opted not to make the elimination adjustments
as the effect would have a misleading impact
on the key ratios for the business as typically
used by the industry and also to maintain
consistency with prior years. KPMG confirmed
that although this was an unadjusted difference,
it was both immaterial and consistent with
prior years.

The Committee fully considered and challenged
management on the approach they had
taken not to make elimination adjustments
on the grounds of immateriality. Following
comprehensive review, the Committee
confirmed its acceptance of management’s
position on the basis that accounting for
intra-group trading in this way was acceptable
given the immateriality of the sums involved
and resulted in a better overall presentation
of the financial statements.

IFRIC 21 levies
The impact of IFRIC 21 on levies was considered
by management and the Group’s auditor, with
the implication to Admiral being on the amounts
it pays to the Motor Insurers Bureau and the
Financial Services Compensation Scheme. The
standard is not mandatory until 2015 but the
Committee agreed with management that in
the interest of transparency it was appropriate
for the Group to early adopt, with full disclosure
of its implications being provided in the Report
and Accounts.

Deferred tax assets
The Group’s two US operations – Elephant
Auto and compare.com, are both loss-making,
reflecting the stage of development of each
business. The Committee discussed the potential
deferred tax assets (DTA) recommended by
management in relation to the accumulated
losses carried forward at the balance sheet date
for both operations. The Committee concluded
that the proposed assets were consistent with
the accounting standard.

Misstatements
The Committee considered all misstatements
reported by the auditor and were satisfied
that no material amounts remain unadjusted.
The Committee confirms that it is satisfied
that the auditor has fulfilled its responsibilities
with diligence and professional scepticism.

After reviewing the presentations and reports
from management and consulting where
necessary with the auditor, the Committee
is satisfied that the financial statements
appropriately address the critical judgements
and key estimates (both in respect to the amounts
reported and the disclosures). The Committee

is also satisfied that the significant assumptions
used for determining the value of assets and
liabilities have been appropriately scrutinised,
challenged and are sufficiently robust.

Non-audit fees
During the year the Committee reviewed its
policy on non-audit services that sets out the
procedure for approval, by the Committee,
of expenditure with the Group’s auditor
of over £30,000, including the process where
it is necessary for approval of such work to
be given outside of the normal Committee
meeting timetable. Such circumstances will
require the approval of the Audit Committee
Chair, who will consider and approve such fees
on behalf of the Committee and will ensure
that auditor independence and objectivity
are not compromised. Such approval of fees
in excess of £30,000 will then be notified by
the Committee Chair to the next Committee
meeting following approval.

The Group’s auditor, KPMG LLP, provides
some non-audit services, the majority of which
comprise compliance and advisory services
related to various taxation issues within the
Group, and which are not considered by the
Committee to compromise their independence
and objectivity as auditor. This decision is
typically based on the merit of using KPMG’s
existing knowledge of the Group’s business;
their particular expertise in relation to the
advice sought on each relevant transaction
and the consequent value added and inherent
saving of fees. The level of non-audit fees is
reviewed at each Committee meeting and
details are included in the Annual Report.

The Committee also considered the implications
of both the forthcoming tender of the External
Audit and the potential adoption by the UK
of EU legislation that prohibits auditors from
carrying out certain non-audit services including
tax and other consultancy. The Committee
will continue to track developments to ensure
the Group will be able to comply with future
legislation and guidance in this area.

Effectiveness of the External Audit process
The Committee undertakes an annual review
to assess the independence and objectivity
of the external auditor and the effectiveness
of the audit process, taking into consideration
relevant professional and regulatory
requirements, the progress achieved against
the agreed audit plan, and the competence
with which the auditor handles the key accounting
and audit judgements. Following this review
the Committee concluded that the auditor,
KPMG LLP, remained independent and provided
a service that was robust and fit for purpose.

Audit tender
The Committee confirmed in last year’s Annual
Report that it was the Group’s intention to put
the External Audit services contract out to tender
at the end of the five-year rotation of the
current audit engagement partner. Although
the transitional rules under the EU legislation
give the Group the option to delay the tender
process until 2022, the Committee remains of

ANNUAL REPORT AND ACCOUNTS 2014

WWW.ADMIRALGROUP.CO.UK

the view that the audit for the year ending
31 December 2016 will be put out to tender
in 2015.

In view of the high quality of service received
by the Group from the current external auditor,
and the above intention to undertake a full
tender of the audit for the 2016 financial year,
the Committee recommends the reappointment
of KPMG for the next financial year. A resolution
for the reappointment of KPMG as auditor will,
therefore, be proposed at the forthcoming AGM.
There are no contractual obligations that restrict
the Group’s choice of external auditor.

Internal Audit
The Group Head of Internal Audit attends all
Audit Committee meetings and provides a
range of presentations and papers to the
Committee, through which the Committee
monitors the effectiveness of the Group’s
internal controls. The Committee reviewed
and approved the Group Internal Audit Terms
of Reference which set out the role; objectives;
reporting lines and accountability; authority;
independence; and objectivity of the Internal
Audit function. The role and competence of
each Internal Audit function across the Group
was also assessed and considered by the
Committee. It was agreed that the Group
Head of Internal Audit would have increased
responsibility over the Internal Audit activities
in the Group’s overseas locations.

Members of the Committee also receive
all issued audit reports, enabling them to
challenge the reports’ content and related
recommendations. The Committee approves
the Internal Audit programmes at the start of
each calendar year whilst the effectiveness
and workload of the Internal Audit functions
and the adequacy of available resources are
monitored throughout the year.

In accordance with agreed parameters, the
overseas businesses of ConTe, Admiral Seguros
and Elephant have their own locally based
internal auditors, who report to their respective
CEOs. All reports are evaluated by the Group
Head of Internal Audit to ensure the quality
and effectiveness of the reported findings.
In addition, the UK Internal Audit department
carries out high level governance reviews of
all foreign operations, assessing the internal
control frameworks and system of risk
management. The overseas internal auditors
attend Committee meetings periodically.

Committee effectiveness review
As part of the Committee’s detailed annual review
of its performance and processes, each
Committee member completed a comprehensive
questionnaire designed to provide objective
assessment of the Committee’s performance,
including its effectiveness in monitoring Internal
and External Audit. The Committee discussed
the results of the review and it was concluded
that the Committee and the audit process
were effective; that the Committee had full
access to all the information it required; that
the Committee had appropriate Terms of
Reference; and that it was adequately
discharging its responsibilities.

INTRODUCTION

STRATEGIC REPORT
STRATEGIC REPORT

CORPORATE GOVERNANCE

FINANCIAL STATEMENTS

OTHER INFORMATION
OTHER INFORMATION

REPORT OF THE GROUP RISK COMMITTEE

Statement from Jean Park

The Committee has focused on
developing the Board’s approved risk
strategy and risk appetite.”

Jean Park
Chair of the Group Risk Committee

Dear Shareholder,
As you are aware, I took over the Chair of the Group Risk Committee
in April 2014. At a similar time we appointed a new Director of Risk,
James Armstrong, and subsequently we have spent significant time
building on the risk management activities undertaken by the Group.

During the year the Committee has focused on developing the Board’s
approved risk strategy and risk appetite to a more granular level. This
has been developed as part of the Group’s Enterprise Risk Management
Framework (ERMF). A significant amount of time has been dedicated
to Solvency II work. In particular, the GRC signed off the annual Own Risk
and Solvency Assessment (ORSA) report towards the end of the year as
well as approving a number of new policies required as part of the overall
systems of governance.

I look forward to continuing the good work of 2014 this year as we move
towards the implementation of Solvency II.

Jean Park
Chair of the Group Risk Committee
4 March 2015

The Group Risk Committee’s
responsibilities can be
summarised as:
@ Agreeing the Group’s risk

management framework, including
the remits of Risk Management
Committees that are established
within each of the Group’s operational
entities and overseeing the risk
management functions.

@ Monitoring the Group’s prudential

risk exposure, which includes
ensuring that the Group’s capital
resources and liquidity profile are
appropriate to its needs whilst
meeting minimum regulatory
requirements, including overseeing
and challenging the design and
execution of the Group’s stress and
scenario testing.

@ Monitoring the Group’s current
and future conduct risk exposure.

@ Ensuring the adequacy and

effectiveness of the Group’s systems
and controls for the prevention of
financial crime, including prevention
of bribery and adequacy of anti-money
laundering and data protection
systems and controls.

@ Monitoring the adequacy and
effectiveness of the Group’s
Compliance functions.

@ Reviewing the Group’s progress
towards achieving Solvency II
compliance.

@ Reviewing compliance with Group
policies, including the established
Reserving Policy and process.

@ Considering and recommending to
the Board for approval the Group’s
risk appetite, including any changes
to the appetite for each material
type of risk faced by the Group.

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

INTRODUCTIONREPORT OF THE GROUP RISK COMMITTEE CONTINUED

Summary of key activities in 2014
During the year the Committee:
@ Reviewed the Group’s updated risk strategy in the context of the Group’s agreed strategic objectives.

@ Reviewed the Group’s updated risk appetite including an updated suite of Key Risk Indicators (KRIs) with associated

triggers and limits.

@ Reviewed the Group’s Enterprise Risk Management Framework in preparation for Solvency II implementation.

@ Considered the adequacy of risk mitigation measures and contingency plans.

@ Oversaw the development of customer outcome risks and the aggregation of these risks into tier one categories

that will be used for reporting purposes in 2015. This included the establishment of a Conduct Risk Committee that
manages the Conduct Risk MI on behalf of the business.

@ Monitored the Group’s progress towards implementation of Solvency II and plans for compliance with the EIOPA

interim guidelines.

@ Reviewed the Group’s proposed dividend level in line with the capital policy.

@ Approved the 2014 ORSA policy.

@ Recommended to the Board approval of the 2014 ORSA Report prior to submission to the UK and Gibraltar regulators.

@ Reviewed in-depth analysis of a number of the Group’s most significant risk areas, including insurance risk in the UK

Car Insurance operation.

@ Monitored KRIs within the overall risk management framework.

@ Provided quarterly written reports to the Group Board on conduct risk and complaints.

@ Reviewed its own Terms of Reference.

@ Approved the Terms of Reference for the Group Asset and Liability Committee (GALCO).

@ Approved the new Terms of Reference for the UK Risk Management Committee following the creation of the GALCO.

@ Approved a number of new/revised key risk management policies in preparation for Solvency II.

@ Received internal presentations on a number of key risk areas including ORSA and capital modelling.

@ Reviewed the progress and risks associated with the IT project responsible for the implementation of a new policy

administration system and data warehouse.

ANNUAL REPORT AND ACCOUNTS 2014

WWW.ADMIRALGROUP.CO.UK

Membership
Membership at the end of the year was: Annette Court, Lucy Kellaway, Jean Park (Chair) and
David Stevens.

The Company Secretary acts as Secretary to the Committee. The Committee met five times
during the year.

Group Risk Committee attendance (5 meetings)

Jean Park

David Stevens

Martin Jackson

Lucy Kellaway

John Sussens

Annette Court

Chairman

Member

Did not attend

Duties and responsibilities
The duties and responsibilities of the Committee
are set out in Terms of Reference that were
approved by the Board in January 2013 and
updated and approved in January 2015. The
responsibilities of the Committee can be
summarised on page 53.

included the development of the Conduct
Risk MI Framework, with the introduction
of a new suite of metrics for monitoring
the key risks in this area. These updates have
improved the effectiveness of the Committee
by enabling greater focus on the main risks
affecting the business.

The work of the Committee is supported by
more detailed work undertaken by executive
Risk Management Committees in each of the
Group’s operational entities. The membership
of the UK Risk Management Committee includes
the Group Chief Operating Officer, Group
Chief Financial Officer and Group Director of
Risk. Membership of the other UK and overseas
Committees includes the Managing Director
of the operation. At each meeting, the Risk
Management Committees consider significant
movements in the operation’s risk profile, any
risks that have arisen and any emerging risks.
Risk Management Committees also assess
and monitor any regulatory issues, ensuring
that their resolution and the action taken are
appropriately recorded. In the UK, the Risk
Management Committee receives regular
information on Conduct Risk, such as complaint
handling reports and other related
management information.

The Committee Chair reports formally to the
Board on its proceedings after each meeting
on all matters within its duties and responsibilities,
as set out in previously circulated minutes to
the Board. The Committee Chair also reports
on the activities of the Committee in a formal
written report that is submitted to and discussed
by the Board every six months.

Following a review of the Committee
effectiveness in December 2013, the Committee
has overseen development of an Enterprise
Risk Management Framework. The aim of the
framework is to improve the understanding of
risks at a Group level to help evaluate strategic
opportunities and support the preparation for
Solvency II implementation in 2016. The new
framework includes an updated Risk Strategy
alongside a refreshed suite of KRIs with
associated triggers and limits. This has also

Internal control and risk management
The Board is ultimately responsible for the
Group’s system of internal control and, through
the Audit Committee, has reviewed the
effectiveness of these systems. The systems
of internal control over business, operational,
financial, and compliance risks are designed
to manage rather than eliminate the risk of
failure to achieve business objectives and
can only provide reasonable and not absolute
assurance against material misstatement or loss.

The Board is of the view that there is an ongoing
process for identifying, evaluating and managing
the Group’s internal controls; that it has been
in place for the year ended 31 December 2014;
and that, up to the date of approval of the
Annual Report and Accounts, it is regularly
reviewed by the Board and accords with the
internal control guidance for Directors provided
in the Code.

A key element of the control system is that the
Board meets regularly with a formal schedule
of matters reserved to it for decision and has put
in place an organisational structure with clearly
defined lines of responsibility. As described
above, in order to ensure these responsibilities
are properly discharged, the Board has delegated
the task of supervision of risk management to
the Group Risk Committee (GRC) and of internal
control to the Group Audit Committee.

There are several key elements to the risk
management environment throughout the
Group. These include the setting of risk
management strategy, risk appetite and risk
policy, and the oversight of the activities of the
Group Risk function by the GRC; dissemination
of that policy by the Chief Executive; delivery
of the policy by the UK Risk Management
Committee and the Group’s other UK and

overseas entities through the application
of the Group’s systems of internal control and
risk management; and the overall assurance
provided to the Audit Committee by Internal
Audit that the systems operate effectively.

The Board recognises that the day-to-day
responsibility for implementing these policies
must lie with the senior management whose
operational decisions must take into account
risk and how this can be controlled effectively.
The GRC reports on its activities to the Audit
Committee in support of the overall assurance
provided by the Audit Committee that the
Group’s risk management and compliance
systems operate effectively.

The Group Risk function defines and prescribes
the financial and operational risk assessment
processes for the business; performs second
line reviews, including reserving and capital
modelling processes; maintains the risk registers;
undertakes regular reviews of these risks in
conjunction with line management; delivers
the Own Risk and Solvency Assessment (ORSA);
and records any actual losses or near misses
that occur as a consequence of the realisation
of risk. The Director of Risk has responsibility
for ensuring that managers are aware of their
risk management obligations, providing them
with support and advice, and ensuring that
the risk management strategy is properly
communicated. Reports are produced showing
the most significant risks identified and the
controls in place. Internal Audit uses the risk
registers to plan and inform their programme
of audits around the most significant risks to
the Group to ensure that the prescribed controls
are in place and are operating effectively.

The GRC receives reports setting out key
performance and risk indicators and considers
possible control issues brought to its attention
by early warning mechanisms that are embedded
within the operational units. It, together with
the Audit Committee, also receives regular
reports from the relevant Internal Audit functions,
which include recommendations for improvement
of the control and operational environment.
Twice a year the Chair of the Group Risk
Committee provides a comprehensive written
report to the Board on the Group’s risk appetite,
risk strategy and risk management policy
considering the principal assessed exposures
and the effectiveness of the mitigation
strategies adopted.

The Audit Committee reports to the Board
on the appropriateness and effectiveness
of the risk management systems and internal
controls (including financial controls). Where
appropriate, the Committee provides a
high-level challenge to the steps being taken
by the GRC to implement the risk management
strategy. The Internal Audit functions undertake
regular reviews of internal control systems
and business processes, identifying control
weaknesses and making recommendations
to management on improvements where
necessary. Internal Audit also reviews the
effectiveness of the Group Risk function.

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTIONFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORTINTRODUCTION

The Nomination Committee’s
primary responsibilities are to:
@ Lead the process for making
appointments to the Board.

@ Ensure there is a formal, rigorous
and transparent procedure for the
appointment of new Directors to
the Board.

@ Ensure plans are in place for orderly
succession for appointments to the
Board and for other senior
management positions.

REPORT OF THE NOMINATION COMMITTEE

Statement from Alastair Lyons

The Committee continued the development
of a clear structured succession plan.”

Alastair Lyons
Chairman of the Nomination Committee

Dear Shareholder,
In accordance with its remit to review regularly the composition and
experience of the Board, the focus and attention of the Committee during the
year was on succession planning. The Committee led the process of Executive
and Non-Executive Board appointments given Kevin Chidwick’s move to
devote himself full-time to the role of CEO of Elephant Auto, the Group’s US
insurance business, entailing his stepping down from the role of CFO and from
membership of the Board, and John Sussens and Martin Jackson stepped
down from their Non-Executive roles on the Board during the year after their
allotted nine years. The Committee assessed the appropriateness of Geraint
Jones, the Deputy CFO, to succeed Kevin Chidwick as CFO and carried out a
robust and comprehensive Non-Executive recruitment process resulting in the
appointment of Penny James. This appointment further enhanced the range
of skills, breadth of experience and diversity around the Board table.

In the context of several Directors retiring from the Board over the next
two years, the Committee continued the development of a clear structured
succession plan that would ensure appropriate action was taken well ahead
of the dates on which individuals would be retiring in order to achieve their
replacement, if appropriate, with individuals of the appropriate skills,
experience and fit to the Board.

Given that Roger Abravanel will not be seeking re-election at the forthcoming
AGM, the Nomination Committee will consider the appropriate size and
composition of the Board going forward.

Alastair Lyons
Chairman of the Nomination Committee
4 March 2015

ANNUAL REPORT AND ACCOUNTS 2014

WWW.ADMIRALGROUP.CO.UK

Membership
The membership of the Committee at the year
end was Alastair Lyons (Chairman), Colin
Holmes and Lucy Kellaway. The Company
Secretary acts as Secretary to the Committee.
The Committee invites the Chief Executive to
attend meetings when it deems appropriate.
The Nomination Committee met formally on
one occasion in 2014 although members of the
Committee corresponded and met informally
on a number of occasions to consider and
meet with individuals that the Committee
had identified as possible candidates to join
the Board.

Appointments
Following this process, the Committee identified
Penny James, who has extensive insurance
experience in particular in her current role as
Director of Group Finance at Prudential plc
since March 2011 and her previous appointments
as Chief Finance Officer of Omega Insurance
Holdings and UK General Insurance CFO
of Zurich Financial Services. Given Penny’s
background, experience and competence,
and the external references that were obtained,
the Committee did not consider it either
necessary or appropriate to undertake a full
search led by an external recruitment consultancy.

Nomination Committee attendance (1 meeting)

Alastair Lyons

Lucy Kellaway

Colin Holmes

Chairman

Member

Did not attend

Duties and responsibilities
The Committee leads the process for making
appointments to the Board or where the
appointee is likely to become a Board member.
The Committee ensures there is a formal,
rigorous and transparent procedure for the
appointment of new Directors to the Board
through a full evaluation of the skills, knowledge
and experience required of Directors. The
Committee also ensures plans are in place
for orderly succession for appointments to
the Board and reviews the succession plans
for other senior management positions.
Responsibility for making senior management
appointments rests with the Chief Executive.

During the year
During 2014, having regard to the length of
service of some of the existing Board members,
the Board decided to initiate a search for a
new Non-Executive Director to join the Board
and to ensure continuity across the process of
succession that will ensue over the next couple
of years. The Group has in place a policy of
recruiting well ahead of impending retirements
in order to ensure continuity of knowledge and
Board dynamics.

The Nomination Committee led this process
and assessed the balance of skills, knowledge,
independence, diversity and experience on
the Board. The Committee developed an
appropriate specification for this role identifying
the need for the successful candidate to have
insurance experience and a technical accounting
qualification, with preferably experience in a
senior finance role within the insurance sector.

Each Committee member met separately
with Penny and agreed that she would bring
invaluable insurance experience to the Board
given her current role with Prudential plc.
The Board approved the Committee’s
recommendation and following regulatory
approval Penny was formally appointed to
the Board with effect from 1 January 2015.

In August 2014 the Committee recommended
for approval by the Board the appointment of
Geraint Jones as Chief Financial Officer (CFO).
Geraint took over from Kevin Chidwick, who
was handing over his CFO duties to focus on
his role in the US as CEO of the Group’s rapidly
growing Elephant Auto Insurance business.
Despite stepping off the Board, Kevin continues
to be involved in Group matters and to attend
and contribute to all Group Board meetings.
Geraint joined Admiral in 2002 and has since
then held a number of senior finance positions
including Head of Finance, before being
promoted to Deputy Chief Financial Officer
in January 2012. A Fellow of the Institute of
Chartered Accountants in England and Wales,
Geraint has also worked as an external auditor
at Ernst & Young and KPMG. Geraint’s
appointment demonstrates the depth of talent
that exists within Admiral’s senior management
team and his deep understanding of Admiral’s
business and culture, coupled with strong
leadership and financial skills, made him the
natural choice to succeed Kevin as CFO.

Detailed information of individual
Directors can be found on
pages 42 to 43

Succession plan
The Board, at its meeting in March 2014,
considered the Group’s current Succession
Plan, which considered the senior roles within
the Group and identified whether there was
emergency short term cover in place in the
event that an individual left the organisation,
and whether there was a permanent replacement
available within the organisation, or whether
the position would need to be filled externally.
It also identified where there were individuals
who, with further experience and guidance,
would be capable of moving into particular
senior management roles.

At this meeting the emerging talent across
the Group was discussed in detail with the
Executive team identifying key individuals
within the organisation who had impressed
in their current roles and who had the
potential to contribute to the business by
working on projects in other areas of the
Group. Such exposure would also assist
with their development in order that, at the
appropriate time, they might be in a position
to succeed to senior management positions.

The Committee remains satisfied that
succession plans for Directors and senior
management are in place to ensure the
continued ability of the Group to implement
its strategy and compete effectively in the
markets in which it operates.

Board diversity
The Group remains strongly supportive of
the principle of boardroom diversity, of which
gender is an important, but not the only, aspect.
What is important is diversity of thought,
experience and approach, and each new
appointment must complement what already
exists at the Board table. Accordingly,
appointments will always be made on merit
against objective criteria, including diversity,
and not just to achieve an externally prescribed
number. Given five of the twelve current
members of the Group Board are women,
the Group has already met the target set for
2015 by Lord Davies in his report: Women
on Boards. The Group remains committed
to providing equal opportunities, eliminating
discrimination and encouraging diversity
amongst its workforce both in the UK and
overseas. A breakdown of the gender of
Company Directors and senior employees
at the end of the financial year together
with details of the Group’s Equality, Diversity
and Dignity at Work Policy are set out in the
Directors’ Report on pages 73 to 75.

Remuneration Committee
Full details of the membership, responsibilities
and activities of the Remuneration Committee
can be found in the Directors’ Remuneration
Report set out on pages 60 to 72.

Appointments made in the last year

Geraint Jones
Chief Financial
Officer, appointed
in August 2014

Penny James
Non-Executive
Director, appointed
in January 2015

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTIONFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORTINTRODUCTIONREPORT OF THE REMUNERATION COMMITTEE

Statement from Annette Court

A number of changes are proposed to the
DFSS to ensure that senior managers remain
motivated and are appropriately rewarded.”

Annette Court
Chairman of the Remuneration Committee

Dear Shareholder,
I am pleased to introduce the Directors’ Remuneration Report (the Report) for the year ended 31 December 2014, which
has been prepared by the Remuneration Committee (the Committee) and approved by the Board. This is the first report
I have prepared in my capacity as new Committee Chairman, a role I assumed on 9 April 2014, replacing John Sussens.

2014 has been another good year for the Admiral Group despite challenging conditions in the cyclical core UK motor
insurance market. Earnings per share in the year were 103.0 pence (2013: 104.6 pence) with a return on equity of 52%
(2013: 58%). Total dividends for the financial year (including the proposed final dividend of 49.0 pence per share) will
be 98.4 pence per share, representing 95% of our earnings. The Group’s strategy remains to continue to maximise our
position in the UK while taking what we know and do well, which is internet and telephone delivery of car insurance and
price comparison, to our overseas businesses.

Two of the three Executive Directors are founding Directors and receive remuneration that comprises salary and modest
benefits only. The Committee continues to hold the view that this is appropriate, as their significant shareholdings provide
a sufficient alignment of their interest with those of other shareholders. In order to provide full transparency of pay arrangements
for our Executive Directors, this Report includes single figure and comparative data for our CFO as well as for our CEO,
as the pay arrangements for the CFO are more reflective of those for (non-founder) executives.

My predecessor, John, advised in his letter last year that one of the Group’s share plans – the DFSS (Discretionary Free Share
Scheme) – is due to expire in 2015, and that the Company would carry out a comprehensive review of the plan in the context
of the Group’s Remuneration Policy in 2014, with any proposed changes put to shareholders for approval at the Group’s
AGM in 2015. The review took into account the changes to the business in both size and geography since the last review
in 2004, shortly after flotation, and recent trends in FTSE incentive design and pay levels particularly in the context of the
Group maintaining base salary levels for most senior management positions at well below the lower quartile of their peer
group in the FTSE 350.

As a result of the review, a number of changes are proposed to the DFSS in order to ensure that senior managers remain
motivated; are appropriately rewarded and that the Group continues to be an attractive employer that talented individuals
want to join, whilst at the same time providing appropriate incentives, and rewards, for the 2,300 employees that participate
in the DFSS across the Group. I am confident that the proposed changes will continue to support the view, held by the
Board, that share ownership drives outstanding performance and promotes the long term success of the business whilst
remaining in alignment with shareholder interests.

The key changes that have been proposed to the DFSS are:

@ Increased maximum DFSS opportunity of £2 million. For awards above £1 million, a maximum of 600% of base salary
applies. We would only expect to utilise the increased maximum award in certain particular circumstances such as the
recruitment of a new Executive Director. In this case, we would provide an explanation in our Annual Report on Remuneration.

@ Introduction of 100% performance related awards to key senior employees where their award exceeds a threshold.

@ In addition to Earnings per Share (EPS), two additional performance measures in the DFSS: relative Total Shareholder
Return (TSR) and Return on Equity (ROE). The exact measures for each award may vary to reflect strategic priorities.
For the 2015 awards, it is intended that vesting will be linked one third to each of EPS, TSR and ROE.

@ Introduction of malus and clawback provisions to allow the recovery of both vested and unvested awards, for example,

in the event of gross misconduct or misstatement.

ANNUAL REPORT AND ACCOUNTS 2014

WWW.ADMIRALGROUP.CO.UK

During the early part of 2015, we consulted with our top shareholders on the proposed revisions to the DFSS. Feedback
has been positive and we hope to receive your support for both the revised DFSS and the revised Remuneration Policy
at the upcoming AGM.

In addition to consideration of the proposed DFSS changes set out above, the Committee also considered the following
matters during the year ended 31 December 2014:

@ Reviewing the salary arrangements and fee proposals for the Executive Directors, the Chairman and senior management.

@ Reviewing the appropriateness of the performance conditions for the Free Share Incentive Plan (SIP) awards.

@ Reviewing the Group’s two key share plans to ensure both are up to date with current legislation.

@ Reviewing the maximum limit for shares distributed via the SIP.

@ Reviewing the Company’s performance against the performance conditions applicable to the DFSS and SIP awards

and where appropriate authorising the vesting of awards.

@ Reviewing and authorising the grant of awards under both the DFSS and SIP.

@ Reviewing minimum shareholding requirements for Executive Directors.

@ Reviewing the Committee’s Terms of Reference and recommending amendments to the Board for approval.

Annette Court
Chairman of the Remuneration Committee
4 March 2015

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTIONFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORTINTRODUCTIONDIRECTORS’ REMUNERATION REPORT

Directors’ Remuneration Policy

Compliance statement
This Remuneration Report has been prepared
according to the requirements of the Companies
Act 2006 (the Act), Regulation 11 and Schedule 8
of the Large and Medium-Sized Companies and
Groups (Accounts and Reports) (Amendment)
Regulations 2013 and other relevant requirements
of the FCA Listing Rules. In addition, the Board
has applied the principles of good corporate
governance set out in the UK Corporate
Governance Code (the Code) and has
considered the guidelines issued by its
leading shareholders and bodies such as
the Association of British Insurers and the
National Association of Pension Funds.

This section of the report sets out the policy
for Executive Directors which shareholders are
asked to approve at the 2015 Annual General
Meeting (AGM). The Committee intends that
this policy will formally come into effect from
the date of the 2015 AGM.

Remuneration paid to Executive Directors
in 2014 and remuneration arrangements
proposed for 2015 are set out in the Annual
Report on Remuneration.

Key principles of Admiral
remuneration arrangements
The Group is committed to the primary objective
of maximising shareholder value over time
and ensuring that there is a strong link between
performance and reward. This is reflected in
the Group’s stated Remuneration Policy of
paying competitive, performance-linked and
shareholder-aligned remuneration packages
comprising basic salaries coupled with
participation in performance-based share
schemes to generate competitive total reward
packages for superior performance. The Board
is satisfied that the adoption of this policy
continues to meet the objectives of attracting
and retaining executives of the highest quality
across the Group.

The Committee reviews the framework and
remuneration packages of the Executive
Directors and the most senior managers and
recognises the need to ensure that the
Remuneration Policy is firmly linked to the
Group’s strategy, including its risk management
approach. In setting the policy and making
remuneration decisions, the Committee takes
into account pay and conditions elsewhere in
the Group.

The main principles underlying the Remuneration
Policy are:

@ Competitive – the Group aims to combine
salaries with attractive performance-related
incentives which provide the potential for
competitive total reward packages for the
achievement of superior performance.
Base salaries reflect the role, job size and
responsibility together with individual
performance and effectiveness. Prevailing
market and economic conditions and
developments in governance are also
considered, as are general salary levels
throughout the organisation. In considering
total remuneration for the Executive
Directors, the Committee takes into
account remuneration in companies of a
similar size in the Financial Services sector.

@ Performance-linked – a significant part

of the Executive Directors’ (excluding the
founding Directors) and senior managers’
reward remains performance-linked and
shareholder-aligned.

@ Transparent – all aspects of the remuneration

structure are clear to employees and
openly communicated.

Remuneration policy table
This table describes the key components of the remuneration arrangements for Executive Directors for 2015 and beyond.

Purpose and link to strategy

Operation

Opportunity and performance metrics

Base salary
To attract and retain talent by setting base
salaries at levels appropriate for the business.

Salaries are reviewed annually or following a
significant change in responsibilities.

Any salary increases are applied in line with
the outcome of the review.

Salary levels/increases take account of:

@ Scope and responsibility of the position.

@ Individual performance and effectiveness,
and experience of the individual in the role.

@ Average increase awarded across the Group.

In respect of existing Executive Directors,
it is anticipated that salary increases will
normally be in line with the increase for
the general employee population over
the term of this policy. More significant
increases may be awarded in certain
circumstances including, but not limited to:
where there has been a significant increase
in role size or complexity, to apply salary
progression for a newly appointed
Executive Director, or where the Executive
Director’s salary has fallen significantly
behind market.

Where increases are awarded in excess of
that for the general employee population,
the Committee will provide the rationale
in the relevant year’s Annual Report
on Remuneration.

Pension
To provide retirement benefits.

The Group operates a Personal Pension Plan,
a Defined Contribution Scheme.

This is available to all employees following
completion of their probationary period.

The Group matches employee contributions
up to a maximum of 6% of base salary subject
to an overall maximum employer contribution
of £9,000. Salary is the only element of
remuneration that is pensionable.

Henry Engelhardt has declined to be
included in the plan.

ANNUAL REPORT AND ACCOUNTS 2014

WWW.ADMIRALGROUP.CO.UK

Purpose and link to strategy

Operation

Opportunity and performance metrics

Other benefits
To provide competitive benefits.

Discretionary Free Share Scheme (DFSS)
To motivate and reward longer term
performance, aid long term retention of key
executive talent, use capital efficiently, grow
profits sustainably and further strengthen
the alignment of the interests of
shareholders and staff.

DFSS bonus
To further align incentive structures with
shareholder interests through the delivery
of dividend equivalents.

Includes (but not limited to):

@ Death in service scheme.

@ Private medical cover.

@ Permanent health insurance.

@ Relocation, at the Committee’s discretion.

All benefits are non-pensionable.

Benefits may vary by role.

None of the existing Executive Directors
received total taxable benefits exceeding
5% of salary (excluding relocation) during
the most recent financial year, and it is not
anticipated that the cost of benefits
provided will exceed this level over the
term of this policy.

The Committee retains the discretion
to approve a higher cost in exceptional
circumstances (e.g. relocation), or in
circumstances driven by factors outside
the Company’s control (e.g. material
increases in insurance premiums).

Executive Directors may be granted awards
annually at the discretion of the Committee.
Henry Engelhardt and David Stevens have
declined to participate given their significant
shareholdings.

Awards are generally made as a specific
number of shares and vest after a minimum
of three years subject to Group performance
and continued employment.

Awards are subject to clawback and malus,
i.e. forfeiture or reduction of unvested
awards and recovery of vested awards in
exceptional circumstances (such as material
misstatement or gross misconduct).

Maximum opportunity: £2 million. For awards
above £1 million a maximum of 600% of
base salary applies.

Vesting of DFSS awards is subject to the
Group’s performance over a three-year
performance period. The performance
measures and respective weightings
may vary year-on-year to reflect
strategic priorities.

Details of the measures, weightings and
performance targets used for specific DFSS
grants are included in the Annual Report
on Remuneration.

Threshold performance will result in vesting
of up to 25% of the maximum award.

To incentivise shareholder value creation,
in particular in the form of dividends,
management participate in a bonus scheme
which directly links their awards to dividends
paid to shareholders. Bonus is calculated to
be equivalent to dividends that would have
been payable during the year on all outstanding
DFSS shares awarded but not vested.

DFSS bonus payments are subject to clawback
in exceptional circumstances (such as material
misstatement or gross misconduct).

Maximum opportunity: sum equal to
dividends payable during the year on
awarded but unvested DFSS shares.

No bonus is payable unless dividends are
payable on Admiral shares.

Approved Free Share Incentive Plan (SIP)
To encourage share ownership across all
employees using HMRC approved schemes.

All UK employees participate in the SIP
(except Henry Engelhardt and David Stevens,
who have declined to participate). Grants are
made twice a year based on the results of
each half year and vest after three years
subject to continued employment.

The SIP is an all-employee scheme and
Executive Directors participate on the same
terms as other employees. The acquisition of
shares is therefore not subject to the
satisfaction of a performance target.

Maximum opportunity is in line with
HMRC limits.

Minimum shareholding requirement
To align interests of Executive Directors
with shareholders.

Guideline to be met within five years
of appointment.

Two times salary.

The Committee is satisfied that the above Remuneration Policy is in the best interests of shareholders and does not promote excessive risk-taking.
The Committee retains discretion to make non-significant changes to the Remuneration Policy without reverting to shareholders.

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTIONFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORTINTRODUCTIONDIRECTORS’ REMUNERATION REPORT CONTINUED

Directors’ Remuneration Policy continued

Notes to the remuneration policy table
Payments from existing awards
Executive Directors are eligible to receive payment from any award made prior to the approval and implementation of the Remuneration Policy.
This includes all outstanding awards under the DFSS, made prior to the approval of the 2015 DFSS, and awards of DFSS shares that vest 50% on
performance and 50% on continued employment made to the new CFO prior to his appointment to the Board.

Selection of performance measures
EPS vs. LIBOR has been selected as a performance measure for awards under both the existing and 2015 DFSS as the Committee feels it is a strong
indicator of both long term shareholder return and the underlying financial performance of the business. It is transparent and visible and provides
good line-of-sight to executives. For awards to be made in 2015, two further measures will be added. The first additional measure is TSR vs. the
FTSE 350 (excluding investment companies), selected to reflect value creation for Admiral’s shareholders as compared with the general market.
The second additional measure is ROE, selected as the Committee believes that ROE reinforces the focus on capital efficiency and delivery of strong
returns for our shareholders, thereby further strengthening the alignment of management’s incentives with Admiral’s strategy. The specific performance
measures and their respective weightings in respect of each DFSS award may vary to reflect the strategic priorities at the time of the award.

Performance targets are set to be stretching and achievable, taking into account the Company’s strategic priorities and the economic environment
in which the Company operates. The financial targets are set taking into account a range of reference points including the Group’s strategic plan
and broker forecasts for both Admiral and its insurance peers. The Committee believes that the performance targets set are stretching, provide
motivation, and that maximum outcomes are only available for outstanding performance.

Remuneration policy for other employees
The Company’s approach to annual salary reviews is consistent across the Group, with consideration given to the role size, experience required,
individual performance and pay levels in comparable companies.

In general, the Remuneration Policy which applies to other senior executives is consistent with that for Executive Directors. Remuneration is typically
linked to Company and individual performance in a way that reinforces shareholder value creation.

Approximately 2,300 employees from across the Group, as well as the CFO, participate in the DFSS. The Committee recommends for approval by
the Board awards to all participants under the DFSS. For the CFO and around 20 senior managers, all share awards are subject to the performance
conditions detailed in the policy table. For employees at lower organisational levels, awards are split: 50% of the award is subject to the same performance
conditions and the other 50% has no performance conditions attached other than the requirement that the recipient remains an employee of the
Group at the date of vesting. Award sizes vary by organisational level. All holders of DFSS awards receive the DFSS bonus. Overseas employees
receive an equivalent award to the UK SIP awards under the DFSS. These awards have no performance measures attached.

All employees are eligible to participate in the SIP on the same terms.

Remuneration arrangements for founding Directors
Two of the three Executive Directors (Henry Engelhardt and David Stevens) are founding Directors. They and the Committee continue to hold the
view that the significant shareholdings held by them provide a sufficient alignment of their interest in the performance of the Group with the interests
of other shareholders. In light of this, their remuneration packages consist only of a below market rate salary and benefits such as private medical
cover, permanent health insurance and death in service cover. During the year David Stevens joined the Group’s Personal Pension Plan and from
October 2014 the Group matched his contributions under the Plan. The Group does not contribute to any pension arrangements on behalf of
Henry Engelhardt. Henry Engelhardt and David Stevens have not participated, nor is it intended that they participate, in any Group share schemes.

Service contracts and leaver/change of control provisions
The Company’s policy is to limit termination payments on termination to pre-established contractual arrangements. In the event that the employment
of an Executive Director is terminated, any compensation payable will be determined in accordance with the terms of the service contract between
the Company and the employee, as well as the rules of any incentive plans. Under normal circumstances, Executive Directors are entitled to receive
termination payments in lieu of notice based on base salary and compensation for loss of benefits. The Company has the ability to pay such sums
in instalments, requiring the Executive Director to mitigate loss over the relevant period. The notice period for all Executive Directors is one year.

There is no provision in the Executive Directors’ contracts for compensation to be payable on early termination of their contract over and above
the notice period element. Executive Director service contracts are available to view at the Company’s registered office.

Executive Director

Henry Engelhardt

David Stevens

Geraint Jones

Date of appointment

22 October 1999

13 August 2014

ANNUAL REPORT AND ACCOUNTS 2014

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When considering termination payments, the Committee reviews all potential incentive outcomes to ensure they are fair to both shareholders and
participants. The table below summarises how the awards under the DFSS and DFSS bonus scheme are typically treated in specific circumstances,
with the final treatment remaining subject to the Committee’s discretion:

Plan

DFSS

Scenario

Resignation

Timing of vesting

Awards lapse

Treatment of awards

n/a

Death, injury or disability, redundancy, retirement or
any other reasons the Committee may determine

Normal vesting date

Any outstanding award will be pro-rated for time
and performance.

Change of control

Immediately

Any outstanding award will be pro-rated for time and
extent to which the Committee determines that the
performance conditions have been met or are likely
to be met at the point of change of control.

DFSS bonus

Resignation

Death, injury or disability, redundancy, retirement or
any other reasons the Committee may determine

Change of control

n/a

Not payable after the event.

Non-Executive Directors
The Company has entered into letters of appointment with its Non-Executive Directors (NEDs). Summary details of terms and notice periods are
included below.

NED

Alastair Lyons

Roger Abravanel

Manfred Aldag

Annette Court

Colin Holmes

Penny James

Margaret Johnson

Lucy Kellaway

Jean Park

Term

3 years

Indefinite

3 years

Commencement date

Notice period

1 July 2013

6 March 2012

n/a

21 March 2015

3 December 2013

1 January 2015

4 September 2012

17 January 2014

Three months

One month

One month – automatically terminates should
he cease employment with Munich Re

One month

The NEDs are not eligible to participate in the DFSS or DFSS bonus scheme and do not receive any pension contributions.

Details of the policy on NED fees are set out in the table below:

Purpose and link to strategy

Operation

Opportunity and performance metrics

To attract and retain NEDs of the
highest calibre with experience
relevant to the Company

Fees are reviewed annually.

The Group Chairman fee is determined by the
Committee after consultation with the Executive
Directors. The NED fees are determined by
the Group Chairman together with the
Executive Directors.

Additional fees are payable for acting as Senior
Independent Director or as Chair or member
of a Board Committee as appropriate, and may be
payable as appropriate in relation to other additional
responsibilities (e.g. attending meetings overseas).

Fee levels are reviewed by reference to time
commitment and responsibility.

Fees are currently paid entirely in cash, but the Board
retains discretion to part-pay fees in Company shares.

Any fee increases are applied in line with the
outcome of the review.

The current Group Chairman, as with the founding
Directors, holds a significant shareholding in the
Group and this is reflected in the size of his fee,
which is materially below that of Chairs of
organisations of similar size and complexity.

ADMIRAL GROUP PLC

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Directors’ Remuneration Policy continued

Pay-for-performance: scenario analysis
The following charts provide an estimate of the potential future reward opportunities for the Executive Directors, and the potential split between
the different elements of pay under three different performance scenarios: ‘Minimum’, ‘On-target’ and ‘Maximum’. As described on page 61,
Admiral’s DFSS bonus is directly aligned with dividends received by shareholders. As such, there is no ‘threshold’ or ‘target’ performance defined
for this element of pay. The figures shown in the chart below for the CFO’s DFSS bonus include the value of the actual DFSS bonus paid in 2014.
Under all scenarios, potential reward opportunities are based on expected awards for 2015 (in accordance with Admiral’s Remuneration Policy),
applied to salaries as at 31 December 2014. The ‘On-target’ column includes a 20% vesting for DFSS awards which would occur for achieving
threshold performance targets.

Chief Executive Officer

Chief Financial Officer

Chief Operating Officer

£1,497k

80%

£393k £393k £393k

100%

£537k

45%

£297k
29% 16%

71% 39% 14%

m
u
m
n
M

t
e
g
r
a
t
-
n
O

m
u
m
x
a
M

m
u
m
n
M

t
e
g
r
a
t
-
n
O

m
u
m
x
a
M

£381k £381k £381k

100%

t
e
g
r
a
t
-
n
O

m
u
m
x
a
M

Key

Salary, pension and benefits

Single-year variable (DFSS bonus)

Multi-year variable (DFSS)

m
u
m
n
M

The charts above exclude the effect of any Company share price movement. For this reason, were the CFO’s DFSS shares to vest in full, his actual
total remuneration may exceed the £ value shown in the chart above.

Component

Base salary

Pension

Benefits

DFSS

DFSS bonus

Minimum

On-target

Maximum

Annual base salary for 2015

£9,000 annual contribution for CFO and COO; no contribution for CEO

Taxable value of annual benefits provided

0% vesting

20% average vesting

100% vesting

Based on DFSS bonus paid in 2014

Approach to remuneration relating to new appointments
External appointments
In the case of appointing a new Executive Director, the Committee may make use of any of the existing components of remuneration, as follows:

Component

Approach

Maximum annual grant value

Base salary

Pension

Benefits

SIP

DFSS

The base salary will be determined by the Committee with reference
to the scope and responsibility of the position as well as internal
relativities and their current remuneration.

New appointees will be eligible to participate in the Personal Pension
Plan with Group contributions in line with the existing policy.

New appointees will be eligible to receive benefits which may include
(but are not limited to) death in service scheme, private medical cover,
and permanent health insurance.

New appointees will be eligible to participate in the SIP.

New appointees will be granted awards under the DFSS on the same
terms as other Executives, as described in the policy table.

£2 million. Awards over £1 million are subject to a
maximum of 600% of base salary.

DFSS bonus

New appointees will be granted awards under the DFSS bonus scheme
on the same terms as other Executives, as described in the policy table.

Linked to Admiral dividend.

The Committee may also make an award in respect of a new appointment to ‘buy out’ incentive arrangements forfeited on leaving a previous employer.
In doing so, the Committee will consider relevant factors including any performance conditions attached to these awards and the likelihood of
those conditions being met to ensure that the value of the buy-outs are no greater than the fair value of the awards they replace. The Committee
may also avail itself of Listing Rule 9.4.2 R if appropriate in respect of buy-out incentive arrangements.

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Internal appointments
Remuneration for new Executive Directors appointed by way of internal promotion will similarly be determined in line with the policy for external
appointees, as detailed on page 64. Where an individual has contractual commitments made prior to their promotion to the Board, the Company
will continue to honour these arrangements. Incentive opportunities for below Board employees are typically no higher than for Executive Directors,
but measures may vary if necessary.

NED recruitment
In recruiting a new Non-Executive Director, the Committee will use the policy as set out in the table on page 63. A base fee would be payable for Board
membership, with additional fees payable for acting as Senior Independent Director or as Chair or member of a Board Committee as appropriate.

Other directorships
Executive Directors are permitted to, although none currently do, accept appointments as Non-Executive Directors of companies with prior approval
of the Group Chairman. Approval will only be given where the appointment does not present a conflict of interest with the Group’s activities and
the wider exposure gained will be beneficial to the development of the individual.

Considerations of conditions elsewhere in the Group
The Committee considers the pay and employment conditions elsewhere in the Group when determining remuneration for Executive Directors. Whilst
the Committee does not currently consult specifically with employees on the Executive Remuneration Policy, it consults with and receives updates
on employee pay arrangements from the Head of People Services and takes this into consideration when reviewing Executive remuneration.

Considerations of shareholder views
When determining remuneration, the Committee takes into account best practice guidelines issued by institutional shareholder bodies. The Committee
is open to feedback from shareholders on Remuneration Policy and will continue to monitor trends and developments in corporate governance
and market practice to ensure the structure of the Executive remuneration remains appropriate.

Further detail on the votes received on the Directors’ Remuneration Policy and Annual Report on Remuneration are provided in the Annual Report
on Remuneration.

ADMIRAL GROUP PLC

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Annual Report on Remuneration

This section of the report provides details of how Admiral’s Remuneration Policy was implemented in 2014 and the remuneration arrangements
proposed for 2015.

Remuneration Committee membership in 2014
The Board sets the Group’s Remuneration Policy and, through the authority delegated to it by the Board, the Committee is responsible for making
recommendations to the Board on the structure and implementation of the Remuneration Policy across the Group with consideration to the prevailing
economic climate within the economies in which the Group operates. Its remit includes recommending the remuneration of the Group Board Chairman,
the Executive Directors and the Company Secretary; reviewing the remuneration of senior management; and reviewing the composition of and
awards made under the performance-related incentive schemes.

At the end of 2014 the Committee consisted of Margaret Johnson, Roger Abravanel and Jean Park under the Chairmanship of Annette Court.
The Committee met eight times during the year.

The Group Chairman and CEO are invited to meetings where the Committee considers it appropriate to obtain their advice on Group strategy and
performance and Senior Executive pay strategy. The members of the Committee do not have any personal financial interests (other than shareholdings), or
any conflicts, that relate to the business of the Committee. The Committee members do not have any day-to-day involvement in the running of the Group.

Advisor to the Committee
During the year, in order to enable the Committee to reach informed decisions on Executive remuneration, advice on market data and trends was
obtained from independent consultants, Kepler Associates. Kepler reports directly to the Committee Chair and is a signatory to the Code of Conduct
for Remuneration Consultants (which can be found at www.remunerationconsultantsgroup.com). Kepler does not provide any other services to the
Group. The fees paid to Kepler in respect of work carried out in 2014 (based on time and materials) totalled £4,135, excluding expenses and VAT.

The Committee undertakes due diligence periodically to ensure that Kepler remains independent of the Company and that the advice provided
is impartial and objective. The Committee is satisfied that the advice provided by Kepler is independent.

In addition, PricewaterhouseCoopers LLP (PwC) provided the Committee with advice on the structure of the Group’s share schemes. The fees paid
to PwC for work during 2014 totalled £8,200, excluding expenses and VAT. The Company Secretary also circulates market survey results as appropriate.

Summary of shareholder voting at the 2014 AGM
The table below shows the results of the binding and advisory votes on the Directors’ Remuneration Policy and Annual Report on Remuneration
of the 2014 Directors’ Remuneration Report, respectively, at the 2014 AGM.

Directors’ Remuneration Policy

Total number of votes

202,909,688

3,045,740

205,955,428

Annual Report on Remuneration

Total number of votes

207,649,080

% of votes cast

99.6%

% of votes cast

98.5%

1.5%

771,144

0.4%

208,420,224

For

Against

Total votes cast

Abstentions

2,548,073

1.2%

82,528

0.0%

Total single figure of remuneration for Executive Directors (audited)
The table below sets out the total single figure remuneration received by each Executive Director for the year ended 31 December 2014 and the prior year.

Executive Director

1. Base salary

2. Benefits

3. Pension

5. DFSS

6. DFSS bonus

7. Other

Henry Engelhardt

2014

£392,870

Geraint Jones8

2013

£387,147

2014

2013

£60,263

n/a

David Stevens

2014

£371,340

2013

£364,130

Kevin Chidwick9

2014

£280,126

2013

£443,289

£390

£399

£150

n/a

£390

£399

£240

£399

n/a

£900

n/a

£5,523

£9,000

£3,470

£3,000

£171,228

£87,250

4. SIP

n/a

£3,000

£459,598

£176,525

£177,104 £1,102,116

£3,000

£675,075

£148,680

£165,000

£1,444,443

Total
remuneration

£393,260

£387,546

£325,361

n/a

£372,630

£364,529

n/a

The figures have been calculated as follows:
1. Base salary/fee: amount earned for the year.
2. Benefits: the taxable value of annual benefits received in the year.
3. Pension: the value of the Company’s contribution during the year.
4. SIP: the face value at grant.
5. DFSS: the value at vesting of shares vesting on performance over the three-year periods ending 31 December 2014 and 31 December 2013. For the 2014

calculations, given that vesting occurs in October 2015, after the Directors’ Remuneration Report is finalised, the figures are based on the average share price
in the last three months of 2014 (£12.62). The 2013 calculations have been based on the actual share price on vest (£13.50).

6. DFSS bonus: the value at grant of bonus equivalent to dividends that would have been payable during the year on all outstanding DFSS shares awarded but

not yet vested.

7. Kevin Chidwick was paid £177,104 in 2014 (2013: £165,000) to reimburse him for expenses incurred in relation to his being based in the US after taking on CEO

responsibility for the Group’s US insurer Elephant Auto.

8. Geraint Jones was appointed to the Board as CFO on 13 August 2014. His 2014 remuneration includes salary, pension and benefits in respect of his service as

CFO, his full year DFSS and his full year DFSS bonus.

9. Kevin Chidwick left the Board on 13 August 2014 to focus on his new role as CEO of Elephant Auto. His 2014 remuneration includes salary, pension and

benefits in respect of his service as CFO, his full year DFSS and his full year DFSS bonus.

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Total single figure of remuneration for Non-Executive Directors (audited)
The table below sets out the total single figure remuneration received by each NED for the year ended 31 December 2014 and the prior year.

Director

Alastair Lyons

Roger Abravanel

Manfred Aldag

Annette Court

Colin Holmes

Margaret Johnson

Lucy Kellaway
Jean Park*1
Martin Jackson*2
John Sussens*2

Total fees

2014

2013

£228,228

£55,000

£6,000

£86,383

£80,295

£67,000

£63,809

£82,103

£20,769

£21,323

£50,000

£6,000

£74,000

£70,000

£62,000

£50,000

—

£70,000

£72,000

*1 Jean Park was appointed to the Board on 17 January 2014. Her total single figure remuneration for 2014 includes amounts relating to the month immediately
prior to her appointment to the Board when she prepared for and attended, as an observer, a Group Risk Committee meeting and Group Board meeting

*2 Martin Jackson and John Sussens retired from the Board with effect from 9 April 2014

Incentive outcomes for financial year to 31 December 2014
DFSS awards vesting on performance to 31 December 2014
Awards were made under the DFSS to Kevin Chidwick and Geraint Jones on 11 October 2012. Vesting is dependent on the Company’s EPS
performance in excess of a risk-free return, defined as average three-month LIBOR, over a three-year period commencing on 1 January 2012.
10% of shares vest for matching LIBOR, full vesting occurs for outperforming LIBOR by 10% p.a., with straight-line vesting in between. No vesting
occurs for EPS growth below LIBOR. The table below details the Company’s EPS performance against targets and vesting outcomes over the
performance period ending on 31 December 2014.

Performance period

Executive Director

Interest held

1 Jan 2012 – 31 Dec 2014

Geraint Jones*3
Kevin Chidwick

16,000

52,250

Admiral EPS
index

LIBOR
index

Out-

performance*1

% vesting

Interest
vesting

Vesting
date

Estimated

value*2

126 points 102 points

24 points

85%

70%

13,568

11 Oct 2015

£171,228

36,418

11 Oct 2015

£459,598

*1 36 points are required for 100% vesting

*2 Calculated based on the average share price in the last three months of 2014 (£12.62)

*3 Only 50% of Geraint Jones’ 2012 DFSS award was subject to performance, as the award was made prior to his appointment to the Board

DFSS bonus in respect of 2014
The Group paid a bonus to all holders of DFSS shares in 2014, which was equivalent to the dividend payable on all outstanding DFSS shares
awarded but not yet vested. The Committee continues to feel that having a Group-wide bonus equivalent to the dividend flow received by
investors further aligns the incentive structure with shareholders.

In 2014, Kevin Chidwick and Geraint Jones received DFSS bonuses of £176,525 and £87,250, respectively (2013 – Kevin Chidwick: £148,680).

Scheme interests awarded in 2014
DFSS
In September 2014, Kevin Chidwick was granted an award under the DFSS of 35,000 shares with a value at the date of award of £429,520.
Following his appointment as CFO, in September 2014 Geraint Jones was granted an award of 35,000 shares with a value at the date of award
of £429,520. The three-year period over which performance will be measured will be 1 January 2014 to 31 December 2016. The award is eligible
to vest in its entirety on the third anniversary of the date of grant (i.e. October 2016), subject to performance and to continued employment.
Henry Engelhardt and David Stevens again declined to be included given their significant shareholdings.

Geraint Jones was also granted an award in April 2014 of 20,000 shares with a value at date of award of £274,800. As this award was made prior
to his appointment to the Board, only 50% of this award is subject to performance.

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Annual Report on Remuneration continued

Scheme interests awarded in 2014 continued
DFSS continued
Awards made up to and including 2014 vest based on EPS growth vs. LIBOR, as outlined on page 61.

Type of award

Discretionary Free Share Scheme

Face value of awards granted in 2014

CEO: n/a

CFO (Geraint Jones): 20,000 shares on 15 April 2014 with a value at the date of award of £274,800
(based on share price of £13.74) (50% of the award is subject to performance); and 35,000 shares
on 22 September 2014 with a value at the date of award of £429,520 (based on share price of
£12.272) (100% of the award is subject to performance).

COO: n/a

Previous CFO (Kevin Chidwick): 35,000 shares on 22 September 2014 with a value at the date
of award of £429,520 (based on share price of £12.272)

Performance period

Performance conditions

Threshold (10% vests)

Maximum (100% vests)

3 years from 1 January 2014

Growth in EPS vs. LIBOR

Growth in line with LIBOR over 3 years

Growth of 10% p.a. in excess of LIBOR over 3 years

SIP
In March and September 2014, Kevin Chidwick and Geraint Jones were granted awards under the SIP of 100 shares in March 2014, with a face value
of £1,506, and 114 shares in September 2014, with a face value of £1,489. The shares will vest on 14 March and 5 September 2017 respectively
subject to continued employment only. Henry Engelhardt and David Stevens again declined to be included given their significant shareholdings.

Exit payments and payments to past Directors
No payments were made during the year. Unvested DFSS shares awarded to Kevin Chidwick during the period he was CFO remain subject to
100% performance.

Implementation of remuneration policy for 2015
Executive Directors
Salary, pension and benefits
Remuneration for the Executive Directors in 2015 will be determined in line with the latest policy. The Committee approved the following base
salaries for the Executive Directors in 2014:

Director

Henry Engelhardt

Geraint Jones

David Stevens

Latest salary

2014 salary

% change

£392,870

£200,000

£371,340

£392,870

£156,000

£371,340

—

28%

Effective date

1 July 2014

1 January 2015

— 1 September 2014

Geraint Jones was appointed to the Board on a relatively low salary and the Committee expects to make salary increases that are above general
inflation in the next few years to reflect his demonstrated development in the CFO role and the performance of the business. The Committee will
determine the levels of future increases taking into account both his individual and Company performance, and with reference to market pay levels.
Geraint’s current salary of £200,000 is significantly below the median level for companies of a similar size.

Geraint Jones will continue to participate in the Group Personal Pension Plan, where employee contributions are matched up to a maximum
6% of base salary with maximum employer contribution of £9,000. David Stevens will also continue to participate in the plan, on the same basis
as in 2014. As in previous years, Henry Engelhardt has declined to be included in the plan for 2014. All Executive Directors will continue to receive
benefits in line with the policy.

DFSS
The Company held a comprehensive review of the DFSS in 2014, taking into account the changes to the business in both size and geography since
the last review in 2004, and recent trends in FTSE incentive design and pay levels. As a result of the review, a number of changes to the DFSS have
been proposed in order to ensure that senior managers remain motivated; are appropriately rewarded; and that the Group continues to be an
attractive employer that talented individuals want to join whilst at the same time providing appropriate incentives, and rewards, for the 2,300
employees that participate in the DFSS across the Group.

The key changes that have been made to the DFSS include:

@ Increased maximum DFSS opportunity of £2 million. Awards above £1 million are subject to a 600% of salary limit.

@ Inclusion of 100% performance related awards for approximately 20 of the Group’s most senior managers.

@ Two additional performance measures in the DFSS: relative TSR and ROE.

@ Introduction of malus and clawback provisions.

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In advance of each DFSS cycle, the Committee reviews the appropriateness of the performance measures and corresponding targets. Vesting of
the 2015 award will be linked to three-year EPS growth vs. LIBOR, TSR vs. FTSE 350 (excluding investment companies), and ROE, weighted equally.
The Committee intends to make DFSS awards in September 2015 and indicative targets are shown in the table below.

Performance measure

EPS growth vs. LIBOR

TSR vs. FTSE 350
(excluding investment companies)

ROE

Performance range

Threshold

Maximum

Vesting

Growth in line
with LIBOR

Growth of 10% p.a.
in excess of LIBOR

10% for reaching threshold with straight line
relationship to 100% at maximum performance.

Median

Top quartile

25% for median, with straight line
relationship to 100% for top quartile.

25%

55%

25% for reaching threshold with straight line
relationship to 100% at maximum performance.

The Committee will determine the precise targets closer to the time of making the awards, later in the year, and will disclose them in the 2015
Annual Report on Remuneration.

Chairman and Non-Executive Directors
The fee payable to the Chairman of the Board is £232,793 p.a. with effect from 1 January 2015. The basic fee payable to each NED is £55,000 p.a.
The fees payable for chairing the Audit, Group, Risk, Remuneration and Nomination Committees are £20,000, £20,000, £10,000 and £5,000 p.a.,
respectively. The additional fee paid for being Senior Independent Director is £10,000 p.a. The fees payable for membership of the Audit and
Group Risk Committees are £12,000 p.a. each.

Percentage change in CEO remuneration
The table below shows the percentage change in CEO remuneration from 2013 compared to the average percentage change in remuneration
for all other employees. The analysis is based on a consistent set of employees, i.e. the same individuals appear in the 2013 and 2014 populations.
As the CEO does not participate in the DFSS bonus scheme, to provide a meaningful comparison, we have also included data for the CFO.

Salary

Taxable benefits
DFSS bonus*3
Total

CEO

CFO

Other employees

2014

2013

% change

2014

2013

% change

£392,870

£387,147

£390

—

£399

—

£393,260

£387,546

-2%

—

£340,389*1
£177,494*2
£263,775*4
£781,658

£443,289

£165,399

£148,680

£757,368

-23%

77%

-2%

-1%

*1 Based on the sum of remuneration paid to Kevin Chidwick up to and including 13 August 2014 and to Geraint Jones from 13 August 2014

*2 In January 2014 Kevin Chidwick was provided with a cash reimbursement of 177,104 in relation to expenses incurred in his relocation to the US

*3 DFSS bonus change represents the change in dividends paid, which is the driver of the level of bonus payable to holders of unvested DFSS shares

*4 CFO DFSS bonus includes full DFSS bonus paid to both Geraint Jones (£87,250) and Kevin Chidwick (£176,525) during the year

Relative importance of spend on pay
The table below shows the percentage change in dividends and total employee remuneration spend from the financial year ended 31 December 2013
to the financial year ended 31 December 2014.

Distribution to shareholders

Employee remuneration

2014
£m

271

209

2013
£m

271

205

%
change

—

The Directors are proposing a final dividend for the year ended 31 December 2014 of 49.0 pence per share bringing the total dividend for 2014
to 98.4 pence per share (2013: 99.5 pence per share).

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTIONFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORTINTRODUCTIONDIRECTORS’ REMUNERATION REPORT CONTINUED

Annual Report on Remuneration continued

Pay for performance
The following graph sets out a comparison of Total Shareholder Return (TSR) for Admiral Group plc shares with that of the FTSE 100 Index, of
which the Company is a constituent, over the six-year period to 31 December 2014. The Directors consider this to be the most appropriate index
against which the Company should be compared. TSR is defined as the percentage change over the period, assuming reinvestment of income.

Historical TSR performance
Growth in the value of a hypothetical £100 holding over the six years to 31 December 2014

8
0
0
2

r
e
b
m
e
c
e
D
1
3

t
a
d
e
t
s
e
v
n

0
0
1
£
f

o
e
u
a
V

220

200

180

160

140

120

100

Admiral

FTSE100

Source: Thomson Reuters Datastream

31/12/08

31/12/09

31/12/10

31/12/11

31/12/12

31/12/13

31/12/14

CEO

2009

2010

2011

2012

2013

2014

CEO single figure of remuneration

£328,027

£343,106

£358,199

£373,759

£387,546

£393,260

DFSS vesting outcome (% of maximum)

n/a

CFO

Incumbent

2009

2010

2011

2012

2013

2014

Kevin Chidwick

Geraint Jones

CFO single figure of remuneration

£632,312

£1,269,535

£1,048,130

£1,431,218

£1,444,443*1 £1,102,116 *1

£325,361

DFSS vesting outcome (% of maximum)

98%

100%

70%

85%

*1 These figures include reimbursement of £177,104 and £165,000 in 2014 and 2013, respectively, for expenses incurred in respect of the previous CFO’s relocation

Annual bonus outcome has been excluded as Admiral does not operate any performance-based annual bonus schemes.

Dilution
The Company has controls in place to ensure that shares awarded under the schemes operated by the Company within any rolling ten-year period
do not exceed 10% of the number of ordinary shares in the capital of the Company in issue at the time of each award.

ANNUAL REPORT AND ACCOUNTS 2014

WWW.ADMIRALGROUP.CO.UK

Total shareholdings of Directors (audited)
Executive Directors have agreed to (acquire and) retain a beneficial shareholding equal to at least 200% of base salary, which can be built up over
a period of five years from the date of appointment.

As at 31 December 2014, the Directors have the following shareholdings:

Director

Henry Engelhardt
Geraint Jones*1

David Stevens

Kevin Chidwick*2
Alastair Lyons

Roger Abravanel

Manfred Aldag

Annette Court

Colin Holmes

Margaret Johnson

Lucy Kellaway
Jean Park*5

Shares held

Beneficially
owned
outright

Subject to
performance
conditions

Shareholding
requirement
(% of salary)

Current
shareholding
(% of salary/fee)

Requirement
met?

34,005,472
42,741*3

9,881,950

98,458*3

312,152

n/a
87,000*4

n/a

139,500

200%

>200%

Yes

—

1,919

—

40,000

—

*1 Geraint Jones was appointed to the Board on 13 August 2014

*2 Kevin Chidwick left the Board on 13 August 2014

*3 Total includes SIP shares both matured and awarded

*4 Total includes 26,000 unvested DFSS shares, awarded to Geraint Jones before he was appointed CFO, that are not subject to performance conditions

*5 Jean Park was appointed to the Board on 17 January 2014

There have been no changes to Directors’ shareholdings since 31 December 2014.

None of the Directors had an interest in the shares of any subsidiary undertaking of the Company or in any significant contracts of the Group.

Current Chief Financial Officer Geraint Jones’ interests in shares under the DFSS and SIP (audited)

At start
of year

16,000

—

110

128

126

112

116

—

Awarded
during year

Vested/matured
during year

—

20,000

35,000

—

100

114

16,000

—

110

—

At end
of year

—

16,000

20,000

35,000

—

128

126

112

116

100

114

Price at
award
(£)

Value at
award date
(£)

Value at
31/12/14
or maturity
(£)

Date of
award

Final
vesting/
maturity
date

£16.39

£10.73

£12.09

£13.74

£12.27

£16.78

£13.52

£11.80

£11.82

£13.48

£12.83

£15.06

£13.06

£262,240

£216,024*1

15/04/2011

15/04/2014

£171,680

£193,440

£274,800

£429,520

£211,680

11/10/2012

11/10/2015

£211,680

10/10/2013

10/10/2016

£264,600

15/04/2014

15/04/2017

£463,050

22/09/2014

22/09/2017

£1,510

£1,487

£1,510

£1,489

£1,510

£1,488

£1,506

£1,489

£1,350*1
£1,418*1
£1,693

£1,667

£1,482

£1,535

£1,323

£1,508

08/03/2011

08/03/2014

05/09/2011

05/09/2014

16/03/2012

16/03/2015

03/09/2012

03/09/2015

15/03/2013

15/03/2016

02/09/2013

02/09/2016

14/03/2014

14/03/2017

05/09/2014

05/09/2017

Type

DFSS

SIP

*1 Value at maturity

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTIONFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORTINTRODUCTIONDIRECTORS’ REMUNERATION REPORT CONTINUED

Annual Report on Remuneration continued

Former Chief Financial Officer Kevin Chidwick’s interests in shares under the DFSS and SIP (audited)

Type

DFSS

SIP

At start
of year

50,000

52,250

—

110

128

126

112

116

—

Awarded
during year

Vested/matured
during year

—

35,000

—

100

114

50,000

—

110

—

At end
of year

—

52,250

35,000

—

128

126

112

116

100

114

Price at
award
(£)

£16.39

£10.73

£12.09

£12.27

£16.78

£13.52

£11.80

£11.82

£13.48

£12.83

£15.06

£13.06

Value at
award date
(£)

£819,500

£560,643

£631,703

£429,520

£1,510

£1,487

£1,510

£1,489

£1,510

£1,488

£1,506

£1,489

Value at
31/12/14
or maturity
(£)

£675,075*1
£691,268

Date of
award

Final
vesting/
maturity
date

15/04/2011

15/04/2014

11/10/2012

11/10/2015

£691,268

10/10/2013

10/10/2016

£463,050

22/09/2014

22/09/2017

£1,350*1
£1,418*1
£1,693

£1,667

£1,482

£1,535

£1,323

£1,508

08/03/2011

08/03/2014

05/09/2011

05/09/2014

16/03/2012

16/03/2015

03/09/2012

03/09/2015

15/03/2013

15/03/2016

02/09/2013

02/09/2016

14/03/2014

14/03/2017

05/09/2014

05/09/2017

*1 Value at maturity

The closing price of Admiral shares on 31 December 2014 was £13.23 per share. Performance conditions for DFSS awards made in 2012 and 2013
are the same as those for awards made in 2014, as detailed in the Remuneration Policy table.

By Order of the Board,

Annette Court
Chairman of the Remuneration Committee
4 March 2015

ANNUAL REPORT AND ACCOUNTS 2014

WWW.ADMIRALGROUP.CO.UK

DIRECTORS’ REPORT

The data has been prepared with reference to
the WRI/WBCSD Greenhouse Gas Protocol:
A Corporate Accounting and Reporting
Standard (Revised Edition) and in accordance
with the guidance for corporate reporting
issued by the Department for Environment,
Food and Rural Affairs (DEFRA).

There are no material exclusions from this
data. Exclusions included figures for gas, air
conditioning and water because the information
was not available from the managing agents
of the Group’s multiple office locations. In
addition, emissions data from the US, France
and one of the Indian offices has been excluded
due to difficulties in collecting complete and
accurate data. These locations together total
8% (2013: 7%) of Group headcount and are
therefore considered immaterial.

Detailed information on the Group’s
environmental performance and the
methodology for the measurement
of greenhouse gas emissions is
available on the corporate website,
www.admiralgroup.co.uk.

Going concern
The Directors consider that the Group has
adequate financial resources to continue
operating for the foreseeable future and
that it is therefore appropriate to adopt the
going concern basis in preparing the financial
statements. In considering the appropriateness
of this assumption, the Board has reviewed
the Group’s projections for the next 12 months
and beyond, including cash flow forecasts and
regulatory capital surpluses.

The Directors present their Annual Report and
the audited financial statements for the year
ended 31 December 2014.

Statutory disclosures
Group results and dividends
The profit for the year, after tax but before
dividends, amounted to £281.6 million
(2013: £286.9 million).

The Directors declared and paid dividends of
£273.5 million during 2014 (2013: £255.8 million)
– refer to note 11b for further details.

The Directors have proposed a final dividend
of £136 million (49.0 pence per share) payable
on 29 May 2015.

Employee policies
Detailed information on the Group’s employment
practices is set out in the Strategic Report and
on the corporate website. The Group purchases
appropriate liability insurance for all staff
and Directors.

Diversity, ethics and human rights
Admiral Group respects and values the
individuality and diversity of every employee.
The Group’s Equality, Diversity and Dignity at
Work policy ensures that every employee is
treated equally and fairly and that all employees
are aware of their obligations. The Group is
fully committed to the health and safety and
the human rights of its employees regardless
of their background. In addition, the Group
maintains a number of employee codes of
conduct regarding appropriate ethical
standards in the workplace.

The Group’s principles of respect for human
rights, diversity, health and safety and workplace
ethical standards not only apply to staff directly
employed by Admiral, but also to staff employed
by the Group’s outsourced partner in Bangalore,
India. To meet this commitment, Admiral Group
maintains regular contact with its outsourcer’s
management team and the Group’s senior
managers visit the outsourcer on a regular basis,
whilst the Group also provides training and
development to ensure that the team uphold
these principles. In addition, Admiral Group
has appointed a manager based permanently
at the outsourced operation, who is responsible
for ensuring that the Group’s principles are
adhered to by the outsourced partner, and that
the wellbeing of outsourced staff is monitored.

Gender diversity
The table below provides a breakdown of the
gender of Company Directors and employees
at the end of the financial year:

Company Directors*1

Other senior managers*2

Male

Female

All employees

3,598

3,601

*1 Company Directors consists of the Board

of Directors, as detailed on pages 42 to 43,
excluding Penny James who was appointed
to the Board on 1 January 2015

*2 Other senior managers is as defined in the
Companies Act 2006 (Strategic Report and
Directors’ Report) and includes persons
responsible for planning, directing or controlling
the activities of the Company, or a strategically
significant part of the Company, other than
Company Directors. Any other Directors of
undertakings included in the consolidated
accounts that are not considered strategically
significant have not been included

Contractual arrangements
The Group considers its co-insurance and
reinsurance contracts, as described in the
Strategic Report section on page 25 to be
essential to the running of the Group’s
business. No other contractual arrangements
are considered to be essential.

Financial instruments
The objectives and policies for managing
risks in relation to financial instruments held
by the Group are set out in note 6 to the
financial statements.

Directors and their interests
The present Directors of the Company are shown
on pages 42 to 43 of this Report, whilst Directors’
interests in the share capital of the Company
are set out in the Remuneration Report on
page 71.

Greenhouse gas emissions
The annual level of greenhouse gas emissions,
resulting from activities for which the Group
is responsible, in 2014 was 6,836 CO2e (2013:
6,383 CO2e), equivalent to 1.19 tonnes (2013:
1.11 tonnes) per employee*1. Please note that
the comparative figures have changed since
the 2013 Annual Report, reflecting a validation
process and different locations included in
the measure.

*1 Average employee number excludes employees

from three offices for which data could not
be collected.

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTIONFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORTINTRODUCTIONDIRECTORS’ REPORT CONTINUED

Appointments of Directors
The Company’s Articles of Association (the
Articles) give the Directors power to appoint
and replace Directors. Under the Terms of
Reference of the Nomination Committee, any
appointment must be recommended by the
Nomination Committee for approval by the
Board of Directors. The Articles also require
Directors to retire and submit themselves for
election at the first Annual General Meeting
following appointment and all Directors who
held office at the time of the two preceding
Annual General Meetings to submit themselves
for re-election.

However, in accordance with the requirement
under the UK Corporate Governance Code
(the Code) for annual election of Directors, all
Directors, except for Roger Abravanel, will submit
themselves for re-election at the Group's
Annual General Meeting on 29 April 2015.

Articles of Association
The Articles may only be amended by special
resolution of the shareholders.

Power of the Directors
The Directors are responsible for managing the
business of the Company and may exercise all
powers of the Company subject to the provisions
of relevant statutes, to any directions given
by special resolution and to the Company’s
Memorandum and Articles. The Articles, for
example, contain specific provisions and
restrictions concerning the Company’s power
to borrow money. Powers relating to the
issuing of new shares are also included in the
Articles and such authorities are renewed by
shareholders at the Annual General Meeting
each year.

Annual General Meeting (AGM)
It is proposed that the next AGM be held at
The Old Library, Cardiff CF10 3ND on Wednesday
29 April 2015 at 2.00pm, notice of which will be
sent to shareholders with the Annual Report.

Share capital, AGM and related matters
Major shareholders
Other than as stated below, as far as the Company is aware, there are no persons with significant
direct or indirect holdings in the Company. Information provided to the Company pursuant to
the Financial Conduct Authority’s (FCA) Disclosure and Transparency Rules (DTRs) is published
on a Regulatory Information Service and on the Company’s website.

At 30 January 2015, the Company had received notifications in accordance with the FCA’s DTRs
of the following notifiable interests in the voting rights in the Company’s issued share capital:

Munich Re

Manning & Napier Advisors

Mackenzie Financial Corporation

The interests of Directors and Officers and
their connected persons in the issued share
capital of the Company are given in the
Remuneration Report.

Additional information for shareholders
Where not provided previously in this Directors'
Report, the following provides the additional
information required for shareholders as a result
of the implementation of the Takeovers
Directive into UK law.

At 31 December 2014, the Company's issued
share capital comprised a single class of shares
referred to as ordinary shares. Details of the
share capital and shares issued during the year
can be found in note 11d.

On a poll, every member present in person or
by proxy and entitled to vote shall have one
vote for every ordinary share held. The notice
of the general meeting specifies deadlines for
exercising voting rights either by proxy notice
or present in person or by proxy in relation to
resolutions to be passed at general meeting.
All proxy votes are counted and the numbers
for, against or withheld in relation to each
resolution are announced at the Annual General
Meeting and published on the Company's
website after the meeting.

There are no restrictions on the transfer of
ordinary shares in the Company other than:

@ Certain restrictions may from time to time
be imposed by laws and regulations (for
example, insider trading laws).

@ Pursuant to the Listing Rules of the FCA

whereby certain employees of the Company
require the approval of the Company to
deal in the Company's securities.

Number of
shares

28,599,400

13,866,579

11,790,994

10.26%

4.98%

4.23%

The Company has not purchased any of its
own shares during the period.

There are no agreements between the Company
and its Directors or employees providing for
compensation for loss of office or employment
(whether through resignation, purported
redundancy or otherwise) that occurs because
of a takeover bid.

There are a number of agreements that alter
or terminate upon a change of control of the
Company following a takeover bid, such as
commercial contracts. None are considered
to be significant in terms of their impact on
the business of the Group as a whole except
for the long term co-insurance agreement in
place with Great Lakes Reinsurance (UK) plc.
Details relating to this agreement are
contained in the Strategic Report.

Power to issue shares
At the last Annual General Meeting, held
on 9 April 2014, authority was given to the
Directors to allot unissued relevant securities
in the Company up to a maximum of £91,127,
equivalent to one third of the issued share
capital as at 7 March 2014. This authority expires
on the date of the Annual General Meeting to
be held on 29 April 2015 and the Directors will
seek to renew this authority for the following year.

A further special resolution passed at that
meeting granted authority to the Directors
to allot equity securities in the Company
(up to a maximum of 5% of the issued share
capital of the Company) for cash, without
regard to the pre-emption provisions of the
Companies Act 2006. This authority also
expires on the date of the Annual General
Meeting to be held on 29 April 2015 and the
Directors will seek to renew this authority for
the following year.

ANNUAL REPORT AND ACCOUNTS 2014

WWW.ADMIRALGROUP.CO.UK

Reporting, accountability and audit
UK Corporate Governance Code

In preparing each of the Group and Parent
Company financial statements, the Directors
are required to:

Responsibility statement
The Directors confirm that to the best of
their knowledge:

Admiral is subject to the UK
Corporate Governance Code,
published by the Financial Reporting
Council (FRC) and available on their
website, www.frc.org.uk.

The FRC issued a revised version of the Code
in September 2014 which applies to companies
with a financial year beginning on or after
1 October 2014. Therefore, the edition of the
Code published in September 2012 applied
throughout the financial year ending
31 December 2014. The Company’s Annual
Report and Accounts, taken as a whole,
addresses the requirements of the 2012 Code.

During the year to 31 December 2014, the
Company has in all respects complied with
the provisions of the 2012 Code.

The Directors confirm that the Annual
Report and Accounts, taken as a whole, is fair,
balanced and understandable and provides
the information necessary for shareholders to
assess the Company’s performance, business
model and strategy.

Directors’ responsibilities
The Directors are responsible for preparing
the Annual Report and the Group and Parent
Company financial statements, in accordance
with applicable law and regulations.

Company law requires the Directors to prepare
Group and Parent Company financial statements
for each financial year. Under that law they
are required to prepare the Group financial
statements in accordance with International
Financial Reporting Standards (IFRS) as adopted
by the EU and applicable law and have elected
to prepare the Parent Company financial
statements in accordance with UK Accounting
Standards and applicable law (UK Generally
Accepted Accounting Practice).

Under company law the Directors must not
approve the financial statements unless they are
satisfied that they give a true and fair view
of the state of affairs of the Group and Parent
Company and of their profit or loss for
that period.

@ Select suitable accounting policies and

then apply them consistently.

@ Make judgements and estimates that are

reasonable and prudent.

@ For the Group financial statements, state
whether they have been prepared in
accordance with IFRS as adopted by the EU.

@ For the Parent Company financial

statements, state whether applicable UK
Accounting Standards have been followed,
subject to any material departures
disclosed and explained in the Parent
Company financial statements.

@ Prepare the financial statements on the

going concern basis unless it is inappropriate
to presume that the Group and the Parent
Company will continue in business.

The Directors are responsible for keeping
proper accounting records that disclose with
reasonable accuracy at any time the financial
position of the Parent Company and enable
them to ensure that its financial statements
comply with the Companies Act 2006. They
have general responsibility for taking such
steps as are reasonably open to them to
safeguard the assets of the Group and to prevent
and detect fraud and other irregularities.

Under applicable law and regulations, the
Directors are also responsible for preparing
a Strategic Report, Directors’ Report, Directors’
Remuneration Report and Corporate Governance
Statement that comply with that law and
those regulations.

The Directors are responsible for the
maintenance and integrity of the corporate
and financial information included on the
Company’s website. Legislation in the UK
governing the preparation and dissemination
of financial statements may differ from
legislation in other jurisdictions.

@ The financial statements, prepared in
accordance with the applicable set of
accounting standards, give a true and fair
view of the assets, liabilities, financial
position and profit or loss of the Company
and the undertakings included in the
consolidation taken as a whole; and

@ The management report required by DTR
4.1.8R (contained in the Strategic Report
and the Directors’ Report) includes a fair
review of the development and performance
of the business and the position of the
Company and the undertakings included
in the consolidation taken as a whole,
together with a description of the principal
risks and uncertainties that they face.

Disclosure of information to auditors
The Directors who held office at the date of
approval of this Directors’ Report confirm that,
so far as they are each aware, there is no relevant
audit information of which the Company’s
auditor is unaware; and each Director has
taken all the steps that they ought to have
taken as a Director to make themselves aware
of any relevant audit information and to
establish that the Company’s auditor is aware
of that information.

Auditor
The Company’s auditor, KPMG LLP, has
indicated willingness to continue in office
and resolutions to reappoint it and to authorise
the Directors to fix its remuneration will be
proposed at the Annual General Meeting.

By Order of the Board,

Mark Waters
Company Secretary
4 March 2015

Geraint Jones
Chief Financial Officer
4 March 2015

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTIONFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORTINTRODUCTIONINDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF ADMIRAL GROUP PLC ONLY

@ Our response – Our audit procedures
included testing the controls over the
underwriting and claims process and
performing substantive analysis over
the trends in claims frequency and size.
Using our actuarial specialists to support
us, we assessed the level of reserves held
for incurred claims through evaluating
the competence, capability and objectivity
of the Group’s external actuary, assessing
the actuarial methodologies employed,
including the use of paid and incurred chain
ladders and the average cost per claim
method, challenging key judgements, for
example the extent to which improvements
in claims trends are taken into account in
reserve projections, and benchmarking key
assumptions against KPMG sourced market
data. In respect of the amounts related to
large bodily injury claims and actual and
potential PPOs, we investigated the process
for identifying and assessing the required
reserve for large claims and for updating
this reserve as more information becomes
available, investigated the process for
assessing cases that have the potential to
be settled as PPOs and benchmarked the
key assumptions made in calculating large
bodily injury claims reserves, including
mortality (in the case of PPO cases) and
discount rates applied. The focus of our
work is the UK Motor portfolio.

In respect of the margin held above
the actuarial best estimate, we assessed
the rationale for this margin including
consideration of the level of prudence
within the margin, the consistency with
which the underlying judgements have
been applied in relation to the current
year and prior periods and the existence
of any management bias.

We have also considered the adequacy of
the Group’s disclosures about the margin
held above the actuarial best estimate,
and the degree of estimation and
sensitivity to key assumptions.

Co-insurance and reinsurance
Refer to page 51 (Audit Committee
statement), note 5 (accounting policy
and financial disclosures).

@ The risk – The Group has in place a number
of proportional risk sharing agreements,
where insurers outside the Group underwrite
a majority of the risk generated, either
through co-insurance or quota share
reinsurance contracts. For reinsurance
contracts, there is judgement involved
in the assessment of whether risk has
been transferred, which impacts on the
appropriate accounting including whether
premium income and insurance claims
are presented gross or net of reinsurance.
A number of the reinsurance arrangements
also include reinsurance caps, whereby
the Group is limited as to the amount it
can recover against insurance claims and
operating expenses based on the cap in
place. This impacts the underlying profit
of the Group. For co-insurance contracts,
the accounting is driven by the fact that the
Group does not retain the underlying risks
and rewards of the business underwritten.
The outcome of these judgements affect
the recognition and timing of revenue
along with profit recognition and disclosure
of income and expenses associated with
these risk sharing agreements.

@ Our response – Our audit procedures

included critically assessing the contract
terms for these arrangements to ascertain
whether, taking into account relevant
accounting standards, the appropriate
risk transfer has occurred to support
the treatment of the arrangement as
co-insurance or quota share reinsurance.
We reviewed the terms of the reinsurance
caps, re-calculated the expected total
cap cost and compared to the actual
cap cost recognised, and assessed the
appropriateness of the allocation between
insurance claims and operating expenses.
We have also considered the adequacy of
the Group’s disclosures and appropriateness
of the presentation of transactions and
balances relating to these arrangements.

Opinions and conclusions arising
from our audit
1. Our opinion on the financial
statements is unmodified
We have audited the financial statements
of Admiral Group plc for the year ended
31 December 2014 set out on pages 78
to 113. In our opinion:

@ the financial statements give a true and
fair view of the state of the Group’s and
of the Parent Company’s affairs as at
31 December 2014 and of the Group’s
profit for the year then ended;

@ the Group financial statements have

been properly prepared in accordance
with International Financial Reporting
Standards as adopted by the European
Union (IFRSs as adopted by the EU);

@ the Parent Company financial statements

have been properly prepared in accordance
with UK Accounting Standards; and

@ the financial statements have been prepared
in accordance with the requirements of the
Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the
IAS Regulation.

2. Our assessment of risks
of material misstatement
In arriving at our audit opinion above on
the financial statements the risks of material
misstatement that had the greatest effect
on our audit were as follows.

Insurance liabilities (£2,097.4 million)
Refer to page 51 (Audit Committee
Statement), note 5d (accounting policy
and financial disclosures).

@ The risk – The provision for claims

outstanding comprises the estimated cost
of settling all claims incurred but unpaid at
the balance sheet date, whether reported
or not. This is a judgemental and complex
area due to the inherent uncertainty of
estimating claims not yet reported, future
costs of settling claims, discount rates
and whether customers will be awarded
a lump sum claim or a periodic payment.
The amounts involved are potentially
significant and the application of
accounting standards to determine the
amount, if any, to be provided as a liability,
is inherently subjective. One of the most
significant uncertainties relates to the
reserve held for large bodily injury claims
and actual and potential Periodic Payment
Order settlements (PPOs). The UK motor
portfolio presents the biggest risk of
material misstatement.

ANNUAL REPORT AND ACCOUNTS 2014

WWW.ADMIRALGROUP.CO.UK

Profit commission (£71.8 million)
Refer to page 51 (Audit Committee
statement), note 5c (accounting policy
and financial disclosures).

@ The risk – The recognition of profit

commission income from co-insurers and
quota share reinsurers is initially in line
with the loss ratios booked in the financial
statements and will vary with movements
in the loss ratios. The recognition of this
income is therefore subject to the same
level of estimation as the claims liability
noted above until, in the case of quota
share reinsurance, the relevant contracts
are commuted, at which point no further
profit commission is recognised. In addition,
different contractual arrangements are in
place with the Group’s co-insurance and
reinsurance partners and there is a risk that
the differences in arrangements are not
appropriately accounted for, resulting in
significant misstatement.

@ Our response – Our audit procedures
included, in addition to our procedures
over insurance liabilities noted above,
forming an expectation of the profit
commission income based on loss ratios
applied and contractual terms of each
arrangement, comparing this to actual
profit commission income recognised
and corroborating any changes to the
profit commission arrangements during
the year. We have also considered the
adequacy of the Group’s disclosures
about the arrangements in place.

3. Our application of materiality and
an overview of the scope of our audit
The materiality for the Group financial statements
as a whole was set at £18.5 million, determined
with reference to a benchmark of Group profit
before taxation (of which it represents 5%).
We report to the Audit Committee any corrected
or uncorrected identified misstatements
exceeding £0.9 million, in addition to other
identified misstatements that warranted
reporting on qualitative grounds.

Of the Group’s 12 reporting components, we
subjected four to audits for Group reporting
purposes, two to specified risk focused audit
procedures and one to a review of financial
information (including enquiry). The components
for which we performed specified risk focused
procedures and a review of financial information
were not individually financially significant
enough to require an audit for Group reporting
purposes, but did present specific individual
risks that needed to be addressed.

The components within the scope of our work
accounted for 94% of Group net revenue, 97%
of Group profit before tax and 97% of Group
total assets.

The remaining 6% of total Group net revenue,
3% of Group profit before tax and 3% of total
Group assets is represented by 5 reporting
components, none of which individually
represented more than 2% of any of total
Group net revenue, Group profit before tax
or total Group assets.

For these remaining components, we
performed analysis at an aggregated Group
level to re-examine our assessment that there
were no significant risks of material
misstatement within these.

The Group audit team instructed two component
auditors as to the significant risk focused audit
procedures to be performed. The procedures
on the remaining components were performed
by the Group audit team. The Group audit
team approved the component materialities,
which ranged from £500,000 to £16,500,000,
having regard to the mix of size and risk profile
of the Group across the components.

4. Our opinion on other matters prescribed
by the Companies Act 2006 is unmodified
In our opinion:

@ the part of the Directors’ Remuneration
Report to be audited has been properly
prepared in accordance with the
Companies Act 2006; and

@ the information given in the Strategic
Report and Directors’ Report for the
financial year for which the financial
statements are prepared is consistent
with the financial statements.

5. We have nothing to report in respect
of the matters on which we are required
to report by exception
Under ISAs (UK and Ireland) we are required to
report to you if, based on the knowledge we
acquired during our audit, we have identified
other information in the annual report that
contains a material inconsistency with either
that knowledge or the financial statements,
a material misstatement of fact, or that is
otherwise misleading.

In particular, we are required to report to you if:

@ we have identified material inconsistencies
between the knowledge we acquired during
our audit and the directors’ statement that
they consider that the annual report and
financial statements taken as a whole is fair,
balanced and understandable and provides
the information necessary for shareholders
to assess the Group’s performance, business
model and strategy; or

@ the Audit Committee Statement does not
appropriately address matters communicated
by us to the Audit Committee.

Under the Companies Act 2006 we are
required to report to you if, in our opinion:

@ adequate accounting records have not been
kept by the Parent Company, or returns
adequate for our audit have not been
received from branches not visited by us; or

@ the Parent Company financial statements

and the part of the Directors’ Remuneration
Report to be audited are not in agreement
with the accounting records and returns; or

@ certain disclosures of directors’ remuneration

specified by law are not made; or

@ we have not received all the information

and explanations we require for our audit.

Under the Listing Rules we are required to review:

@ the directors’ statement, set out on page 73,

in relation to going concern; and

@ the part of the Corporate Governance
Statement on page 40 relating to the
company’s compliance with the ten provisions
of the 2012 UK Corporate Governance
Code specified for our review.

We have nothing to report in respect of the
above responsibilities.

Scope and responsibilities
As explained more fully in the Directors’
Responsibilities Statement set out on page 75,
the directors are responsible for the preparation
of the financial statements and for being
satisfied that they give a true and fair view.
A description of the scope of an audit of
financial statements is provided on the
Financial Reporting Council’s website at
www.frc.org.uk/auditscopeukprivate. This
report is made solely to the company’s members
as a body and is subject to important
explanations and disclaimers regarding our
responsibilities, published on our website at
www.kpmg.com/uk/auditscopeukco2014a,
which are incorporated into this report as if
set out in full and should be read to provide
an understanding of the purpose of this
report, the work we have undertaken and
the basis of our opinions.

Salim Tharani (Senior Statutory Auditor)
for and on behalf of KPMG LLP,
Statutory Auditor
Chartered Accountants
3 Assembly Square
Britannia Quay
Cardiff
CF10 4AX
4 March 2015

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTIONFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORT
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2014

Insurance premium revenue

Insurance premium ceded to reinsurers

Net insurance premium revenue

Other revenue

Profit commission

Investment and interest income

Net revenue

Insurance claims and claims handling expenses

Insurance claims and claims handling expenses recoverable from reinsurers

Net insurance claims

Operating expenses and share scheme charges

Operating expenses and share scheme charges recoverable from co- and reinsurers

Net operating expenses and share scheme charges

Total expenses

Operating profit

Finance costs

Profit before tax

Taxation expense

Profit after tax

Profit after tax attributable to:

Equity holders of the parent

Non-controlling interests (NCI)

Earnings per share

Basic

Diluted

Dividends declared and paid (total)

Dividends declared and paid (per share)

ANNUAL REPORT AND ACCOUNTS 2014

WWW.ADMIRALGROUP.CO.UK

Year ended

31 December
2014
£m

31 December
2013
£m

Note

1,099.7

1,136.4

(634.8)

(653.4)

464.9

332.5

71.8

15.4

884.6

(794.5)

535.4

(259.1)

(501.8)

231.6

(270.2)

(529.3)

355.3

(4.6)

350.7

(69.1)

281.6

285.2

(3.6)

281.6

103.0p

102.8p

273.5

100.0p

483.0

327.8

99.3

14.3

924.4

(826.7)

523.7

(303.0)

(467.0)

215.8

(251.2)

(554.2)

370.2

—

370.2

(83.3)

286.9

287.0

(0.1)

286.9

104.6p

104.4p

255.8

94.4p

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2014

Profit for the period

Other comprehensive income

Items that are or may be reclassified to profit or loss

Movements in fair value reserve

Exchange differences on translation of foreign operations

Other comprehensive income for the period, net of income tax

Total comprehensive income for the period

Total comprehensive income for the period attributable to:

Equity holders of the parent

Non-controlling interests

Year ended

31 December
2014
£m

31 December
2013
£m

281.6

286.9

10.9

3.0

13.9

—

(1.3)

295.5

285.6

298.6

(3.1)

295.5

286.1

(0.5)

285.6

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTIONFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORTCONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2014

ASSETS

Property and equipment

Intangible assets

Deferred income tax

Reinsurance assets

Trade and other receivables

Financial assets

Cash and cash equivalents

Total assets

EQUITY

Share capital

Share premium account

Other reserves

Retained earnings

Total equity attributable to equity holders of the parent

Non-controlling interests

Total equity

LIABILITIES

Insurance contracts

Subordinated liabilities

Trade and other payables

Current tax liabilities

Total liabilities

Total equity and total liabilities

As at

31 December
2014
£m

31 December
2013
£m

Note

6, 10

32.3

107.2

22.9

829.8

82.0

12.4

92.8

17.0

821.2

77.5

2,547.4

2,265.0

255.9

187.9

3,877.5

3,473.8

0.3

13.1

13.2

540.6

567.2

13.7

580.9

0.3

13.1

(0.2)

502.6

515.8

8.3

524.1

2,097.4

1,901.3

203.8

965.8

29.6

3,296.6

3,877.5

—

1,013.7

34.7

2,949.7

3,473.8

These financial statements were approved by the Board of Directors on 4 March 2015 and were signed on its behalf by:

Geraint Jones
Chief Financial Officer
Admiral Group plc

Company Number: 03849958

ANNUAL REPORT AND ACCOUNTS 2014

WWW.ADMIRALGROUP.CO.UK

CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2014

Profit after tax

Adjustments for non-cash items:

– Depreciation

– Amortisation of software

– Other gains and losses

– Share scheme charges

– Investment income on gilts

– Finance costs

Change in gross insurance contract liabilities

Change in reinsurance assets

Change in trade and other receivables, including from policyholders

Change in trade and other payables, including tax and social security

Taxation expense

Cash flows from operating activities, before movements in investments

Net cash flow into investments

Cash flows from operating activities, net of movements in investments

Taxation payments

Net cash flow from operating activities

Cash flows from investing activities

Purchases of property, equipment and software

Interest and investment income received

Net cash used in investing activities

Cash flows from financing activities

Non-controlling interest capital contribution

Proceeds on issue of subordinated liabilities

Transaction costs on issue of subordinated liabilities

Repayment of finance lease liabilities

Equity dividends paid

Net cash used in financing activities

Net increase/(decrease) in cash and cash equivalents

Cash and cash equivalents at 1 January

Effects of changes in foreign exchange rates

Cash and cash equivalents at end of period

Year ended

31 December
2014
£m

31 December
2013
£m

Note

281.6

286.9

7.1

4.6

(0.2)

23.2

(2.6)

4.6

196.1

(8.6)

14.7

(49.4)

69.1

540.2

(286.3)

253.9

(77.0)

176.9

(50.6)

3.1

(47.5)

8.5

200.0

(0.8)

1.4

(273.5)

(64.4)

65.0

187.9

3.0

255.9

7.3

4.9

0.2

25.7

—

204.4

(18.2)

14.3

8.0

83.3

616.8

(295.3)

321.5

(88.5)

233.0

(10.1)

—

(10.1)

6.4

—

(0.9)

(255.8)

(250.3)

(27.4)

216.6

(1.3)

187.9

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTIONFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORTCONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2014

At 1 January 2013

Profit for the period

Other comprehensive income

Currency translation differences

Total comprehensive income for the period

Transactions with equity holders

Dividends

Share scheme credit

Deferred tax charge on share scheme credit

Contributions by NCIs

Changes in ownership interests without
a change in control

Total transactions with equity holders

As at 31 December 2013

At 1 January 2014

Profit for the period

Other comprehensive income

Movements in fair value reserve

Currency translation differences

Total comprehensive income for the period

Transactions with equity holders

Dividends

Share scheme credit

Deferred tax credit on share scheme credit

Contributions by NCIs

Total transactions with equity holders

Attributable to the owners of the Company

Share
capital
£m

0.3

—

Share
premium
account
£m

13.1

—

0.3

—

13.1

—

Fair value
reserve
£m

Foreign
exchange
reserve
£m

—

10.9

—

10.9

—

0.7

—

(0.9)

—

(0.2)

—

2.5

—

Retained
profit
and loss
£m

443.0

287.0

Total
£m

457.1

287.0

—

(0.9)

287.0

286.1

(255.8)

25.7

2.1

0.3

2.1

0.3

(227.4)

502.6

285.2

515.8

285.2

—

10.9

2.5

Non-
controlling
interests
£m

Total equity
£m

3.6

(0.1)

(0.4)

(0.5)

—

5.5

(0.3)

5.2

8.3

(3.6)

—

0.5

460.7

286.9

(1.3)

285.6

(255.8)

25.7

2.1

5.8

—

(222.2)

524.1

281.6

10.9

3.0

285.2

298.6

(3.1)

295.5

(273.5)

23.2

3.1

—

23.2

3.1

—

(247.2)

—

8.5

(273.5)

23.2

3.1

8.5

(238.7)

As at 31 December 2014

0.3

13.1

10.9

2.3

540.6

567.2

13.7

580.9

ANNUAL REPORT AND ACCOUNTS 2014

WWW.ADMIRALGROUP.CO.UK

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014

1. General information
Admiral Group plc is a company incorporated
in England and Wales. Its registered office
is at Capital Tower, Greyfriars Road, Cardiff,
CF10 3AZ and its shares are listed on the
London Stock Exchange.

The Consolidated financial statements have
been prepared and approved by the Directors
in accordance with International Financial
Reporting Standards (IFRS) as adopted by
the European Union (EU). The Company has
elected to prepare its Parent Company financial
statements in accordance with UK Generally
Accepted Accounting Practice (GAAP).

Adoption of new and revised standards
The Group has applied all adopted IFRS
and interpretations endorsed by the EU at
31 December 2014, including all amendments
to extant standards that are not effective until
later accounting periods. This is inclusive of:

@ IFRIC Interpretation 21 Levies

IFRIC Interpretation 21 Levies was endorsed
on 13 June 2014 and subsequently adopted
by the Group. The IFRIC is effective for
accounting periods beginning on or
after 1 January 2014. It clarifies the IFRS
requirements in relation to the timing of
recognition of provisions for levies charged
by public authorities. This is relevant
to the Group in terms of its obligations
to pay levies relating to insurance business,
primarily to the Motor Insurers’ Bureau,
Financial Services Compensation Scheme
and other regulatory bodies in the UK.

The Group has aligned the timing of its
recognition of provisions for levies to
that required by the IFRIC. The impact
of the adjustment in 2014 is a reduction
in net operating expenses of £6.7 million.
Whilst this is considered to be a change
in accounting policy in line with IAS 8,
no restatement of comparative information
has been performed on materiality grounds.

@ IFRS 10, 11 and 12 (‘the consolidation

suite of standards’)
Subsidiaries
As a result of IFRS 10 (2011), the Group has
changed its accounting policy for determining
whether it has control over and consequently
whether it consolidates its investees.
IFRS 10 introduces a new control model
that focuses on whether the Group has
power over an investee, exposure or rights
to variable returns from its involvement
with the investee and ability to use its
power to affect those returns.

In accordance with the transitional provisions
of IFRS 10, the Group reassessed the control
conclusion for its investees at 1 January 2014.
No modifications of previous conclusions
about control regarding the Group’s
investees were required.

There are a number of standards, amendments
to standards and interpretations that were
issued by 31 December 2014 but have either
yet to be endorsed by the EU, or were endorsed
shortly after the year end. The following IFRSs
have been issued but have not been applied
by the Group in these financial statements:

@ IFRS 9 Financial Instruments.

@ IFRS 14 Regulatory Deferral Accounts.

@ IFRS 15 Revenue from Contracts

with Customers.

@ Amendments to IFRS 10, 11 and 12 and

IAS 1, 16, 27, 28, 38 and 41.

In 2014, the IASB issued the full, final version
of IFRS 9. This version supersedes all previous
versions. The standard has an effective date of
1 January 2018 although earlier application is
permitted. The standard includes requirements
relating to the recognition, measurement,
impairment, de-recognition of assets along
with general hedge accounting.

IFRS 15 was also issued during 2014 and applies
to annual reporting periods beginning on or
after 1 January 2017. The standard introduces
a simple, five step principles-based model to
be applied to the accounting of all contracts
with customers.

The Group is currently assessing the impact of
both IFRS 9 and IFRS 15 on its results, financial
position and cash flows, along with any impacts
of the other standards and amendments which
have yet to be endorsed.

2. Basis of preparation
The accounts have been prepared on a going
concern basis. In considering the appropriateness
of this assumption, the Board has reviewed
the Group’s projections for the next 12 months
and beyond, including cash flow forecasts and
regulatory capital surpluses. During July 2014,
the Group announced a successful, inaugural
bond placement of £200 million, ten-year, tier
two subordinated notes with a fixed interest
charge of 5.5%.

The Directors have a reasonable expectation
that the Company has adequate resources
to continue in operational existence for the
foreseeable future. Thus they continue to
adopt the going concern basis in preparing
the annual financial statements.

Further information regarding the Company’s
business activities, together with the factors likely
to affect its future development, performance
and position, is set out in the Strategic Report
on pages 6 to 39. Further information regarding
the financial position of the Company, its cash
flows, liquidity position and borrowing facilities
are described in the Strategic Report on
pages 18 to 21. In addition notes 6 and 11
to the financial statements

include the Company’s objectives, policies
and processes for managing its capital; its
financial risk management objectives; details
of its financial instruments; and its exposures
to credit risk and liquidity risk.

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 at 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 £0.1 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
in conformity with adopted IFRS 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
year in which the estimate is reviewed if this
revision affects only that year, or in the year
of the revision and future years if the revision
affects both current and future years. 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.

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTIONFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORT

3. Critical accounting judgements
and estimates
Judgements
In applying the Group’s accounting policies
as described in the notes to the financial
statements, management has primarily applied
judgement in the following two areas:

@ Classification of the Group’s contracts with

reinsurers as reinsurance contracts:

A contract is required to transfer significant
insurance risk in order to be classified as
such. Management reviews all terms and
conditions of each such contract, and if
necessary obtains the opinion of an
independent expert at the negotiation stage
in order to be able to make this judgement.

@ Recognition of deferred tax assets relating

to unused tax losses:

Management applies judgement in
determining the probability of future
taxable profits of an entity against which
to utilise accumulated losses in determining
the recognition of deferred tax assets.
In applying this judgement, management
makes an assessment of the reliability of
approved business plan projections using
both qualitative and quantitative factors
including the age and status of the business,
the Group’s previous experience in similar
markets, historic performance against
business plans and the application of
a number of stress and sensitivity tests
to the projections.

Estimation techniques used in calculation
of claims provisions and profit commission
Estimation techniques are used in the calculation
of the provisions for claims outstanding, which
represent a projection of the ultimate cost of
settling claims that have occurred prior to the
balance sheet date and remain unsettled at
the balance sheet date.

The key area where these techniques are used
relates to the ultimate cost of reported claims.
A secondary area relates to the emergence of
claims that occurred prior to the balance sheet
date, but had not been reported at that date.

The estimates of the ultimate cost of reported
claims are based on the setting of claim
provisions on a case-by-case basis, for all
but the simplest of claims.

The sum of these provisions is compared
with projected ultimate costs using a variety
of different projection techniques (including
incurred and paid chain ladder and an average
cost of claim approach) to allow an actuarial
assessment of their potential outcome. They
include allowance for unreported claims.

The most significant sensitivity in the use of the
projection techniques arises from any future
step change in claims costs, which would cause
future claim cost inflation to deviate from historic
trends. This is most likely to arise from a change
in the regulatory or judicial regime that leads
to an increase in awards or legal costs for bodily
injury claims that is significantly above or
below the historical trend.

Foreign currency transactions are translated
into the functional currency using the exchange
rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting
from the settlement of such transactions and
from the translation at year end exchange rates
of monetary assets and liabilities denominated
in foreign currencies are recognised in the
income statement.

The Group’s independent actuarial advisors
project best estimate claims reserves using
a variety of recognised actuarial techniques.

The Group’s reserving policy requires
management to reserve within a range of
potential outcomes above the projected best
estimate outcome, to allow for unforeseen
adverse claims development.

For further detail on objectives, policies and
procedures for managing insurance risk, refer
to note 5 of the financial statements.

Future changes in claims reserves also impact
profit commission income, as the measurement
of this income is dependent on the loss ratio
booked in the financial statements, and cash
receivable is dependent on actuarial projections
of ultimate loss ratios.

4. Group consolidation and
operating segments
4a. Accounting policies
(i) Group consolidation
The Consolidated financial statements comprise
the results and balances of the Company and
its subsidiaries (together referred to as the
Group) for the year ended 31 December 2014
and comparative figures for the year ended
31 December 2013. The financial statements
of the Company’s subsidiaries are consolidated
in the Group financial statements. The Company
controls 100% of the voting share capital of all
its principal subsidiaries, except Rastreator.com
Limited, Inspop USA LLC, Admiral Law Limited,
BDE Law Limited and the indirect holding in
comparenow.com Insurance Agency LLC.

The Parent Company financial statements
present information about the Company
as a separate entity and not about its Group.
In accordance with IAS 24, transactions or
balances between Group companies that have
been eliminated on consolidation are not
reported as related party transactions in the
Consolidated financial statements.

(ii) Foreign currency translation
Items included in the financial statements
of each of the Group’s entities are measured
using the currency of the primary economic
environment in which the entity operates
(‘the functional currency’). The Consolidated
financial statements are presented in millions
of pounds sterling, which is the Group’s
presentation currency.

Non-monetary items measured at cost are
translated at their historic rate and non-monetary
items held at fair value are translated using the
foreign exchange rate on the date that the fair
value was established.

The financial statements of foreign operations
whose functional currency is not pounds
sterling are translated into the Group
presentation currency (sterling) as follows:

@ Assets and liabilities for each balance sheet
presented are translated at the closing rate
at the date of that balance sheet.

@ Income and expenses for each income

statement are translated at average exchange
rates (unless this average is not a reasonable
approximation of the cumulative effect of
the rates prevailing on the transaction dates,
in which case income and expenses are
translated at the date of the transaction).

@ All resulting exchange differences are

recognised in other comprehensive income
and in a separate component of equity except
to the extent that the translation differences
are attributable to non-controlling interests.

On disposal of a foreign operation, the
cumulative amount recognised in equity
relating to that particular operation is
recognised in the income statement.

4b. Segment reporting
The Group has four reportable segments, as
described below. These segments represent
the principal split of business that is regularly
reported to the Group’s Board of Directors,
which is considered to be the Group’s chief
operating decision maker in line with IFRS 8
Operating Segments.

UK Car Insurance
The segment consists of the underwriting of car
insurance and other products that supplement
the car insurance policy. It also includes the
generation of revenue from additional products
and fees from underwriting car insurance in the
UK. The Directors consider the results of these
activities to be reportable as one segment as the
activities carried out in generating the revenue
are not independent of each other and are
performed as one business. This mirrors the
approach taken in management reporting.

ANNUAL REPORT AND ACCOUNTS 2014

WWW.ADMIRALGROUP.CO.UK

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 DECEMBER 2014

4. Group consolidation and operating segments continued
4b. Segment reporting continued
International Car Insurance
The segment consists of the underwriting of car insurance and the generation of revenue from additional products and fees, from underwriting car
insurance outside of the UK. It specifically covers the Group operations Admiral Seguros in Spain, ConTe in Italy, L’olivier Assurances in France and
Elephant Auto in the US. None of these operations are reportable on an individual basis, based on the threshold requirements in IFRS 8.

Price Comparison
The segment relates to the Group’s price comparison websites; Confused.com in the UK, Rastreator in Spain, LeLynx in France and compare.com
in the US. Each of the Price Comparison businesses are operating in individual geographical segments but are grouped into one reporting
segment as Rastreator, LeLynx and compare.com do not individually meet the threshold requirements in IFRS 8.

Other
The ‘Other’ segment is designed to be comprised of all other operating segments that do not meet the threshold requirements for individual
reporting. It includes UK household insurance, the Group’s commercial van insurance broker, Gladiator, and commercial van insurance.

Taxes are not allocated across the segments and, as with the corporate activities, are included in the reconciliation to the Consolidated Income Statement
and Consolidated Statement of Financial Position.

An analysis of the Group’s revenue and results for the year ended 31 December 2014, by reportable segment, are shown below. The accounting
policies of the reportable segments are consistent with those presented in the notes to the financial statements for the Group.

Turnover*1

Net insurance premium revenue

Other Revenue and profit commission

Investment and interest income

Net revenue

Net insurance claims

Expenses

Segment profit/(loss) before tax

Other central revenue and expenses,
including share scheme charges

Investment and interest income

Finance costs

Consolidated profit before tax

Taxation expense

Consolidated profit after tax

Other segment items:

– Capital expenditure

– Depreciation and amortisation

Year ended 31 December 2014

UK Car
Insurance
£m

1,602.7

394.3

272.2

11.5

678.0

(198.3)

(81.7)

398.0

International
Car Insurance
£m

Price
Comparison
£m

206.2

58.1

7.1

0.2

65.4

(50.5)

(34.8)

(19.9)

107.5

—

107.5

—

107.5

—

(110.3)

(2.8)

Other
£m

54.6

12.5

17.5

—

30.0

(10.3)

(17.6)

2.1

Eliminations
£m

—

65.1

30.6

21.3

22.1

1.0

1.5

0.2

—

Total
£m

1,971.0

464.9

404.3

11.7

880.9

(259.1)

(244.4)

377.4

(25.8)

3.7

(4.6)

350.7

(69.1)

281.6

88.9

54.4

*1 Turnover is a non-GAAP measure and consists of total premiums written (including co-insurers’ share) and Other Revenue. Refer to note 12 for further information

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTIONFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORT4. Group consolidation and operating segments continued
4b. Segment reporting continued
Revenue and results for the corresponding reportable segments for the year ended 31 December 2013 are shown below.

Year ended 31 December 2013

Turnover*1

Net insurance premium revenue

Other revenue and profit commission

Investment and interest income

Net revenue

Net insurance claims

Expenses

Finance costs

Segment profit/(loss) before tax

Other central revenue and expenses,
including share scheme charges

Interest income

Consolidated profit before tax

Taxation expense

Consolidated profit after tax

Other segment items:

– Capital expenditure

– Depreciation and amortisation

UK Car
Insurance
£m

1,698.9

425.1

293.4

12.4

730.9

(251.3)

(85.7)

—

393.9

International
Car Insurance
£m

Price
Comparison
£m

187.8

54.1

6.6

—

60.7

(49.1)

(33.7)

—

(22.1)

112.7

—

112.7

—

112.7

—

(92.3)

—

20.4

Other
£m

30.8

3.8

14.4

—

18.2

(2.6)

(13.2)

—

2.4

25.0

28.5

48.1

50.4

4.0

1.3

0.7

0.8

Eliminations
£m

—

Total
£m

2,030.2

483.0

427.1

12.4

922.5

(303.0)

(224.9)

—

394.6

(26.3)

1.9

370.2

(83.3)

286.9

77.8

81.0

*1 Turnover is a non-GAAP measure and consists of total premiums written (including co-insurers’ share) and Other Revenue. Refer to note 12 for further information

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 £9.5 million (2013: £10.8 million). These amounts have
not been eliminated on consolidation as the Directors consider that not doing so results in a better overall presentation of the financial statements.
The impact on the financial statements in the current and prior period is not material. There are no other transactions between reportable segments.

Within the UK Car Insurance segment, transactions between the Group’s intermediary and the Group’s insurance companies relating to vehicle
commission totalling £13.3 million (2013: £18.4 million) have been eliminated (from the insurance expenses and other revenue lines in the income
statement) on the basis that the non-elimination would have materially distorted the presentation of key performance indicators.

Revenues from external customers for products and services are consistent with the split of reportable segment revenues as shown on page 85.

Information about geographical locations
All material revenues from external customers, and net assets attributed to a foreign country, are shown within the International Car Insurance
reportable segment shown on the previous pages. 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.

ANNUAL REPORT AND ACCOUNTS 2014

WWW.ADMIRALGROUP.CO.UK

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 DECEMBER 20144. Group consolidation and operating segments continued
4b. Segment reporting continued
Segment assets and liabilities
The identifiable segment assets and liabilities at 31 December 2014 are as follows:

As at 31 December 2014

Property and equipment

Intangible assets

Reinsurance assets

Trade and other receivables

Financial assets

Cash and cash equivalents

Reportable segment assets

Insurance contract liabilities

Trade and other payables

Reportable segment liabilities

Reportable segment net assets

Unallocated assets and liabilities

Consolidated net assets

UK Car
Insurance
£m

International Car
Insurance
£m

Price
Comparison
£m

29.0

89.6

677.5

204.9

2,219.6

101.8

3,322.4

1,839.4

900.7

2,740.1

582.3

2.5

12.2

137.9

(4.2)

124.5

38.6

311.5

228.7

42.4

271.1

40.4

0.7

2.9

—

11.7

—

49.0

64.3

—

7.4

56.9

Other
£m

0.1

2.5

14.4

3.6

—

16.4

37.0

29.3

15.3

44.6

Eliminations
£m

—

(134.0)

—

(134.0)

—

(7.6)

(134.0)

Total
£m

32.3

107.2

829.8

82.0

2,344.1

205.8

3,601.2

2,097.4

965.8

3,063.2

538.0

42.9

580.9

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 Car Insurance, Price Comparison and International Car Insurance segments is not allocated in arriving at segment
profits. This is consistent with regular management reporting.

Eliminations represent inter-segment funding and balances included in trade and other receivables.

The segment assets and liabilities at 31 December 2013 are as follows:

As at 31 December 2013

Property and equipment

Intangible assets

Reinsurance assets

Trade and other receivables

Financial assets

Cash and cash equivalents

Reportable segment assets

Insurance contract liabilities

Trade and other payables

Reportable segment liabilities

Reportable segment net assets

Unallocated assets and liabilities

Consolidated net assets

UK Car
Insurance
£m

International Car
Insurance
£m

Price
Comparison
£m

8.2

76.5

705.0

104.1

2,113.4

101.6

3,108.8

1,690.4

959.9

2,650.3

458.5

2.6

13.1

111.4

(11.0)

122.2

35.7

274.0

198.5

36.0

234.5

39.5

1.0

2.6

—

7.1

—

38.7

49.4

—

6.5

42.9

Other
£m

0.6

4.8

35.1

—

8.6

49.7

12.4

11.3

23.7

26.0

Eliminations
£m

—

(57.8)

—

(57.8)

—

(57.8)

Total
£m

12.4

92.8

821.2

77.5

2,235.6

184.6

3,424.1

1,901.3

1,013.7

2,915.0

509.1

15.0

524.1

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTIONFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORT5. Premium, claims and profit commissions
5a. Accounting policies
(i) Revenue – premiums
Premiums relating to insurance contracts are recognised as revenue proportionally over the period of cover. Premiums with an inception date
after the end of the period are held in the statement of financial position as deferred revenue. Outstanding collections from policyholders are
recognised within policyholder receivables.

(ii) Revenue – profit commission
Under some of the co-insurance and reinsurance contracts under which motor premiums are shared or ceded, profit commission may be earned
on a particular year of account, which is usually subject to performance criteria such as loss ratios and expense ratios. The commission is dependent
on the ultimate outcome of any year, with revenue being recognised when loss and expense ratios used in the preparation of the financial statements
move below a contractual threshold.

(iii) Insurance contracts and reinsurance assets
Premiums
The proportion of premium receivable on in-force policies relating to unexpired risks is reported in insurance contract liabilities and reinsurance
assets as the unearned premium provision – gross and reinsurers’ share respectively.

Claims
Claims and claims handling expenses are charged as incurred, based on the estimated direct and indirect costs of settling all liabilities arising
on events occurring up to the balance sheet date.

The provision for claims outstanding comprises provisions for the estimated cost of settling all claims incurred but unpaid at the balance sheet
date, whether reported or not. Anticipated reinsurance recoveries are disclosed separately as assets.

Whilst the Directors consider that the gross provisions for claims and the related reinsurance recoveries are fairly stated on the basis of the information
currently available to them, the ultimate liability will vary as a result of subsequent information and events and may result in significant adjustments
to the amounts provided.

Adjustments to the amounts of claims provisions established in prior years are reflected in the income statement for the period in which the
adjustments are made and disclosed separately if material. The methods used, and the estimates made, are reviewed regularly.

Provision for unexpired risks is made where necessary for the estimated amount required over and above unearned premiums (net of deferred
acquisition costs) to meet future claims and related expenses.

Co-insurance
The Group has entered into certain co-insurance contracts under which insurance risks are shared on a proportional basis, with the co-insurer taking
a specific percentage of premium written and being responsible for the same proportion of each claim. As the contractual liability is several and
not joint, neither the premiums nor claims relating to the co-insurance are included in the income statement. Under the terms of these agreements
the co-insurers reimburse the Group for the same proportionate share of the costs of acquiring and administering the business.

Reinsurance assets
Contracts entered into by the Group with reinsurers under which the Group is compensated for losses on the insurance contracts issued by the
Group are classified as reinsurance contracts. A contract is only accounted for as a reinsurance contract where there is significant insurance risk
transfer between the insured and the insurer.

Reinsurance assets include balances due from reinsurance companies for ceded insurance liabilities. Amounts recoverable from reinsurers are
estimated in a consistent manner with the outstanding claims provisions or settled claims associated with the reinsured policies and in accordance
with the relevant reinsurance contract.

The Group assesses its reinsurance assets for impairment on a regular basis, and in detail every six months. If there is objective evidence that the
asset is impaired, then the carrying value will be written down to its recoverable amount.

On the commutation of reinsurance contracts, the reinsurer is discharged from all obligations relating to the contract. Reinsurance assets and
liabilities relating to the commuted contracts are settled in the period in which the commutation agreement is signed.

5b. Net insurance premium revenue

Total motor insurance premiums written before co-insurance

Group gross premiums written after co-insurance

Outwards reinsurance premiums

Net insurance premiums written

Change in gross unearned premium provision

Change in reinsurers’ share of unearned premium provision

Net insurance premium revenue

31 December
2014
£m

31 December
2013
£m

1,675.6

1,102.1

(644.9)

457.2

(2.4)

10.1

464.9

1,737.6

1,088.4

(620.2)

468.2

48.0

(33.2)

483.0

The Group’s share of the car 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 10 or 12 months.

ANNUAL REPORT AND ACCOUNTS 2014

WWW.ADMIRALGROUP.CO.UK

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 DECEMBER 20145. Premium, claims and profit commissions continued
5c. Profit commission

Underwriting year

2009 and prior

2010

2011

2012

Total profit commission

31 December
2014
£m

31 December
2013
£m

5.3

13.8

27.8

24.9

71.8

3.1

24.9

26.7

44.6

99.3

5d. Reinsurance assets and insurance contract liabilities
(i) Objectives, policies and procedures for the management of insurance risk
The Group is involved in issuing motor insurance contracts that transfer risk from policyholders to the Group and its underwriting partners.

Insurance risk involves uncertainty over the occurrence, amount or timing of claims arising on insurance contracts issued.

Reserving risk is the risk that the value of insurance liabilities established is insufficient to cover the ultimate cost of claims incurred at the balance
sheet date, whether reported or unreported. Other risks include inadequate pricing and reinsurance policies, and inappropriate claims management
processes and controls.

The Board of Directors is responsible for the management of insurance risk, although as mentioned in note 6, it has delegated the detailed oversight
of risk management to the Group Risk Committee.

The Group also has a Reserving Committee which comprises senior managers within the finance, claims, pricing and actuarial functions. The Reserving
Committee primarily recommends the approach for UK Car Insurance reserving but also reviews the systems and controls in place to support
accurate reserving and material reserving issues such as Periodic Payment Order (PPO) and claims inflation, which represent the key uncertainties
in the amount or timing of claims settlements.

The Board implements certain policies in order to mitigate and control the level of insurance risk accepted by the Group. These include pricing
policies and claims management and administration processes, in addition to reserving policies and co- and reinsurance arrangements as detailed
on the following page.

Reserving policies and controls
Reserving risk is mitigated through a series of processes and controls. The key processes are as follows:

@ Regular management and internal actuarial review of individual and aggregate case claim reserves, including regular reporting of management

information and exception reporting of significant movements.

@ Regular management and internal actuarial review of large claims, including claims settled or potentially settled by PPOs for which the uncertainty

is increased by factors such as the lifetime of the claimant and movements in the indexation for the cost of future care of the claimant.

@ Bi-annual external actuarial review of best estimate claims reserves using a variety of recognised actuarial techniques, including reviews of the

potential ranges around best estimates.

@ Use of a Reserving policy which informs management’s reserving decisions for the purposes of the Group’s financial statements. As described

in note 3, critical accounting judgements and estimates, the policy determines that reserves should be set within a range above projected best
estimate outcomes to allow for unforeseen adverse claims development.

Co-insurance and reinsurance
As noted in the Strategic Report, the Group shares a significant amount of the motor insurance business generated with external underwriters.
In 2014, 40% of the UK risk was shared under a co-insurance contract, under which the primary risk is borne by the co-insurer. A further 35%
of the UK risk was ceded under quota share reinsurance contracts. Co-insurance and reinsurance contracts are also used in the International
Car Insurance businesses. Further detail can be found in the Strategic Report on page 30.

As well as these proportional arrangements, an excess of loss reinsurance programme is also purchased to protect the Group against very large
individual claims and catastrophe losses.

Concentration of insurance risk
The Directors do not believe there are significant concentrations of insurance risk. This is because, although the Group has historically written only
one significant line of UK insurance business, the risks are spread across a large number of people and a wide regional base. The introduction of the
international car insurance businesses in recent years and the launch of UK household business in 2012 will further contribute to the diversification
of the Group’s insurance risk as these businesses grow.

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTIONFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORT5. Premium, claims and profit commissions continued
5d. Reinsurance assets and insurance contract liabilities continued
(ii) Sensitivity of recognised amounts to changes in assumptions
The following table sets out the impact on equity and profit or loss at 31 December 2014 that would result from a 1% movement in the UK loss
ratios used for each underwriting year for which material amounts remain outstanding.

Booked loss ratio

Impact of 1% change (£m)

Underwriting year

2011

68%

12.0

2012

73%

12.0

2013

82%

3.0

2014

92%

1.6

The impact is stated net of reinsurance and includes the change in net insurance claims along with the associated profit commission movements
that result from changes in loss ratios. The figures are stated net of tax at the current rate.

(iii) Analysis of recognised amounts

Gross
Claims outstanding*1
Unearned premium provision

Total gross insurance liabilities

Recoverable from reinsurers
Claims outstanding*1
Unearned premium provision

Total reinsurers’ share of insurance liabilities

Net

Claims outstanding

Unearned premium provision

Total insurance liabilities – net

31 December
2014
£m

31 December
2013
£m

1,596.0

501.4

2,097.4

538.2

291.6

829.8

1,057.8

209.8

1,267.6

1,400.4

500.9

1,901.3

537.4

283.8

821.2

863.0

217.1

1,080.1

*1 The claims outstanding recoverable from reinsurers at 31 December 2014 includes £21.4 million representing outstanding recoveries from excess of loss

reinsurance contracts

The maturity profile of gross insurance liabilities at the end of 2014 is as follows:

Claims outstanding

Unearned premium provision

Total gross insurance liabilities

The maturity profile of gross insurance liabilities at the end of 2013 was as follows:

Claims outstanding

Unearned premium provision

Total gross insurance liabilities

< 1 year
£m

542.6

236.2

778.8

< 1 year
£m

419.9

235.4

655.3

1–3 years
£m

547.3

103.3

650.6

1–3 years
£m

478.0

103.1

581.1

> 3 years
£m

506.1

161.9

668.0

> 3 years
£m

502.5

162.4

664.9

ANNUAL REPORT AND ACCOUNTS 2014

WWW.ADMIRALGROUP.CO.UK

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 DECEMBER 20145. Premium, claims and profit commissions continued
5d. Reinsurance assets and insurance contract liabilities continued
(iv) Analysis of UK car insurance claims incurred
The following tables illustrate the development of gross and net UK Car Insurance claims incurred for the past five financial periods, including the
impact of re-estimation of claims provisions at the end of each financial year. The first table shows actual gross claims incurred, the second shows
actual net claims incurred and the third shows the development of UK loss ratios. Figures are presented on an underwriting year basis.

Analysis of claims incurred (gross amounts)

Underwriting year (UK only)

2010 and prior

2011

2012

2013

2014

UK gross claims incurred (excluding claims handling costs)

International and other gross claims incurred

Claims handling costs

Total gross claims incurred

Analysis of claims incurred (net amounts)

Underwriting year (UK only)

2010 and prior

2011

2012

2013

2014

UK net claims incurred (excluding claims handling costs)

International and other net claims incurred

Claims handling costs

Total net claims incurred

UK loss ratio development

Underwriting year (UK only)

2010

2011

2012

2013

2014

Total
£m

(679.6)

(748.6)

(742.6)

(421.9)

Total
£m

(263.7)

(280.7)

(309.3)

(175.8)

Financial year ended 31 December

2010
£m

2011
£m

2012
£m

2013
£m

(360.3)

—

(360.3)

(39.4)

(17.0)

(416.7)

(249.9)

(444.5)

—

(694.4)

(65.6)

(25.9)

(785.9)

4.2

(329.7)

(463.7)

—

(789.2)

(113.9)

(26.0)

(929.1)

41.7

43.4

(335.1)

(421.2)

—

(671.2)

(132.6)

(22.9)

(826.7)

Financial year ended 31 December

2010
£m

2011
£m

2012
£m

2013
£m

(184.1)

—

(184.1)

(15.9)

(8.5)

(208.5)

(119.9)

(203.7)

—

(323.6)

(28.3)

(11.9)

(363.8)

2.9

(151.1)

(191.3)

—

(339.5)

(54.2)

(10.8)

(404.5)

41.7

39.7

(139.6)

(175.4)

—

(233.6)

(59.9)

(9.5)

(303.0)

2014
£m

28.1

51.4

50.2

(321.4)

(421.9)

(613.6)

(159.5)

(21.4)

(794.5)

2014
£m

28.1

51.4

50.2

(133.9)

(175.8)

(180.0)

(70.2)

(8.9)

(259.1)

Financial year ended 31 December

2010

2011

2012

2013

2014

78%

—

77%

82%

—

75%

76%

84%

—

70%

72%

78%

85%

—

67%

73%

82%

92%

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTIONFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORT5. Premium, claims and profit commissions continued
5d. Reinsurance assets and insurance contract liabilities continued
(v) Analysis of claims reserve releases (UK Car Insurance business only)
The following table analyses the impact of movements in prior year claims provisions on a gross and net basis. Figures are presented on an
underwriting year basis.

Gross

Underwriting year

2010 and prior

2011

2012

2013

Total gross release (UK Car Insurance)

Total gross release (International Car Insurance)

Total gross release

Net

Underwriting year

2010 and prior

2011

2012

2013

Total net release (UK Car Insurance)

Total net release (International Car Insurance)

Total net release

Analysis of net releases on UK Car Insurance:

– Net releases on Admiral net share
– Releases on commuted quota share reinsurance contracts*1

Total net release as above

2010
£m

40.7

—

40.7

—

40.7

2010
£m

23.5

—

23.5

—

23.5

23.1

0.4

23.5

Financial year ended 31 December

2011
£m

10.3

—

10.3

—

10.3

2012
£m

4.2

32.0

—

36.2

—

36.2

Financial year ended 31 December

2011
£m

10.3

—

10.3

—

10.3

7.8

2.5

10.3

2012
£m

2.9

14.7

—

17.6

—

17.6

16.3

1.3

17.6

2013
£m

41.7

43.3

30.8

—

115.8

—

115.8

2013
£m

41.7

39.7

12.8

—

94.2

—

94.2

53.3

40.9

94.2

2014
£m

28.1

51.4

50.2

18.4

148.1

12.6

160.7

2014
£m

28.1

51.4

50.2

7.7

137.4

6.3

143.7

66.8

70.6

137.4

*1 Admiral typically commutes quota share reinsurance contracts in its UK Car Insurance business 24 or 36 months following the start of the underwriting year.
After commutation, any changes in claims costs on the commuted proportion of the business are reflected within claims costs and are separately analysed
here. £70.6 million of releases on commuted quota share contracts is split as follows: 2012: £29.1 million; 2011: £27.9 million; 2010 and prior: £13.6 million

Profit commission is analysed in note 5c.

(vi) Reconciliation of movement in net claims provision

Net claims reserve at start of period

Net claims incurred (excluding releases)

Net reserve releases

Movement in net claims reserve due to commutation

Net claims paid

Net claims reserve at end of period*1

31 December
2014
£m

31 December
2013
£m

863.0

392.9

(143.7)

273.6

(328.0)

1,057.8

660.4

387.7

(94.2)

208.7

(299.6)

863.0

*1 The increase in net claims reserve from £863.0 million at 31 December 2013 to £1,057.8 million at 31 December 2014 is partly as a result of the increase in the

size of gross claims reserves but largely due to the impact of commutations of reinsurance contracts in the UK Car Insurance business

ANNUAL REPORT AND ACCOUNTS 2014

WWW.ADMIRALGROUP.CO.UK

Net unearned premium provision at start of period

Written in the period

Earned in the period

Net unearned premium provision at end of period

31 December
2014
£m

31 December
2013
£m

217.1

457.2

(464.5)

209.8

233.5

468.2

(484.6)

217.1

6. Investments
6a. Accounting policies
(i) Investment income and finance costs
Investment income from financial assets comprises interest income and net realised gains on financial assets classified as ‘fair value through profit
or loss’ and ‘available for sale’, and interest income on holdings in term deposits and gilts.

Finance costs from financial liabilities comprise interest expense on subordinated notes, calculated on the effective interest rate method. The effective
interest rate method calculates the amortised cost of a financial asset (or group of financial assets) and allocates the interest income over the expected
life of the asset.

(ii) Financial assets – investments and receivables
Initial recognition
Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss (FVTPL), loans and receivables or held
to maturity investments.

At initial recognition assets are recognised at fair value and classified according to the purpose for which they were acquired.

The Group’s investments in money market liquidity funds and short term debt securities are designated as FVTPL at inception.

This designation is permitted under IAS 39, as the investments in money market funds and short dated securities are managed as a group of assets
and internal performance evaluation of this group is conducted on a fair value basis.

The Group’s deposits with credit institutions and gilts are classified as held to maturity investments, which is consistent with the intention for which
they were purchased.

The Group’s holdings in Fixed Income and Asset Backed Securities are classified as available for sale (AFS) investments, which is consistent with
the intention for which they were purchased.

This designation is permitted under IAS 39.

Subsequent measurement
Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised through the income statement.

AFS Fixed income and Asset Backed Securities are stated at fair value.

Deposits and gilts with fixed maturities, classified as held to maturity investments are measured at amortised cost using the effective interest
method. Movements in the amortised cost are recognised through the income statement, as are any impairment losses.

Loans and receivables are stated at their amortised cost less impairment using the effective interest method. Impairment losses are recognised
through the income statement.

Impairment of financial assets
The Group assesses at each balance sheet date whether any financial assets or groups of financial assets held at amortised cost are impaired.
Financial assets are impaired where there is evidence that one or more events occurring after the initial recognition of the asset, may lead to
a reduction in the estimated future cash flows arising from the asset.

Objective evidence of impairment may include default on cash flows due from the asset and reported financial difficulty of the issuer or counterparty.

De-recognition of financial assets
A financial asset is derecognised when the rights to receive cash flows from that asset have expired, or when the Group transfers the asset and all
the attaching substantial risks and rewards relating to the asset to a third party.

Cash and cash equivalents
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. All cash and cash equivalents are measured at amortised cost.

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTIONFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORT6. Investments continued
6a. Accounting policies continued
(iii) Financial liabilities – subordinated notes
Initial recognition
The Group’s financial liabilities comprising subordinated notes were initially recognised at fair value received, net of transaction costs incurred.

Subsequent measurement
Subordinated notes are measured at amortised cost using the effective interest method. Movements in the amortised cost are recognised through
the income statement.

De-recognition of financial liabilities
A financial liability is derecognised when the obligation under that liability is discharged, cancelled or expires.

(iv) Fair value measurement of assets held at amortised cost
The fair value of gilts and subordinated notes held at amortised cost is calculated with reference to quoted market valuations. See note 6d
for a comparison of fair value and carrying value at the statement of financial position date.

The Group’s deposits are held with well rated institutions; as such the approximate fair value is the book value of the investment as impairment
of the capital is not expected. The amortised cost carrying amount of receivables is a reasonable approximation of fair value.

6b. Investment and interest income

Investment income

Investment return on money market funds

Interest income on short dated debt securities

Interest income on available for sale debt securities

Interest income on term deposits with credit institutions

Interest income on held to maturity gilt assets

Unwind of discount on gilts

Notional accrual for reinsurers’ share of investment return

Interest receivable*1

Total investment and interest income

*1 Interest received during the year was £1.5 million (2013: £1.9 million)

6c. Finance costs

Interest payable*1

Total finance costs

*1 Interest paid during the year was £nil (2013: £nil)

Finance costs represent interest payable on the £200 million subordinated notes.

31 December
2014
£m

31 December
2013
£m

5.4

—

9.4

5.2

2.6

22.6

(0.4)

(8.3)

13.9

1.5

15.4

4.7

1.5

—

6.2

—

12.4

—

12.4

1.9

14.3

31 December
2014
£m

31 December
2013
£m

4.6

—

ANNUAL REPORT AND ACCOUNTS 2014

WWW.ADMIRALGROUP.CO.UK

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 DECEMBER 20146. Investments continued
6d. Financial assets and liabilities
The Group’s financial instruments can be analysed as follows:

Financial assets

Investments held at fair value through profit or loss

Money market funds

Short dated debt securities

Investments classified as available for sale

Available for sale debt securities

Investments classified as held to maturity

Term deposits with credit institutions

Gilts

Assets classified as loans and receivables

Amounts owed by policyholders

Total financial assets per Consolidated Statement of Financial Position

Trade and other receivables

Cash and cash equivalents

Financial liabilities

Subordinated notes

Trade and other payables

Total financial liabilities per Consolidated Statement of Financial Position

31 December
2014
£m

31 December
2013
£m

909.2

—

909.2

822.7

263.1

199.1

462.2

353.3

2,547.4

82.0

255.9

1,406.1

202.4

1,608.5

—

288.4

—

288.4

368.1

2,265.0

77.5

187.9

2,885.3

2,530.4

203.8

965.8

1,169.6

—

1,013.7

The nominal £200 million subordinated notes were issued on 25 July 2014 at a fixed rate of 5.5% and have a redemption date of 25 July 2024.

The notes are unsecured subordinated obligations of the Group and rank pari passu without any preference among themselves. In the event of a
winding-up or bankruptcy, they are to be repaid only after the claims of all other creditors have been met.

There have been no defaults on any of the notes during the year. The Group has the option to defer interest payments on the notes but to date has
not exercised this right. The aggregate fair value of subordinated dated notes at the balance sheet date is disclosed in the table below.

Fair value measurement
The measurement of investments at the end of the period, for investments held at fair value and short term debt securities held at fair value, is based
on active quoted market values (level one).

The measurement of available for sale debt securities at the end of the period, is also based on active quoted market values (level one).

The deposits are held with well rated institutions; as such the approximate fair value is the book value of the investment as impairment of the
capital is not expected. There is no quoted market for these holdings and as such a level two valuation is used. The book value of term deposits
is £263.1 million (2013: £288.4 million).

The amortised cost carrying amount of receivables is a reasonable approximation of fair value. The fair values of gilts and subordinated notes
(both level one valuations) together with their carrying values shown in the Consolidated Statement of Financial Position are as follows:

Financial assets

Gilts

Financial liabilities

Subordinated notes

31 December 2014

31 December 2013

Carrying
amount
£m

Fair
value
£m

Carrying
amount
£m

199.1

216.2

203.8

211.2

—

Fair
value
£m

—

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

Financial assets

Investments held at fair value

Term deposits with credit institutions

Short dated debt securities

Gilts

Receivables – amounts owed by policyholders

Total financial assets

Trade and other receivables

Cash and cash equivalents

Financial liabilities

Subordinated notes

Trade and other payables

The maturity profile of financial assets and liabilities at 31 December 2013 was as follows:

Financial assets

Investments held at fair value

Term deposits with credit institutions

Short term debt securities

Gilts

Receivables – amounts owed by policyholders

Total financial assets

Trade and other receivables

Cash and cash equivalents

Financial liabilities

Subordinated notes

Trade and other payables

On demand
£m

< 1 year
£m

Between
1 and 2 years
£m

> 2 years
£m

605.4

—

605.4

—

255.9

861.3

—

303.8

48.6

161.3

0.9

353.3

867.9

82.0

—

949.9

4.6

965.8

970.4

—

104.5

183.8

—

288.3

—

110.0

477.6

198.2

—

785.8

—

288.3

785.8

—

199.2

—

199.2

On demand
£m

< 1 year
£m

Between
1 and 2 years
£m

> 2 years
£m

1,104.8

—

301.3

188.9

202.4

—

368.1

1,104.8

1,060.7

—

187.9

77.5

—

1,292.7

1,138.2

—

1,013.7

—

99.5

—

99.5

—

99.5

—

ANNUAL REPORT AND ACCOUNTS 2014

WWW.ADMIRALGROUP.CO.UK

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 DECEMBER 20146. Investments continued
6d. Financial assets and liabilities continued
Objectives, policies and procedures for managing financial assets and liabilities
The Group’s activities expose it primarily to financial risks of credit risk, interest rate risk, liquidity risk and foreign exchange risk. The Board of Directors
has delegated the task of supervising risk management and internal control to the Group Risk Committee. There is also an Investment Committee
that makes recommendations to the Board on the Group’s investment strategy.

There are several key elements to the risk management environment throughout the Group. These are detailed in full in the Corporate Governance
Statement. Specific considerations for the risks arising from financial assets and liabilities are detailed below.

Credit risk
The Group defines credit risk as the risk of loss if another party fails to perform its obligations. The key areas of exposure to credit risk for the
Group result through its reinsurance programme, investments, bank deposits and policyholder receivables.

Economic and financial market conditions have led the Directors to consider counterparty exposure more frequently and in significant detail.
The Directors consider that the policies and procedures in place to manage credit exposure continue to be appropriate for the Group’s risk
appetite and, during 2014 and historically, no material credit losses have been experienced by the Group.

There are no specific concentrations of credit risk with respect to investment counterparties due to the structure of the liquidity funds which
invest in a wide range of very short duration, high quality securities. Cash balances and deposits are placed only with highly rated credit institutions.
The detailed holdings are reviewed regularly by the Investment Committee.

To mitigate the risk arising from exposure to reinsurers (in the form of reinsurance recoveries and profit commissions), the Group only conducts
business with companies of appropriate financial strength ratings. In addition, many reinsurance contracts are operated on a funds withheld basis,
which substantially reduces credit risk, as the Group withholds the cash received as collateral.

The other principal form of credit risk is in respect of amounts due from policyholders, largely due to the potential for default by instalment payers.
The impact of this is mitigated by the large customer base and low average level of balance recoverable. There is also mitigation by the operation
of numerous high- and low-level controls in this area, including payment on policy acceptance as opposed to inception and automated cancellation
procedures for policies in default.

The Group’s maximum exposure to credit risk at 31 December 2014 is £3,047.4 million (2013: £2,644.8 million), being the carrying value of financial
assets and cash, and the excess of reinsurance assets over amounts owed to reinsurers under funds withheld arrangements. The Group does not
use credit derivatives or similar instruments to mitigate exposure. The amount of bad debt expense relating to policyholder debt charged to the
income statement in 2014 and 2013 is insignificant.

There were no significant financial assets that were past due at the close of either 2014 or 2013.

The Group’s credit risk exposure to assets with external ratings is as follows:

Financial institutions – Credit institutions

UK Government gilts

Reinsurers

31 December
2014
£m

31 December
2013
£m

291.1

625.8

413.0

531.2

1,216.0

1,060.6

Rating

AAA

BBB and below

119.6

199.1

207.8

16.3

80.0

—

190.8

14.0

Interest rate risk
The Group considers interest rate risk to be the risk that unfavourable movements in interest rates could adversely impact on the capital values
of financial assets and liabilities.

As noted above, the Group invests the following asset types:

@ Money market liquidity funds and cash plus liquidity funds, which in turn invest in a mixture of short dated fixed and variable rate securities, such as cash

deposits, certificates of deposits, floating rate notes and other commercial paper.

@ Term deposits with well rated institutions are short in duration (one to five years). These are classified as term and valued at amortised cost.

Therefore neither the carrying value of the asset, nor the interest return will be impacted by fluctuations in interest rates.

@ Available for sale debt securities. These securities are held within two segregated mandates. The guidelines of the investments retain a similar
credit quality of the money market funds (all holdings are investment grade). The duration of the securities is relatively short and similar to the
duration of the on book claims liabilities (the average duration is three years).

@ UK Government gilts. These are classified as term and valued at amortised cost. Therefore neither the capital value of the gilts, nor the interest return,

will be impacted by fluctuations in interest rates.

In 2014, the Group issued £200 million of subordinated notes with a ten year maturity and fixed rate coupon of 5.5%. This liability is valued at amortised
cost and therefore neither the carrying value of the deposits, nor the interest payable, will be impacted by fluctuations in interest rates.

No sensitivity analysis to interest rates has been presented on the grounds of materiality.

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTIONFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORT6. Investments continued
6d. Financial assets and liabilities continued
Objectives, policies and procedures for managing financial assets and liabilities continued
Liquidity risk
Liquidity risk is defined as the risk that the Group does not have sufficient, available financial resources to enable it to meet its obligations as they
fall due, or can only secure them at excessive cost.

The Group is strongly cash-generative due to the large proportion of revenue arising from non-underwriting activity. Further, as noted above,
a significant portion of insurance funds are invested in money market liquidity funds with same day liquidity, meaning that a large proportion
of the Group cash and investments is immediately available.

A breakdown of the Group’s other financial liabilities, trade payables and other payables is shown in note 10.

The subordinated notes have a ten year maturity whereas all trade and other payables will mature within three to six months of the balance sheet date.
(Refer to the maturity profile at the start of this note for further detail.)

In practice, the Group’s Directors expect actual cash flows to be consistent with this maturity profile except for amounts owed to co-insurers
and reinsurers. Of the total amounts owed to co-insurers and reinsurers of £756.5 million (2013: £785.3 million), £585.7 million (2013: £629.3 million)
is held under funds withheld arrangements and therefore not expected to be settled within 12 months.

A maturity analysis for insurance contract liabilities is included in note 5. The maturity profile for financial assets is included at the start of this note.

The Group’s Directors believe that the cash flows arising from these assets will be consistent with this profile. Liquidity risk is not, therefore,
considered to be significant.

Foreign exchange risks
Foreign exchange risks arise from unfavourable movements in foreign exchange rates that could adversely impact the valuation of overseas assets.

The Group is exposed to foreign exchange risk through its operations overseas. Although the relative size of the international operations means
that the risks are relatively small, increasingly volatile foreign exchange rates could result in larger potential gains or losses. Assets held to fund
insurance liabilities are held in the currency of the liabilities; however, surplus assets held as regulatory capital in foreign currencies remain exposed.

The Group’s exposures to net assets held in euros and dollars at the balance sheet date were £2.2 million and £72.0 million respectively
(2013: £7.1 million and £60.2 million).

Fair value
For cash at bank and cash deposits and other receivables, the fair value approximates to the book value due to their short maturity. For assets held
at fair value through profit and loss, their value equates to level one (quoted prices in active markets) of the fair value hierarchy.

For gilts and subordinated notes, the fair value is calculated with reference to the quoted market valuation. This is compared to carrying value
earlier in this note.

6e. Cash and cash equivalents

Cash at bank and in hand

Total cash and cash equivalents

31 December
2014
£m

31 December
2013
£m

255.9

187.9

Cash and cash equivalents includes cash in hand, deposits held at call with banks, and other short-term term deposits with original maturities
of three months or less.

7. Other Revenue
7a. Accounting policy
(i) Contribution from additional products and fees and Other Revenue
Contribution from additional products and fees and Other Revenue includes revenue earned on the sale of products supplementing the core motor
insurance policy, administration and other charges paid by the policyholder, referral fees, revenue from policies paid by instalments and vehicle
commission charges paid by co- and reinsurers. Revenue is credited to the income statement over the period matching the Group’s obligations
to provide services. Where the Group has no remaining contractual obligations, the revenue is recognised immediately. An allowance is made
for expected cancellations where the customer may be entitled to a refund of amounts charged.

Commission from price comparison activities and broking commission earned by Gladiator is credited to revenue on the sale of the underlying
insurance policy.

ANNUAL REPORT AND ACCOUNTS 2014

WWW.ADMIRALGROUP.CO.UK

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 DECEMBER 20147. Other Revenue continued
7b. Contribution from additional products and fees and Other Revenue

Contribution from additional products and fees

Price comparison revenue

Other Revenue

Total Other Revenue

Refer to the Strategic Report for further detail on the sources of revenue.

31 December
2014
£m

31 December
2013
£m

185.6

107.5

39.4

332.5

177.0

112.7

38.1

327.8

8. Expenses
8a. Accounting policies
(i) Acquisition costs and operating expenses
Acquisition costs incurred in obtaining new and renewal business are charged to the income statement over the period in which those premiums
are earned. All other operating expenses are charged to the income statement in the period that they are incurred.

(ii) Employee benefits
Pensions
The Group contributes to defined contribution personal pension plans for its employees. The contributions payable to these schemes are charged
in the accounting period to which they relate.

Employee share schemes
The Group operates a number of equity and cash settled compensation schemes for its employees. The fair value of the employee services received
in exchange for the grant of free shares under the equity settled schemes is recognised as an expense, with a corresponding increase in equity.
For cash settled schemes, the fair value of services received are also recognised as an expense, with a corresponding increase in liability.

For equity settled schemes, the total charge expensed over the vesting period is determined by reference to the fair value of the free shares
granted as determined at the grant date (excluding the impact of non-market vesting conditions). Non-market conditions such as profitability
targets as well as staff attrition rates are included in assumptions over the number of free shares to vest under the applicable scheme.

For cash settled schemes, the total charge expensed over the vesting period is determined by reference to the closing Admiral Group share price
at the end of the period. Prior to the vesting of each scheme, the closing share price at the end of the reporting period is used as an approximation
for the closing share price at the end of the vesting period. As with equity settled schemes, non-market vesting conditions also impact on the total
charge expensed over the vesting period.

At each balance sheet date, the Group revises its assumptions on the number of shares to be granted with the impact of any change in the
assumptions recognised through income.

Refer to note 8f for further details on share schemes.

8b. Operating expenses and share scheme charges

Acquisition of insurance contracts

Administration and other marketing costs (insurance contracts)

Insurance contract expenses

Administration and other marketing costs (other)

Share scheme charges

Total expenses and share scheme charges

31 December 2014

Recoverable
from co- and
reinsurers
£m

(56.7)

(162.0)

(218.7)

—

(12.9)

(231.6)

Gross
£m

91.9

209.5

301.4

166.3

34.1

501.8

Net
£m

35.2

47.5

82.7

166.3

21.2

270.2

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTIONFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORT8. Expenses continued
8b. Operating expenses and share scheme charges continued

Acquisition of insurance contracts

Administration and other marketing costs (insurance contracts)

Insurance contract expenses

Administration and other marketing costs (other)

Share scheme charges

Total expenses and share scheme charges

31 December 2013

Recoverable
from co- and
reinsurers
£m

(51.8)

(150.5)

(202.3)

—

(13.5)

(215.8)

Gross
£m

85.5

203.5

289.0

142.0

36.0

467.0

Net
£m

33.7

53.0

86.7

142.0

22.5

251.2

The £47.5 million (2013: £53.0 million) administration and marketing costs allocated to insurance contracts is principally made up of salary costs.

Analysis of other administration and other marketing costs:

Expenses relating to additional products and fees

Price comparison operating expenses

Other expenses

Total

31 December
2014
£m

31 December
2013
£m

37.9

110.3

18.1

166.3

34.4

92.3

15.3

142.0

Refer to note 12 for a reconciliation between insurance contract expenses and the reported expense ratio.

8c. Staff costs and other expenses

31 December 2014

31 December 2013

Salaries

Social security charges

Pension costs

Share scheme charges (see note 8f)

Total staff expenses

Depreciation charge:

– Owned assets

– Leased assets

Amortisation charge:

– Software

– Deferred acquisition costs

Operating lease rentals:

– Buildings

Auditor’s remuneration (including VAT):

– Fees payable for the audit of the Company’s annual accounts

– Fees payable for the audit of the Company’s subsidiary accounts

– Fees payable for other services

Net foreign exchange (gains)/losses

Analysis of fees paid to the auditor for other services:

– Tax compliance services

– Tax advisory services

– Other services

Total as above

Total
£m

155.3

14.6

5.4

34.1

209.4

6.8

0.3

4.6

—

11.2

—

0.3

(1.4)

0.1

0.2

—

0.3

Net
£m

57.9

6.1

1.9

10.7

76.6

2.7

0.1

2.0

42.7

3.7

—

0.2

0.1

(1.4)

—

0.1

—

0.1

Total
£m

148.5

16.7

4.1

36.0

205.3

7.2

0.1

4.9

—

11.4

—

0.3

1.5

0.1

0.2

—

0.3

Net
£m

49.2

5.7

1.4

9.0

65.3

2.6

—

1.9

68.8

3.6

—

0.2

0.1

1.5

—

0.1

—

0.1

Total and net expenses are before and after co- and reinsurance arrangements respectively.

Refer to the Corporate Governance Report for details of the Audit Committee’s policy on fees paid to the Company’s auditor for non-audit
services. The ratio of non-audit fees to audit fees in 2014 was 109% (2013: 108%).

The amortisation of software and deferred acquisition cost assets is charged to expenses in the income statement.

100

ANNUAL REPORT AND ACCOUNTS 2014

WWW.ADMIRALGROUP.CO.UK

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 DECEMBER 20148. Expenses continued
8d. Staff numbers (including Directors)

Direct customer contact staff

Support staff

Total

8e. Directors’ remuneration
(i) Directors’ remuneration

Directors’ emoluments

Amounts receivable under long term incentive schemes

Company contributions to money purchase pension plans

Total

(ii) Number of Directors

Retirement benefits are accruing to the following number of Directors under:

– Money purchase schemes

– Defined benefit schemes

8f. Staff share schemes
Analysis of share scheme costs (per the Consolidated Income Statement):

SIP charge (i)

DFSS charge (ii)

Total share scheme charges

Average for the year

2014
Number

5,179

1,738

6,917

2013
Number

5,145

1,420

6,565

31 December
2014
£m

31 December
2013
£m

2.0

0.9

—

2.9

2.0

0.8

—

2.8

2014
Number

2013
Number

—

31 December
2014
£m

31 December
2013
£m

8.6

12.6

21.2

7.6

14.9

22.5

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 note 8c (2014: £34.1 million; 2013: £36.0 million) and the gross credit to reserves reported in the Consolidated Statement of Changes in Equity
(2014: £23.2 million; 2013: £25.7 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.

(i) The Approved Share Incentive Plan (the SIP)
Eligible employees qualified for awards under the SIP based upon the performance of the Group in each half-year period. The current maximum
award for each year is £3,000 per employee. The awards are made with reference to the Group’s performance against prior year profit before tax.
Employees must remain in employment for the holding period (three years from the date of award) otherwise the shares are forfeited.

The fair value of shares awarded is either the share price at the date of award, or is estimated at the latest share price available when drawing
up the financial statements for awards not yet made (and later adjusted to reflect the actual share price on the award date). Awards under the
SIP are entitled to receive dividends, and, hence, no adjustment has been made to this fair value.

(ii) The Discretionary Free Share Scheme (the DFSS)
Under the DFSS, details of which are contained in the remuneration policy section of the Directors’ Remuneration Report, individuals receive
an award of free shares at no charge. Staff must remain in employment until the vesting date in order to receive shares. The maximum number
of shares that can vest relating to the 2014 scheme is 2,680,858 (2013 scheme: 2,348,549).

The amount of award that actually vests is based on the growth in the Company’s earnings per share (EPS) relative to a risk free return (RFR),
for which LIBOR has been selected as a benchmark. This performance is measured over the three year period the award applies to. For the
2014 and 2013 schemes, 50% of the shares awarded at the start of the three year vesting period are subject to these performance conditions.

The range of awards is as follows:

@ If the growth in EPS is less than the RFR, no awards vest.

@ EPS growth is equal to RFR – 10% of maximum award vests.

@ To achieve the maximum award, EPS growth has to be 36 points higher than RFR over the three year period.

Between 10% and 100% of the maximum awards, a linear relationship exists.

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8f. Staff share schemes continued
(ii) The Discretionary Free Share Scheme (the DFSS) continued
Awards under the DFSS are not eligible for dividends (although a discretionary bonus is currently paid equivalent to the dividend that would have
been paid on the respective shareholding) and hence the fair value of free shares to be awarded under this scheme has been revised downwards
to take account of these distributions. The unadjusted fair value is based on the share price at the date on which awards were made (as stated in
the Directors’ Remuneration Report).

Number of free share awards committed at 31 December 2014

SIP H211 scheme

SIP H112 scheme

SIP H212 scheme

SIP H113 scheme

SIP H213 scheme

SIP H114 scheme

DFSS 2012 scheme 1st award

DFSS 2012 scheme 2nd award

DFSS 2013 scheme 1st award

DFSS 2013 scheme 2nd award

DFSS 2014 scheme 1st award

DFSS 2014 scheme 2nd award

Total awards committed

Awards
outstanding*1

598,400

617,778

533,792

603,432

514,500

575,016

181,668

1,979,752

173,348

2,175,201

203,292

2,477,566

10,633,745

Vesting
date

March 2015

September 2015

March 2016

September 2016

March 2017

September 2017

March 2015

October 2015

March 2016

October 2016

March 2017

September 2017

*1 Being the maximum number of awards expected to be made before accounting for expected staff attrition

During the year ended 31 December 2014, awards under the SIP H210 and H111 schemes and the DFSS 2011 scheme vested. The total number
of awards vesting for each scheme is as follows.

Number of free share awards vesting during the year ended 31 December 2014

SIP H210 scheme

SIP H111 scheme

DFSS 2011 scheme 1st award

DFSS 2011 scheme 2nd award

Original awards

Awards vested

346,590

489,280

279,990

380,160

1,634,732

1,486,410

157,312

102,121

9. Taxation
9a. Accounting policy
Income tax on the profit or loss for the periods presented comprises current and deferred tax.

(i) Current tax
Current tax is the expected tax payable on the taxable income for the period, using tax rates that have been enacted or substantively enacted
by the balance sheet date, and includes any adjustment to tax payable in respect of previous periods.

Current tax related to items recognised in other comprehensive income is also recognised in other comprehensive income and not in the
income statement.

(ii) Deferred tax
Deferred tax is provided in full using the balance sheet liability method, providing for temporary differences arising between the carrying amount
of assets and liabilities for accounting purposes and the amounts used for taxation purposes. It is calculated at the tax rates that have been enacted
or substantially enacted by the balance sheet date and that are expected to apply in the period when the liability is settled or the asset is realised.

The principal temporary differences arise from carried forward losses, depreciation of property and equipment and share scheme charges. The resulting
deferred tax is charged or credited in the income statement, except in relation to share scheme charges where the amount of tax benefit credited
to the income statement is limited to an equivalent credit calculated on the accounting charge. Any excess is recognised directly in equity.

Deferred tax assets relating to carried forward losses are recognised only to the extent that it is probable that future taxable profits will be available
against which the assets can be utilised. The probability of the availability of future taxable profits is determined by a combination of the classification
of the status of the businesses holding cumulative tax losses and the business plan profit projections for that business, subject to appropriate stress testing.

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NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 DECEMBER 20149. Taxation continued
9b. Taxation

Current tax

Corporation tax on profits for the year

(Over)/under provision relating to prior periods

Current tax charge

Deferred tax

Current period deferred taxation movement

Over provision relating to prior periods – deferred tax

Total tax charge per Consolidated Income Statement

Factors affecting the total tax charge are:

31 December
2014
£m

31 December
2013
£m

72.2

(0.4)

71.8

(1.8)

(0.9)

69.1

83.4

0.4

83.8

0.1

(0.6)

83.3

31 December
2014
£m

31 December
2013
£m

Profit before tax

Corporation tax thereon at effective UK corporation tax rate of 21.50% (2013: 23.25%)

Expenses and provisions not deductible for tax purposes

Impact of change in UK tax rate on deferred tax balances

Adjustments relating to prior periods

Impact of different overseas tax rates

Unrecognised deferred tax

Other differences

Total tax charge for the period as above

9c. Deferred income tax asset
Analysis of deferred tax asset

350.7

75.4

(0.9)

—

(1.3)

(11.2)

7.1

—

69.1

Balance brought forward at 1 January 2013

Tax treatment of share scheme charges through income or expense

Tax treatment of share scheme charges through reserves

Capital allowances

Carried forward losses

Other difference

Balance carried forward at 31 December 2013

Tax treatment of share scheme charges through income or expense

Tax treatment of share scheme charges through reserves

Capital allowances

Carried forward losses

Other difference

Balance carried forward at 31 December 2014

Tax treatment
of share
schemes
£m

Capital
allowances
£m

Carried
forward losses
£m

Other
differences
£m

(3.8)

1.8

(2.1)

—

(4.1)

2.4

(3.1)

—

(4.8)

(1.9)

—

(1.4)

—

(3.3)

—

(1.3)

—

(4.6)

(5.7)

(3.8)

—

(2.1)

—

(7.8)

—

(5.6)

—

(13.4)

—

2.0

(1.8)

—

1.7

(0.1)

370.2

86.1

0.2

2.7

(0.2)

(5.6)

—

0.1

83.3

Total
£m

(15.2)

1.8

(2.1)

(1.4)

(2.1)

2.0

(17.0)

2.4

(3.1)

(1.3)

(5.6)

1.7

(22.9)

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OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTIONFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORT9. Taxation continued
9c. Deferred income tax asset continued
Analysis of deferred tax asset continued
The UK corporation tax rate reduced from 23% to 21% on 1 April 2014. The average effective rate of tax for 2014 is 21.50% (2013: 23.25%). It will fall
to 20% in April 2015. Deferred tax has therefore been calculated at 20% where the temporary difference is expected to reverse after this date.

The deferred tax asset relating to carried forward losses of £13.4 million (2013: £7.8 million) relates to losses incurred in the Group’s US businesses,
Elephant Auto and compare.com, and is calculated at the local US rate of tax (35%).

Elephant Auto (asset recognised: £3.6 million; remaining unused losses: £33 million) – the asset is expected to be recovered over the next seven
years. The recognised asset has been limited to the amount supported by forecast cash flows over the next seven years. Whilst profits are
expected to be available after 2021, the Group considers these longer term forecasts to be more uncertain and has therefore not recognised an
asset that would only be supported by profits beyond the seven year period.

compare.com (asset recognised: £9.8 million; remaining unused losses: £nil) – the asset is expected to be fully recovered over the next five years.
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.

The Group considers full recovery of the assets to be probable in both cases.

At 31 December 2014 the Group had unused tax losses amounting to £33 million (2013: £nil), relating to these businesses, for which no deferred tax
asset has been recognised.

10. Other assets and other liabilities
10a. Accounting policy
(i) Property and equipment, and depreciation
All property and equipment is stated at cost less accumulated depreciation. Depreciation is calculated using the straight line method to write off
the cost less residual values of the assets over their useful economic lives. These useful economic lives are as follows:

Improvements to short leasehold buildings

– four to ten years

Computer equipment

Office equipment

Furniture and fittings

Motor vehicles

– two to four years

– four years

(ii) Impairment of property and equipment
In the case of property and equipment, carrying values are reviewed at each balance sheet date to determine whether there are any indications of
impairment. If any such indications exist, the asset’s recoverable amount is estimated and compared to the carrying value. The carrying value is the
higher of the fair value of the asset, less costs to sell and the asset’s value in use. Impairment losses are recognised through the income statement.

(iii) Leased assets
The rental costs relating to assets held under operating leases are charged to the income statement on a straight line basis over the life of the lease.

Leases under the terms of which the Group assumes substantially all of the risks and rewards of ownership are classed as finance leases. Assets
acquired under finance leases are included in property and equipment at fair value on acquisition and are depreciated in the same manner as
equivalent owned assets. Finance lease and hire purchase obligations are included in creditors and the finance costs are spread over the periods
of the agreements based on the net amount outstanding.

(iv) Intangible assets
Goodwill
All business combinations are accounted for using the acquisition method. Goodwill has been recognised in acquisitions of subsidiaries, and
represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired.

The classification and accounting treatment of acquisitions occurring before 1 January 2004 have not been reconsidered in preparing the Group’s
opening IFRS balance sheet at 1 January 2004 due to the exemption available in IFRS 1 (First time adoption). In respect of acquisitions prior to
1 January 2004, goodwill is included at the transition date on the basis of its deemed cost, which represents the amount recorded under UK GAAP,
which was tested for impairment at the transition date. On transition, amortisation of goodwill has ceased as required by IAS 38.

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash generating units (CGUs) according to business
segment and is reviewed annually for impairment.

The goodwill held on the balance sheet at 31 December 2014 is allocated solely to the UK Car Insurance segment.

Impairment of goodwill
The annual impairment review involves comparing the carrying amount to the estimated recoverable amount (by allocating the goodwill to CGUs)
and recognising an impairment loss if the recoverable amount is lower. Impairment losses are recognised through the income statement and are
not subsequently reversed.

The recoverable amount is the greater of the fair value of the asset less costs to sell and the value in use of the CGU.

The value in use calculations use cash flow projections based on financial budgets approved by management covering a three year period. Cash
flows beyond this period are considered, but not included in the calculation. The discount rate applied to the cash flow projections in the value in
use calculations is 6.8% (2013: 9.8%), based on the Group’s weighted average cost of capital, which is in line with the market (source: Bloomberg).

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NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 DECEMBER 201410. Other assets and other liabilities continued
10a. Accounting policy continued
(iv) Intangible assets continued
The key assumptions used in the value in use calculations are those regarding growth rates and expected changes in pricing and expenses incurred
during the period. Management estimates growth rates and changes in pricing based on past practices and expected future changes in the market.

The headroom above the goodwill carrying value is very significant, and there is no foreseeable event that would eliminate this margin.

Deferred acquisition costs
Acquisition costs comprise all direct and indirect costs arising from the conclusion of insurance contracts. Deferred acquisition costs represent the
proportion of acquisition costs incurred that correspond to the unearned premiums provision at the balance sheet date. This balance is held as an
intangible asset. It is amortised over the term of the contract as premium is earned.

Software
Purchased software is recognised as an intangible asset and amortised over its expected useful life (generally the licence term). Internally generated
software is recognised as an intangible asset, with directly attributable costs incurred in the development stage capitalised. The internally generated
software assets are amortised over the expected useful life of the systems and amortisation commences when the software is available for use.

The carrying value of software is reviewed every six months for evidence of impairment, with the value being written down if any impairment exists.
Impairment may be reversed if conditions subsequently improve.

10b. Property and equipment

Improvements
to short
leasehold
buildings
£m

Computer
equipment
£m

Office
equipment
£m

Furniture
and fittings
£m

Cost
At 1 January 2013
Additions
Disposals

At 31 December 2013

Depreciation
At 1 January 2013
Charge for the year
Disposals

At 31 December 2013

Net book amount
At 1 January 2013

Net book amount
At 31 December 2013

Cost
At 1 January 2014
Additions*1
Disposals
At 31 December 2014
Depreciation
At 1 January 2014
Charge for the year

Disposals

At 31 December 2014

Net book amount

At 31 December 2014

*1 The increase in additions is due to investment in the fit-out of new premises

The net book value of assets held under finance leases is as follows:

Computer equipment

7.3
1.2
—

8.5

5.3
1.0
—

6.3

2.0

2.2

8.5
16.9
(0.5)
24.9

6.3
1.7

(0.4)

7.6

17.3

31.6
1.7
(0.5)

32.8

22.6
3.9
(0.4)

26.1

9.0

6.7

32.8
6.8
(0.1)
39.5

26.1
3.6

—

29.7

9.8

12.9
0.1
—

13.0

8.7
1.7
—

10.4

4.2

2.6

13.0
1.0
—
14.0

10.4
1.2

—

11.6

2.4

Total
£m

56.8
3.3
(0.5)

59.6

40.3
7.3
(0.4)

47.2

16.5

12.4

59.6
27.2
(0.6)
86.2

47.2
7.1

(0.4)

53.9

5.0
0.3
—

5.3

3.7
0.7
—

4.4

1.3

0.9

5.3
2.5
—
7.8

4.4
0.6

—

5.0

2.8

32.3

31 December
2014
£m

31 December
2013
£m

2.5

—

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105

OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTIONFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORT10. Other assets and other liabilities continued
10c. Intangible Assets

At 1 January 2013
Additions
Amortisation charge
Disposals

At 31 December 2013
Additions
Amortisation charge
Disposals
At 31 December 2014

Goodwill
£m

62.3
—
—
—

62.3
—
—
—
62.3

Deferred
acquisition
costs
£m

20.3
67.7
(68.8)
—

19.2
38.3
(42.7)
—
14.8

Software
£m

9.9
6.8
(4.9)
(0.5)

11.3
23.4
(4.6)
—
30.1

Total
£m

92.5
74.5
(73.7)
(0.5)

92.8
61.7
(47.3)
—
107.2

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. As described in the accounting policies, 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 for further information.

10d. Trade and other receivables

Trade receivables

Prepayments and accrued income

Total trade and other receivables

10e. Trade and other payables

Trade payables

Amounts owed to co-insurers and reinsurers

Finance leases due within 12 months

Other taxation and social security liabilities

Other payables

Accruals and deferred income (see below)

Total trade and other payables

31 December
2014
£m

31 December
2013
£m

78.4

3.6

82.0

73.9

3.6

77.5

31 December
2014
£m

31 December
2013
£m

24.6

756.5

1.4

20.9

82.2

80.2

965.8

16.9

785.3

0.1

20.6

90.1

100.7

1,013.7

Of amounts owed to co-insurers and reinsurers, £585.7 million (2013: £629.3 million) is held under funds withheld arrangements.

Analysis of accruals and deferred income:

Premium receivable in advance of policy inception

Accrued expenses

Deferred income

Total accruals and deferred income as above

31 December
2014
£m

31 December
2013
£m

50.9

11.1

18.2

80.2

60.7

22.0

18.0

100.7

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NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 DECEMBER 201410. Other assets and other liabilities continued
10f. Obligations under finance leases
Analysis of finance lease liabilities:

Less than one year

Between one and five years

More than five years

At 31 December 2014

At 31 December 2013

Minimum
lease
payments
£m

1.4

—

1.4

Interest
£m

Principal
£m

—

1.4

—

1.4

Minimum
lease
payments
£m

0.1

—

0.1

Interest
£m

Principal
£m

—

0.1

—

0.1

The fair value of the Group’s lease obligations approximates to their carrying amount.

10g. Financial commitments
The Group was committed to total minimum obligations under operating leases on land and buildings as follows:

Minimum payments due on operating leases

Within one year

Within two to five years

Over five years

Total commitments

31 December
2014
£m

31 December
2013
£m

8.5

36.9

115.5

160.9

5.3

8.2

1.8

15.3

Operating lease payments represent rentals payable by the Group for its office properties. The increase in operating lease commitments from the
prior period is due to the agreement of long term lease agreements relating to new premises in South Wales.

10h. Contingent liabilities
The Group is, from time to time, engaged in legal matters or disputes (including, but not limited to, employment, regulatory matters and data
protection) which might result in an outflow of benefits from the Group. Where the Group is able to reliably estimate probable losses, provision is
made. The Group has not disclosed estimates of the potential financial effect of contingent liabilities arising from matters where the impact is
highly unlikely to be material, or where it is not practicable to do so, or, in cases where it is practicable, where disclosure could prejudice conduct
of the matters.

In particular, the Group’s US insurance operation is subject to legal action in relation to alleged breach of consumer protection legislation. At the
balance sheet date, the outcome and duration of the legal action is highly uncertain and it is not possible to make a reliable estimate of the outcome.

11. Share capital
11a. Accounting policies
(i) Share capital
Shares are classified as equity when there is no obligation to transfer cash or other assets.

(ii) Dividends
Dividends are recorded in the period in which they are declared and paid.

11b. Dividends
Dividends were declared and paid as follows:

March 2013 (45.5 pence per share, paid June 2013)

August 2013 (48.9 pence per share, paid October 2013)

March 2014 (50.6 pence per share, paid May 2014)

August 2014 (49.4 pence per share, paid October 2014)

Total dividends

31 December
2014
£m

31 December
2013
£m

—

138.3

135.2

273.5

123.1

132.7

—

255.8

The dividends declared in March represent the final dividends paid in respect of the 2012 and 2013 financial years. The dividends declared in August
are interim distributions in respect of 2013 and 2014.

A final dividend of 49.0 pence per share (£136 million) has been proposed in respect of the 2014 financial year. Refer to the Chairman’s Statement
and Strategic Report for further detail.

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OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTIONFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORT11. Share capital continued
11c. Earnings per share

Profit for the financial year after taxation attributable to equity shareholders

Weighted average number of shares – basic

Unadjusted earnings per share – basic

Weighted average number of shares – diluted

Unadjusted earnings per share – diluted

31 December
2014
£m

285.2

31 December
2013
£m

287.0

276,885,828

274,311,039

103.0p

104.6p

277,334,765

274,813,144

102.8p

104.4p

The difference between the basic and diluted number of shares at the end of 2014 (being 448,937; 2013: 502,105) relates to awards committed, but
not yet issued under the Group’s share schemes. Refer to note 8 for further detail.

11d. Share capital

Authorised

500,000,000 ordinary shares of 0.1 pence

Issued, called up and fully paid

278,689,742 ordinary shares of 0.1 pence

276,141,432 ordinary shares of 0.1 pence

31 December
2014
£m

31 December
2013
£m

0.5

0.3

—

0.3

0.5

—

0.3

During 2014 2,548,310 (2013: 2,617,838) new ordinary shares of 0.1 pence were issued to the trusts administering the Group’s share schemes.

748,310 (2013: 917,838) 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 31 December 2014 of 7,232,394 (31 December 2013: 6,484,084). These shares are entitled to receive dividends.

1,800,000 (2013: 1,700,000) were issued to the Admiral Group Employee Benefit Trust for the purposes of the Discretionary Free Share Scheme to
give a closing number at 31 December 2014 of 12,861,948 (31 December 2013: 11,061,948). The Trustees have waived the right to dividend payments,
other than to the extent of 0.001 pence 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.

11e. 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 meet regulatory requirements with an appropriate margin. 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 make distributions after taking into account capital that is required to be held a) for regulatory purposes; b) to
fund expansion activities; and c) as a further buffer against unforeseen events. This policy gives the Directors flexibility in managing the Group’s capital.

The Group’s regulatory capital requirements are discussed in the Group Financial Review within the Strategic Report.

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NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 DECEMBER 201411. Share capital continued
11f. Group subsidiary companies
The Parent Company’s subsidiaries are as follows:

Subsidiary

Country of
incorporation

Class of
shares held

%
Ownership

Able Insurance Services Limited

England and Wales

Admiral Insurance (Gibraltar) Limited

Gibraltar

Admiral Insurance Company Limited

Admiral Law Limited

Admiral Life Limited

Admiral Syndicate Limited

Admiral Syndicate Management Limited

BDE Law Limited

Bell Direct Limited

England and Wales

comparenow.com Insurance Agency LLC

United States of America

Confused.com Limited

Diamond Motor Insurance Services Limited

England and Wales

Elephant Insurance Company

United States of America

Elephant Insurance Services Limited

England and Wales

Elephant Insurance Services LLC

United States of America

EUI (France) Limited

EUI Limited

England and Wales

Inspop Technologies Private Limited

India

Inspop USA LLC

Inspop.com (France) Limited

Inspop.com Limited

Rastreator.com Limited

United States of America

England and Wales

Ordinary

100

67.79
(indirect)

100

67.79

100

Principal
activity

Insurance Intermediary

Insurance Company

Legal Company

Dormant

Non Trading

Dormant

Legal Company

Dormant

Insurance Intermediary

Dormant

Insurance Company

Dormant

Insurance Intermediary

Internet technology supplier

Insurance Intermediary

For further information on how the Group conducts its business across the UK, Europe and the US, refer to the Strategic Report.

11g. Related party transactions
Details relating to the remuneration and shareholdings of key management personnel are set out in the Directors’ Remuneration 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 only the Executive Directors of Admiral Group plc are key management personnel. Aggregate compensation for the
Executive Directors is disclosed in the Directors’ Remuneration Report on pages 60 to 72.

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

109

OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTIONFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORT12. Reconciliations
The following tables reconcile significant key performance indicators and non-GAAP measures included in the Strategic Report to items included
in the financial statements.

12a. Reconciliation of turnover to reported total premiums written and Other Revenue as per the financial statements

Total premiums written before co-insurance arrangements per note 5b of financial statements

Other Revenue per note 7b of financial statements

UK vehicle commission*1
Other*2
Turnover as per note 4b of financial statements

31 December
2014
£m

31 December
2013
£m

1,675.6

332.5

2,008.1

(50.8)

13.7

1,737.6

327.8

2,065.4

(48.1)

12.9

1,971.0

2,030.2

*1 During 2012 Admiral ceased earning Other Revenue from the sale of non-optional 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 non-optional 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

12b. Reconciliation of claims incurred to reported Group loss ratio, excluding releases on commuted reinsurance

Net insurance claims

Less: net claims handling expenses

Add back reserve releases on commuted reinsurance

Adjusted net claims

Net insurance premium revenue

Reported loss ratio

31 December 2014

31 December 2013

UK Car
£m

188.9

(8.9)

70.6

250.6

365.1

68.6%

Group
£m

259.1

(8.9)

70.6

320.8

464.9

69.0%

UK Car
£m

243.3

(9.5)

40.9

274.7

403.9

68.0%

12c. Reconciliation of expenses related to insurance contracts to reported Group expense ratio

Net insurance expenses

Add: net claims handling expenses

Adjusted net expenses

Net insurance premium revenue

Reported expense ratio

31 December 2014

31 December 2013

UK Car
£m

43.5

8.9

52.4

365.1

14.4%

Group
£m

82.7

8.9

91.6

464.9

19.7%

UK Car
£m

51.2

9.5

60.7

403.9

15.0%

Group
£m

303.0

(9.5)

40.9

334.4

483.0

69.2%

Group
£m

86.7

9.5

96.2

483.0

19.9%

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NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 DECEMBER 2014PARENT COMPANY FINANCIAL STATEMENTS
PARENT COMPANY BALANCE SHEET

Non-current assets

Shares in Group undertakings

Intangible assets

Other investments

Current assets

Amounts owed from subsidiary undertakings

Trade and other receivables

Cash at bank and in hand

Creditors – falling due within one year

Other creditors

Net current liabilities

Total assets less current liabilities

Creditors – falling due after one year

Subordinated liabilities

Net assets

Capital and reserves

Called up share capital

Share premium account

Capital redemption reserve

Profit and loss account

As at

31 December
2014
£m

31 December
2013
£m

Note

243.1

0.7

203.2

1.5

1.4

50.0

52.9

(73.6)

(20.7)

426.3

(203.8)

222.5

0.3

13.1

—

209.1

222.5

212.6

—

29.5

8.0

0.1

3.3

11.4

(63.4)

(52.0)

190.1

—

190.1

0.3

13.1

—

176.7

190.1

These financial statements were approved by the Board of Directors on 4 March 2015 and were signed on its behalf by:

Geraint Jones
Chief Financial Officer
Admiral Group plc

Company number: 03849958

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

111

OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTIONFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORTNOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014

The following accounting policies have been
applied consistently in dealing with items
which are considered material in relation
to the financial statements:

1. Basis of preparation
The accounts have been prepared on a going
concern basis. In considering the appropriateness
of this assumption, the Board has reviewed
the Company’s projections for the next
12 months and beyond, including cash flow
forecasts and regulatory capital surpluses.

As a result of this review the Directors have
satisfied themselves that it is appropriate to
prepare these financial statements on a going
concern basis.

The adoption of new accounting standards
during the year has not had a material impact
on either the current year or comparative figures.

The Admiral Group plc Company financial
statements have been prepared in accordance
with applicable accounting standards, under
the historical cost convention and in accordance
with the provisions of Section 396 to the
Companies Act 2006.

As permitted by Section 408 of the Companies
Act 2006, the profit and loss account of the
Parent Company is not presented. Under
FRS 1 Cash Flow Statements the Company is
exempt from having to present a cash flow
statement on the grounds that its cash flows
are included in the Group’s published
Consolidated financial statements.

The Parent Company audit fee is not disclosed
in these accounts as it is disclosed in the
Consolidated financial statements for Admiral
Group plc, which precede them at note 8c.

Refer to note 11 of the Consolidated
financial statements for disclosure of
related party transactions.

2. Investments
Shares in Group undertakings are valued at
cost less any provision for impairment in value.

3. Taxation
The charge for taxation is based on the profit
for the year and takes into account taxation
deferred because of timing differences between
the treatment of certain items for taxation and
accounting purposes.

Deferred tax assets are recognised to the
extent that they are regarded as recoverable.
They are regarded as recoverable to the extent
that, on the basis of all available evidence, it
can be regarded as more likely than not that
there will be sufficient taxable profits from
which the future reversal of the underlying
timing differences can be deducted.

4. Employee share schemes
The Group operates a number of share schemes for its employees. For equity settled schemes
commencing 1 January 2004 and after, the fair value of the employee services received in exchange
for the grant of free shares under the schemes is recognised as an expense in the Parent Company’s
subsidiaries, with a corresponding increase in equity in the Parent Company.

Refer to note 8 of the Consolidated financial statements for further details on share schemes.

5. Shares in Group undertakings

Investments in subsidiary undertakings:

At 1 January 2013

Additions

At 31 December 2013

Additions

At 31 December 2014

£m

192.3

20.3

212.6

30.5

243.1

A full list of the Company’s subsidiaries is disclosed in note 11 of the Consolidated financial statements.

6. Other investments

Other investments:

At 1 January 2013

Disposals

At 31 December 2013

Additions

Disposals

At 31 December 2014

£m

74.6

(45.1)

29.5

199.1

(25.4)

203.2

Other investments are money market liquidity funds and gilts. Refer to note 6 of the Group
financial statements details of the Group’s investments, including money market liquidity funds
and gilts.

7. Trade and other receivables – due within one year

Trade and other receivables

Corporation tax recoverable

8. Other creditors – due within one year

Trade payables and other liabilities

Amounts owed to subsidiary undertakings

Corporation tax payable

9. Other Creditors – due after one year

Subordinated notes

31 December
2014
£m

31 December
2013
£m

0.1

1.3

1.4

0.1

—

0.1

31 December
2014
£m

31 December
2013
£m

1.4

72.2

—

73.6

0.4

—

63.0

63.4

31 December
2014
£m

31 December
2013
£m

203.8

—

The Company issued subordinated notes in 2014. Refer to note 6 of the Group financial
statements for details of the subordinated notes issue.

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10. Reconciliation of movements in shareholders’ funds

Company figures

At 1 January 2013

Retained profit for the period

Dividends

Issues of share capital

Share scheme charges

As at 31 December 2013

Retained profit for the period

Dividends

Issues of share capital

Share scheme charges

As at 31 December 2014

Share
capital
£m

0.3

—

0.3

—

0.3

Share
premium
account
£m

13.1

—

13.1

—

Retained
profit
and loss
£m

203.5

203.3

(255.8)

—

25.7

176.7

282.7

(273.5)

—

23.2

Total
equity
£m

216.9

203.3

(255.8)

—

25.7

190.1

282.7

(273.5)

—

23.2

13.1

209.1

222.5

11. Share Capital
Full details of the Company’s share capital are included in note 11 of the Consolidated financial statements.

ADMIRAL GROUP PLC

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OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTIONFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORTCONSOLIDATED FINANCIAL SUMMARY

Basis of preparation
The figures below are as stated in the Group financial statements preceding this financial summary and issued previously. Only selected lines from
the income statement and balance sheet have been included.

Income statement

Total premiums

Net insurance premium revenue

Other Revenue

Profit commission

Investment and interest income

Net revenue

Net insurance claims

Net expenses

Operating profit

Finance costs

Profit before tax

Balance sheet

Property and equipment

Intangible assets

Deferred income tax

Reinsurance assets

Trade and other receivables

Financial assets

Cash and cash equivalents

Assets held for sale

Total assets

Equity

Insurance contracts

Subordinated liabilities

Trade and other payables

Current tax liabilities

Total liabilities

2014
£m

2013
£m

2012
£m

2011
£m

2010
£m

1,675.6

1,737.6

1,897.2

1,841.3

1,308.6

464.9

332.5

71.8

15.4

884.6

(259.1)

(270.2)

355.3

(4.6)

350.7

2014
£m

32.3

107.2

22.9

829.8

82.0

2,547.4

255.9

—

3,877.5

580.9

2,097.4

203.8

965.8

29.6

3,877.5

483.0

327.8

99.3

14.3

924.4

(303.0)

(251.2)

370.2

—

370.2

2013
£m

12.4

92.8

17.0

821.2

77.5

2,265.0

187.9

—

3,473.8

524.1

1,901.3

—

1,013.7

34.7

3,473.8

498.9

361.1

108.4

15.9

984.3

(404.5)

(235.2)

344.6

—

344.6

2012
£m

16.5

92.5

15.2

803.0

55.3

2,005.1

216.6

—

3,204.2

460.7

1,696.9

—

1,006.5

40.1

3,204.2

445.8

349.0

61.8

13.7

870.3

(363.8)

(207.4)

299.1

—

299.1

2011
£m

17.6

87.5

10.3

639.8

52.1

1,583.0

224.6

—

2,614.9

394.4

1,333.7

—

856.6

30.2

288.1

276.2

67.0

9.5

640.8

(208.5)

(166.8)

265.5

—

265.5

2010
£m

13.6

82.9

12.4

357.0

47.9

1,004.7

246.7

1.5

1,766.7

350.7

806.6

—

561.0

48.4

2,614.9

1,766.7

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GLOSSARY

Accident year

The year in which an accident occurs, also referred to as the earned basis.

Actuarial best estimate

The probability-weighted average of all future claims and cost scenarios calculated using
historical data, actuarial methods and judgement.

Claims reserves

Co-insurance

Combined ratio

Commutation

Expense ratio

A monetary amount set aside for the future payment of incurred claims that have not yet been
settled, thus representing a balance sheet liability.

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.

The sum of the loss ratio and the expense ratio.

An agreement between a ceding insurer and the reinsurer that provides for the valuation,
payment and complete discharge of all obligations between the parties under a particular
reinsurance contract.

The ratio can be calculated on an earned or written basis. Expressed as a percentage, of (i) net
operating expenses, either divided by (ii) written or earned premiums, net of reinsurance.

Insurance market cycle

The tendency for the insurance market to swing between highs and lows of profitability over
time, with the potential to influence premium rates (also known as the ‘underwriting cycle’).

Loss ratio

Net claims

The loss ratio can be calculated on an accident year or underwriting year basis, and is expressed
as a percentage of (i) claims incurred, divided by (ii) net premiums.

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 premium revenue

Also referred to as net earned premium. The element of premium, less reinsurance premium,
earned in the period.

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 commission

A provision found in some reinsurance and co-insurance 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).

Total/Gross/Net premiums written

Total = total premiums written, including co-insurance.

Gross = total premiums written, including reinsurance but excluding co-insurance.

Net = total premiums written, excluding reinsurance and co-insurance.

Turnover

A non-GAAP measure, turnover is the sum of ‘total premiums written’ and ‘Other Revenue’.

Ultimate loss ratio

Underwriting year

The projected ratio for a particular accident year or underwriting year, often used in the
calculation of underwriting profit and profit commission.

The year in which the policy was incepted, also referred to as the written basis. Claims incurred
are allocated to the calendar year in which the policy was underwritten.

Written/Earned basis

A policy can be written in one calendar year but earned over a subsequent calendar year.

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

115

OTHER INFORMATIONSTRATEGIC REPORTINTRODUCTIONFINANCIAL STATEMENTSOTHER INFORMATIONCORPORATE GOVERNANCESTRATEGIC REPORTDIRECTORS AND ADVISORS

Directors
Alastair Lyons, CBE
Non-Executive Chairman

Henry Engelhardt, CBE
Chief Executive Officer

Geraint Jones
Chief Financial Officer

David Stevens, CBE
Chief Operating Officer

Roger Abravanel
Non-Executive Director

Manfred Aldag
Non-Executive Director

Annette Court
Non-Executive Director

Colin Holmes
Non-Executive Director

Penny James
Non-Executive Director

Margaret Johnson, OBE
Non-Executive Director

Lucy Kellaway
Non-Executive Director

Jean Park
Non-Executive Director

Company Secretary
Mark Waters
Ty Admiral
David Street
Cardiff CF10 2EH

Auditor
KPMG LLP
3 Assembly Square
Britannia Quay
Cardiff CF10 4AX

Actuarial advisor
Ernst & Young LLP
1 More London Place
London SE1 2AF

Bankers
Lloyds Bank plc
City Office
Bailey Drive
Gillingham Business Park
Kent ME8 0LS

Registrar
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU

Joint corporate brokers
Merrill Lynch International
2 King Edward Street
London EC1A 1HQ

UBS Investment Bank
1 Finsbury Avenue
London EC2M 2PP

Solicitors
Clifford Chance LLP
10 Upper Bank Street
London E14 5JJ

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Corporate website
The Group’s corporate website is at
www.admiralgroup.co.uk. A range of
information about the Admiral Group is
presented, including the Group’s history:
financial reports and press releases;
corporate responsibility and governance.

The website also includes the contact details
for investor relations.

Financial calendar
Final 2014 dividend
7 May 2015 – Ex dividend date
8 May 2015 – Record date
29 May 2015 – Payment date

Annual General Meeting
29 April 2015

Interim results
19 August 2015

The Group does not produce printed copies
of interim results for shareholders unless
requested.

Admiral Group businesses

UK
Car Insurance:
Admiral www.admiral.com
elephant.co.uk www.elephant.co.uk
Diamond www.diamond.co.uk
Bell www.bell.co.uk

Price Comparison:
Confused.com www.confused.com

Household Insurance:
Admiral Household www.admiral.com/home-insurance

Household

Van Insurance:
Gladiator www.gladiator.co.uk

Spain
Car Insurance:
Balumba www.balumba.es
Qualitas Auto www.qualitasauto.com

The interim results will be available on the
corporate website from 19 August 2015.

Price Comparison:
Rastreator www.rastreator.com

Registered office
Capital Tower
Greyfriars Road
Cardiff CF10 3AZ

Italy
Car Insurance:
ConTe www.conte.it

USA
Car Insurance:
Elephant Auto www.elephant.com

Price Comparison:
compare.com www.compare.com

France
Car Insurance:
L’olivier Assurances www.lolivier.fr

Price Comparison:
LeLynx www.lelynx.fr

The Group’s commitment to environmental issues is reflected in this Annual Report which has
been printed on Revive 100 Silk which is made from 100% post-consumer fibres, FSC® certified
and PCF (Process Chlorine Free). Printed in the UK by

using their

and

environmental printing technology, and vegetable inks were used throughout.
is a CarbonNeutral® company. Both manufacturing mill and the printer are

registered to the Environmental Management System ISO14001 and are Forest Stewardship
Council® (FSC) chain-of-custody certified.

ADMIRAL GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2014

117

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTINTRODUCTIONCORPORATE GOVERNANCEOTHER INFORMATION
2014 was an
award winning year!

2nd place in the
Sunday Times Best Big
Companies to Work For listings, 2014

3rd Best
Large UK Workplace
Great Place to Work Institute, 2014

Best
Workplaces
Europe

3rd Best
Multinational Workplace in Europe,
Great Place to Work Institute’s Best
Multinationals in Europe, 2014

23rd Best
Best Large Workplace in Canada
(Admiral Halifax)

11th Best
Small to Medium Workplace in Italy
(ConTe)

5th Best
Workplaces PYMES (SMEs) in Spain
Great Place to Work Institute, 2014
(Rastreator)

8th Best
Company to Work for in Spain
(Admiral Seguros: Balumba and Qualitas Auto)

4th Best
Large Employer in the
Richmond Times Dispatch Sterling Award
(Elephant Auto)