Always
striving
better,together
for
Admiral Group plc
Annual Report and Accounts 2020
Admiral Group plc · Annual Report and Accounts 2020
We’re a global financial services provider offering motor, household
and travel insurance, as well as comparison and lending products
In the UK we offer motor, household and travel insurance. Our other businesses in the UK include
Admiral Financial Services Limited, Admiral Law Limited and Comparison website Confused.com.
We also have insurance businesses in Italy, Spain, France and the US, and a global comparison business.
www.admiralgroup.co.uk
At Admiral, we care deeply about our employees, our customers, and the impact we make on the world.
Our purpose is to help more people to look after their future; always striving for better, together.
Financial and Strategic highlights
Group’s share of profit
before tax*1 (£m)
£638.4m
Group statutory profit before tax from
continuing operations (£m)
Earnings per share*1 (pence)
£608.2m
179.5p
2020
2019
2018
£638.4m
£526.1m
£479.3m
2020
2019
2018
£608.2m
£505.1m
£464.6m
2020
2019
2018
179.5p
148.3p
137.1p
Return on equity*1 (%)
Net revenue from continuing operations (£bn)
Turnover*1*2 (£bn)
52%
2020
2019
2018
£1.31bn
£3.55bn
52%
52%
56%
2020
2019
2018
£1.31bn
£1.21bn
£1.26bn
2020
2019
2018
£3.55bn
£3.46bn
£3.28bn
Customers (million)
Dividend per share (pence)
Solvency ratio (post dividend)*3
7.66m
2020
2019
2018
156.5p
7.66m
6.98m
6.51m
2020
2019
2018
156.5p
140.0p
126.0p
187%
(2019: 190%)
Sustainability highlights
Gender split across the Group
Emissions (tonnes C02 per employee)
53% Female, 47% Male
(2019: 51% Female, 49% Male)
0.21 tonnes
(2019: 0.36 tonnes)
*1 Alternative performance measure (APM) – refer to the Glossary for definition and explanation.
*2 Alternative performance measure (APM) – refer to note 14 for reconciliation to the financial statements.
*3 Unaudited: refer to capital structure and financial position section on pages 34 and 35 for further information.
*4 Based on our UK Reevoo results, 7598 responses received.
Reevoo Scores (% customers)*4
Happy with service
Would buy again
95%
(2019: 97%)
98%
(2019: 98%)
01
Contents
Company Overview
02 Business overview
04
Long term success
06 Stakeholders
Strategic Report
09 Chair’s statement
13 20 years of service
Covid-19
For individuals, businesses, and communities, 2020 was dominated by
the Covid-19 outbreak, with our business and key stakeholders impacted
by these challenges. Admiral focused on doing the right thing for all our
stakeholders and responded quickly to ensure we were supporting our
customers, our people, and the communities they represent.
Please refer to the following sections to read more about our actions.
14 Chief Executive Officer’s statement
Covid-19 overview
Page 33
18 Business model
20 Strategic progress
24 Strategy in action
28 Key performance indicators
30 Chief Financial Officer’s review
32 Group overview
38 UK Insurance
45
49
International Insurance
Loans
51 Comparison
55 Other
56 Sustainability and responsibility
58 Customers
64 People
70 Partners
71 Shareholders
72 Community
76 Environment
80 Non-financial information statement
82 Section 172 statement
85 Risk management approach
86 Principal risks and uncertainties
90 Emerging risks
91 Task force on climate-related financial disclosures
Corporate Governance
95
Introduction from the Chair
96 Board of Directors
100 Governance report
114 The Audit Committee
121 The Group Risk Committee
128 The Nomination and Governance Committee
132 The Remuneration Committee
136 Remuneration at a glance
137 Directors’ remuneration policy
146 Annual report on remuneration
158 Directors’ report
Financial Statements
163 Independent Auditor’s Report
174 Consolidated Income Statement
176 Consolidated Statement of Comprehensive Income
177 Consolidated Statement of Financial Position
178 Consolidated Cash Flow Statement
179 Consolidated Statement of Changes in Equity
180 Notes to the Financial Statements
248 Parent Company Financial Statements
251 Notes to the Parent Company Financial Statements
260 Consolidated Financial Summary (unaudited)
Additional Information
261 Glossary
Providing quality service remotely
Page 58
Helping our customers
Page 62
Health and wellbeing of our people
Page 67
Working with our partners
Dividend decisions
Supporting our communities
Page 70
Page 71
Page 72
Contributing to Covid-19 funds
Page 75
Refunding our customers
Page 83
Look out for the Covid-19 signposting icon
throughout the report for more detail.
14
30
Chief Executive’s statement
Chief Financial Officer’s review
• Transition to remote working
• Highlights
• Digital acceleration
• Penguin Portals
• Striving to do things better
• Comparison disposal
• Capital, dividends and
internal model
• Farewell David, welcome Milena
56
82
Sustainability and responsibility
Section 172 statement
• Customers
• People
• Partners
• Shareholders
• Community
• Environment
• Stay at Home Refund
• Other Customer Initiatives
• Sale of Penguin Portals
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information
02
Admiral Group plc · Annual Report and Accounts 2020
Business overview
Admiral Group is one of the UK’s largest and most
recognised personal lines insurance providers.
About us
Admiral Group plc is a global financial
services company offering motor
insurance, household insurance and
travel insurance, as well as comparison
and lending products.
Our financial statements report on the
following segments:
• UK Insurance
• International Insurance
• Loans
• Comparison
• Other
UK Motor Insurance
UK Household Insurance
Admiral is one of the largest
car and van insurers in the UK.
Admiral has a growing UK Household
Insurance business.
Other Group items include share
scheme charges, other interest
and investment income, business
development costs, central overheads,
and finance charges.
Brands
Where we are based
Our headquarters are in Cardiff, South
Wales, and Admiral Group is proud to be
Wales’ only FTSE 100 Company. We also
have offices in Swansea and Newport,
and a strong international presence,
with additional offices in countries
including Gibraltar, France, Italy, Spain,
US, Canada, India, and Mexico.
Customers
Customers
4.75 million
(2019: 4.37 million)
1.16 million
(2019: 1.01 million)
Turnover*1*2
Turnover*1*2
£2.47 billion
(2019: £2.46 billion)
£194 million
(2019: £171 million)
Net insurance premium revenue
Net insurance premium revenue
£451 million
(2019: £453 million)
£43 million
(2019: £37 million)
40
44
UK Motor review
UK Household review
Staff employed globally
Customers worldwide
11,000+
7.66 million
Net revenue
from continuing operations
£1.31 billion
03
International Insurance
Loans
Comparison
Admiral has insurance businesses in
Spain, Italy, France, and the US.
Admiral Loans offers unsecured
personal loans and car finance products.
Comparison businesses in the UK,
Spain, France and the US as well as
a fledgling business in Mexico.
Brands
Customers
Loan balances
Quotes
1.60 million
(2019: 1.42 million)
£360 million
(2019: £455 million)
21 million quotes
(2019: 24 million quotes)
Turnover*1*2
Total interest income on loans
Turnover*1*2
£649 million
(2019: £624 million)
£37 million
(2019: £31 million)
£190 million
(2019: £172 million)
Net insurance premium revenue
£204 million
(2019: £169 million)
47
50
54
International Insurance review
Loans review
Comparison review
*1 Alternative performance measure (APM) – refer to the Glossary for definition and explanation.
*2 Alternative performance measure (APM) – refer to note 14 for reconciliation to the financial statements.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 04
Admiral Group plc · Annual Report and Accounts 2020
Long term success
At Admiral, we care deeply – about our employees, our customers, and the impact
we make on the world. We strive to do the right thing at every turn. Our purpose
defines the reason we exist, and the way we do things. Our purpose is to:
We care – deeply – about people. We
want to be there to help: to provide
reassurance, relief, and encouragement
when it’s most needed.
We believe that “People who like what they
do, do it better.” We strive to do better
every day, because we like what we do.
This attitude enables our test-and-learn
culture and our operational excellence.
From the beginning, we’ve
offered more people access to
protection by pricing fairly and
competitively. As we grow, we
seek to create inclusive
products that will provide
more people with good
financial services.
Our products – car and home
insurance, loans, pet and travel,
and more – help people protect
what’s important to them and
enable their dreams, so they
can create a better tomorrow.
In the wider world, we act
sustainably so we can all look
after our shared future.
At Admiral, we strive to include everyone in
opportunities – for example, through our share
scheme and our dedication to our communities.
We believe in the power of the team, quoting our
founder Henry Engelhardt, it’s all in “The Team,
The Team, The Team.”
All underpinned by our Four Pillars of culture
Admiral’s four pillars help define our unique workplace culture and have
been the basis for some of our greatest achievements, including being on
the Sunday Times Best Companies to work for list for 20 years in a row.
Fun
We want our people to look forward to
coming to work, celebrate being who
they are, and feel happy and supported
enough to give that little bit extra.
05
Our purpose-led approach
Business model
We build on our core competencies to create value for our stakeholders,
focusing on profitable growth, strong risk selection capabilities, a
controlled test-and-learn approach, the strength of our culture and
the depth of our business relationships.
Strategy
Culture
KPIs
Our strategy remains highly focused on building customer-
focused sustainable businesses for the long-term. We strive to
keep doing what we’re doing and do it better year after year.
Prioritising our people is part of Admiral’s DNA. It’s the
foundation of our Company belief that happy employees =
happy customers = happy shareholders. We’re determined to
always remain a great place to work.
We are aware that our customers, shareholders and employees
care about our goals and objectives. We take pride in sharing both
financial and non-financial KPIs, all of which help us to build a strong
business for the future.
Customers, shareholders
and employees
We strive to ensure that our customers receive excellent and
convenient service, fair prices, and good value financial products.
We build our business profitably and responsibly so that we can
return value to our shareholders, and our employees.
Communities & partners
Making sure our business has a positive social impact is important
to us. Supporting the communities where we work, and the partners
we work with, is integral to our approach.
Environmental impact
We integrate environmental considerations across our operations.
By taking actions to mitigate our impact on the environment,
we develop sustainable solutions for the long-term.
Governance
Our corporate governance structure underpins the long-term success
of the Group. Our Board acts as the decision-making forum, considering
the interests of our customers, people, communities, shareholders,
external partners and our impact on the environment.
Communication
Equality
We encourage effective and transparent
communication at all levels. This is
aided by accessible management
and opportunities to encourage
feedback across the Company.
We work hard to promote a sense of
fairness and equality. Everyone has the
opportunity to succeed - backed by
groups related to diversity, inclusion
and social mobility.
Recognition & Reward
A job well-done should be appropriately
rewarded. At the heart of this pillar is
our share ownership scheme, which
rewards success with a stake in the
Company.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 06
Admiral Group plc · Annual Report and Accounts 2020
Stakeholders
Value creation and future priorities
At Admiral, we are committed to building strong and sustainable businesses
that are focused on achieving positive outcomes for all our stakeholders.
Customers
People
Shareholders
Our customers are at the heart of
everything we do, and we strive to provide
them with good value financial products
that meet their needs, and excellent and
efficient customer service.
We strive to create an environment where
people enjoy their work and feel happy,
supported, and valued in their roles; we
believe that our unique culture is integral
to our success.
Admiral regularly engages with
shareholders through open and transparent
dialogue, as investor engagement fosters
long term strategic understanding of
our business.
Value Creation in 2020
Value Creation in 2020
Value Creation in 2020
• Admiral UK was named Direct to
Consumer Business of the Year in
The Insurance Times Awards.
•
‘Third Best Big Company to Work for in
the UK’ in the 2020 Sunday Times Best
Companies To Work For Awards.
• Record MyAccount usage growth as we
• 96% of staff believe Admiral Group is a
expanded our digital service solutions to
meet changing customer needs.
• We reviewed how our culture drives fair
outcomes for customers in accordance
with best practice regulatory guidance
from the FCA.
friendly place to work*1.
•
Increased female representation at the
executive level to 34% (+2% YoY).
• Female Group Board representation
• Maintained a strong capital position and
delivered positive financial results.
• Admiral actively engaged with a number
of key environmental, social and
governance (ESG) indices to provide
better insight and transparency on our
commitments to ESG practices.
• Return on equity 52% (2019: 52%)
increased to 45.5% (2019: 40%).
• Earnings per share 179.5p (2019: 148.3p)
• Dividend per share 156.5p (2019: 140.0p)
Covid-19 Summary
Covid-19 Summary
Covid-19 Summary
• We returned £110 million to our UK
motor insurance customers through
the Admiral Stay at Home Refund and
reduced prices across our operations.
• We supported over 9,000 NHS and
Emergency staff workers through our
key worker initiatives.
• We supported our travel insurance
customers through free policy
extensions and cancellations.
• We supported our loans customers through
payment holidays and reduced payments.
• Made staff learning and development
• Paid the deferred FY19 special dividend
tools fully available online.
following the interim 2020 results.
•
Initiated a review of our UK benefits to
ensure they better meet the changing
needs of our staff as a result of the shift
to homeworking.
• Supported our staff throughout the
transition to homeworking, with 96%
of staff enjoying working from home
according to our staff survey responses
in October.
• All meetings previously held face-to-face
were moved online, as we continued our
regular shareholder engagement.
• Our Chair and Senior Independent Board
member (SID) held Corporate Governance
meetings with a number of our largest
shareholders, addressing amongst other
topics, pandemic related developments.
Priorities in 2021
Priorities in 2021
Priorities in 2021
• Continue to use customer feedback to
improve our products and services.
solutions for our staff.
• Continue to implement smart-working
• Continue to maintain frequent and
• Continue to grow and improve our
• Ensure we remain a great place to work
digital channels.
for homeworking and office-based staff.
• Continue to support NHS and Emergency
•
staff workers during the Covid-19
pandemic.
• Continue to ensure fair treatment of all
our customers.
Increase female representation at
executive level to 40% by 2023.
• Maintain a minimum of 33% female
representation on the Admiral Group
Board.
*1
Based on Group-wide results for the 2021 Great Place to Work Survey, data surveyed in 2020.
open dialogue with our shareholders to
foster long-term understanding of the
Group’s strategy.
• Continue to develop our ESG disclosures.
• Alignment of disclosures to SASB
insurance industry standards.
07
Read more in our Section 172 statement on page 82
Partners
Communities
Environment
Strategically aligned partnerships with
reinsurers and strong relationships with
our strategic suppliers play an extremely
important role in our business operations.
As Wales’ largest private sector employer,
we believe it is our responsibility to support
our local communities. Therefore, giving
back to our communities is an integral part
of Admiral’s culture.
Admiral recognises the reality of the
threats posed by climate change and we
strongly believe we must mitigate our
impact on the environment in response
to the growing environmental challenges.
Value Creation in 2020
Value Creation in 2020
Value Creation in 2020
• Maintained relationships with strategic
partners through internal relationship
managers and ongoing dialogue.
• Renewal/maintenance of the Group’s
• Provided an additional £25,000 to our
dedicated Ministry of Giving Charity
partners to support them over
the lockdown.
• Our 2019 carbon emissions data was
externally verified by Carbon Trust and
we have offset carbon emissions for our
operations to become carbon neutral*1.
reinsurance and quota share contracts.
• Adapted our initiatives online to
• We expanded our climate disclosure in
• We re-appointed our External Auditor
and appointed a Remuneration
Consultant (subject to shareholder
approval) following robust tender
processes.
continue to promote employability
across our local communities.
• Continued to support events and
organisations that promote diversity
and inclusion in our communities.
line with TCFD recommendations.
• Our approach for managing our
environmental impact has been
a core focus area for the Sustainability
Working Group.
• We became a member of the
Institutional Investors Group for
Climate Change.
Covid-19 Summary
Covid-19 Summary
Covid-19 Summary
• Ran multiple surveys throughout the
lockdown period to understand our
partners’ needs.
• Dedicated £6 million to the Admiral
Support Fund to help those worst impacted
by Covid-19.
• Large reduction in our building
operations emissions due to the
homeworking transition.
• Supported our UK Garage Network
during the lockdown period.
• From the Admiral Support Fund, £2
million was donated to the Covid-19
Support Fund established by the
insurance and long-term savings
industry.
• Our bike to work scheme saw a huge
boost during the first Covid-19 lockdown,
with orders increasing by over 200%
in April to June compared to the same
period in 2019.
•
In addition, our international operations
supported those impacted by Covid-19
on a regional and national basis.
Priorities in 2021
Priorities in 2021
Priorities in 2021
• Maintain active and open relationships
with all our partners to understand their
needs and how we can best support
them.
• Continue to support our communities
through donations and volunteering.
• Continue to promote employability in
our local communities.
• Further increase the number of our
strategic and key suppliers who have
diversity and equality policies, and
environmental policies in place.
• Continue to support our long-term
community initiatives.
• Continue to engage our staff through
volunteering opportunities and
involvement in decision-making
regarding community initiatives.
• Set carbon intensity reduction targets
for our investment portfolio in line with
the goals of the 2015 Paris Agreement.
• Continue to improve our emissions
data disclosure in line with best
practice expectations.
*1
Admiral has fully offset carbon emissions through the purchase of carbon credits for 2019 during 2020, and aims to offset 2020 emissions during 2021, once third party verification is complete.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 08
Admiral Group plc · Annual Report and Accounts 2020
Strategic Report
09 Chair’s statement
13 20 years of service
14 Chief Executive Officer’s statement
18 Business model
20
24
Strategic progress
Strategy in action
28 Key performance indicators
56
Sustainability and Responsibility
58 Customers
64 People
70 Partners
71
Shareholders
72 Community
76
Environment
30 Chief Financial Officer’s review
80 Non-financial Information Statement
32 Group overview
38 UK Insurance
82
Section 172 statement
85 Risk management approach
International Insurance
86 Principal risks and uncertainties
45
49
Loans
51 Comparison
55 Other
90
91
Emerging risks
Task force on Climate-related
financial disclosures
Customers
are at theheart
of whatwe do
98%
of customers would buy again*1
*1 UK score based on all insurance and financial services products in 2020.
Chair’s
statement
Most importantly we
demonstrated that we
were doing the right
things not only for staff,
but also for customers,
suppliers, shareholders
and the broader
community.”
09
What a year this has been! For Admiral the most significant event, apart from the
Covid-19 pandemic of course, has been the announcement that David Stevens will be
retiring as Group CEO and that Milena Mondini de Focatiis will be succeeding him (as I
mentioned in last year’s annual report). This will take effect from 1 January 2021 after
a successful transition period – more on this later.
Background to the year
Most of the year has been dominated by the
repercussions of the Covid-19 pandemic.
Life changed in unimaginable ways for all
of our staff and customers. I am immensely
proud of the way that Admiral responded
to this situation. Our people’s health and
well-being were at the centre of our
response and we remained true to Admiral’s
values in ensuring they were protected
and allowing them to provide continued
support to our customers. Management
communicated quickly and clearly, and
it was evident to all why Admiral remains
one of the Best Companies to work for.
Our people rose to the challenge and went
above and beyond to support customers
and each other through difficult times.
Most importantly we demonstrated that
we were doing the right thing not only for
staff, but also for customers, suppliers,
shareholders and the broader community.
A key part of our response was the
announcement of the Admiral Stay at Home
premium refund. We announced back in
April that we would give back £190 million to
our customers through a £110 million rebate
in the UK as well as pricing reductions across
operations and supporting the communities
in which we operate, which included the
launch of a £6 million Covid-19 community
support fund. This approach was unique to
UK insurers. It was led by management and
endorsed by the Board.
Looking back at 2020
Admiral is reporting a strong performance
in 2020 in both reported profit and growth.
This is once again due to our people. They
make the real difference at Admiral. They
remain true to our purpose and ensure that
we do the right thing in consideration of all
of our stakeholders.
The Group has continued to grow with
turnover increasing by 2% to £3.55 billion,
whilst customer numbers are 10% higher
than 2019 at 7.7 million. The Group’s share
of pre-tax profit increased by 21% to
£638.4 million.
Covid-19 impacted the results in all markets
in which we operate, resulting in reduced
accident frequencies and lower loss
ratios. We continue to maintain a prudent
approach and, as a result, benefited from
strong reserve releases from past years.
Earnings per share rose by 21% and return
on equity was 52%. The Group’s solvency
ratio remains robust at 187% (190% at the
end of 2019).
In the UK the FCA announced a market
pricing study for general insurance which
will predominantly affect our motor and
household products. This is still to be
finalised, but we anticipate that it will
have a significant impact on the market.
We see this as an opportunity to continue
to build on Admiral’s strengths and desire
to do the right thing for customers. As a
reminder, approximately 80% of Admiral
customers shop around at renewal, so we
are encouraged that the majority choose
to remain with us; this being an indicator
of our good customer experience and
competitive pricing.
There have been strong contributions
across the Group. Apart from UK Insurance
there has been growth in profit and
customers from our European insurers and
also Confused.com. In the US we continue
to strengthen the fundamentals of our
insurance business.
The Loans business has been impacted by
Covid-19 and we took early action to pause
issuing new loans when the pandemic hit.
We have maintained a cautious approach
since. The loans book remains resilient
despite economic uncertainty largely as
a result of our prime customer base and
prudent approach.
Admiral announced the purchase of the
Penguin Portals and Preminen comparison
businesses by ZPG Comparison Services
Holdings UK Limited ('RVU') in December
2020. The Board believes the decision is a
positive outcome for all stakeholders and
provides an opportunity to combine the
strengths of these businesses to allow for
continued growth.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 10
Admiral Group plc · Annual Report and Accounts 2020
Chair’s statement continued
We also continue to take
what we do well and what
we learn to new markets and
new products, both in the UK
and abroad.”
Dividend
As a result of the Covid-19 pandemic and
regulatory guidance, we suspended the
pay-out of the 2019 final special dividend.
We were subsequently able to pay this
out in addition to our half-year dividend
in August with the confidence that we
have a strong capital position.
Our dividend policy remains that we pay a
normal dividend of 65% of post-tax profit
and distribute each year the available
surplus over and above what we retain
to meet regulatory requirements, the
future development of our business and
appropriate buffers. The Directors have
recommended a final dividend of 86.0
pence per share (2019: 77.0 pence per
share) for the year to 31 December 2020
representing a distribution of 89% of our
second half earnings.
This will bring the total dividend for the
year to 156.5 pence per share, an overall
increase of 12%. This represents a pay-out
ratio of 87%. The Group has delivered a
Total Shareholder Return (TSR) of 335%
over the last 10 years (as illustrated in the
chart on page 154).
Group Board in 2020
The Board recognises the need for a strong
corporate governance framework and
supporting processes across the Group.
The Board believes that good governance,
with the tone set from the top, is a key
factor in delivering sustainable business
performance and creating value for all the
Group’s stakeholders.
We reviewed our Group strategy in 2020
in the light of the Covid-19 pandemic. It
remains straightforward and highly focused
on building customer-centric, sustainable
businesses for the long-term. We strive
to keep doing what we’re doing and do it
better year after year.
In our UK Insurance business, we remain
determined to strengthen our core
competitive advantages and pursue our
culture of innovation and ‘test and learn’
approach. For example, we are continuing
to deploy technology relating to digital
and self-service to improve the customer
experience and overall efficiencies.
We also continue to take what we do well
and what we learn to new markets and
new products, both in the UK and abroad.
We are agile enough to adapt to evolving
business environments and encourage
entrepreneurial initiatives to solve
challenges. We offer the best outcome to
our customers, people and investors. One
example is the launch of Admiral Pioneer, a
team that builds on our traditional test and
learn approach to focus on diversification
through new business areas.
From a governance perspective, we have
applied the principles of the Corporate
Governance Code which ensures that we
will continue to take on board the views of
all of our stakeholders in our discussions
and decision making. As you would expect,
we already have strong links with our
people and in 2020, the Board revisited
and enhanced several areas of focus. These
included our culture, engagement, diversity,
our impact on the environment and
climate change, and how we give back and
participate in the communities in which we
operate through our Ministry of Giving.
Once again Admiral was recognised as a
Great Place to Work in 2020, being 14th
best workplace in the world on the annual
25 World’s Best Workplaces list. We were
awarded the Sunday Times 3rd best big
company to work for in the UK and a lifetime
achievement award for the only company
to be listed for 20 consecutive years. We
were also named the 5th best workplace
for women in the UK. I could go on..! Of
course, this doesn’t happen by accident. We
continue to believe that if people like what
they do, they do it better. Our people feel
involved because they have a voice, they
are shareholders in our business, and they
genuinely care.
11
This year I had the pleasure of
visiting our operations in the
UK, France, Italy, Spain and the
US, but all visits were virtual.”
Having our people as shareholders remains
a distinctive element of Admiral’s incentive
schemes. These are designed to ensure
that decisions are made by management to
support long-term value growth, that the
right behaviours are rewarded, and that our
people’s interests are aligned with those of
shareholders. Our core belief is that over
the long-term, share appreciation depends
on delivering great outcomes for our
customers. Further details are provided in
the Remuneration Report on page 132.
During the year, I usually visit our overseas
operations as well as being present regularly
in South Wales. This year I had the pleasure
of visiting our operations in the UK,
France, Italy, Spain and the US, but all visits
were virtual. All Non-Executive Directors
participated in a number of these visits.
This allowed us to keep contact with staff
during this difficult period and directly hear
their views and the challenges they faced.
The Admiral culture still shines through.
We reviewed the composition of the Board
in 2020 and, as I highlighted in last year’s
report, we identified the need to appoint
someone with a technology background.
I am delighted that JP Rangaswami was
appointed in April. He brings a wealth of
experience and has already made an impact.
The Board and I feel that there is a good
balance of experience, skills and knowledge
to support and challenge the management
team, and that operations are supported by
effective governance and control systems.
Hampton-Alexander
Review
2020 marks the fifth and final year of the
Hampton-Alexander Review. This review is
an independent, voluntary, and business-
led initiative, which is supported by the
Government, to increase the representation
of women in senior leadership positions and
on boards of FTSE 350 companies.
As part of this initiative, a target of 33%
representation of women by 2020 in both
these categories was established. In 2020
across the FTSE 100, the number of women
in the Combined Executive Committee &
Direct Reports increased to over 30% but
fell short of the targeted 33%, with women’s
representation on FTSE Boards standing at
over 36%. Admiral has managed to achieve
both of these targets, and was ranked 14th
in the FTSE 100 for the representation of
women on Boards and in leadership, with
women representing 45.5% of our Board
and 34.5% of our Combined Executive
Committee & Direct Reports as of
11 January 2021.
14th
in FTSE 100 for representation
of women on Boards and
in leadership
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 12
Admiral Group plc · Annual Report and Accounts 2020
Chair’s statement continued
I would like to thank David
Stevens for the amazing
contribution he has made
to the Group.”
Our focus areas for the Board remain to:
Group CEO
• continue to build on the remarkably
special Admiral culture and in so doing,
continue to put our people, customers
and wider impact on the community at
the heart of what we do;
• continue our history of growth,
profitability and innovation;
•
invest in the development and growth
of our people – we have focused on the
quality and development of our senior
management team, added to our talent
base by some external hires, and reviewed
our succession pipeline;
• ensure excellent governance and the
highest standards; and
• focus on all aspects of ESG.
Our role in society
Admiral takes its role in society very
seriously and has an active approach to
sustainability (more information in the
Sustainability Report on the Admiral
website.) We are proud to be Wales’
only FTSE 100 headquartered company
and employ over 7,000 people in South
Wales. Our people play an active part in
the communities in which we operate.
We carefully consider our impact on the
community and environment, including
factors such as the green credentials of
our buildings, raising funds for multiple
charities, and considering the impact of
climate change across the business.
This year we reviewed our responsible
investment policy with regard to our ESG
positioning. The business also verified
carbon emissions for our operations by a
third party and these were subsequently
offset to become carbon neutral. We aim to
be an economically strong and responsible
business over the long-term, guided by
a clear purpose, so that we can make a
positive and significant impact not just on
our customers and our people but on the
economy and society.
I would like to thank David Stevens for the
amazing contribution he has made to the
Group. As a co-founder (back in 1991), he has
contributed enormously to all the elements
that make Admiral so special and successful,
including underwriting, product innovation,
the unique Admiral culture and much more.
David has brought a unique combination
of great brainpower, integrity, innovation,
caring and humility. Suffice to say, it has
been a real pleasure to work with him. We
are grateful that he will continue to work
with Admiral in a part-time advisory capacity
focusing on risk selection, financial services
and diversification.
In Milena we have a natural successor and a
leader for the next generation. She brings
a deep appreciation of the special Admiral
culture, entrepreneurial spirit, commercial
track record and people development
skills. After a smooth transition period, the
Board is confident that, with a very strong
and experienced management team, she
will build an even stronger Admiral for the
future.
Thank you
On behalf of the Board, I would like to thank
everyone at Admiral for their continued
hard work, their adaptability and caring
behaviour and their contribution to the
Group’s results in 2020. I would also like to
thank our shareholders for their support and
confidence. Most of all I would like to thank
our customers for placing their business
with us.
Annette Court
Group Chair
3 March 2021
13
David Stevens, one of the founders of Admiral, stepped down as Group CEO in 2020.
Annette Court, the Chair of the Admiral Group Board, takes the opportunity to chat
with David about his time at Admiral and his plans for the future.
Our former Group CEO David Stevens, CBE, was recognised and awarded the Industry Achiever
Award, by the Insurance Times Awards in 2020. The award recognises an inspirational,
boundary pushing and dedicated individual who has really made a difference.
Within Admiral, and the communities that we represent, David has set a high standard for
leadership with integrity and humility – and demonstrated how a vision can become a reality
with the right team, an innovative mindset and strong values.
As you come to the end of your term as CEO, what is the
Admiral has won many awards as a great place to work, and
legacy you feel you’re leaving behind?
you’ve won several leadership awards – given your experience, do
you have any advice for aspiring leaders?
The Company that was passed on to me was a company that did well by
its staff, by its customers and by its shareholders. I am very happy to say that
remains true of the Company that I hand on to Milena. Those are the outcomes
of a set of values and competences that lie at the heart of what makes Admiral
a success. For me, the most important legacy is the development of leaders
across the company that share those values and build on and indeed add to
those competencies.
If it’s advice you are looking for, firstly, I recommend Henry’s recent
publication (Think, Lead, Succeed, The Admiral Way). Secondly, I recommend
negotiating a commission before promoting a book! Thirdly, recruit people
for the values they hold as much as the expertise they bring in the confident
expectation that they go on to do so in their turn.
Looking back on your time at Admiral, what are your fondest
I’m delighted that you’ll still be involved in some areas of the
memories/what will you miss the most?
business – could you highlight one or two things
you’re most excited about?
For pure adrenalin nothing matched the annual presentations at the
Staff General Meetings. As much as I loved our results presentations, none
of them quite matched the immediate buzz of a few thousand colleagues
laughing together, whether at me or with me, it didn’t matter. What will
I miss most of all? The people. This year was in many ways bittersweet;
Admiral’s response to the Covid-19 pandemic has made me immensely proud,
but it has also meant I could neither say my farewells or express my gratitude
in person to so many.
Admiral is a little bit of an addictive habit, so I was very happy when
Milena offered for me to stay involved with Admiral after I step down. I am
already enjoying diving deeper into some of the parts of the business I find
most intellectually stimulating, notably risk selection in insurance.
What will life look like in retirement?
Lots of possible directions. Alongside my continued involvement with
Admiral, I am hoping to invest in a few local start-ups to see if we can get
a second Welsh company on the FTSE100 in a decade or two. On the other
hand, I might go back to be being a (sadly very mature) student of almost
anything historical (except the Tudors).
1993
Day One, January 2nd.
The phones worked and
rang! The IT systems
worked! We sold 38 policies.
(And the first claims didn’t
arrive until early February.)
1999
Pitching to the Board of our
Bermudan reinsurer majority
shareholder to convince them that
they shouldn’t sell Admiral. We failed
miserably, opening the door on the
Management Buy Out the following
year which gave us both (Henry and I),
freedom and prosperity.
2017
Donning a heart-shaped
one-piece costume, and a
Cupid’s bow, to introduce
Admiral’s very own in-house
dating app ('Bind’r') to largely
positive (and surprised!) Staff
General Meeting audience.
1999
Admiral was voted Welsh
Company of The Year.
Perhaps less prestigious
than some of the future
awards, but very
exciting at the time
(and it’s always
good to win
at home).
2004
Flotation. Especially the first
day of the road show when
we got buy-in from a couple
of large, influential investors,
and at the heady heights
of a £750 million
valuation.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 14
Admiral Group plc · Annual Report and Accounts 2020
Chief Executive Officer’s statement
In my Insurance Review in
last year’s annual report,
I described 2019 as an
‘eventful year.’
In hindsight, I would
change that headline as
it was actually pretty
ordinary compared to
the twelve months that
followed. I had no idea
what 2020 would hold!”
In my Insurance Review in last year’s annual
report, I described 2019 as an ‘eventful year.’
In hindsight, I would change that headline as
it was actually pretty ordinary compared to
the twelve months that followed. I had no
idea what 2020 would hold!
In early March 2020, the Board announced
my appointment as Group CEO Designate.
Succeeding David is a huge honour, as is
the opportunity to lead the company that
Henry and David built together; an incredibly
successful business underpinned by a truly
unique culture and a fantastic team.
The morning of that announcement, I
thought that I had a long transition period
ahead of me to ensure a smooth handover as
well as the opportunity to visit all of Admiral’s
subsidiaries around the world in-person.
Again, the reality turned out to be quite
different. The following day, one of my
investor meetings was cancelled because of
Covid-19. Fast-forward two weeks, and the
whole of the UK was in lockdown. And since
then, the months that followed have been
characterised by one major change after
another; both at a societal level and in the
way that businesses operate.
Transition to remote working
We had to very rapidly shift to remote
working to ensure that our staff were safe,
a focus which remained our primary concern
throughout this last year. We successfully
set up the majority of our staff to work from
home in under a month - a move that we
previously thought would take several years.
What a great lesson about the power of
focus! This allowed us to provide continuity
to our customers, despite the logistical and
technical challenges.
Digital acceleration
During the pandemic, the propensity of
customers to interact online increased
substantially, leading us to accelerate our
digital programs across the Group. In 2020,
we more than doubled the percentage of
digital interactions with our customers in
the UK, and we made a lot of new online
functionality available to them.
We believe that our international businesses,
operating in countries where online is not yet
the primary distribution channel, will benefit
from this trend in the long run. The same could
be true for UK Insurance lines beyond Motor.
Purchase of Penguin Portals
The digital acceleration has also accentuated
market interest in platforms such as Penguins
Portals, our global network of comparison
site businesses. Just before the year end, we
announced the agreement to sell Penguin
Portals to RVU, subject to regulatory approval.
It is the first time that we are separating
from such a significant part of the Group and
from so many great colleagues, who will be
missed enormously. We are hugely proud of
what they have achieved and how they have
transformed – or even created – the markets
in which they operate. We believe that this
was the right choice for the long-term success
of these businesses as they will find additional
synergies and opportunities to further fulfil
their ambitions with RVU.
Striving to do things better
As our different geographies entered
lockdown, we also saw material changes
in the underlying drivers of our business
performance, primarily a reduction in motor
claims frequency. We were fortunate; our
main reliance on Motor Insurance put us in
a privileged position, at a time when many
other businesses were struggling. Naturally,
this led to deep questioning internally:
what is our responsibility to our customers
who haven’t been able to use our product
as much as they had hoped? How should
Admiral support wider society in a time of
great economic uncertainty? And how can
Admiral best balance the outcomes for all
its different stakeholders?
We stayed true to our values and did what
we believed was right.
In this annual report, you will read plenty of
examples of this such as the Admiral Stay
at Home Refund, where we returned £110
million in premiums to our UK customers, and
several changes to our products and policy
terms to support key workers. We helped
our partners and local communities through
the many initiatives that were supported by
Admiral’s £6 million Covid-19 Support Fund,
such as distributing iPads to care homes and
supplies to children being home schooled.
Help more people to
look after their future.
Always striving for
better, together.”
15
We achieved all this while continuing
to deliver great financial outcomes for
our shareholders and strengthening the
foundations of our business.
More than ever, we wanted to ensure that
our products deliver good value, are fairly
priced and therefore affordable and inclusive
for more people. We wanted to help and
provide people with more support and
peace of mind for the future. We wanted
to look after our customers, our staff, and
our business partners when they need it
the most. As always, we strive to find new
ways to do things better, by using data and
through our test and learn approach. Every
day and in every circumstance, we strive
for excellence together as a team, as it’s
ingrained in our culture. Or, in summary:
“ Help more people to look after their future.
Always striving for better, together”.
And this is, indeed, our new purpose statement.
Could there be a better moment for the
Admiral team to take stock and reassert what
we stand for? It is in difficult and pressurised
times when you can really test and see the
true colours of people. Our culture during
the pandemic has not only remained strong
but has shone brighter than ever. Personally,
in my 14 years at Admiral, I have never been
prouder to work for this Group.
What I like about this new statement is
that you can read it through different
lenses. First, our customers, as we help
them to protect, achieve, and afford what
is important to them. Second, our staff,
as we help our colleagues to achieve their
potential, build on their strengths, and
improve their future. Third, the larger
community, as we not only provide more
employment opportunities in a company
that is a great place to work, but also as we
contribute to addressing challenges such as
diversity, inclusion, and climate change.
This alignment of the interests of different
stakeholders has always been a distinctive
feature of Admiral and a strength of our
business model. We develop strong long-
lasting relationships with our partners in
distribution, reinsurance and claims, with
our customers, who reward us with strong
retention rates and service scores, and, most
importantly, with our staff, who have an
impressive average tenure in the business.
And we manage to do so not only because
we care, but also because we take a long-
term perspective in our decision making.
An important element that underpins
this culture is our reward system, which is
based on Admiral shares rather than short-
term incentives. Admiral employees are
shareholders.
So, what are our long-term objectives?
We remain focused on two main strategic
priorities to strengthen our competitive
position and increase our resilience to
potential disruptive changes in mobility
and our core market.
First and foremost, our priority is to
accelerate the evolution of our core
businesses toward what we call ‘Admiral 2.0’,
an organisation that leverages on Admiral’s
historical strengths but is even more agile. It
is digital first and embraces flexible working
practices. But above all else, it is a company
that continues to put the customer at
the forefront and leverages even more on
data and advanced analytics to constantly
improve the user experience. As mentioned
before, 2020 was a strong year in that
respect; we doubled the number of machine
learning models pushed to production,
moved a vast part of the business to scaled
agile, transitioned the majority of customer
data to the cloud in our biggest businesses,
and materially improved our Net Promoter
Score (NPS) in every country. But we are
also very conscious there is potential to
do much more.
Our second strategic priority is to continue
our product diversification journey, to find
new opportunities where we can deploy our
competitive advantage, to develop stronger
propositions for our customers and increase
our engagement with them, both through
the reinforcement of existing products,
such as Household Insurance and Loans, and
through seeding new ones, both in the UK
and internationally. In 2020, we launched
Pet Insurance in Italy, Household Insurance
in France, and set up a new team of 'Admiral
Pioneers' to explore new opportunities
within the UK.
In addition, one big focus area in 2021 will be
(hopefully) the adaptation to a post-Covid-19
‘new normal,’ ensuring that we bring the key
learnings from the past year with us.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 16
Admiral Group plc · Annual Report and Accounts 2020
Chief Executive Officer’s statement continued
In the 2021 Great Place
to Work survey 90% of
respondents said that
Admiral is a great place
to work*1.”
We have made the decision to embrace a
hybrid working model and offer much more
flexibility to our staff in the future. This
reflects our belief that, very simply, “people
who like what they do, do it better” (Henry
Engelhardt, Admiral’s co-founder and first
CEO). This will also allow us to better compete
for talent. This year, our staff demonstrated
incredible resilience, the ability to adapt and
an impressive commitment. Despite all the
personal, technical, and logistical challenges,
everyone at Admiral worked incredibly hard
and delivered fantastic results. I can’t thank
my colleagues enough.
A special thank you to all the managers at
Admiral as well. Overnight all of Admiral’s
senior management team transformed
themselves into Chief Communication
Officers to ensure that they were on-hand to
support staff, assist customers, and be there
for each other. I take so much confidence for
the future from the strength, the talent, and
the competence of the Admiral team.
In the 2021 Great Place to Work survey 90%
of respondents said that Admiral is a great
place to work*1. There is no better testament
to our culture and to our people!
I’ve learnt my lesson by now, and I am not
going to define the past year as another
eventful year because – like all people from
Naples – I don’t like to challenge fate. Not
twice. But, looking back, I like to think of 2020
as the touchstone year for our operational
resilience, agility, and, more importantly, our
values and culture.
Milena Mondini de Focatiis
Group Chief Executive Officer
3 March 2021
*1
Based on Group-wide results for the 2021 Great Place to Work Survey, data surveyed in 2020.
Ten things you might not know
about Milena.
1. Place of birth
Napoli, Italy
2. Education
Master in Telecommunications
Engineering and MBA (INSEAD)
3. Work experience before Admiral
Strategy consultant (Accenture;
Bain & Company)
4. Positions held at Admiral
ConTe CEO, Head of European
Insurance, Head of UK and EU
Insurance and Group CEO
5. Favourite Admiral tradition
Fancy dress parties!
6. Passions
Travel, winter and summer sports,
and interior design
7. Spoken Languages
Fluent in Italian and English; enough
Spanish and French to order great
tapas and French wine
8. What excites you at work
Unleashing the full potential and
positive energy of people and teams
9. Personal resolution for 2021
Win the most challenging
competition of all – parents of
almost-teenager vs. video games
10. Professional resolution for 2021
Ensure that Admiral continues
to be a Great Place to Work, as
much at home as in the office
17
The
team,
the
team,
the
team
100%
of UK based employees employed
for more than one year own
shares in Admiral Group*1
96%
of staff believe people at work
are treated fairly regardless of
their race or ethnic origin*2
*1 More details on our employee share scheme can be found in our Remuneration Committee Report.
*2 Based on Group-wide results for the 2021 Great Place to Work Survey, data surveyed in 2020.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 18
Admiral Group plc · Annual Report and Accounts 2020
Business model
We build on our core competencies to create value for our stakeholders, focusing on profitable growth, strong
risk selection capabilities, a controlled test-and-learn approach, the strength of our culture and the depth of
our business relationships.
The business model includes an assessment of the projected solvency of the business as part of the capital
plan and ORSA assessment, which includes consideration of principal risks facing the Group, as well as
consideration of emerging risks such as climate change.
Our core
capabilities
1. Providing good value
financial products
We take great pride in providing good
value financial products and services
that meet customer needs. We aim to
maximise the value of our core business
and lay the foundation for future growth
with new products.
2. Risk selection and data analytics
Our unique approach to risk selection is built
upon experience, underwriting skill, and
increasingly, on insights from big data and
analytics. Our data driven approach forms
a foundation for business decisions.
6. Financial discipline
and a cost-conscious culture
Admiral focuses on bottom line profitability in
the short, medium and long term, and this guides
decisions made across all our business operations.
Our cost-conscious approach to business
translates to a competitive expense ratio. We aim
to return excess capital to shareholders without
withholding the necessary support needed by our
businesses, albeit limiting the luxury of excess
capital. This allows management to remain
focused on the most important aspects
of the business.
3. Excellent customer service
We strive to provide dependable and helpful
customer service resulting in satisfied and loyal
customers. We work hard so that customers
can access the most suitable products for their
needs, across their preferred channels.
5. Efficient capital employment
Admiral shares a large proportion of risk with co-
and reinsurance partners, underpinned by strong
underwriting results. Sharing risk allows Admiral
to hold less capital as it bears less risk, resulting
in a superior return on capital for Admiral
shareholders whilst also providing protection
for losses.
4. Efficient claims management
We maintain our focus on efficient claims
management backed by a culture of continuous
improvement, decades of experience in claims
handling, a cost-conscious culture and great
customer service.
19
What sets us
apart
Track record of long term, profitable growth
Test and learn approach
Admiral focuses on building long-term sustainable businesses
for the future. We have a prudent approach in the way we run our
businesses, including a prudent reserving philosophy within our
Insurance operations and Loans business. We aim to continuously
improve and build on our key competitive advantages of cost
efficiency, risk selection and claims management which
we combine with our wider strategic strengths to
ensure long term value creation.
Admiral has a strong culture of innovation and organic growth.
Our businesses have been built from the ground up. We identify
and understand opportunities, take measured steps to test
our understanding of the challenges and effectiveness of our
solutions, and learn from these experiences. The Company
continues to investigate opportunities to improve our existing
businesses and build new businesses.
Test and learn approach
U nique co m pany culture
and depth of relationships
Unique company culture
and depth of relationships
We believe that people who like what they do,
do it better, and we go out of our way to make
Admiral a great place to work with strong core
values and a commitment to diversity and
inclusion. This creates an environment where
people share ideas, aren’t afraid to speak up and
change things, and above all, feel valued.
ter m, profitable gro w th
Track record of long
R
e
s
s
u
p
s
t
o
n
a
i
n
si
a
b
l
b
e a
l
e o
n
p
d
e
r
a
ti
o
n
s
Responsible and sustainable operations
Central to our approach towards long term value
creation is our continued commitment to drive positive
outcomes for all our stakeholders. We appreciate that
stakeholder needs evolve over time, and we consciously
adapt to remain a responsible, sustainable business for
the long term. We genuinely care about the impact that
we have on our customers, people, communities, partners,
the environment and our shareholders, and how we can best
drive real value for all of our stakeholders.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 20
Admiral Group plc · Annual Report and Accounts 2020
Strategic
progress
The underlying strategy for Admiral remains unchanged and is highly focused on building customer-centric,
sustainable businesses for the long-term. We strive to keep doing what we’re doing well and do it better year
after year.
Investing
in core
positioning
Strategic Objective
2020 Progress
Sustained competitive advantage
• Market leading combined ratio.
Invest to ensure continued efficient
claims management, strong risk
selection to underwrite profitable
business, a cost-conscious culture
and great customer service.
• First place in the Direct to Consumer Business of the Year
in the Insurance Times Awards.
•
Improvements in claims processes, particularly in analytics
and automation.
Continued growth and profitability
• Continued a disciplined, rational approach to growth and
Profitably grow our UK Motor and
Household insurance operations.
prioritising profitability.
• Growth in UK Motor and Household customers.
• Strong retention in UK Motor and Household.
Strong digital, data and
tech capabilities
• Enhancement of advanced data and analytics tools through
the launch of our Data and Analytics (‘DnA’) project.
Investing
in core
transformation
Enhance digital, data and tech
capabilities in line with adapting to
customer and business needs.
• Doubled the number of Admiral App users.
• Launch of ‘add a car’ in MyAccount.
• Loans launched a new Self-Service Portal to allow
customers to manage their loan online.
• MyAccount log ins grew by over 40%.
• Admiral Seguros rolled out an AI solution implemented to
assess vehicle damage through photos sent via an app.
Smart working
• Configured and distributed over 6,200 laptops to UK
Evolve ways of working through
Admiral’s Smart Working approach
– with a focus on four pillars: Smart
People, Smart Technology, Smart
Spaces and Smart Business Practices.
homeworking employees.
• Provided UK staff with over 1,300 chairs and almost 11,000
specialised items.
• Adapted to flexible working arrangements.
21
2021 Focus
• Maintain strong performance of our UK Insurance business.
• Leader in insurance risk selection and efficient claims
management.
• Continue to be an efficient business with a focus on expenses.
Related KPI
See our KPIs on page 28
9%
increase in customer numbers
across UK motor book
• Continue to take advantage of growth opportunities in UK
Motor and Household.
• Focus on MultiCover and MultiCar growth (UK).
• Continue to strengthen customer retention.
98%
of customers would buy again*1
• Continued focus as a data, tech and digital first business.
• Promote usage of the Admiral App.
• Growth in number of transactions completed online.
• Enhance and encourage claims to be started online.
• Ensure continued strength in operational resilience, IT and
information security.
•
Improve AI capabilities across the wider portfolio.
40%
increase in online portal logins via MyAccount,
our online self-service portal
• Continue to enhance our IT support services and to provide
employees with all software and hardware required to excel at
their roles.
• Continue to monitor staff needs while working from home and
adapt accordingly.
• Continue to protect our culture and values through collaborative,
engaging working practices.
90%
of respondents said that Admiral
is a great place to work*2
*1 UK score based on all insurance and financial services products in 2020.
*2 2021 Great Place to Work Survey, data surveyed in 2020.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 22
Admiral Group plc · Annual Report and Accounts 2020
Strategic progress continued
The Board and senior management team undertake a focused annual
review of our strategy and our approach, as well as a consideration of
potential challenges and risks.
Strategic Objective
2020 Progress
Evolution of motor book
• Strong growth in Van Insurance businesses (UK).
Investing
in motor
evolution
Maximise the value of our core
business by evolving our motor
insurance proposition, identifying
opportunities in the current phase
of disruption and trends, and lay
the foundation for future growth.
• Leading telematics provider.
• 47% growth in customers across our Veygo product
offering.
Investing
in future
businesses
International insurance growth
• Growth in policies and profit across International Insurance
Develop profitable, growing,
sustainable insurance businesses
that mirror the UK model.
businesses.
•
Improvements to digital and self-service for customers
across the Group.
• Expansion into broker channels in Italy and Spain.
•
Improved direct acquisition performance in France.
• 70% stronger brand awareness for ConTe in Italy.
New product diversification
• Prudent growth across our Financial Services business.
Build and develop a competitive
advantage in new products, allowing
us to engage more with customers
and build business resilience.
• Creation of a ‘pioneering’ team to focus on new business
opportunities.
• Launch of Household Insurance in France.
• Launch of Pet Insurance in Italy.
People driven workplace
• Named the 14th best workplace in the world on the
Ensure a great place to work with
high staff engagement, and where
people feel supported, developed,
and valued.
annual 25 World’s Best Workplaces list.
• Lifetime Masters award for being recognised as
a great place to work every year since the awards
began 20 years ago.
…whilst
ensuring
Admiral
remains a
great place
to work
23
For more information refer to our Strategy in action case studies on page 24
2021 Focus
• Stay close to the customer, emerging customer needs and
new mobility trends.
• Continue our product diversification journey through
experimenting in the core business and testing emerging
customer propositions.
Related KPI
See our KPIs on page 28
26%
growth in van customers/policies
• Continue our path towards long-term value creation in Europe
and beyond.
• Continue to grow our presence via Comparison and broker
distribution channels.
•
Improve customer persistency across international businesses.
• Continue to strengthen synergies and learnings across operations.
•
In the US, continue to focus on long term customer retention and
improve loss ratio fundamentals.
13%
growth in International
insurance customers
• Further develop Admiral Loans and offer UK customers a better
range of products and an improved online buying experience.
2nd
• Test and learn approach to building new businesses with innovative
customer centric product design and technologies.
Moneyfacts awarded Admiral Financial Services
the Highly Commended Best Personal Loan Provider
(2nd place) and Highly Commended Best Car Finance
Provider (2nd place)
• Be a leader in diversity and inclusion.
• Attract and develop top talent.
• Continue to develop our people by offering opportunities for
training and development, as well as providing interesting
career opportunities.
• Continue to encourage and respond to employee feedback
and improve.
• Ensure our people enjoy working for Admiral.
4th
best super large workplace
(1,000+ employees) in the UK
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 24
Admiral Group plc · Annual Report and Accounts 2020
Our strategy in action
Motor Evolution
In 2020, we introduced a new cross-departmental Data
and Analytics (DnA) project. This strategic project aims to
enhance our Group-wide data and analytics tools, ensuring
that our ability to make data-driven decisions remains a
key driver behind our commercial success.
Data is the backbone of our business, and analysing data
and data-driven decision making is one of Admiral’s core
strengths. To continue to enhance our data capabilities, the
DnA project was launched with the goal to elevate our data
and analytics tools. The aim of the project can be broken
down into three key components:
• Better Data – moving towards cloud-based solutions
to house all of our core insurance data for easy and
accessible use. Wherever possible, data will be available
from the cloud platform in near real-time, improving our
view of the business.
• Better Tooling – maintaining our leading data
capabilities, moving away from restrictive legacy systems
towards a leading agile financial technology (Fintech)
mindset. Enabling our analysts and data scientists to rely
on the latest available tools and techniques to test and
learn innovative solutions.
• Better Decisions – alongside a real time view of what
is happening in our business, the DnA project aims to
improve access to pricing and analytics reporting and
visualisation tools, enabling us to turn insights gained
from improved reporting into meaningful actions.
Digital
capabilities
Admiral 2.0
As our lifestyles evolve and technology advances, we
recognise that the needs and expectations of our customers
change. We are committed to improving communication
with our customers as technology continues to evolve and
we engage with our customers through a range of different
communication, sales and service channels.
Whilst our focus on technological improvements has been
ongoing over the past several years, Covid-19 has truly
accelerated the need for customers to have easy and accessible
online solutions, whilst ensuring that operational resilience, IT
and information security is stronger than ever before.
In 2020, we reinforced our commitment to provide customers
with self-service and digital contact options, driving strong
improvements in our digital performance in the UK over the period:
• Sales that originated online amounted to over 75% of all sales,
whilst conversion of online sales recorded a new high.
• Customers registering on the Admiral App doubled in 2020.
• Digital renewals accounted for a third of total renewals, a
strong increase versus c.10% online renewal levels seen in 2019.
• On MyAccount, our online self-service portal, digital
improvements led to an over 40% increase in online portal log ins.
• New features were also added to MyAccount, including the
ability to add a car to a policy directly via the portal, and
register a claim digitally as well.
As we look ahead we see that our ability to access better
data will enhance more informed decision-making and
allow our customers to access a greater range of affordable
products and services best suited to their needs.
Looking ahead, we plan to enhance our digital capabilities,
and to build upon data synergies across the Group. We expect
to increase our level of investment in this area of strategic
importance, as we continue to optimise our digital estate.
Veygo
As the world of mobility continues to develop in line with customer
preference, our brand Veygo, which offers temporary car insurance
and learner driver insurance, sold its millionth policy in August. Veygo
is focused on delivering products to customers which give people
flexibility in their lifestyles. It aims to enable customers to move
easily from one place to another, in a way which is safe, fast and easy.
Veygo operates exclusively online, meaning insurance can be obtained
instantly, with minimum delay and disruption. Veygo’s progress is
testament to the test and learn approach utilised by Admiral when it
comes to developing new products and exploring new business avenues.
25
Pioneering
Diversification
Admiral views diversification, in the form of the ability to
grow beyond motor insurance, as a key element in building a
sustainable business for the future. Our Group-wide approach
is focused on adapting to the evolving needs and expectations
of our customers.
The Group has a pioneering team dedicated to seeding,
launching, and scaling new businesses, using our proven
‘Test and Learn’ approach. A key focus is the commitment to
improving the customer experience. The team actively tests
new products, business models and partnerships through a
discovery-driven approach. The objective is to identify products
and businesses according to increasingly important societal
areas and trends.
Our ‘Test and Learn’ approach will drive the identification
process for selecting viable new products and businesses. Once
selected, the potential product or business will benefit from
the scale and scope of the wider Group. For example, Group
data and expertise may be used to provide guidance or share
experiences and knowledge. The products and businesses
identified are expected to become
long-term growth areas for
Admiral, and ultimately
sources of long-term value.
Diversification
Admiral has built a prime loan book and is now a relevant
participant in what is a large market in the UK. We see our
financial services capabilities as one way to accelerate
further growth in the future.
Our loans business was born digitally native with online
customer acquisition since inception. By utilising customer
feedback and adopting a ‘Test and Learn’ approach, we
regularly improve our channels of customer communication
to satisfy the changing needs and preferences of
our customers.
Due to the impact of Covid-19, 2020 presented our
Loans team with an opportunity to further improve our
digital offering to existing customers, by providing them
with additional digital options for engaging with us and
managing their loans. This area was prioritised
for development based on suggestions from
customer feedback.
In July, we launched our online self-service portal as a beta,
alongside a Net Promoter Score (NPS) survey to ensure the
portal’s functions, such as settlement quotes, web chat and
payment options, were designed around customer demand
and user feedback.
By the end of 2020, 37% of customers had signed up to use
the portal. Our first NPS score was above 50, categorised as
a ‘great’ score.
2nd
Moneyfacts awarded Admiral Financial
Services the Highly Commended Best Personal
Loan Provider (second place) and Highly
Commended Best Car Finance Provider in both
categories (second place)
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 26
Admiral Group plc · Annual Report and Accounts 2020
Our strategy in action continued
Ensuring that Admiral remains a great place to work drives
our commitment to investing in our people. In 2020, Covid-19
fundamentally changed our working environment, and one of our
biggest areas of strategic investment was to support all business
areas transition from working in the office, to working remotely. To
ensure we would successfully adapt to this homeworking transition,
Admiral embraced a Smart Working approach.
Admiral’s Smart Working approach focuses on four equally
important pillars: Smart People, Smart Technology, Smart Spaces
and Smart Business Practices.
Smart People involves protecting and evolving Admiral’s culture
and values, to ensure our culture remains as unique and integral
as it always has been, even if the way that we interact with each
other has changed. We launched initiatives such as Team Time, with
activities to help teams stay connected and engaged with each
other and the business. We also adapted many of the key events in
our social calendar, holding virtual editions of ‘Admiral’s Got Talent’
and the ‘Top 10’ Department Awards.
Under the Smart Technology pillar, we provided employees with
the software and hardware needed to perform and to excel in
their roles, which included configuring and distributing over 6,200
laptops to homeworking employees.
Smart Spaces refers to adaptable offices, which now accommodate
a combination of office and remote workers. This pillar also covers
employees’ home workspaces, and throughout 2020 we worked
to ensure that employees were comfortable and well-equipped
when working from home. All employees were advised to complete
Display Screen Equipment (DSE) risk assessments and our Facilities
and Workplace Support teams have provided staff with over 1,300
chairs and almost 11,000 specialised items, including laptop risers
and products for back support.
To promote Smart Business Practices, employees were encouraged
to arrange shorter, more effective meetings and take comfort
breaks, with these changes championed by senior managers.
To monitor how well our staff have adapted to these changes, we
sent out monthly staff engagement surveys. In a survey held in
October 2020 across our UK operations, 96% of staff said they were
enjoying working from home, and
90% of staff said they felt well
supported by their manager.
Rewarding our
employees
We maintain a philosophy that ‘people who like what
they do, do it better’, and in doing so, aim to ensure
a work environment where staff are engaged and
have a clear purpose.
One example is through our share ownership
scheme, which is an important part of the Admiral
culture, and aims to reward and recognise our
employees for their hard work and the overall
performance of the Group.
All UK based employees employed at Admiral for
more than one year receive the same number of
shares through our Approved Free Share Plan (SIP).
A wide group of managers across the business
receive additional shares through the Discretionary
Free Share Scheme (DFSS), which is designed to
ensure that decisions are made by management to
support long-term value growth, reward the right
behaviours, and to ensure that our people’s interests
are aligned with those of our shareholders.
Our core belief is that over the long term, share
appreciation depends on achieving great outcomes
for our customers. We recognise the need to ensure
that our employees are highly skilled and motivated.
We prioritise a recognition culture where our
employees can thrive, be innovative and contribute
to the future success of the Group.
To ensure we stay close to staff engagement and
morale, we utilise a culture scorecard matrix as a
benchmark for monitoring culture across the Group.
This is to ensure we are aligned with our purpose and
values; and to provide greater Board insight through
formal reporting of areas of strength, and potential
areas of development. The scorecard matrix is
produced quarterly, reported through the Group’s
Conduct Risk Framework, and shared with the Board
for challenge and review. The scores are supported
by staff comments relating to specific survey
questions to provide further insight. Tolerances are
set at a level that ensure we work hard to maintain
our great culture whilst challenging us to continually
improve. Our Employee
Consultation Group also
acts as a platform for
open communication
between employees,
senior management and
Admiral Group Board,
promoting healthy
debates and discussions.
27
2020 awards
Our 2020 awards are a testament to achieving our commitments
• Lifetime Masters Award, Great Place to Work Institute UK
(Super Large category)
• Great place to work in the UK, Great Place to Work Institute
(20th consecutive year)
• Recognised by the Great Place To Work Institute UK as a Centre
of Excellence in Wellbeing
• 3rd Best Big Company to Work for in the UK, The Sunday Times
• 4th Best Super Large Workplace in the UK (1,000+ employees),
Great Place to Work Institute
• 5th Best Workplace for Women for Super Large Organisations,
Great Place to Work
• 1st Direct to Consumer Business of the Year, Insurance Times Awards
• 2nd Best Personal Loan Provider (Admiral Financial Services), Moneyfacts
• 2nd Best Car Finance Provider’ (2nd place), Moneyfacts
• Innovation in Engagement Practise Award, The Sunday Times Best Companies
• Special Recognition Award, The Sunday Times Best Companies
• 8th Best Multinational Workplace in Europe, The Great Place to Work Institute
• 3rd Best Workplace in Spain (250–500 employees), Best Workplaces in Spain
• 4th Best Workplace in Italy (500 + employees), Best Workplaces Italia 2020
• 11th Best Workplace in France (250–500 employees), Great Place to Work
• 11th Best Workplace in Canada list (1000+ employees),
Best Workplaces in Canada
• Featured in the Best Workplaces in Canada for Mental Wellness list
• Featured in the Best Workplaces in Canada for Inclusion list
• 14th Best Workplace in the World, 25 World’s Best Workplaces
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 28
Admiral Group plc · Annual Report and Accounts 2020
Key performance indicators
In order to implement, develop and measure the Group’s strategic performance, we monitor 12 financial
and non-financial key performance indicators (‘KPIs’) in addition to the Group’s income statement results.
Financial Measures
1.
Group
profit
21%*1
2.
Customer
growth
10%
3.
International
insurance
13%
growth in Group share
of profit before tax
Growth in
customer numbers
growth in International
Insurance customers
Strategic objectives:
Strategic objectives:
Strategic objectives:
Investing in core positioning
Investing in core positioning
Investing in future businesses
Investing in core transformation
Investing in core transformation
Investing in motor evolution
Investing in future businesses
4.
Shareholder
returns
179.5p*1
5.
Strong capital
position
187%*2
EPS (Earnings per share)
Group Solvency ratio
6.
Growth beyond
motor insurance
15%
growth in UK
Household customers
Strategic objectives:
Strategic objectives:
Strategic objectives:
Investing in core positioning
Investing in core positioning
Investing in future businesses
Investing in core transformation
Investing in core transformation
Ensuring Admiral remains a
great place to work
*1 Alternative performance measure (APM) – refer to Glossary for definition and explanation.
*2 Unaudited: refer to capital structure and financial position section on page 34 for further information.
29
Non-Financial Measures
7.
Customer
satisfaction
43%
8.
Improving loyalty
and retention
>5%
9.
Digital
engagement
40%
drop in UK complaints
(per 1000 policies in force)
improvement in NPS
score across all markets
increase in UK customers
using MyAccount
Strategic objectives:
Strategic objectives:
Strategic objectives:
Investing in core positioning
Investing in core positioning
Investing in core positioning
Investing in core transformation
Investing in core transformation
Investing in core transformation
Investing in future businesses
10.
Automation
>500k
hours given back to the
business in automation
savings since 2016
11.
A great place to
work
14th
12.
Sustainability
100%
best workplace in the world
on the annual 25 World’s Best
Workplaces list
of our asset managers are
signed up the UN PRI guidelines
Strategic objectives:
Strategic objectives:
Strategic objectives:
Investing in core transformation
Investing in core transformation
Investing in core transformation
Ensuring Admiral remains a
great place to work
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 30
Admiral Group plc · Annual Report and Accounts 2020
Chief Financial Officer’s
review
In line with our usual
practice of distributing
the majority of post-tax
profits to shareholders,
we have proposed a final
dividend of 86 pence
per share.”
Well, 2020 will surely live long in the memory. The awful impact of Covid-19
overshadowed some quite momentous events at Admiral, including David’s
retirement and our announcement at the end of the year of the disposal of
most of our Comparison businesses.
As we’ve set out throughout the annual report, we’ve tried hard to respond to the pandemic
in a balanced way, looking out for the interests of all our main stakeholders – customers,
staff and shareholders. Hopefully we’ve done a reasonable job.
I’ll start my review by giving some insight into the main highlights of our 2020 results.
Group share of pre-tax profit £m
UK Insurance
International Insurance
Admiral Loans
Comparison
Share scheme cost
Other
Profit
2020
698
9
(14)
31
(54)
(32)
638
2019
597
(1)
(8)
18
(53)
(27)
526
Change
+101
+10
(6)
+13
(1)
(5)
+112
It feels like half a lifetime ago, but remember that 2019’s UK Insurance result was
negatively impacted by a £33 million one-off impact from a change in the Ogden discount
rate (resulting in higher claims costs) and so a fairer year-on-year comparison is profit
of £638 million compared to around £560 million (+£78 million, +14%). Clearly still a very
healthy result, boosted by a significant increase in profit from the UK business.
Whilst claims from previous years continued to develop positively and the motor business
grew at a decent rate (+9% in customer numbers), a notably lower accident year loss ratio
resulted in the step up in profit. That lower ratio is inevitably due to lower claims volumes
resulting from significant reductions in miles driven, especially during the first lockdown
but also in the second half. And it comes despite the £100 million+ rebate of premium in
May (the only rebate of its kind in the UK) and significant discounts to existing and new
customers since (to the best of our knowledge greater discounting than many or all of
our competitors).
We expect that the 2021 loss ratio will be higher than 2020, as claims frequency is very
likely to return towards more normal levels and the impact of discounted policies written
in 2020 feed through into premium earned in 2021.
Our travel insurance business is small relative to the Group and made a very small loss of
around £1 million, though of course volumes ended the year massively behind plan. Admiral
doesn’t sell business interruption insurance and so wasn’t impacted by the major losses to
that product line.
31
Other points of interest from
the results include:
• An improved current year loss ratio (and
resultant higher profit commission)
boosted the Household business profit
to £15 million (v £8 million). The business
also continued to grow quite nicely.
• The International Insurance result was
also positively impacted by reduced
claims frequency and a significantly lower
current year loss ratio. Good growth (in
Europe) and continued positive moves
in previous period claims costs also
contributed to the result (a profit of £9
million v a loss of £1 million). All three
European insurers were profitable (£14
million in aggregate) and the US loss was
lower year-on-year. Combined growth was
13% in customer numbers.
• Admiral Financial Services reported a
loss of £14 million in line with guidance
given with our half year results. Higher
provisions for expected credit losses due
to Covid-19’s impact on the economy
were, unsurprisingly, the key reason.
Arrears experience throughout 2020
was actually very much in line with prior
years and the main impacts of increased
unemployment on credit losses are
expected to be realised in 2021 after
government employment support
schemes come to an end.
• Confused.com led the way to an excellent
result from the Comparison businesses
(a profit of £31 million, up by two thirds).
Confused’s revenue increased by nearly
20%, whilst profit was up more than 40%
for the second year in a row.
• Other parts of the income statement
were largely in line with 2019, though the
increased share price and profits led to a
slight increase in the share scheme cost
and the costs of major projects like the
Comparison disposal led to higher
group overheads.
Comparison disposal
We announced late in 2020 that we had
agreed to sell almost all of the Group’s
comparison businesses under the Penguin
Portals banner to RVU, the comparison
division of ZPG. As we said at the time,
we believe strongly that the combination
of Penguin Portals’ strengths, notably in
insurance comparison across Europe, with
RVU’s strengths beyond insurance and
experience in growth through acquisition,
provides a solid foundation for the
combined businesses to grow and prosper.
Total consideration is expected to be
around £510 million, including the element
attributable to MAPFRE (which owns shares
in some of the businesses in the Penguin
group). Admiral’s share of the proceeds,
net of transaction costs and the minority
interests is expected to be around £450
million (the profit on disposal that would be
recognised in the 2021 income statement
should be a similar number) which we
believe represents a good outcome
for shareholders.
We expect completion to occur in the first
half of 2021 after which we would confirm
our intentions for the use of proceeds.
Capital, dividends and
Admiral’s internal model
In line with our usual practice of distributing
the majority of post-tax profits to
shareholders, we have proposed a final
dividend of 86 pence per share, nearly
90% of earnings, and an increase of 12%
compared to the final 2019 dividend (if
you include the part that we deferred and
paid later in 2020), broadly in line with the
increase in H2 earnings. The solvency ratio
remains very strong at 187%.
Readers of the annual report will be aware
that for the past few years, Admiral has
been developing its own internal model to
calculate its capital requirement. This is
a complex process and continues to take
longer than we initially expected. In late
2020, the Admiral Board has decided to
take some time to review the model. This
will inevitably lead to a further delay in the
likely timing of a formal application to the
regulators to use the model, which we no
longer expect to happen in 2021. Our teams
continue to work extremely hard on this
important project and we’ll provide further
updates later in 2021.
Farewell David, welcome Milena
Finally, from me, it would be remiss to gloss
over one particularly significant Admiral
moment on the very last day of the year. As
my colleagues have commented earlier in
the report, Admiral’s second Group CEO and
founder director (and my boss of five years)
stepped down (‘retired’ is a bit strong as
David still works in an advisory role for us).
David, along with Henry and Andrew and the
other founding management team, created
an amazing company with a culture that
remains healthy and core to everything we
do today. It’s impossible to pay adequate
tribute to David’s immense contribution
to everything Admiral is about, and he’ll be
sorely missed as CEO.
Stepping very ably into his shoes is Milena,
as Admiral’s third CEO in our 30-year history.
We have full confidence in Milena and I’m
already very much enjoying being part of
her team.
Here’s hoping 2021 is another strong year
for Admiral and a much more cheerful one
for us all.
Geraint Jones
Chief Financial Officer
3 March 2021
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 32
Admiral Group plc · Annual Report and Accounts 2020
Group overview
2020 Group Overview
£m
Turnover (£bn)*1*2
Underwriting profit including investment income*1
Profit commission
Net other revenue and expenses (continuing operations)
Operating profit (continuing operations)
Group statutory profit before tax (continuing operations)*3
Group profit before tax (total)*1
Group’s share of profit before tax*1
UK Insurance
International Insurance
Loans
Comparison*3
Other
Group’s share of profit before tax*1
Key metrics:
Group loss ratio*1*2
Group expense ratio*1*2
Group combined ratio*1
Customer numbers (million)
Earnings per share
Dividends
Return on Equity*1
Solvency Ratio
2020
3.55
333.1
134.0
153.4
620.5
608.2
637.6
638.4
698.1
8.8
(13.8)
31.0
(85.7)
638.4
54.4%
26.8%
81.2%
7.66
179.5p
156.5p
52%
187%
2019
3.46
238.0
114.9
164.7
517.6
505.1
522.6
526.1
597.4
(0.9)
(8.4)
18.0
(80.0)
526.1
64.9%
23.7%
88.6%
6.98
148.3p
140.0p
52%
190%
2018
3.28
211.2
93.2
171.5
475.9
464.6
476.2
479.3
555.6
(1.1)
(11.8)
8.8
(72.2)
479.3
67.3%
22.9%
90.2%
6.51
137.1p
126.0p
56%
194%
*1 Alternative Performance Measures – refer to the end of this report for definition and explanation.
*2 See note 14 for a reconciliation of Turnover and reported loss and expense ratios to the financial statements.
*3 See notes 13 and 14 for details of discontinued operations and a reconciliation of the Strategic Report to the financial statements.
33
Key highlights of the Group’s
results for 2020 are as follows:
• Continued growth in turnover (£3.55
billion, up 2% on 2019) and customer
numbers (7.66 million, up 10% on 2019).
• Group’s share of pre-tax profits of £638.4
million (2019: £526.1 million) and Group
profit before tax of £637.6 million (2019:
£522.6 million).
• The main driver of the strong growth in
Group profit was a higher UK Insurance
result, which benefited from reduced
claims frequency and continued strong
prior year reserve releases, and also
the non-recurrence of the £33 million
negative Ogden discount rate impact
in 2019.
• UK Insurance turnover and customers
increased by 2% and 9% respectively to
£2.67 billion and 6.0 million (2019: £2.63
billion and 5.5 million), as the business
passed claims frequency benefits to
customers by refunding premium and
reducing prices.
• UK Household saw strong growth in
turnover and customer numbers, with
an improved result of £15.4 million
(2019: £7.5 million profit) as a result
of lower theft and escape of water
claims in the period.
• The European insurance businesses
delivered a higher profit of £13.6 million
(2019: £8.7 million), and there was a lower
loss in the US insurance business (£4.8
million in 2020 v £9.6 million in 2019). The
overall international insurance profit was
£8.8 million (2019: £0.9 million loss).
• The Comparison businesses recorded
aggregate profits (excluding minority
interests’ share) of £31.0 million (2019:
£18.0 million), with the increase mainly
driven by a very strong profit from
Confused.com of £29.4 million (2019:
£20.4 million).
Covid-19 impact
The Covid-19 (‘Covid’) pandemic impacted all operations during 2020. Early lockdown
restrictions led to fewer miles driven resulting in a significant drop in claims frequency
for the insurance operations as more people stayed at home. In addition, the
comparison businesses saw a strong initial drop in quote volumes which recovered
strongly in most markets as lockdown restrictions eased. Less severe restrictions in
the US led to a lower claims’ frequency impact.
In response to the economic uncertainty in the first half of the year, Admiral paused
sales of both travel insurance and lending products in March to limit any potential
losses in these businesses. Admiral cautiously re-entered both markets in the second
half of 2020. Admiral Loans has taken a particularly prudent approach through
increasing loan provisions due to the likelihood of increased arrears experience due to
higher unemployment levels. However, the level of loans defaults has not experienced
a significant increase to date.
Admiral has maintained a commitment to supporting customers, staff, emergency
workers and local communities during the coronavirus crisis, taking several steps and
adapting to each market context. These include:
• Customer initiatives: Admiral supported customers through relaxed payment
terms, reduced/waived administration fees, premium rate reductions, and providing
additional support for emergency workers. In the UK, Admiral announced a £110
million Stay at Home premium refund for all existing motor insurance customers,
which amounted to £25 per vehicle on cover.
• Staff initiatives: The safety of staff has remained of utmost importance, with many
employees already working from home before the official government lockdown
was in place. Various initiatives were implemented to optimise staff working from
home, including providing relevant equipment as well as wellbeing and mental health
support initiatives. Staff engagement levels are monitored regularly and remain high.
All employees were paid their full salaries, and aside from a very small number
of staff in France, no staff were furloughed, and no support has been sought or
received from government schemes.
• Community initiatives: Admiral supported local communities across our global
operations through donations and volunteer activities. In particular, Admiral set up a
£6 million fund to support charities and communities, with staff involvement in the
allocation of these funds.
Earnings per share
Earnings per share increased by 21% to 179.5
pence (2019: 148.3 pence), in line with the
growth in Admiral’s share of pre-tax profit.
• 63.6 pence per share normal dividend,
based on the dividend policy of
distributing 65% of post-tax profits; plus
• A special dividend of 22.4 pence per share.
Dividends
The Group’s dividend policy is to pay 65% of
post-tax profits as a normal dividend and to
pay a further special dividend comprising
earnings not required to be held in the
Group for solvency capital requirements
including management internal risk
appetite above the regulatory minimum.
The Board has proposed a final dividend of
86.0 pence per share (approximately £250
million), split as follows:
This final dividend is 12% ahead of the
2019 final dividend (77.0 pence per share,
including the special dividend which was
deferred and subsequently paid alongside
the 2020 interim dividend), with a pay-out
ratio of 89% for H2 2020.
The total dividend for the 2020 financial year
is 156.5 pence per share, reflecting a 12%
increase on 2019 and an 87% pay-out ratio.
The payment is due on 4 June 2021, ex-dividend
date 6 May 2021 and record date 7 May 2021.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 34
Admiral Group plc · Annual Report and Accounts 2020
Group overview continued
Return on equity
The Group’s return on equity was 52% in 2020, in line with 2019. The Group’s share of total post-tax profits grew by 21%, in line with
the 21% growth in the group’s share of average equity. The significant growth in profits in the second half of 2020 contributed to the
increase in the group’s share of equity.
Capital structure and financial position
The Group’s co-insurance and reinsurance arrangements for the UK Car Insurance business are in place at least until the end of 2021.
The Group’s net retained share of that business is 22%. Munich Re will underwrite 40% through co-insurance (30%) and reinsurance (10%)
arrangements, until at least the end of 2021. Whilst some agreements with the Group’s other reinsurance partners have already been
concluded, the remaining extensions for business beyond 2021 are expected to be confirmed during the first half of 2021.
Similar longer-term arrangements are in place in the Group’s international insurance operations and the UK Household and Van businesses.
The Group continues to manage its capital to ensure that all entities are able to continue as going concerns and that regulated entities
comfortably meet regulatory capital requirements. Surplus capital within subsidiaries is paid up to the Group holding company in the form
of dividends.
The Group’s regulatory capital is based on the Solvency II Standard Formula, with a capital add-on to reflect recognised limitations in the
Standard Formula with respect to Admiral’s business (predominantly in respect of profit commission arrangements in co- and reinsurance
agreements and risks arising from claims including Periodic Payment Order (PPO) claims).
The Group continues to develop its partial internal model to form the basis of future capital requirements. The expected timescale for
formal application has been extended beyond 2021 as a result of a recent decision by the Admiral Group Board to review certain aspects
of the model. In the interim period before submission, the current capital add-on basis will continue to be used to calculate the regulatory
capital requirement.
The estimated and unaudited regulatory Solvency II position for the Group at the date of this report is as follows:
Group capital position (estimated and unaudited)
Group
Eligible Own Funds (pre 2020 final dividend)
2020 final dividend
Eligible Own Funds (post 2020 final dividend)
Solvency II capital requirement*1
Surplus over regulatory capital requirement
Solvency ratio (post dividend)*2
2020
£bn
1.72
(0.25)
1.47
0.79
0.68
187%
2019
£bn
1.42
(0.22)
1.20
0.63
0.57
190%
*1 Solvency capital requirement includes updated capital add-on which is subject to regulatory approval.
*2 Solvency ratio calculated on a volatility adjusted basis.
Although slightly lower than the 2019 year-end position, the Group continues to maintain a strong post-dividend solvency ratio at 187%
(2019: 190%). Surplus capital over the regulatory capital requirement has increased by over £100 million in the period, primarily as a result
of the strong profitability of the most recent underwriting years. The solvency capital requirement has also increased as a result of the
improved underwriting profitability, specifically in relation to the profit commission that Admiral earns in relation to co-insurance and
reinsurance contracts. Whilst this increase in solvency capital requirement is lower than the increase in Own Funds, it results in a modest
overall reduction to the solvency ratio.
35
The solvency capital requirement includes an updated capital add-on which remains subject to regulatory approval. The solvency ratio
based on the previously approved capital add-on, that is calculated at the balance sheet date rather than the date of this report, and will
be submitted to the regulator within the Q4 Quantitative Reporting Template (QRT) is as follows:
Regulatory solvency ratio (estimated and unaudited)
Solvency ratio as reported above
Change in valuation date
Other (including impact of updated, unapproved capital add-on)
Solvency ratio (QRT basis)
2020
187%
(5%)
24%
206%
2019
190%
(10%)
(10%)
170%
The Group’s capital includes £200 million ten year dated subordinated bonds. The rate of interest is fixed at 5.5% and the bonds mature in
July 2024. The bonds qualify as tier two capital under the Solvency II regulatory regime.
Estimated sensitivities to the current Group solvency ratio are presented in the table below. These sensitivities cover the two most
material risk types, insurance risk and market risk, and within these risks cover the most significant elements of the risk profile. Aside from
the catastrophe events, estimated sensitivities have not been calibrated to individual return periods.
Solvency ratio sensitivities (estimated and unaudited)
UK Motor – incurred loss ratio +5%
UK Motor – 1 in 200 catastrophe event
UK Household – 1 in 200 catastrophe event
Interest rate – yield curve down 50 bps
Credit spreads widen 100 bps
Currency – 25% movement in Euro and US dollar
ASHE – long term inflation assumption up 0.5%
Loans – severe peak unemployment scenario
2020
-10%
-1%
-2%
-4%
-6%
-3%
-3%
-1%
2019
-23%
-1%
-2%
-5%
-8%
-3%
-3%
-4%
The impact of the incurred loss ratio +5% sensitivity is lower than in the prior year. This is linked to the strong underwriting profitability on
the recent underwriting years and the resulting profit commission risk that is held in the solvency capital requirement, which reduces in
the loss ratio deterioration scenario, dampening the solvency ratio sensitivity.
Taxation
The total tax charge reported in the consolidated income statement is £109.8 million (2019: £94.2 million), equating to 17.2% of pre-tax
profit (2019: 18.0%). The reduction in the effective tax charge is the result of higher non-taxable investment income recognised in the
year, and lower losses in the US businesses.
The tax rate equates to 17.5% of pre-tax profit on continuing operations (2019: 17.6%).
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 36
Admiral Group plc · Annual Report and Accounts 2020
Group overview continued
Investments and cash
Investment strategy
Admiral Group’s underlying investment strategy remains the same - the main focus is on capital preservation, with additional priorities
including low volatility of returns, high levels of liquidity and appropriate matching of asset/liability duration and currency. All objectives
continue to be met. The Group’s Investment Committee performs regular reviews of the strategy to ensure it remains appropriate.
Admiral has adopted a responsible investment strategy to reduce Environmental, Social and Governance (ESG) related risks, whilst
achieving sustainable long-term returns. Importantly, ESG criteria are considered within investment decision making and ensures all our
asset managers are signatories of the UN Principles for Responsible Investment and have strong and credible practices.
Admiral has been challenging and engaging with asset managers to define methodology which will assess our portfolios against the Paris
Accord. Admiral has recently become a member of the Institutional Investors Group for Climate Change as a strategy is developed that is
consistent with achieving net zero emissions by 2050. In 2021 Admiral will develop short and long term targets to achieve this.
In addition, our strategy has focused on widening the opportunity set of investments to achieve greater returns without material change
in market risk capital allocated to investments. Examples included high quality (AAA) asset backed securities, private debt assets and
global bond strategies, actively managed on a total return basis. The difficult conditions in early spring did not lead to material distress or
forced selling, and asset returns since then have been strong.
Cash and investments analysis
£m
Fixed income and debt securities
Money market funds and other fair value instruments
Cash deposits
Cash
Total
2020
2,101.3
1,339.3
65.4
351.7
3,857.7
2019
1,957.8
1,160.2
116.5
281.7
3,516.2
2018
1,568.6
1,301.1
100.0
376.8
3,346.5
Investment and interest income in 2020 (net of impairment charges) was £52.9 million, an increase of £17.6 million on 2019 (£35.3 million).
Both years have been impacted by adjustments related to investment income on cash held by Admiral relating to the portion of the motor
insurance business reinsured under quota share contracts. £12.9 million of income earned in 2019 was recognised in the 2020 income
statement as the projection of the result of the 2019 underwriting year improved to a profitable level.
This positive impact was partially offset by higher impairment charges on assets in 2020 compared to the prior year.
The underlying rate of return for the year (excluding accruals related to reinsurance contract funds withheld) on the Group’s cash and
investments was 1.3% (2019: 1.4%).
The Group continues to generate significant amounts of cash and its capital-efficient business model enables the distribution of the
majority of post-tax profits as dividends.
37
Cash flow
£m
Operating cash flow, before movements in investments
Transfers to financial investments
Operating cash flow
Tax payments
Investing cash flows (capital expenditure)
Financing cash flows
Loans funding through special purpose entity
Net contributions from non-controlling interests
Foreign currency translation impact
Net cash movement
Movement in unrealised gains on investments
Movement in accrued interest
Net increase in cash and financial investments
The main items contributing to the operating cash inflow are as follows:
£m
Profit after tax
Change in net insurance liabilities
Net change in trade receivables and liabilities
Change in loans and advances to customers
Non-cash income statement items
Taxation expense
Operating cash flow, before movements in investments
2020
959.8
(176.0)
783.8
(175.0)
(43.1)
(454.3)
(46.2)
2.4
2.4
70.0
40.7
54.8
341.5
2020
527.8
94.8
65.3
77.3
84.8
109.8
959.8
2019
518.1
(188.7)
329.4
(92.8)
(33.6)
(392.4)
85.9
1.6
6.8
(95.1)
34.6
41.5
169.7
2019
428.4
50.4
27.4
(168.7)
86.4
94.2
518.1
2018
488.5
(248.8)
239.7
(55.6)
(23.9)
(346.8)
220.2
19.3
(2.9)
50.0
(26.6)
49.7
321.9
2018
390.5
176.6
14.9
(242.9)
63.7
85.7
488.5
Net cash and investments have increased by £341.5 million or 10% (2019: £169.7 million, 5%). The main drivers include a decrease
in the funding requirements for Admiral Loans business, offset by increased tax payments in 2020 (due to timing) and increased
dividend payments.
The Group’s results are presented in the following sections as:
• UK Insurance – including UK Motor (Car and Van), Household, Travel
•
International Insurance – including L’olivier (France), Admiral Seguros (Spain), ConTe (Italy), Elephant (US)
• Admiral Loans
• Comparison – including Confused.com (UK), LeLynx (France), Rastreator (Spain), Preminen (emerging markets), Compare.com (US)
• Other – including business development costs and other central expenses
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 38
Admiral Group plc · Annual Report and Accounts 2020
UK Insurance
review
Admiral’s unique culture
is one of the fundamental
cornerstones to our success
over the last 27 years, so it’s
a topic we talk about a lot
internally...and in fact, with
anyone else that’s happy to
listen too.”
It’s difficult to put a finger on exactly what
creates that culture. The open-plan offices?
The Ministry of Fun and the ping-pong
competitions that bring people together?
Those daily chats at the water cooler to cross-
pollinate ideas? I’m sure that contributes to it…
but I suspect it’s a bit more deep-rooted than
that, having seen what we’ve achieved as we’ve
worked from kitchens, front rooms, bedrooms
and camper vans over the last 10 months
without an egg-roulette contest in sight!
And what makes me very proud is that
the strength of our culture has featured
extremely prominently during our response
to the pandemic, when it arguably faced its
biggest test so far.
We worked furiously hard in those weeks
from early March through to April to protect
our team and set them up to work safely
from home. We prioritised those in our claims
and service areas to minimise disruption to
those that needed to contact us, and waived
policy excesses and gave free replacement
vehicles to key workers because they had
enough on their plate without the additional
burden of sorting out broken cars.
We arguably deserved a breather at that
point but preferred to go that extra mile by
committing to give back to our customers and
the community. A highlight of course was the
£110 million refund to customers, which has
gone unmatched by competitors, that was
issued during May. We have continued to give
back to customers in the form of premium
reductions throughout the second half of
the year. The result of that is that we’re now
more price competitive at new business and
renewals than we were at the start of the
year. We’re even making more sales when
we’re not the cheapest as a result of the
customer goodwill we’ve created. And whilst
the investment we’ve made in improving
our digital customer journey will increase
the expense ratio in the short term, we
have already seen some of the benefits this
will yield in the long term related to better
service and improved efficiency. The resulting
improved online sales journey, coupled with
improved competitiveness, means that we’ve
managed to grow the book more during 2020
than we’ve done for a number of years.
Whilst the premium refund made the
headlines, a source of equal pride within
Admiral is the difference we’ve made to
individuals in the local community. Whether
that’s the provision of comfortable shoes for
healthcare workers on the Covid-19 wards
in Cardiff, or the donation of iPads to allow
elderly care home residents to see their
loved ones. Maybe a bit cheaper than the
refund, but incredibly valuable, nevertheless.
And what’s ahead of us in 2021? Having just
experienced a challenging year, full of
uncertainties, requiring constant review and
immediate response, I’d say…maybe the
same again?
Ok, maybe not exactly the same. But working
practices will surely never be the same again
as we embrace more flexible and smarter
methods. We’ve spent 2020 trying to project
the length of lockdowns and the impact on
driving habits….and we’ll have the same
challenge in reverse as we try to predict how
quickly the vaccine rollout will happen and
how quickly people return to the roads.
There are also the significant legal and
regulatory changes that will come into
force over the next 12 months, such as the
deflationary impacts of the whiplash reforms
that are finally coming into effect in May.
But much more significantly we’ll have the
implementation of the remedies arising
from the FCA review into pricing practices
that will require parity across new business
and renewal prices. The reforms could be
a game changer for the market, but we are
optimistic that it presents an opportunity for
more sophisticated underwriters, including
Admiral. We’ve further improved our market-
leading pricing capability with investment in
a more responsive and advanced cloud-based
solution and already understand the needs of
customers that regularly shop around at each
renewal to ensure that they get a competitive
price. This leaves us well placed to rise to
the challenges of the new pricing regime,
which are made even more difficult by the
uncertainties of the post-Covid-19 era.
But rather than finishing on what might
happen in 2022, I’d like to end by thanking
the team for what did happen in 2020. We’ve
managed to improve so many aspects of our
business in the most difficult environment
since we launched almost three decades ago,
and once again delivered strong profits in
both our car and household businesses.
A challenging year, but a great response!
Cristina Nestares
CEO UK Insurance
3 March 2021
39
UK Insurance highlights
Group share of UK Insurance
profit before tax*1
UK motor insurance
profit before tax*1
£698.1m
£683.4m
(2019: £597.4m)
(2019: £591.5m)
UK household insurance
profit before tax
£15.4m
(2019: £7.5m)
UK Insurance financial performance
£m
Turnover*1*2
Total premiums written
Net insurance premium revenue
Underwriting profit including investment income*1
Profit commission and other income
Group’s share of UK Insurance profit before tax*1*2
2020
2,672.0
2,373.3
539.7
346.5
351.6
698.1
*1 Alternative Performance Measures – refer to note 14 at the end of this report for definition and explanation.
*2 Alternative Performance Measure – refer to note 14 for reconciliation to the financial statements.
Split of UK Insurance profit before tax
£m
Motor
Household
Travel
Group’s share of UK Insurance profit
Key performance indicators
Vehicles insured at year end*1
Households insured at year end*1
Travel policies insured at year end*1
Total UK Insurance customers*1
2020
683.4
15.4
(0.7)
698.1
2020
4.75m
1.16m
0.07m
5.98m
2019
2,635.0
2,321.7
533.2
257.4
340.0
597.4
2019
591.5
7.5
(1.6)
597.4
2019
4.37m
1.01m
0.09m
5.47m
2018
2,575.7
2,269.8
523.9
227.7
327.9
555.6
2018
561.7
(3.0)
(3.1)
555.6
2018
4.32m
0.87m
0.05m
5.24m
*1 Alternative Performance Measures – refer to the end of the report for definition and explanation.
Key highlights for the UK Insurance business for 2020 include:
• Strong growth in Motor customers in the second half of the year, combined with continued strong growth in Household with Admiral
reducing rates to reflect lower claims frequency in 2020 for Motor and slightly reducing rates for Household.
• A 16% increase in UK Motor profit to £683.4 million (2019: £591.5 million). When adjusted for the adverse change in the ‘one-off’
Ogden impacts of £33.3 million (see below), the like-for-like increase in profit is 10%, primarily as a result of lower current year claims
frequency combined with continued strong releases on prior underwriting years. Refer to the UK motor section below for further
analysis of key metrics such as loss ratio, reserve releases and profit commission.
• Household profit of £15.4 million (2019: £7.5 million profit) as a result of lower theft and escape of water claims frequency in 2020
despite adverse weather in the first half of 2020.
• Travel Insurance recorded a lower loss of £0.7 million (2019: £1.6 million loss) despite Covid-19, though sales volumes were inevitably
significantly lower than expected.
*1 Alternative Performance Measures – refer to note 14 at the end of this report for definition and explanation.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 40
Admiral Group plc · Annual Report and Accounts 2020
UK Insurance review continued
UK Motor Insurance financial review
£m
Turnover*1
Total premiums written*1
Net insurance premium revenue
Investment income*2
Net insurance claims
Net insurance expenses
Underwriting profit including investment income*3
Profit commission
Underwriting profit and profit commission
Net other revenue*4
UK Motor Insurance profit before tax
2020
2,473.8
2,193.0
451.4
50.8
(97.1)
(77.2)
327.9
124.7
452.6
230.8
683.4
*1 Alternative Performance Measures – refer to the end of this report for definition and explanation.
*2
Investment income includes £2.9 million of intra-group interest (2019: £2.8 million; 2018: £0.7 million).
*3 Underwriting profit excludes contribution from underwritten ancillaries (included in net other revenue).
*4 Net other revenue includes instalment income and contribution from underwritten ancillaries and is analysed later in the report.
Key performance indicators
£m
Reported motor loss ratio*1,*2
Reported motor expense ratio*1,*3
Reported motor combined ratio
Written basis motor expense ratio
Reported loss ratio before releases
Claims reserve releases – original net share*1,*4
Claims reserve releases – commuted reinsurance*1,*5
Total claims reserve releases
Other Revenue per vehicle
Vehicles insured at year end
2020
49.2%
19.8%
69.0%
18.8%
72.3%
£104.3m
£137.3m
£241.6m
£61
4.75m
2019
2,455.3
2,158.5
452.6
30.4
(164.7)
(74.7)
243.6
112.2
355.8
235.7
591.5
2019
60.7%
19.1%
79.8%
18.5%
87.6%
£121.7m
£121.7m
£243.4m
£66
4.37m
2018
2,423.1
2,132.1
452.5
32.2
(189.2)
(72.0)
223.5
95.0
318.5
243.2
561.7
2018
63.5%
18.4%
81.9%
17.5%
88.1%
£111.4m
£109.6m
£221.0m
£67
4.32m
*1 Alternative Performance Measures – refer to the end of this report for definition and explanation.
*2 Motor loss ratio adjusted to exclude impact of reserve releases on commuted reinsurance contracts. Reconciliation in note 14b.
*3 Motor expense ratio is calculated by including claims handling expenses that are reported within claims costs in the income statement. Reconciliation in note 14c.
*4 Original net share shows reserve releases on the proportion of the portfolio that Admiral wrote on a net basis at the start of the underwriting year in question.
*5
Commuted reinsurance shows releases, net of loss on commutation, on the proportion of the account that was originally ceded under quota share reinsurance contracts but
has since been commuted and hence reported in underwriting profit rather than profit commission.
41
UK Motor profit increased by 16% during 2020 to £683.4 million (2019: £591.5 million) with the reported combined ratio improving to
69.0% (2019: 79.8%).
Market prices fell over the period to reflect the decrease in claims frequency due to fewer miles driven as a result of the Covid-19
pandemic and lockdowns. Admiral responded to the lower claims frequency with a ‘Stay at Home’ premium refund to customers, as well
as more significant price reductions than the market. New business growth and good retention contributed to a 9% increase in customer
numbers (4.75 million v 4.37 million), whilst turnover growth was more muted (£2.47 billion v £2.46 billion) as a result of the refund and
price reductions.
The results were impacted by a number of factors:
• Net insurance premium revenue was broadly consistent with 2019 at £451.4 million (2019: £452.6 million) after including the impact of
the premium refund of £21.1 million (net of IPT and co-insurance and reinsurance).
• The current period loss ratio was 72.3% (2019: 87.6%). As highlighted below, there are a number of offsetting movements that net to
the overall improvement of 15.3 percentage points.
Reported Motor Loss Ratio
£m
2019
Prior period impact of Ogden change (0% to -0.25%)
2019 (excluding Ogden impact)
Change in current period loss ratio
Change in claims reserve releases – original net share
2020
Current
Period
Loss Ratio
Releases
on Original
Net Share
87.6%
-1.0%
86.6%
-14.3%
–
72.3%
-26.9%
-2.4%
-29.3%
–
+6.2%
-23.1%
Reported
Loss Ratio
60.7%
-3.4%
57.3%
-14.3%
+6.2%
49.2%
•
In 2019, the Ogden discount rate changed to minus 0.25% (a reduction from the best estimate assumption of 0% at 31 December 2018),
reducing the 2019 UK Motor profit by £33.3 million, and increasing the reported combined ratio by 3 percentage points.
• Excluding the impact of the Ogden rate change in the prior period, the 2020 reported loss ratio was just over 8 percentage points lower
than 2019 (49% v 57%). The significant driver of this improvement was the current accident period loss ratio which was 14 percentage
points better than 2019 as a result of Covid-19 lockdowns through 2020 and the associated reductions in claims frequency.
• Reserve releases on Admiral’s original net share of business were strong, improving the reported loss ratio by just over 23 percentage
points in 2020. However, this was 6 percentage points lower than 2019 which had seen an unusually large reserve release as a result of
an increase in the speed of settlements of bodily injury claims following the confirmation of the new Ogden rate.
• The margin held above ultimate outcomes in the financial statement reserves remains both significant and prudent. In relative terms,
it is broadly consistent with that held at the end of 2019.
• Reserve releases from commuted reinsurance and profit commission were higher in 2020 than in 2019, with a combined total of
£262.0 million (2019: £233.9 million), as follows:
£m
2019
Prior period impact of Ogden change (0% to -0.25%)
2019 (excluding Ogden impact)
Change in commuted releases
Change in profit commission
2020
Reserve releases
– commuted
reinsurance
Profit
commission
121.7
+9.0
130.7
+6.6
–
137.3
112.2
+8.9
121.1
–
+3.6
124.7
Total
233.9
+17.9
251.8
+6.6
+3.6
262.0
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 42
Admiral Group plc · Annual Report and Accounts 2020
UK Insurance review continued
• Releases on reserves originally reinsured but since commuted were higher at £137.3 million (v £121.7 million in 2019). Excluding the prior
period Ogden impact, the 2020 releases are £6.6 million higher than 2019, with an increase in the number of underwriting years that are
now reflecting releases on commuted reinsurance reserves.
• The trend is similar for profit commission which improved to £124.7 million (2019: £112.2 million). Underlying profit commission
(excluding the prior period Ogden impact) was broadly consistent with 2019, with a lower level of profit commission from 2017 and prior
underwriting years being offset by profit commission recognition on the 2018-2020 underwriting years for the first time.
• For further background on both reserve releases from commuted reinsurance and profit commission, see the co- and reinsurance
section that follows.
•
Investment income was significantly higher than 2019 at £50.8 million (2019: £30.4 million). The increase is primarily the result of
changes to investment income on cash held by Admiral relating to the portion of the book reinsured under quota share contracts. £12.9
million of the income that was allocated to reinsurers in 2019, was subsequently recognised in the 2020 income statement, creating a
favourable impact of £25.8 million, as shown in the table below:
£m
2019
Exclude accruals on reinsurance balances
2019 (excluding impact of reinsurer accruals)
Change in underlying investment income
Change in provision for asset impairments
2020 (excluding impact of reinsurer accruals)
Release of accruals on reinsurance balances
2020
Investment
income
30.4
+12.9
43.3
+1.8
-7.2
37.9
+12.9
50.8
• Excluding movements on reinsurer accruals, underlying investment income increased by £1.8 million primarily as a result of growth in
the investment portfolio, as set out in the review of Investments earlier in this report. Provisions for asset impairments increased by
£7.2 million as a result of economic uncertainty.
• The reported expense ratio increased to 19.8% in 2020 (2019: 19.1%) with the written basis ratio also higher (18.8% vs 18.5%). The ‘Stay
at Home’ premium refund and wider price reductions contributed to the increase in both ratios, as well as the investment in the period
in both the digital customer journey and Covid-19 related remote working capability.
• Other revenue (including ancillary products underwritten by Admiral) and instalment income decreased to £230.8 million (2019:
£235.7 million) primarily resulting from lower contribution from optional ancillaries. Further detail is set out in the Other revenue and
instalment income section below.
Claims and reserves
As noted above, the Covid-19 pandemic and resulting lockdowns led to fewer miles driven, resulting in significantly lower motor claims
frequency in 2020.
There was a slight increase in damage claims costs as garage repair networks were under pressure and support was provided during
lockdown. In addition, Admiral introduced a number of initiatives during the year to help front-line NHS staff and other critical workers not
automatically provided for under the policy.
The reduction in miles driven resulting in reduced claims frequency also resulted in a reduction in large bodily injury claims, although to a
lesser extent than smaller bodily injury and damage claims frequency, with an increase in the proportion of accidents involving vulnerable
road users such as cyclists and pedestrians.
The first projection of the 2020 accident period loss ratio is notably lower than 2019 at the same point as a result of these factors.
Admiral also continued to experience positive development on the claims costs on previous accident years, resulting in another significant
reserve release in the financial statements (£104.3 million on Admiral’s original net share of business, vs £121.7 million in 2019).
The Group continues to reserve conservatively, setting claims reserves in the financial statements well above actuarial best estimates to
create a margin held to allow for unforeseen adverse development.
The margin held in reserves is prudent and significant and remained at a broadly consistent relative level year-on-year.
43
UK Car Insurance – co-insurance and reinsurance
Profit commission
Admiral makes significant use 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. These arrangements include
profit commission terms which allow Admiral to retain a significant
portion of the profit generated.
Admiral is potentially able to earn material amounts of profit
commission revenue from co- and reinsurance partners, depending
on the profitability of the insurance business underwritten by
the partner. Revenue is recognised in the income statement in
line with the financial statement loss ratios on Admiral’s retained
underwriting.
Munich Re and its subsidiary entity, Great Lakes will underwrite
40% of the UK motor business until at least the end of 2021. 30% of
this total is on a co-insurance basis, with the remaining 10% being
under a quota share reinsurance agreement from 2017 onwards.
The Group also has other quota share reinsurance arrangements
confirmed to the end of at least 2023, covering 38% of the business
written. Admiral expects to confirm the full allocation of these
arrangements beyond 2021 in the first half of 2021.
The nature of the co-insurance proportion underwritten by Munich
Re (via Great Lakes) is such that 30% of all motor premium and
claims for the 2020 year accrue directly to Great Lakes and are
not reflected in the Group’s financial statements. Similarly, Great
Lakes reimburses the Group for its proportional share of expenses
incurred in acquiring and administering this business.
The quota share reinsurance arrangements result in all motor
premiums and claims that are ceded to reinsurers being included in
the Group’s financial statements, but these figures are adjusted to
exclude the reinsurer share, resulting in a net result for the Group.
The Group also purchases excess of loss reinsurance to provide
protection against large claims and reviews this cover annually.
The level of cover purchased for 2021 is marginally lower than that
for 2020 due to continued increases in market prices.
Other Revenue and Instalment Income
UK Motor Insurance Other Revenue – analysis of contribution:
£m
Contribution from additional products & fees
Contribution from additional products underwritten by Admiral*1
Instalment income
Other revenue
Internal costs
Net other revenue
Other revenue per vehicle*2
Other revenue per vehicle net of internal costs
Note 5c to the financial statements analyses profit commission
income by business, type of contract and by underwriting year.
Commutations of quota share reinsurance
Admiral tends to commute its UK Car Insurance quota share
reinsurance contracts 24 months after inception of an underwriting
year, assuming there is sufficient confidence in the profitability of
the business covered by the reinsurance contract.
After the commutation is executed, movements in financial
statement loss ratios result in reserve releases (or strengthening if
the loss ratios were to increase) rather than reduced or increased
profit commission.
During the first half of 2020, the majority of the 2018 quota share
contracts were commuted. At 31 December 2020, quota share
reinsurance contracts remained in place for a small portion of 2017
and 2018 and the full 2019 and 2020 underwriting years. No further
contracts were commuted in the second half of 2020 (as is usual).
Refer to note 5d(v) of the financial statements for further analysis of
reserve releases on commuted quota share reinsurance contracts.
2020
186.8
15.1
100.9
302.8
(72.0)
230.8
£61
£50
2019
202.1
13.9
83.9
299.9
(64.2)
235.7
£66
£56
2018
206.5
13.6
81.4
301.5
(58.3)
243.2
£67
£57
*1
Included in underwriting profit in income statement but re-allocated to Other revenue for purpose of KPIs.
*2 Other revenue (before internal costs) divided by average active vehicles, rolling 12-month basis.
Admiral generates Other revenue from a portfolio of insurance products that complement the core car insurance product, and also fees
generated over the life of the policy.
The most material contributors to net Other revenue continue to be:
• Profit earned from motor policy upgrade products underwritten by Admiral, including breakdown, car hire and personal injury covers;
• Revenue from other insurance products, not underwritten by Admiral;
• Fees such as administration and cancellation fees;
•
Interest charged to customers paying for cover in instalments.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 44
Admiral Group plc · Annual Report and Accounts 2020
UK Insurance review continued
Overall contribution (Other revenue net of costs plus instalment income) decreased to £230.8 million (2019: £235.7 million). This included a
reduction in administration fees and optional ancillary income, partly reflecting more transactions completing digitally and also reflecting
the impact of Covid-19 resulting in lower sales and reduced fees. In addition, lower claims frequency due to Covid-19 led to lower referral
fees from credit hire. These decreases were partially offset by increased instalment income primarily arising from more customers
choosing to pay by monthly instalment. In addition, there was a positive impact from other revenue generated on the Van insurance book.
Other revenue was equivalent to a decrease to £61 per vehicle (gross of costs; 2019: £66), as a result of the factors mentioned above. Net
other revenue (after deducting costs) per vehicle was £50 (2019: £56).
UK Household Insurance financial performance
£m
Turnover*1
Total premiums written*1
Net insurance premium revenue
Underwriting profit/(loss)*1*2
Profit commission and other income
UK Household insurance profit/(loss)
*1 Alternative Performance Measures – refer to the end of this report for definition and explanation.
*2 Underwriting profit/(loss) excluding contribution from underwritten ancillaries.
Key performance indicators
Reported household loss ratio*1
Reported household expense ratio*1
Reported household combined ratio*1
Impact of extreme weather and subsidence*1
Households insured at year end*1
*1 Alternative Performance Measures – refer to the end of this report for definition and explanation.
2020
193.8
175.9
43.2
2.5
12.9
15.4
2020
64.8%
29.4%
94.2%
5.3%
1.16m
2019
171.3
154.9
37.2
0.7
6.8
7.5
2019
69.1%
28.9%
98.0%
–
1.01m
2018
146.0
131.1
31.2
(6.3)
3.3
(3.0)
2018
92.3%
28.1%
120.4%
19.1%
0.87m
The number of households insured increased by 14% to 1.16 million
(2019: 1.01 million). Turnover increased by 13% to £193.8 million
(2019: £171.3 million). New business market volumes slowed as
lockdown was implemented but recovered as restrictions eased.
Retention remained strong. Overall, customers have shifted towards
using digital channels more for both shopping and reporting claims.
The market saw a reduction in claims frequency in early lockdown
which subsequently recovered, but returned to lower levels
during further lockdowns. As more people were staying at home,
the claims mix for Admiral shifted towards increased claims for
accidental damage and reduced claims for theft. Escape of water
claims severity also reduced.
The result was impacted by weather events in the year, costing
approximately £5 million net of recoveries from Flood Re (2019: £nil).
A combined ratio of 94% (2019: 98%) resulted in a net underwriting
profit of £2.5 million (2019: underwriting profit of £0.7 million), which
was supplemented by net other revenue and profit commission
of £12.9 million (2019: £6.8 million). The expense ratio was slightly
higher due to increased costs in the shift to working from home.
The increase in profit commission and other income in the year is
attributable to quota share reinsurance profit commission which
has increased primarily due to favourable loss ratio performance in
the recent underwriting years. Other income is broadly consistent
year on year.
UK Household insurance – reinsurance
The Group’s Household business is supported by long-term
proportional reinsurance arrangements covering 70% of the risk.
In addition, the Group has non-proportional reinsurance to cover
the risk of catastrophes stemming from weather events.
UK Insurance Regulatory environment
The UK Insurance business operates predominantly under the
regulation of:
• the UK Financial Conduct Authority (FCA) and Prudential
Regulatory Authority (PRA) which regulate the Group’s UK
registered subsidiaries including EUI Limited (an insurance
intermediary) and Admiral Insurance Company Limited (AICL;
an insurer); and
• the Financial Services Commission (FSC), which regulates the
Group’s Gibraltar-based insurance company (Admiral Insurance
(Gibraltar) Limited, AIGL), in that territory.
The Group is required to maintain capital at a level prescribed by
the lead regulator for Solvency II purposes, the PRA, and maintains
a surplus above that required level at all times.
International
Insurance
It has been great to witness stronger collaboration amongst our
insurance businesses across the world over the past 12 months.”
Milena Mondini de Focatiis
Group CEO
45
Costantino Moretti
CEO, International Insurance
Pascal Gonzalvez
CEO, L’olivier Assurance
International Insurance
In 2020, our European businesses delivered
another profitable year on a combined
basis, and Elephant showed good signs of
improvement on the fundamentals from
which to grow a profitable business.
The year was truly unlike any other – with
a focus on overcoming the challenges
presented by Covid-19, whilst at the same
time transferring frequency benefits
through price reductions for our customers.
In many countries we offered significant
discounts to reflect lower driving patterns,
and in the US we offered a first-in-the-market
'work from home discount.'
In the US, Elephant continued to focus on
improving technical results, with customer
numbers slightly down. We achieved
improvements in the loss ratio, well beyond
Covid-19 frequency impacts, thanks to
ongoing strengthening of risk selection
capabilities.
In Europe, we had strong profit performance
while still growing in an austere acquisition
environment. Efforts in the expansion into
broker channels in Italy and Spain, and the
strong direct acquisition performance in
France, helped grow our customer base
by 15% year on year, bolstered by our
strong investment in our brands and digital
initiatives. Despite this, turnover grew by
less at 11% due to lower average premiums.
Loss ratio also performed well, with benefits
from Covid-19 frequency trends and
positive prior year development.
Indeed, the strong performance of our
International businesses reaffirms our
strategy of building sustainable and
profitable businesses through efficient
scaling, a competitive advantage on loss
ratio, and by evolving our capabilities in
data, analytics, and digital competencies.
Well done to the international team for
another strong year!
France
The years go by, yet they continue to look
the same: strong performance in the midst
of market adversity and managing the
impact of the Covid-19 pandemic.
Despite another year when price
comparison website quotes (our main
acquisition channel) were shrinking, our
portfolio increased by 26%, thanks to more
loyal customers and more new customers.
Indeed, not only did we manage to keep our
customers happy by serving them with a
high quality of service without interruption
to the business during uncertain economic
times, but we also hit a new record for Net
Promoter Scores in all departments.
Additionally, we managed to increase the
number of new business sales in a market
at half mast, thanks to new acquisition
initiatives helped by a new TV campaign
and growing brand awareness.
We also did a soft launch of our new
household insurance product under the
brand L’olivier - though at a slower pace than
originally planned, because we decided to
put most of our energy on the best response
to deal with the Covid-19 situation. In early
2021, we’re about to accelerate our multi-
product journey again.
L’olivier has also started to deploy its
strategy in order to meet the new vision
defined for 2023: keep growing fast through
accelerated investments in digital and data.
Our new mantra is all about #3D, Data &
Digital to Double. We have set up very high
ambitions and we are all eager to make
it happen!
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 46
Admiral Group plc · Annual Report and Accounts 2020
International Insurance review continued
Antonio Bagetta
CEO, ConTe
Sarah Harris
CEO, Admiral Seguros
Alberto Schiavon
CEO, Elephant
Italy
2020 was unquestionably a year with many
challenges and adversities. Despite this,
ConTe excelled with an increase of 12% in
active customers, double-digit growth in
new business sales, and (for the first time)
persistency above market average.
In 2020 we made significant steps forward
in our ambition to become a great digital,
data driven company with a well-recognised
brand, offering a variety of products and
services. We also began offering customers
a multi-product journey.
Our brand awareness is stronger than ever
and exceeded 70% during the year. We have
also become an Official Partner of the Italian
national football team, a sponsorship that
will give us a great visibility.
Spain
2020 was another positive year for Admiral
Seguros despite the unexpected challenges
presented by Covid-19. In response to the
pandemic we made a range of operational
changes to support our customers, and
reinvested part of the frequency benefit
from lockdowns via discounts.
Despite low price comparison quote volume,
we continued to grow the business, finishing
the year with 327,500 policies. This growth
was bolstered by improved customer
persistency, achieved via several operational
improvements on customer experience. We
also saw good performance from the newly
launched brokers’ channel.
During the lockdown period, we improved
our business performance thanks to lower
frequencies and to the excellent work done
on loss ratio. In that period, we launched
several new initiatives to protect customer
needs (e.g. ‘One Month Free’ offer) which
continued to embed our strong customer
centric approach.
More than ever our people and culture have
been a competitive advantage for ConTe.
Despite the challenging year, we sped
up our business transformation towards
using Scaled Agile methodology and we
celebrated our highest ever Trust Index of
83% in the Great Place to Work survey.
Loss ratio was an ongoing priority throughout
the year. Our new antifraud system went live
over the summer, and we continued to invest
in analytical talent in risk selection.
On the expense side, we accelerated our
digital self-service offering for customers,
particularly around claims handling.
In 2021 we plan to accelerate multi-channel
growth, looking to export our technical
expertise into more traditional distribution
channels.
In the core business, we are working on
ambitious improvements in claims and data
management and will continue to introduce
new digital capabilities for our customers.
Let´s go!
US
2020 saw our intense focus on loss ratio
improvement begin to bear fruit. In the first
9 months of 2020 the US market saw a loss
ratio improvement as a result of Covid-19
frequency benefits, with an even greater
improvement due to our intense focus on
improving the underlying loss ratio.
Lower loss ratios across the market paired
with flat (or falling) prices meant increased
competition and challenges on new business
sales. Early positive signs from a broker
distribution test are giving us alternative
ways for efficient growth.
As unemployment rates increased, many of
our customers struggled to pay us despite
Elephant taking several mitigating actions,
including a payment moratorium, and
having our best ever customer satisfaction
scores. The effects of losing many of
these customers, paired with high sales
competition, meant the book remained flat
year over year.
Finally, during 2020 Elephant made great
progress towards its digital transformation
strategy, and our customers can now fully
self-service through our online platforms.
As we have been working remotely for almost
a year, I have been blessed to be leading a
strong team of highly talented and engaged
individuals who are incredibly committed
towards Elephant’s success, and I look
forward to a strong performance in 2021.
47
International Insurance highlights
Group share of Profit Before Tax*1
Turnover*1
£8.8m
(2019: £-0.9m)
£648.8m
(2019: £623.6m)
Customers
1.60m
(2019: 1.42m)
International Insurance financial performance
£m
Turnover*1
Total premiums written*1
Net insurance premium revenue
Investment income
Net insurance claims
Net insurance expenses
Underwriting result including investment income*1
Net other revenue
International Insurance result
Key performance indicators
Reported loss ratio*2
Expense ratio*2
Combined ratio*3
Combined ratio, net of Other revenue*4
Vehicles insured at period end
2020
648.8
584.0
204.2
–
(139.3)
(78.8)
(13.9)
22.7
8.8
2020
64.3%
43.9%
108.2%
97.9%
1.60m
2019
623.6
562.6
168.6
1.5
(137.2)
(53.0)
(20.1)
19.2
(0.9)
2019
76.8%
37.6%
114.4%
103.7%
1.42m
2018
538.7
484.3
141.7
1.3
(104.0)
(55.8)
(16.8)
15.7
(1.1)
2018
76.6%
39.6%
116.0%
105.1%
1.22m
*1 Alternative Performance Measures – refer to the end of this report for definition and explanation.
*2 Loss ratios and expense ratios have been adjusted to remove the impact of reinsurer caps so the underlying performance of the business is transparent.
*3
*4
Combined ratio is calculated on Admiral’s net share of premiums and excludes Other revenue. It excludes the impact of reinsurer caps. Including the impact of reinsurer caps the
reported combined ratio would be 2020: 107%; 2019: 113%; 2018: 113%.
Combined ratio, net of Other revenue is calculated on Admiral’s net share of premiums and includes Other revenue. Including the impact of reinsurer caps the reported combined
ratio, net of Other revenue would be 2020: 96%; 2019: 102%; 2018: 102%.
Geographical analysis
2020
Vehicles insured at period end (m)
Turnover*1 (£m)
2019
Vehicles insured at period end (m)
Turnover*1 (£m)
Spain
Italy
France
US
Total
0.33
83.9
0.29
78.2
0.77
213.0
0.69
204.2
0.29
139.3
0.23
108.1
0.21
212.6
0.21
233.1
1.60
648.8
1.42
623.6
*1 Alternative Performance Measures – refer to the end of this report for definition and explanation.
Admiral has four insurance businesses outside the UK: Spain (Admiral Seguros), Italy (ConTe), the US (Elephant Auto) and France
(L’olivier Assurance).
The operations continued a trajectory of positive growth in 2020, with customer numbers increasing by 13% to 1.60 million
(2019: 1.42 million) and combined turnover rising by 4% to £648.8 million (2019: £623.6 million).
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 48
Admiral Group plc · Annual Report and Accounts 2020
International Insurance review continued
The key features of the International Car Insurance results are:
• An aggregate profit of £8.8 million (2019: £0.9 million loss) reflecting an improvement in performance of both the European and US
businesses due to lower frequency as a result of Covid-19 and underlying improvements.
• Profits in all of the European businesses for the first time.
• An improvement in Elephant Auto’s result (decreased loss from £9.6 million to £4.8 million year-on-year).
• A lower combined ratio (net of other revenue) of 98% (2019: 104%) reflecting lower current year loss ratios and positive back year
development across the businesses, offset to an extent by an increased expense ratio.
• Continued investment and improvements in technology, people and the customer experience across all operations.
The combined International expense ratio increased to 44% (2019: 37%) as a result of a number of factors including lower average
premium and increased costs from transitioning to home working as a result of Covid-19, a higher retained share in the US and changes in
reinsurer contracts in Italy.
The European insurance operations in Spain, Italy and France insured 1.39 million vehicles at 31 December 2020 – 15% higher than a year
earlier (31 December 2019: 1.21 million). Turnover was up 12% at £436.2 million (2019: £390.5 million). The consolidated result of the
businesses was a profit of £13.6 million (2019: £8.7 million) consisting of continued profitability in Italy, which was joined by profitable
businesses in France and Spain. The combined ratio net of other revenue (excluding the impact of reinsurer caps) improved to 89% from
92% due to the improved claims experience. All businesses continued to focus on customer and digital improvements, and retention
remained strong.
In the US, Admiral underwrites motor insurance in eight states (Virginia, Maryland, Illinois, Texas, Indiana, Tennessee, Ohio, Georgia)
through its Elephant Auto business. Elephant insured 208,400 vehicles at the end of 2020, slightly down year-on-year, and also saw lower
turnover of £212.6 million (2019: £233.1 million). Elephant’s loss for the period decreased to £4.8 million from £9.6 million in 2019.
The business shifted towards providing policies with a six, rather than twelve month term, based on customer demand, which led to
lower written premium compared to the prior period. Elephant continued to focus on improving the loss ratio through enhancements in
underwriting. These changes contributed to the improved loss ratio in 2020, together with favourable claims experience due to Covid-19.
The combined ratio net of other revenue was 108% (118% in 2019).
In 2020, a non-cash impairment charge of £9.1 million was recognised in the financial statements of the parent company with respect
to the carrying value of the parent’s investment in Elephant Auto. The impairment charge arises due to a change in the 5 year forecast
resulting from a strategic decision to move to 6 month policies, which reduces the valuation due to deferring projected underwriting
year profits outside the 5 year forecast period, alongside the impact of Covid-19 on the future forecast performance of the business.
The impairment charge is recognised in the Income Statement of the parent company (refer to note 4 of the Parent Company Financial
Statements for further details) and has no impact on the Group’s consolidated profit for the period or the Group’s 2020 regulatory
capital position.
International Car Insurance co-insurance and reinsurance
In 2020 Admiral retained 35% (Italy) and 30% (France and Spain) of the underwriting risk respectively. In the US, 50% (2019: 33%)
of the risk was retained within the Group.
International Car Insurance Regulatory environment
Admiral’s European insurance operations are primarily regulated by the Spanish insurance regulator, the Direccion General
de Seguros (DGS).
The Group’s US insurer, Elephant Insurance Company, is regulated by the Virginia State Corporation Commission’s Bureau of Insurance.
Both insurers are required to maintain capital at levels prescribed by the regulator and hold a surplus above these requirements at
all times.
Admiral
Loans
Scott Cargill
CEO, Admiral Financial Services Limited
49
Loans
After three years of significant and
sustained progress 2020 will be
remembered as a challenging year for the
Admiral Loans business. In January we wrote
our 100,000th customer and in Q1 we were
writing record volumes and showing signs of
higher margins following the launch of our
new pricing capability. By mid-March our
balances had grown to £515 million and we
were also seeing all time low loss outcomes
reflecting the continuous improvement in
our pricing and risk models.
As the Covid-19 crisis emerged, we took
early action on pricing and by mid-March
we paused writing new business entirely.
We supported over 4,000 customers with
payment holidays. Despite the crisis we have
seen good customer payment performance
throughout 2020, with default rates similar
to or better than previous periods. In line
with the Admiral approach to insurance
reserving, we have taken an appropriately
conservative approach to our loss provision,
with around £26 million being added to
impairment this year of which some £15
million is for loans which remain up to date
giving us a total coverage ratio of 10.4% and
5.8% on up to date loans as we enter 2021.
As with any young business the balance of
focus is often on growth and new customer
acquisition. 2020 has encouraged the
business to accelerate investment into
existing customer management, both in
self-service and collection capabilities. As a
result, as an end-to-end loans operation, we
undoubtedly finish the year stronger than
we entered.
Admiral Loans started cautiously writing
new business in July and will return to
balance sheet growth again in 2021 with a
renewed focus on our mission to provide
affordable, flexible and convenient lending
solutions to UK customers. Our proposition
will remain focused on real rate lending to
give customers transparency and certainty
in their lending decisions. I’d like to thank
the Admiral Loans team for their resilience
and focus in 2020, and with them, I look
forward to further strengthening the
business and prioritising our customers in
the coming year.
4,000
We supported over 4,000 customers
with payment holidays
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 50
Admiral Group plc · Annual Report and Accounts 2020
Admiral Loans continued
Admiral Loans highlights
Net loans balance
£359.8m
(2019: £455.1m)
Loans Financial Review
£m
Total interest income
Interest expense*1
Net interest income
Other fee income*2
Total income
Total interest income
£36.8m
(2019: £30.8m)
Coverage ratio
10.4%
(2019: 5.0%)
2020
36.8
(10.1)
26.7
2.1
28.8
(25.8)
(16.8)
(13.8)
2019
30.8
(9.1)
21.7
1.9
23.6
(14.3)
(17.7)
(8.4)
2018
15.0
(4.3)
10.7
0.4
11.1
(10.2)
(12.7)
(11.8)
Movement in expected credit loss provision and write-off of loans
Expenses
Admiral Loans result
*1
Includes £2.9 million intra-group interest expense (2019: £2.8 million; 2018: £0.7 million).
*2
Includes £0.5 million intra-group income (2019: £nil; 2018: £nil).
Admiral Loans offers a range of unsecured personal loans and car finance products through comparison channels and also direct to
consumers via the Admiral website.
In mid-March 2020, the decision was made to pause the writing of new loans. Management focused on the close monitoring of the existing
loan portfolio performance and ensuring collection processes were robust and prepared for the likelihood of increased arrears experience
resulting from increased unemployment. Admiral also extended payment deferrals and reduced payment arrangements to some
customers according to their needs and in line with regulatory guidance.
From July 2020 Admiral re-started lending with cautious underwriting criteria adjusted to reflect the new economic conditions
following Covid-19. Lending volumes have gradually increased throughout the second half of 2020, but remained significantly below
pre-Covid-19 levels.
Gross loan balances totalled £401.8 million (2019: £479.1 million), with a £42.0 million (2019: £24.0 million) provision, generating a net
loans balance of £359.8 million (2019: £455.1 million). Admiral Loans updated its expected credit loss models with a more cautious set of
economic assumptions and management overlays to reflect the latest expectations of performance. This update led to an £18.0 million
net additional impairment provision (2019: £13.8 million), with a higher provision to loan balance coverage ratio of 10.4% (2019: 5.0%). The
total expected credit loss charge including write-offs was £25.8 million (2019: £14.3 million). For further information, refer to note 7 in the
financial statements.
Admiral Loans recorded a pre-tax loss of £13.8 million in 2020 (increased from £8.4 million in 2019). The higher loss predominantly reflects
the increased charge for expected credit losses, as a result of higher UK unemployment due to Covid-19.
Interest income in the period grew due to the increased size of the average loan book over the period.
Admiral Loans is currently funded through a combination of internal and external funding. The external portion funds approximately
65% of the current loans balance through the securitisation of certain loans via transfer of the rights to the cash-flows to a special
purpose entity ('SPE') which remains under the control of the Group. The securitisation and subsequent issue of notes does not result in
a significant transfer of risk from the Group.
Comparison
review
Elena Betés Novoa
CEO, Comparison Platforms
Louise O’Shea
CEO, Confused.com
51
Global
2020 will be an unforgettable year, sweet &
sour, ending on a high note.
The sour part – our platforms were strongly
affected by the Covid-19 pandemic around
the world. We were able to react quicker
than local players in some geographies
leveraging on international data points and
to develop contingency plans not only to
reduce the impact into our results but also
to help our partners, teams and society as
much as we could. Nonetheless, we were
impacted financially.
The sweet part - the strong ownership
and accountability from all our teams, the
immediate adaptability to the new reality
and even more importantly, the steps
made to disrupt our way of working and
our operating models has made a crisis a
clear opportunity and made us stronger,
as a team.
We could be extremely proud after all, we
close the year delivering strong revenue
growth of 11%, and a positive margin
improvement of 85%.
The effect was stronger on businesses
where we are more linked to transactions
such as buying a car or house, which was
more relevant to LeLynx and Rastreator,
and less in Confused.com that proved highly
resilient linked to the ingrained switching
behaviour of the UK market.
We decided to discontinue our platforms in
Turkey, Tamoniki, and in India, GoSahi – we
believe that expanding platforms requires
difficult decisions to be made based on
KPIs and market learnings at a healthy
incubator stage.
All our platforms are moving in the right
strategic and financial direction.
The strong ending was the announcement in
December that Admiral Group agreed to sell
the majority of its comparison platforms
to RVU, the comparison division of ZPG. We
look forward to growing and learning from
them under a multi-country, and multi-
product digital ecosystem.
I will be grateful forever to Admiral Group,
for providing us with the most valuable
asset, our culture, the capability to dream
bigger and the support to find the optimal
structure to develop and keep our purpose:
Empowering the world to choose better.
The Confused.com team grew by 17%,
most of that remotely, and the health and
wellbeing initiatives we already had in place
took greater priority. More than any other
year, we put our customers and people
first, not to earn more revenue but simply
because it’s the right thing to do. In 2021 we
don’t expect the challenges and uncertainty
to disappear, but our decisions will always
be based on what is best for our customers
and people.
UK
Confused.com entered its 19th year of
trading at the beginning of 2020, embarking
on another year committed to saving
customers’ time and money. This is always
our ambition, but during times of economic
hardship it is more important than ever.
A relatively seamless transition to
working from home and the dedication
and resilience of the Confused.com team
enabled us to rapidly respond to the needs
of our customers as we answered more
queries than ever before, helping people
make better decisions and navigate the
significant uncertainty. Our marketing was
more effective, and the introduction of our
Rewards programme gave every car and
home insurance customer the choice of a
free gift.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 52
Admiral Group plc · Annual Report and Accounts 2020
Comparison review continued
Comparison highlights
Group share of Profit Before Tax*1
Total Comparison revenue
Confused.com profit before tax
£31.0m
(2019: £18.0m)
£190.0m
(2019: £171.6m)
£29.4m
(2019: £20.4m)
Fernando Summers
CEO, Rastreator
Itzal Arbide
CEO, LeLynx
Spain
We close 2020 with mixed feelings. On
one side, it was an unexpectedly uncertain
and challenging year both personally and
professionally; on the other, the positive
reaction and energy of the team who gave
more than 100% to solve these challenges,
both in terms of business and serving
customers, as well as contributing within the
wider community.
Overall, I must say that I am extremely proud
of the combination of:
• Good levels of productivity within our
teams, as we adapted to home-working,
and still maintained our strong culture;
• Financial results very similar to 2019
within a very complicated context, with
several months of much lower traffic and
economic activity.
And, last but not least, three important
figures:
• Lower staff turnover than ever before,
with our team more engaged than ever;
• Highest historical NPS from our
customers;
• Great Place to Work Trust Index
growth for staff, in a growing
operational environment.
As we move into the new year, we will
continue to evolve our strategy and
customer proposition to be closer to our
customers when and where they need us.
We believe that the combination of our
business-oriented and data-centric approach
will drive us to an even stronger 2021.
France
LeLynx celebrated its 10th anniversary in
an extremely uncertain year marked by the
Covid-19 pandemic. Being under a complete
or partial lockdown during most of 2020,
French transactions (cars, houses) were
drastically reduced, and as such, insurance
appetite was lower. Fewer insurance searches
combined with lower conversion from
insurers’ impacted the LeLynx business.
Paradoxically, Covid-19 also brought
opportunities both internally and from the
market perspective.
Looking at LeLynx, I could not be prouder
of the resilience, determination, and the
creativity that the LeLynx team has shown
throughout the year. Proof of this proactive
approach and of efficiency in executing and
improving on contingency plans, LeLynx
finished 2020 at €25 million revenue (-9%
vs 2019) and €1.1 million operating profit
(+120% vs. 2019), proving to be a very flexible
and adaptable model.
As for market opportunities, Covid-19 sped
up the digitalisation of the French customer
base and the awareness of insurers to
become more digital, which has allowed us to
reopen conversations with many of them.
Looking at 2021, LeLynx will continue its
focus to better help the French market
to make the right choice by enlarging our
panel offer, improving the user experience
thanks to our data insights and consolidating
our diversification efforts – all driven by a
focused, passionate team.
*1 Alternative Performance Measures – refer to the end of the report for definition and explanation.
53
Pedro Tabernero
CEO, Preminen
Allie Feakins
CEO, Compare.com
Emerging Markets
What a challenging, encouraging and
learning year 2020 has been for Preminen,
but our aim to keep growing and
empowering customers to choose better is
just growing.
Starting on a bright note, our Mexican
operation, Rastreator.mx, exhibited
outstanding performance as the first
operation in Preminen to achieve
profitability in a market where, despite
being slower than we would like, we
continue to see positive signs of growth
and we are confident in the evolution of the
business. The customer proposition is well
accepted and has enabled us to increase
the product offering.
Some difficult decisions were also made
as we decided to discontinue operations in
Turkey (Tamoniki.com) during Covid-19 to
focus on other geographies and also GoSahi.
com in India as the loans market slowed for
months during the pandemic.
2021 is expected to be the year of further
growth and expansion for Rastreator.mx and
to also deliver further geographic expansion
with the start of trading of a new Penguin
(more info to be shared in future!). Thanks
to the Preminen Team for the hard work –
we’re looking forward to an inspiring 2021!
US
2020 was a year of steady strength-building
for Compare.com. While continuing to grow
our auto insurance panel, we upgraded the
customer value proposition on our quote
page to increase customer engagement
and improve performance. Advances on our
revenue potential helped temper headwinds
to acquisition cost efficiency with some US
insurance companies pushing their Covid-19
loss ratio 'savings' into higher marketing
budgets and growth. In addition to good
variable margin progress, our fixed costs
were materially lower and our approach to
technology and marketing investments was
more agile.
In 2021, we expect the step-change growth
in digital advertising in the US insurance
market to sustain and to accelerate insurer
investments in technology to deliver
more seamless online customer buying
experiences where our comparison model
thrives. As insurer digital capabilities
steadily improve, our network of partners
and panel members is likely to strengthen
and help our customers to more efficiently
realise the savings available from real-time
auto insurance price comparison. Thanks to
the Compare.com team for the hard work
on behalf of our customers – we’re looking
forward to an even better 2021!
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 54
Admiral Group plc · Annual Report and Accounts 2020
Comparison review continued
Comparison review highlights
Comparison financial review
£m
Revenue
Car insurance comparison
Other
Total revenue
Expenses
Profit before tax
Confused.com profit
International comparison result
Group’s share of profit before tax*1
Confused.com profit
International comparison result
2020
2019
2018
123.8
66.2
190.0
(159.8)
30.2
29.4
0.8
30.2
29.4
1.6
31.0
119.4
52.2
171.6
(156.9)
14.7
20.4
(5.7)
14.7
20.4
(2.4)
18.0
110.1
40.9
151.0
(144.4)
6.6
14.3
(7.7)
6.6
14.3
(5.5)
8.8
*1 Alternative Performance Measure – refer to the end of this report for definition and explanation.
The comparison result includes Admiral’s comparison businesses in
the UK (Confused.com), Spain (Rastreator), France (LeLynx) and the
US (Compare.com). In addition, Preminen, the Group’s joint venture
holding company for comparison ventures in new markets, includes
operations in Mexico (Rastreator.mx).
Admiral Group owns 75% of Rastreator, 58% of Compare.com and
50% of Preminen.
Combined revenue grew by 11% to £190.0 million (2019: £171.6
million) and the businesses made a combined profit (excluding
minority interests’ shares) of £31.0 million (2019: £18.0 million).
The key features of the Comparison result are:
•
In the UK, Confused.com saw market share increases in motor and
home insurance comparison leading to significantly increased
profit of £29.4 million (2019: £20.4 million).
• The continental European comparison businesses reported an
increased profit of £3.6 million (2019: £3.5 million).
• Compare.com in the US reduced its pre-tax loss to £1.3 million
(2019: £4.3 million).
• Net expenses for the Preminen operations and Penguin Portals
totalled £0.7 million (Admiral Group share), reflecting investment
in new businesses and good progress in Rastreator Mexico, which
delivered a small profit.
The UK comparison market remains very competitive, however
Confused.com continued to perform strongly and increased market
share across motor and home insurance in 2020. The business saw
a fall in demand for its services in the initial period of lockdown
restrictions in the first half of the year, though volumes recovered
significantly and remained strong for the remainder of the year.
The business continued to improve the customer and product
proposition as well as marketing efficiencies. As a result, turnover
increased by 18% to £133.5 million (2019: £112.7 million).
The combined revenue from the continental European operations
decreased by 3% to £48.5 million (2019: £50.1 million), reflecting
the impact of Covid-19 in the early part of the year, particularly in
LeLynx. These businesses continued to focus on improvements in
customer experience through the digital customer journey.
Performance for both businesses was adversely impacted by
Covid-19, with marketing and other variable costs being reduced
in line with the fall in revenue, but fixed costs remaining stable.
Similar to Confused.com, Rastreator and LeLynx saw a significant
impact on volumes in early lockdown with improvements later in
the year. Both businesses focused on improvements in customer
experience, with Rastreator reaching a record NPS score.
Preminen, the Group’s comparison venture with Mapfre, continues
to explore comparison in new markets overseas. Rastreator.mx
in Mexico has shown continued promise with a small profit in
2020, whilst Tamoniki.com in Turkey was sold in 2020, and loan
comparison portal, GoSahi.com in India, has ceased operations
following difficult trading conditions due to economic uncertainty
as a result of the Covid-19 pandemic.
Compare.com reduced its pre-tax loss to £1.3 million (2019: £4.3
million) as a result of reduced marketing spend and lower fixed
costs. A non-cash impairment of £1.4 million was recognised in 2020
by the Group’s parent company, Admiral Group plc, in respect of
its investment in Compare.com. This impairment is in line with the
reduction in Compare.com’s net assets since the 2019 year-end.
The impairment charge is recognised in the income statement of
the parent company and has no impact on the Group’s consolidated
profit for the period or the Group’s 2020 regulatory capital position.
55
Sale of Comparison businesses
Comparison Regulatory environment
Admiral announced in December 2020 that it had reached an
agreement with ZPG Comparison Services Holdings UK Limited
('RVU') that RVU will purchase Penguin Portals Group ('Penguin
Portals', comprising online comparison portals Confused.com,
Rastreator.com and LeLynx.fr and its 50% share of Preminen
Price Comparison Holdings Limited ('Preminen') and the Group’s
technology operation, Admiral Technologies).
Completion of the transaction is subject to customary regulatory
and competition authority approvals and is expected to close in
the first half of 2021. Further information on the discontinued
operations can be found in note 13 to the financial statements.
Compare.com, the Group’s US comparison operation will be
retained by Admiral.
Confused.com is regulated by the Financial Conduct Authority
(FCA) as an insurance intermediary and is subject to all relevant
intermediation rules, including those on solvency capital.
Rastreator and LeLynx are locally licensed in Spain and France.
Further information on the impact of Brexit on our European
operations can be found on page 126.
Other
Group items
Other Group items financial review
£m
Share scheme charges
Other interest and investment return
Business development costs
Other central overheads
Finance charges
Other Group items
*1 Re-presented to reflect Admiral Loans being presented separately.
2020
(53.8)
4.9
(1.8)
(22.9)
(12.1)
(85.7)
2019*1
(52.7)
6.0
(2.1)
(20.0)
(11.2)
(80.0)
2018*1
(49.0)
2.9
(4.3)
(10.5)
(11.3)
(72.2)
Share scheme charges relate to the Group’s two employee share schemes (refer to note 9 to the financial statements). Charges increased
by £1.1 million in 2020, to £53.8 million reflecting the higher share price during 2020.
Other interest and investment income decreased to £4.9 million in 2020 (2019: £6.0 million). The higher number in 2019 was driven by
increased investment return due to the increased cash holding in the parent company in that year.
Business development costs include costs associated with potential new ventures. During the year Admiral established Admiral Pioneer,
a team focusing on new product diversification opportunities in the UK, which incurred development costs of £0.8 million.
Other central overheads of £22.9 million include the £6 million Covid-19 relief fund as announced by the Group in the year, costs of circa
£4 million in relation to the sale of the comparison businesses and continued spend on a number of significant group projects including
IMAP and IFRS 17.
Finance charges of £12.1 million (2019: £11.2 million) primarily represent interest on the £200 million subordinated notes issued in July
2014, as well as a small charge on the additional Group facilities in place (refer to note 6 to the financial statements).
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 56
Admiral Group plc · Annual Report and Accounts 2020
Sustainability
and
responsibility
Our approach to sustainability acts as a framework and reference point through which our
global businesses implement appropriate and responsible practices. We believe this framework
forms a key part of the Group’s long-term commercial success, and we are committed to
building a sustainable business for the future that considers all stakeholders.
Focusing on
our Customers
Customers at the heart of what we do
Returned £110 million to customers
in a premium rebate
Valuing our People
People who like what they do,
do it better
Ranked 14th in the World’s Best
Workplace 2020 rankings
Supporting our
Communities
Supporting a culture of giving back
Dedicated £6 million to the Admiral
Covid-19 Support Fund
Caring for
our Environment
Proactively working to
reduce our impact
Joined the Institutional Investors
Group on Climate Change (IIGCC)
Engaging
our Shareholders
Engaging with shareholders and
providing good shareholder returns
Strong overall results and
sustainable dividend returns
Working with
our Partners
Building and maintaining
strong relationships
Provided financial support
to our UK Garage Repairers
57
Building a sustainable
business which drives
positive impact for our
stakeholders is at the
core of who we are,
and what we do.”
Sustainability Governance
Building a sustainable business which drives positive impacts for our stakeholders is at
the core of who we are, and what we do. Our Group CEO, Milena Mondini, is the appointed
Sustainability Representative on the Group Board.
A sustainability working group was established in 2020 to provide additional governance
support around matters related to ESG. The Working Group consists primarily of members
of departments from Investment, Risk, Facilities, and Investor Relations but also actively
engages with other departments across the business.
The sustainability working group reports directly to Milena and provides regular updates
to the Group Board. In addition, various Group functions also provide regular updates on
Sustainability related topics to the Group Board to ensure adequate levels of oversight into
current and future initiatives are in place.
Sustainable Development Goals
The 17 Sustainable Development Goals (SDGs), adopted in 2015, are part of the United
Nations 2030 Agenda for Sustainable Development. The private sector is expected to
contribute towards these goals, which cover global issues such as poverty, inequality, and
climate change. The group completed an initial exercise in 2020 to understand how we
broadly contribute to the SDG’s, and have listed a subset where we believe we have the
most impact below. We aim to conduct more detailed analysis to understand how our
activities and targets support these goals in 2021.
Sustainable
Development
Goals
Milena Mondini de Focatiis
Group Chief Executive Officer
3 March 2021
Priority Targets
Our Ongoing Contributions
(5.5) Ensure women’s full and
effective participation and equal
opportunities for leadership at
all levels of decision making in
political, economic, and public life.
• Signed PWC’s #TechSheCan Charter.
• Target in place to increase women in
executive roles to 40% by 2023.
• Signatory of the Women in Finance Charter.
(8.6) Substantially reduce the
proportion of youth not in
employment, education, or
training.
•
•
Support Cyber College Cymru which aims to
create pathways into digital careers.
Employee volunteering with One Million
Mentors.
(10.2) Empower and promote the
social, economic, and political
inclusion of all, irrespective of
age, sex, disability, race, ethnicity,
origin, religion or economic or
other status.
• Partnership with the Prince’s Trust to
deliver skills training.
• Our Diversity & Inclusion Forum consists
of six working groups.
• Partnered with Stonewall Cymru and the
Social Mobility Foundation.
• Signed up to the Social Mobility Pledge.
• Launched unconscious bias training for
recruitment staff in 2020.
(11.2) Provide access to safe,
affordable, accessible and
sustainable transport systems
for all.
• Provide insurance cover to both fully
electric and hybrid vehicles.
• Employee commuting schemes (Bike to
Work, Season Ticket Loans).
(12.6) Encourage companies,
especially large and transnational
companies, to adopt sustainable
practices and integrate
sustainability information into
their reporting cycle.
• Engaged with multiple ESG indices.
•
Implemented feedback from ESG indices
to improve reporting.
• Received external verification of carbon
emissions data.
• Enhanced ESG disclosure in Sustainability
and Annual Report.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 58
Admiral Group plc · Annual Report and Accounts 2020
Our customers
As a customer centric organisation, we strive to ensure that every customer receives
the best possible service whenever and however they contact us. We work hard to
ensure that customers can access the most suitable products for their needs.
Net Promoter Score
(2019: 75)*2
76
Would buy again
(2019: 98%)*2
98%
Our engagement methods will inevitably
evolve as further steps are taken to
enhance the Group’s digital capabilities to
position itself well for the long term, in an
increasingly digital world.
Board oversight of engagement
The Board receives updates on the
treatment of existing customers, and on
ensuring fair outcomes throughout the
customer journey. Customer and employee
feedback is fed into Board discussions
which ultimately shapes strategic decision-
making, such as plans related to digital
investment and future diversification.
The Board also receives annual feedback on
the Conduct Risk framework through the
Group Risk Committee.
The effectiveness of the engagement
mechanisms is assessed through the
monitoring of various customer KPIs and
KRIs, such as Net Promotor Score (NPS) and
complaints data.
Engaging with our customers
Customers are at the heart of our business
operations, and everything that we do.
We are committed to providing them with
good value financial products, and excellent
and convenient service, as this, as well as
fair and reasonable treatment, is what we
perceive to be the key material issues for
our customers.
How we engage
We engage with our customers through
various methods of communication,
covering different points of the customer
lifecycle. These include:
• Our Customer Service teams
• New Business and Renewals teams
• Our Claims teams
• Customer feedback – comment forms,
surveys, SMS
• Our Complaints teams
• Customer focus groups
• Direct conversations
• Perception studies
• Online customer portals
• Social media
Vulnerable
customers
In 2020, more customers required additional support due to the impact
of the Covid-19 pandemic.
Our existing vulnerable customer approach was enhanced, as we introduced
a specialist team to support customers with affordability concerns and
provided refresher training for customer support staff on how
to identify and support vulnerable customers.
We continue to sit on the Association of British Insurers
Vulnerable Customers Working Group, to ensure we can
contribute towards shaping the way that vulnerable
customers are supported across the insurance sector.
Admiral is committed to further strengthening our
vulnerable customer services in anticipation of
the finalised regulatory guidance on the fair
treatment of vulnerable customers.
59
Customers are at the heart of what we do.”
Examples of actions taken
Admiral approached the pandemic as
an opportunity to continue to serve our
customers in the best way possible. During
the first national lockdown in 2020, we
considered what we could do to help
our UK customers at a time of economic
uncertainty brought about by the pandemic.
• Waive motoring excess fees for NHS or
emergency service workers and support
NHS volunteers by guaranteeing cover for
customers using their vehicle to transport
people, deliver medical supplies and
equipment, or items to people who were
self-isolating.
• Support NHS and emergency service
workers by giving them a free courtesy
vehicle if their vehicle was stolen,
undriveable after an accident, or declared
a total loss, to keep them on the road
during the lockdown.
• Support customers who were in financial
hardship as a result of the pandemic, by
being flexible with customers struggling
with monthly payments for insurance and
personal loans. The cancellation windows
and fee free periods were also extended.
• The UK Business management thought
it was the appropriate response to give
back to customers when customers were
driving less and experiencing challenging
economic conditions. Together with
management, the Board discussed the
best approach and concluded that it was
appropriate to offer UK motor customers
a premium refund of £25 per policy (‘Stay
at Home Refund’).
How we monitor the impact
of our actions
• We track and monitor our NPS scores
• Ongoing monitoring of customer
satisfaction scores
• Feedback and insight relating to products
and services from all customer facing
teams across the business
• Activity levels on the MyAccount Portal
• Call volumes
• Ombudsman feedback
• Social media
Digital renewal
transactions grew
to a third of renewals
in 2020*1
MyAccount log ins
grew by over
40%
Customers happy with
their service (2019: 97%)*2
95%
Customer Service SMS
feedback (2019: 9.15)*3
9.28
Conduct risk
Fair treatment of customers is one of Admiral’s core values
and is supported by our Conduct Risk Framework.
Conduct Risk appetite and standards have been set by the
Board, and our Conduct Risk reporting (CRMI) is aligned to
these. A Customer and Conduct Committee oversees the
delivery of fair customer outcomes, and is supported by a
Conduct Risk Working Group, which assists the Committee
to discharge its Conduct Risk oversight responsibilities.
In the last 12 months we have focused on ensuring the
suppliers and third parties we work with are aligned to our
Conduct Risk approach. In accordance with the regulator’s
focus, we have also reviewed how Admiral’s culture drives
fair outcomes for customers and have taken a fresh look
at the role that Purpose, Leadership, Reward, Governance,
Psychological safety, and Diversity & Inclusion play in this.
Notes
*1
From 10% in 2019.
*2
*3
Based on our UK Reevoo results,
7598 responses received.
Based on SMS feedback where
customers rate the level of service
they received and the handler
they interacted with on a scale of
one to ten; the score shown is the
average of these metrics.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 60
Admiral Group plc · Annual Report and Accounts 2020
Our customers continued
Without our customers we would not have a business – therefore, we place
huge importance on ensuring that each of our customers receives the best
possible service.
2020 has reiterated the critical need for companies to maintain high levels of customer service and this
continues to be one of Admiral’s core focus areas.
Giving our
kudos
customers
The above
and beyond
campaign
Kudos is a customer experience measurement programme
used across all our customer facing contact centres.
The programme focuses on three key customer impact
areas: average speed of answer, customer SMS feedback and
external call monitoring by senior management. The Customer
Matters initiative, a cross departmental project launched in
May 2019 that involves over 3,500 employees and focuses
on improving customer interactions across our customer-
facing departments, will be formally merged into the Kudos
programme from 2021 onwards.
The Above and Beyond initiative highlights how we strive
to put smiles on the faces of our customers during their
interactions with us.
This New Business initiative encourages handlers to
nominate customers who they feel are deserving of a special
surprise. Across 2020 we sent 204 surprises to our customers,
up from 170 during 2019. Nominations often relate to
celebratory occasions such as Birthdays and Weddings, or
sometimes handlers wish to surprise customers with treats
for their much-loved pets. This year, New Business ran a key
worker special, inviting handlers to nominate
customers who are also frontline heroes,
so we could thank them and show our
appreciation for all their hard work
by sending a special surprise.
61
Many departments across Admiral work together to ensure that the needs of our customers are continually met.
We have long-standing customer initiatives and processes which seek to measure how our customers feel about
our services, reward staff who perform above expectations and make our customers smile.
As a testament to our services, Admiral UK was named the 2020 Direct to Consumer Business of the Year in The
Insurance Times Awards.
Improving
the online
experience
Cristina’s
commentaries
Our UK CEO Cristina shares a monthly commentary that covers
all things customer related.
This commentary usually includes examples of great customer
service and outlines the process changes across departments
that have helped improve the customer experience. Cristina also
awards the title of Customer Champion to one of our customer-
facing agents who received the highest available score in SMS
feedback. In July, Cristina was so impressed with the service being
provided to our customers that she selected three Customer
Champions instead of one, including Tanya from Customer Care.
Whilst speaking to an elderly customer looking to reduce their
payments, Tanya learned that the customer had no family in the
UK to help with shopping and no internet
access, meaning they had to visit the
supermarket to purchase essential
items themselves. Tanya went above
and beyond, calling supermarkets at
lunch and after work to organise a
regular delivery order and arranging
for a gift card to be sent to the customer.
Providing excellent and ever-improving
customer service continues to be one of
our fundamental goals.
Therefore, obtaining customer feedback is vitally
important, as this feedback allows us to understand
what we are doing well and identify the priority areas
for improvement. Once we have received customer
feedback, we then seek to improve our level of
customer service by acting on this feedback and
implementing any necessary changes. For example,
Admiral Loans launched a self-service portal to allow
customers to manage their loans online in 2020.
This portal enables customers to check their loan
balance and their next payment date and amount.
Introducing a self-service portal was a priority for
the Loans team, as customer demand for such a tool
was highlighted by feedback from
Reevoo, social media and customer
facing agents. Since its inception,
over 37% of our customers have
signed up to the loans self-service
portal. We will continue to seek
valuable customer feedback
and act upon this feedback to
improve our customer offering.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 62
Admiral Group plc · Annual Report and Accounts 2020
Our customers continued
Covid-19 and our customers
We value our customers above all else and in 2020 the impact of Covid-19 made supporting our
customers even more important. Admiral’s response to the pandemic focused on ensuring we do
everything possible to support our customers.
Supporting our travel customers
As global travel was severely disrupted by Covid-19,
we focused on supporting our customers through
this very stressful and difficult period.
We paid out on claims for trip cancellation when
the Foreign & Commonwealth Office advised against
travel, even though this is excluded in our terms.
We extended our travel insurance free of
charge to those stuck abroad due to delays in
transport or illness, and we allowed customers
to cancel policies outside of the usual cooling
off period without charging any fees, meaning
customers only paid for their time on cover. We
also offered a 15-month renewal term, with three
months at no charge, and allowed customers to
cancel within three months and receive a full
refund if they had not travelled or claimed.
Supporting key workers
In the UK, all NHS and emergency services workers
were provided with a replacement vehicle, if they
could not drive theirs, and an excess refund if they
were involved in an incident during the first
UK-wide lockdown.
2,843 customers had their excess waived; 6,300
customers had their glass excess refunded; 807
customers were provided hire – in total, 9,143
customers received help from our key worker
initiative. In November, we relaunched our key
worker initiative and to support NHS volunteers, we
guaranteed cover for customers using their vehicle
to deliver medical supplies, equipment or items to
people who are self-isolating. Veygo, our short-term
car insurance provider, offered a 75% discount to all
NHS staff, which saved nearly 500 NHS staff members
over £50,000 in temporary car insurance costs. In
France, from mid-March to the start of July, L’olivier
allowed customers working in healthcare to use the
‘assistance pack’ option free of charge, which allowed
customers to be assisted from their home in case of
breakdown, theft or accident, and offered customers
the option of a loan vehicle.
63
We value our
customers
above all else
and in
the impact of
2020
Covid-19
customers
even more important
made supporting our
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 64
Admiral Group plc · Annual Report and Accounts 2020
Our people
We believe that a happy workplace inspires employees to give that little bit extra.
Being a great place to work allows for happier, more productive employees and
ultimately better outcomes for our customers and other stakeholders.
96%
of our staff believe that
Admiral is a friendly place
to work*1
100%
of UK based employees
employed for more than
one year own shares in
the Group*2
91%
of staff believe that
management is
approachable and
easy to talk with*3
Admiral
stay-at-home
marathon
Engaging with our people
We want employee insights to continue
to play a part in facilitating the Admiral
Group Board discussions and
decision-making processes.
Our priorities are to ensure open lines
of communication, fair treatment,
opportunities for career progression,
reward, and recognition. We aim to retain
our reputation as a desirable and attractive
place for our people to work. We perceive
that key material issues for our people
generally relate to having a friendly and
productive workplace where staff are
engaged, and where their views are heard
and considered. During the Covid-19
pandemic, flexible working, including having
appropriate equipment for work purposes,
and health and wellbeing have been key
priorities for employees around the Group.
How we engage
Staff are encouraged to engage across
multiple channels including website chats
and face-to-face, where possible. We also
engage via:
• 1:1 meetings with managers
• Employee Consultation Group (ECG)
meetings
• Staff surveys
• Feedback schemes such as ‘Ask Milena’
and ‘Speak Up’
• An open-door policy and open plan offices
(although the majority of 2020 has been
spent working from home for our staff)
• Participation in the Great Place
to Work survey
• Exit interviews
• Grievances
• Whistleblowing channels
Board oversight of engagement
The Board receives updates relating to
diversity and inclusion, maintenance of the
corporate culture and values, particularly in
light of the need for staff to work remotely
during 2020, and the Employee Consultation
Group meetings in the UK and overseas
businesses.
The Group CEO and CFO host our Staff
General Meeting (which allows for questions
to be raised to the Board), and also host
numerous forums with staff members.
These have been able to proceed virtually
during 2020.
Non-Executive Directors attend ECG
meetings on a rotational basis and feed their
comments into the Board. The Board Chair
and other Non-Executive Directors have
also made virtual visits to different business
departments and overseas locations.
The Admiral Stay at Home Half Marathon is a charity driven initiative which asked
participants and their families to complete 13.1 miles over May Bank Holiday weekend.
In support of UK key workers, over 330 staff members,
senior managers, Board members and their families
all signed up for the challenge. By the end of the
weekend, whether through walking, running, cycling
or even rowing, participants had travelled
4,507km and taken over 45 million steps.
Over £16,000 was raised, and
subsequently matched by Admiral,
taking the total amount raised
to £32,000. These funds
were used to support The
UK Intensive Care Society,
a critical cause in the fight
against Covid-19.
In 2020, a year after the ECG was set up,
a review was performed to assess how
effective the ECG meetings had been and
to establish if there were any areas for
improvement. (See page 68 for further
information on the 2020 ECG
Effectiveness Review.)
been provided. We have hosted 27 live
meditation classes in lockdown which can be
accessed by all staff. We have also provided
neurodiversity support, Wellbeing in the
Workplace risk assessments, a ‘Speak to
Somebody’ button on our intranet and
in-the-moment counselling.
We also use pulse surveys to determine
whether our actions and engagement with
staff remain effective. The latest UK results
in 2020 showed that:
• 74% scored themselves as a four or five*4
when asked ‘how are you feeling?’
(1221 people)
• 96% of the total number working from
home are enjoying it (1374 out of 1429
people)
• 86% scored communication as
a four or five (1406 people)
• 90% feel well-supported by
their manager (1477 people)
Examples of actions taken
During the year, the Board had oversight of
the return to work/office considerations as
a result of the ending of the first lockdown.
The decision to restrict staff working in
our offices to a minimum was based on
a balance of staff health and safety and
mental health wellbeing.
Throughout 2020, we responded to the
crisis by ensuring that staff continue to
have a safe, supported and sustainable
working environment. Additional safety
measures have been put in place in
Admiral offices, Display Screen Equipment
(DSE) assessments have been prioritised
and home working office furniture has
Recruitment
trainingand
65
People statistics
In 2020, our staff completed over 250,000
online courses, and 39 employees gained
leadership and management qualifications
through ILM and the Admiral Academy.
Attrition has dropped by c.5% compared
to 2019.
Sickness has reduced overall by 0.7%
compared to 2019.
We have seen a c.30% drop in Leavers in the
last 12 months.
From a recruitment perspective, we have
seen an increase of 70% in applications per
vacancy in Business Support and 85% in
the Contact Centre since the onset of the
Covid-19 pandemic.
96%
of staff are enjoying working
from home*5
52.5%
Female staff across the Group*6
40%
of senior management
staff are female
The longer-term consequence of staff
working from home has led to the initiation
of a Smart Working project. 2020 has proven
we can operate differently, and our people
have asked for more flexibility. We will support
our people’s freedom of choice and deliver
business benefits through Smart Working.
The Smart Working Project aims to promote
flexibility both in terms of time and location,
the measurement of performance based on
output and to transform how we work
to support independent creativity and
collaboration.
How we monitor the impact
of our actions
• #3 Best Big Company to Work for UK in
2020
• #4: Best Super Large Workplace in the UK,
Great Places to Work
• #5: Best Workplace for Women in the UK,
Great Places to Work
• ECG outcomes and employee feedback
• Gender targets
• Diversity metrics
• Number of completed training courses
Notes
via the Admiral Academy
• Results relating to the Annual Culture
Matrix Report (a review of culture
related metrics and tolerances)
*1
*2
*3
Based on Group-wide results for the 2021 Great
Place to Work Survey, data surveyed in 2020.
For more infomation on employee share schemes
refer to the Remuneration Report.
Based on Group-wide results for the 2021 Great
Place to Work Survey, data surveyed in 2020.
*4 On a scale of 1 to 5, 1 being ‘poor’ and 5 being ‘great’.
*5
Based on 1429 responses in our October UK Pulse
Staff Survey.
*6 0.2% identify as non binary.
Our internal recruitment teams play a key part in ensuring
the continued successful growth of the business.
Faced with a complete shift to remote working in
2020, they quickly adapted, holding almost 3500
virtual interviews and remotely onboarding over
600 new starters between March and the end of
2020. This year, three internal training schemes
were also launched in our UK offices, a Talent
Agility Programme, Digital Scheme and IT Training
Scheme. These schemes focus on recruiting from
our customer facing staff and transferring their
knowledge to help develop our support functions. We firmly believe that
strong product knowledge from customer interactions provides a strong
base by which candidates can be successful in a variety of roles across the
business. Positions on all three schemes were recruited 100% remotely and
are conducted fully remotely as well.
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Admiral Group plc · Annual Report and Accounts 2020
Our people continued
That little
extra
Graduate
Scheme
Acknowledging the difficult circumstances this year has
had on many of our staff, several initiatives were put in
place by our senior management to support and reward
their performance. UK-based staff across our insurance
operations received an additional five days holiday as a
thank-you for all their hard work and to encourage them
to take well-deserved time off. Alongside this, outgoing
Group CEO David Stevens announced in the 2020 SGM
that, as way of saying thank you, he and his wife Heather
would make a personal gift of £1000 to all full-time
employees and £500 to all other employees.
In 2020 we were named as a top
graduate employer in the Sunday Times
Top 100 UK Graduate Employers list.
This is the second year running we have
made the list, ranking 79th this year
(up from 96th in 2019). Our graduate programmes have been
running since 2006 and cater to a wide range of students through
both a general scheme and a data/analytics programme. These
include a five week induction, followed by three to four rotations
across the business, offering candidates a complete perspective
of our operations before they settle into their full-time roles.
Speak
somebody
to
Black history
Month
Whilst our staff intranet resource, Atlas, has played a key role
this year in ensuring our staff stayed connected and updated
on all latest Group updates, it has also played an important
role in supporting mental health. Through Atlas, initiatives
have been available to staff including one-to-one counselling,
our Ecare programmes, online mental health training and
meditation sessions. Acknowledging the shift to homeworking,
support initiatives were also extended to staff’s immediate
families. As the impact of the Covid-19 pandemic flows into
2021, we are committed to ensuring our people continue to
feel supported in these difficult circumstances.
Over the month of October, Admiral celebrated Black History
Month. This initiative encourages our people to reflect on the
diverse histories of those from African and Caribbean descent,
and take note of the achievements and contributions to the
social, political, economic and cultural development of the
UK. To mark the occasion our BAME working group sponsored
Black History Month Wales and the National Youth Awards that
seek to recognise our young people of African and Caribbean
heritage in Wales. Staff were invited to share their own stories
or those of their family members or friends linked to black
history, with our favourites shared throughout the month.
67
Covid-19 and our people
In response to the Covid-19 pandemic, supporting our people was a priority. We put the health of our
people at the forefront of this response, by facilitating homeworking and supporting their physical and
mental wellbeing. We also took steps to ensure that the unique Admiral culture remained as strong and
integral as it always has been.
Online staff SGM
Employee Consultation Group
This year marked the 23rd annual Staff General
Meeting (SGM) and the first time the SGM was
held completely online.
Whilst the Covid-19 pandemic meant the need
for a new virtual format, it did not stop our senior
management from keeping with tradition as
they updated the Group on how the business is
performing, discussed future ambitions, and poked
some light-hearted fun at themselves. This year’s
SGM held special importance as it marked the
last SGM of Group CEO David Stevens and despite
Covid-19, the SGM continues to be a key channel
through which senior management communicate
with staff. It offers a chance to talk about the
business, reflect on all the progress made and
thank staff for all their hard work.
Launched in January 2019, the Employee
Consultation Group is a communication platform
designed to promote two-way communication
between the Admiral Group Board and all UK-
based employees.
Each meeting is attended by elected staff
representatives, at least one Non-Executive
Director, and invitations are regularly extended
to our coffee morning managers (senior business
managers). Whilst the Covid-19 pandemic forced
us to move meetings online, in 2020, six meetings
were held where outcomes included:
• Updated benefits: Following an ECG query, the
benefits team surveyed staff to understand
their awareness of existing benefits, the utility
of such benefits and the areas needing change as
a result of the shift to homeworking. Subsequent
communication and benefits improvements
were made as a result of the feedback received.
• Holiday allowance: Admiral allowed higher
flexibility in its holiday allowance policies in
response to staff feedback regarding the rules
in place.
• Winter Support Fund: Support was put in place
to provide staff with additional support to help
with the cost of heating and electricity whilst
homeworking.
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68
Admiral Group plc · Annual Report and Accounts 2020
Our people continued
Engagement with employees
The Board recognises the importance of
engaging with its workforce and does so
through a combination of informal and
formal channels. In order to ensure that there
is an effective means by which the views
of the workforce can be heard, the Board
established an Employee Consultation Group
(ECG) in 2019 with the aim of enhancing
and formalising its pre-existing employee
engagement arrangements.
Membership of the ECG comprises elected
staff representatives and the remit of the
ECG is to act as a forum for staff consultation,
gathering staff opinion and fostering a safe
environment to raise matters of interest and
generate ideas. There were six ECG meetings
during 2020 with a range of topics discussed,
including pay, benefits, IT and workplace
services, particularly in respect of remote
working. The Strategic Report outlines
further information on how the workforce
influenced the Board’s decision-making,
Non-Executive Directors are invited to attend
ECG meetings on a rotational basis and report
back to the Board on matters discussed, as
well as actions agreed at the meeting. Taking
this approach ensures that each of the Non-
Executive Directors has the opportunity to
engage with the workforce directly and to
hear first-hand the issues and matters that
are affecting the workforce.
In addition, the Chair of the ECG regularly
attends Board meetings to report on matters
discussed at recent ECG meetings and any
areas of concern. Through this interaction,
the Board has been able to have regard to the
views of employees when making decisions
involving working arrangements as a result
of the Covid-19 pandemic and the policy on
executive remuneration.
• Opportunities to improve transparency in
respect of the topics raised by the workforce
that do not make it onto meeting agendas
but are resolved by other means, and in
respect of the sharing of the output of ECG
meetings across all UK subsidiary boards and
any other relevant forums.
• With regard to the role of ECG members,
a review of the appropriateness of the
allocation of representatives across the
different business areas, to determine if a
more equal distribution of representatives
across the business could be achieved and
determine the support available to those
representatives of larger departments.
• Providing the ECG Chair with the power to
recommend to the Board the extension of
the tenure of ECG members by one year in
extraordinary circumstances, such as the
Covid-19 pandemic, to ensure continuity.
• Formalising the ECG agenda to allocate time
for an attending Non-Executive Director to
provide feedback to the ECG meeting and
take questions from ECG members to aid
the two-way engagement mechanism. The
opportunity was also taken at the Board
meeting in December to remind the Board
and Senior Managers that the ECG can be
used as a consulting forum, where this would
add value, noting that this opportunity
had been used by the Chair of the Group
Remuneration Committee in respect of
the Directors’ Remuneration Policy and
in hearing direct feedback of employee
sentiment during the Covid-19 pandemic.
• Opportunities to improve the co-
ordination and scheduling of topics
provided to the ECG for discussion in
advance of the Board meetings, which
would improve the timing and specificity
of the workforce views captured within
the Board reporting template.
At the end of 2020, the ECG carried out
a review to assess the effectiveness of
its meetings as a meaningful workforce
engagement mechanism. The assessment
included a review of the ECG’s terms of
reference, its performance and effectiveness,
and the representative electoral process,
with the outcome reported by the Chair
of the ECG to the Board in December. The
review recognised that there were a number
of actions which could be taken to further
enhance the effectiveness of the ECG as
an engagement mechanism, which were
endorsed by the Board and included:
The Board has determined that, whilst
recognising that there is room for further
improvement, the operation of the ECG
has been and continues to be an effective
means of engaging with the workforce, to
help the Board understand the matters that
concern the workforce and their specific
interests, whilst having regard to these
in the decisions that are made at Board
level. The Board will ensure that the ECG
continues to develop and embed as an
effective, formal workforce advisory panel
and that regular interaction with the Board
is maintained.
Further work has been undertaken during
the year to ensure that existing work forums
for employees of the Group’s overseas
businesses are aligned with the operation of
the ECG. A formal ECG has been established
for the overseas businesses and the Board
received its first report on this engagement
mechanism at the end of the year. The
Board will continue to monitor its progress
through the regular updates it is scheduled
to receive during 2021.
Communication
There are a wide range of communication
tools used by the Group to communicate
matters that concern employees which
assists in the understanding of business
goals and objectives and economic and
financial factors affecting the performance
of the Group. Some of these tools include
the staff portal (Atlas), internal newsletters,
the use of videos, which has increased
during the Covid-19 pandemic, team
briefings, suggestion schemes, staff forums,
updates on the staff share scheme and the
annual Staff General Meeting (SGM) which
was delivered virtually during 2020.
The transparency of our communication
philosophy extends to senior managers
and Directors, who sit amongst their teams
which encourages a dialogue between
staff of all levels of seniority across all
areas of our business. Furthermore, our
Chief Executive Officer (CEO) operates an
‘open door’ policy so if any member of our
staff wants to ask a question, they can
email her directly through our ‘Ask Milena’
intranet initiative. Our senior managers and
Directors also participate in regular online
and video chats with staff.
For information on how the Directors
have engaged with employees during the
financial year and how Directors have
had regard to employee interests during
the financial year when making strategic
decisions, please refer to the Strategic
Report on pages 64 and 65.
The Group encourages involvement in the
performance of the business through the
participation by the majority of the Group’s
employees in the Group’s Share Incentive
Plan (SIP) under which they are given shares
in the Company. This share ownership gives
employees a good understanding of the
financial and economic factors that could
affect the Company’s performance.
Engagement with customers,
suppliers and others
Diversity, ethics and
human rights
During 2020, the Board has continued
to focus on, and take into account in the
decisions that it makes, the relationships
with its customers, employees, suppliers,
business partners, the wider community and
other stakeholders. The Board recognises
that there are a wide range of business
relationships that are important to the long-
term sustainable success of the business.
Further information on Board engagement
with the Group’s stakeholders can be found
in the s172 statement in the Strategic
Report on page 82.
The customer remains central to the Group’s
culture and the Board considered customer
outcomes and the fair treatment of its
customers as part of its decision to offer a
‘Stay at Home’ refund of £25 in respect of
each validly held UK motor insurance policy
as at 20 April 2020.
Further information on how the Board
considered the interests of its customers in
reaching this decision is outlined on page 83.
In addition, the Board also considered an
update on Group Procurement during the
year which included a recap of the Group
Procurement Framework governing the
management of suppliers, modern slavery
due diligence, procurement activities in
2020, and those planned for 2021.
The relationship with the Group’s
reinsurance and co-insurance partners is
integral to the long term strategy decisions
made by the Board, particularly with
regards to the discussion and approval of
the Group’s five year business plan and the
established reinsurance and coinsurance
arrangements that the Group has in
place which are a key part of the Group’s
business model.
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.
Admiral has signed up to the Women in
Finance Charter and was named the 5th
place in the Great Place to Work for Women
in 2020. Our Diversity Forum promotes
gender equality in the workplace and has
been instrumental in driving improvements
in the Group’s activity to promote diversity
and inclusion.
69
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
Other senior managers
Male
Female
7
7
5
7
All employees
5,633
5,812
Notes
*1
*2
Company Directors consists of the Board of Directors,
as detailed on pages 96 to 99.
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.
Further information on the Group’s approach to diversity
is also set out in the Nomination and Governance
Committee section on pages 128 to 131.
Disabled employees
Admiral Group gives full and fair
consideration to applications for
employment made by those with
disabilities, having regard to their particular
aptitudes and abilities. Admiral Group’s
UK businesses are Disability Confident
Employers. This means they are recognised
as going the extra mile to make sure
disabled people get a fair chance.
The Group will support any employee who
is disabled or has a life-threatening illness
and help them to contribute to the Group
as long as their health allows. Managers in
the Group are sensitive to health concerns
and special needs and will not knowingly
allow any employee with a disabling or
life-threatening illness to suffer from
discrimination at work. The Group provides
staff with access to the EAP Care First
confidential helpline which offers advice
and support on a range of health issues.
Admiral has a Disability Forum to help
promote inclusivity in the Group for those
with a disability. In 2019, the Company was
awarded Level 2 status of the Disability
Confident Award and is now aspiring
to achieve the Disability Leader Award.
There is also a Workplace Support Team
to provide support for those with physical
disabilities, neurodiversity and short-term
mental health problems. Training sessions
to help better staff understand those with
neurodiversity are also available.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 70
Admiral Group plc · Annual Report and Accounts 2020
Our partners
In terms of partnerships, the Group’s relationship with its reinsurers continues to
be an integral part of the Group’s business model and plans. A number of major
suppliers are also deemed to be of strategic importance to the Group.
Board oversight of engagement
The Board receives updates on:
How we monitor the impact
of our actions
Engaging with our partners
Admiral views key material issues for our
external partners as generally relating to
being treated fairly during the sourcing
stage, solid two-way communication
channels, financial returns and timely
financial payments, strong collaborative
relationships and meeting our cyber
security requirements.
How we engage
Key parties have internal relationship
managers responsible for ongoing dialogue,
for example with co- and reinsurance
partners, and strategic partners.
The Group’s dedicated Regulatory
Relationship teams maintain channels of
communication with the FCA and PRA in
the UK, and all our international regulated
intermediaries and insurers.
We have supervisory teams that have
oversight for the Group, who provide
ongoing reviews of key and strategic
suppliers, and Group procurement functions
and systems. We also have a supplier
working group.
Supporting our
suppliers
over the
lockdown
• all proportional risk sharing agreements
including co-insurance and reinsurance
contracts
• all insurance and comparison businesses
• Loans business and other Group items
• matters relating to partnerships and
opportunities
• relationships with key partners and
procurement
• regulatory, technological and
consumer trends
• Modern Slavery considerations
The Board takes all updates into
account when considering the long-
term consequences of its strategies and
business plan.
The CFO provides updates on the activities
related to the renewal of the Group’s
reinsurance and quota share contracts,
including maintaining the ongoing
strategic relationship with Munich Re.
• Successful renewal of risk sharing
agreements and contracts
• Engagement with co-insurance and
reinsurance partners
• Feedback from strategic suppliers
and partners
• Compliance and audit activities
• We track efficiency savings in
procurement activities
70%
ConTe brand awareness grew by 70% in
2020, and we became official partners
of The Italian National Football Team.
88%
of our strategic and key suppliers have
a fully embedded diversity and equality
policy in place.*1
80%
of our strategic and key suppliers have
an environmental policy in place.*1
*1
Percentage based on strategic and key suppliers
of EUI, AFSL and Admiral Pioneer.
Throughout the summer lockdown period Admiral ran a series of surveys with our claims
supply chain to understand how they were prepared for the lockdown and how we could
help them if needed.
In response to this, we provided over £500,000 in
additional cleaning and financial support fees to UK
garage repairers. This included providing financial
support for courtesy car costs where the repairer
was unable to supply a vehicle, and a financial
contribution for customers who were unable to
return their courtesy car after their vehicle was
repaired. We also ensured that payment to suppliers
were completed and expedited as fast as possible by
utilising automation, increasing the volume of auto
authorised repairs by 10% in Q2 (versus Q1).
71
Our shareholders
Investor engagement fosters understanding of Admiral’s strategy.
Board oversight of engagement
The Board receives regular updates on
the activities of the investor relations
team, as well as on meetings held between
Board members and/or management and
investors.
The Board also receives investor feedback
and uses it to shape its approach to
Corporate Governance, ensuring that any
issues or concerns raised are considered and
addressed.
Examples of actions taken
In April 2020, the Board considered
whether to amend or withdraw the
2019 final dividend resolution given the
economic uncertainty brought about as a
consequence of the pandemic. As part of
the decision to defer the special element
of the 2019 final dividend resolution, the
Board considered the impact on various
stakeholders including its shareholders,
customers, staff and regulators.
The financial analysis considered by the
Board demonstrated that the Group was
able to pay the previously announced
normal and special dividend whilst
remaining strongly capitalised, with high
levels of liquidity, to be able to withstand a
range of severe stresses.
The Board considered how the deferral of
the special dividend could impact staff,
from a retention and morale perspective, as
it would result in the staff dividend bonus
being reduced. The Board also considered
how the decision to defer the special
element could be misinterpreted as a
deferral due to capital considerations.
However, given the regulatory preference
for prudence, the current crisis and the
reputational risk of paying a full dividend
when customers, staff and the community
were being adversely impacted by the
crisis, the Board made the decision to pay
the normal dividend in early June 2020
but defer the 2019 special dividend for
further consideration at the 2020 half year.
The Board requested that the associated
communications were sufficiently clear to
mitigate the risk of misinterpretation.
Shareholders received the deferred 2019
special dividend with the interim 2020
dividend on 1 October 2020.
How we monitor the impact of
our actions
• Broker feedback
• Analyst feedback
• Shareholder feedback
•
Investor Relations reports
• Feedback from proxy firms
• AGM voting results
179.5p EPS
(2019: 148.3p)
Management attended 13 virtual
conferences in 2020
Our shareholder base continues to be
led by low turnover value, index and
growth investors.
Engaging with our shareholders
We consider the key material issues for
our shareholders generally relate to
financial returns, two-way engagement
and communication, viability of long-
term success, and products and services
that are fit for purpose and provide solid
financial returns.
The Board also recognises the growing
importance of ESG factors in investment
decision making.
How we engage
The Group engages regularly with
shareholders through frequent and open
dialogue and our Investor Relations calendar
consists of various activities.
• Results announcements and presentations
• Annual Report
• Roadshows (in person where
possible, and remotely)
• Conferences
• Analyst and Investor phone calls
• 1:1 meetings
• Group meetings
• On-site investor visits (where possible)
• Annual General Meeting
• Staff General Meetings
• Corporate Governance shareholder
meetings (with Chair and Senior
Independent Director)
Dividend Prudence
In light of the regulatory guidance to
insurers urging restraint on the payments
of dividends due to the uncertainty of the
Covid-19 economic environment, the Admiral
Group Board announced the decision to defer
the payment of the special dividend for the
year ended 31 December 2019.
After careful consideration, the Board decided
to pay the normal dividend of 56.3 per share,
but to suspend the payment of the special
dividend of 20.7 per share.
The Group confirmed significant liquidity
and a strong solvency position, well above
its target level and regulatory thresholds.
Robust stress tests against the Company’s
financial position supported the payment
of the previously announced final dividend
in full under normal circumstances.
However, the Board was mindful of the
call for heightened prudence from its
regulators and concluded that suspending
the payment of the special dividend was
appropriate at the time.
The Board announced it would review the
position in relation to the special dividend
alongside the Company’s half year results,
indicating the intention to pay the suspended
dividend later in the year unless there was a
significant deterioration in the Company’s
financial position, trading or outlook.
In August 2020, at the Interim Results, Admiral
announced the deferred special dividend
would be paid together with a strong interim
results dividend, with the explanation that
there was a “reduced level of uncertainty in the
economic environment compared to earlier in
the year”.
Admiral took a prudent view which we
believe was the right decision based on the
regulatory and economic environment, and in
the long-term interests of the business and
its shareholders.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 72
Admiral Group plc · Annual Report and Accounts 2020
Our communities
Giving back to our communities is an integral part of our company culture. Our
employees play a key role in how we engage with our communities, and we work
collectively to drive long term change both inside and outside of the business.
Engaging with our communities
How we engage
Community Chest Budget
over the last 10 years
(UK only)
£1.1 million
Donated by ConTe (Italy) to
communities in 2020
+€85k
Community
chest
As a large employer across several countries,
we believe it is our responsibility to provide
employment opportunities for those in the
local areas whilst training and developing
our staff. We are committed to promoting
and recognising diversity both within
Admiral, and in the communities in which we
operate. A culture of giving and a sense of
responsibility for the community is shared
across the whole Group. We perceive that
key material issues for our communities
generally relate to support and ongoing
dialogue, financial and resource-based
contributions, and consistency and integrity
relating to our promises.
Our employees drive our community
engagement as they are involved in
nominating and choosing which initiatives
we support. We engage in a number of
ways, including:
• Staff volunteering
• Charity initiatives
• Partnerships with recruitment bodies
• Partnerships with educational bodies
• Sponsorship of various community events
• Fundraising
• Funding projects through our Community
Chest Programme
• Funding projects through our Ministry of
Giving Programme
Board oversight of engagement
The Board receives updates on the key
community initiatives across the Group and
provides direction on how we can continue
to make a long lasting, positive impact.
The Admiral Community Chest provides financial support to staff directly involved with
local charities and organisations. The fund has been running since 1998 and had a budget
of £130,000 for 2020.
We contribute to around 350 different
charities and organisations each year
through this fund, supporting small
community projects and encouraging
staff involvement in the community. Our
Community Chest initiative reflects our
commitment to making a difference in our
local communities. Although the funding
required for many of these grass roots
projects is relatively small, these projects
positively impact our local communities and
our employees are empowered to nominate
projects that are important to them,
placing our employees at the centre of our
community strategy.
An example of this initiative is when Amy,
a member of our Communications team,
requested £500 on behalf of her mum,
a teaching assistant at a local Primary
School who supports children on the
autistic spectrum. The donation was used
to purchase a new TV, as funds were not
available to replace the broken one and
many of the pupils rely on visual support
during their lessons.
73
Donated by Admiral Seguros
(Spain) to communities in 2020
+€65k
Admiral committed £6 million for charitable donations
as part of the Admiral Covid-19 Support Fund.”
Examples of actions taken
During 2020, Admiral committed £6 million
for charitable donations as part of the
Admiral Covid-19 Support Fund (UK and
internationally), including £2 million to an
insurance industry wide charitable effort
orchestrated by the Association of British
Insurers. A large portion of this funding was
allocated to the NHS, charities, schools,
nursing homes and support groups in
South Wales.
set up by Admiral to through which staff can
apply for financial support for local charities
and organisations which they and their
families are directly involved in.
Through our Ministry of Giving, we donated
£50,000 to local communities in South
Wales affected by flooding in February 2020.
How we monitor the impact
of our actions
• Feedback from charities, recruitment and
£100,000 was donated to the Wales
Coronavirus Resilience Fund through
Community Foundation Wales, and
Admiral’s operations outside the UK are also
supporting their own local communities.
educational bodies
• Feedback from employees
• Community feedback
• Dialogue with organisations
• Feedback from the Welsh Government
We also had a Community Chest budget of
£130,000, but we were not able to spend
the total budget due to activities that could
not take place as a result of the Covid-19
restrictions. The Community Chest is a fund
Ministry
of
Giving
In 2018, Admiral committed £400,000 to fund four charity projects in South Wales
across 2019/20, with the charities chosen via an employee vote.
One of those chosen was Wooden Spoon, a charity focused on brightening the lives
of children with life limiting illnesses. Our partnership with Wooden Spoon funded a
project to build a playground in a school that supports children with a range of mental
and physical disabilities. The playground was designed to improve the physical health,
communication skills and mental wellbeing of pupils.
For further details on our Ministry of Giving charity
partners and progress updates on the vital work they have
undertaken in 2020, please see our Sustainability Report,
which is available on the Admiral Group website.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information
74
Admiral Group plc · Annual Report and Accounts 2020
Our communities continued
Our community objectives are focused on supporting the local communities
in which we are based and supporting the charities and organisations directly
connected with our employees.
As we develop our longstanding community initiatives, we continue to explore new ways of generating
meaningful community impact across our operations. Furthermore, as a large employer across several countries,
we believe it is our responsibility to provide employment opportunities for those within our local communities.
Standing by our
community commitments
Festival of Sport
We also continued to
support the Festival of
Sport, an event that
provides children with
disabilities an opportunity to get involved with a variety of sports,
activities, and games. For over 15 years, Admiral has provided
financial assistance and hundreds of employee volunteers to
help facilitate this annual event. Although the 2020 festival was
cancelled due to Covid-19, we supported this important community
festival by making a financial donation to the event organisers. This
donation was used to provide gift bags to all the children who were
planning on attending the event, which contained sports equipment
and 2021 festival t-shirts.
Pride
Although Covid-19 severely disrupted many of the community
events we proudly sponsor each year, we continued to support
adapted versions of these events where possible during 2020.
We continued our long-standing partnership with Pride Cymru,
a partnership that started back in 2000, by sponsoring their Big
Online Week, a digital celebration of LGBTQ+ equality and diversity
across Wales. This adapted event involved Admiral Academy and the
PRIDE network hosting a webinar, with panellists from Stonewall
Cymru, Pride Cymru, Principality and Admiral discussing the
meaning of Pride and its ongoing importance in 2020.
Promoting
employability
in our communities
with a focus on technology
One of our core community aims is to promote employability
across the communities in which we operate. Cyber College Cymru
is a new initiative that is focused on creating pathways into digital
careers for those who are passionate about technology. The
curriculum has been developed with support from Admiral, other
private sector partners and the University of South Wales, as part
of the Welsh Government’s Strategic Insight Programme. Two
student cohorts began their studies in September and students
will receive a BTEC Extended Diploma after completing the two-
year course. Alongside helping to shape the curriculum, Admiral
will provide mentoring for students, deliver guest lectures, and
offer work placements. We also work in partnership with One
Million Mentors, the Cardiff Commitment and The Prince’s Trust,
to further promote employability across communities in Wales.
Promoting
employability in
our international communities
Our international operations also engage in programmes that focus on
promoting employability. In Spain, Admiral Seguros support Women’s
Lab, a training programme for unemployed women at risk of social
exclusion. The training involves a 15-hour online course, including
exercises on interview preparation and communication skills, and
aims to facilitate access to employment. In France, L’olivier partnered
with GEIQ Emploi et Handicap, an organisation that aims to integrate
individuals with disabilities into participating companies. Successful
candidates are employed by GEIQ on a fixed-term contract and
available to work for L’olivier throughout this period, with potential
for the role to become permanent. In Italy, ConTe’s senior managers
volunteered mentoring hours to support the development paths of
women who are preparing for executive manager roles. ConTe also
participated in inter-company round tables to share the experience
of ConTe female managers with young women new to the workforce,
particularly supporting their development in technology-related fields.
Covid-19 and our community
Supporting our local communities has played a fundamental role in Admiral’s response to the Covid-19
pandemic, with the challenges and disruption facing communities making Admiral’s community work
more important than ever before.
75
Admiral Support Fund
International Response to Covid-19
The Admiral Support Fund has been in operation
since March 23rd. The fund’s value was £6 million,
with £2 million donated to the Covid-19 Support
Fund established by the insurance and long-term
savings industry.
As a proud Welsh company, we really wanted
to support communities across Wales and the
Admiral Support Fund has allowed us to do exactly
this. The fund’s donation model responds to
staff requests and we have already supported
over 200 beneficiaries. The fund has had a far-
reaching impact and catered to a wide variety
of needs, through initiatives such as providing
school equipment, delivering medical supplies and
PPE, sourcing tablets for care homes, donating
meals to hospitals and making cash donations.
The Cardiff Food Appeal and the Community
Fund Wales received donations of £50,000 and
£100,000 respectively, whilst our four existing
Ministry of Giving charity partners each received an
additional £25,000 in funding to help them through
this challenging period. With many traditional
fundraising activities halted due to Covid-19, we
donated over £250,000 to 16 large charities, with
these funds to be used to support services provided
in Wales. We also allocated £2 million from the fund
to be split between our international operations.
Our international operations contributed
towards the Covid-19 response in their respective
countries.
In France, L’olivier contributed to the Covid-19
solidarity fund gathered by the French Insurance
Federation (the FFA), to help the small and medium
sized businesses most affected by the crisis. L’olivier
also donated proceeds from TV commercials to
the ‘Fondation de France’, who were supporting
health care and medical personnel and contributing
towards Covid-19 research. In Italy, ConTe donated
€50,000 to three local charities and a hospital in
Rome, providing support during the peak of the
outbreak and purchasing essential equipment and
Covid-19 tests. ConTe also financially supported
families in difficult situations across Rome and
funded the schooling costs for a class of pupils in
partnership with the Italia Uganda Foundation. In
Spain, Admiral Seguros made a €40,000 donation to
Cruz Roja, who were protecting the most vulnerable
people in the local community and purchasing PPE
for hospitals in Seville.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 76
Admiral Group plc · Annual Report and Accounts 2020
Our environment
Admiral is mindful that it is increasingly important to demonstrate responsible
business behaviour with regards to the environment.
Group emissions
(2019: 3,833 tcO2e)
2,044 tCO2e
Emissions per employee
(2019: 0.36 tCO2e)
0.21tCO2e
CDP score
(2019: F)
C-
UK electricity sourced from
renewable sources
100%
Engaging with our environment
Board oversight of engagement
We aim to reduce our environmental
footprint and encourage responsible
behaviour. We perceive that key material
issues for our environment generally relate
to the direction of travel and progress
relating to environmental concerns,
awareness of topical issues and the sharing
of best practice, reducing carbon emissions
and the Group’s overall environmental
footprint, and the creation of a sustainable
business for the future.
The Board receives updates on our
Responsible Investment Policy, and gives
feedback relating to investments and topics
for consideration. Directors are kept up to
date with business initiatives on ESG matters.
A Sustainability Working Group was initiated
in 2020 which includes employees from
the Group’s Risk, Finance, Investments,
Facilities, and Investor Relations functions
to oversee the implementation of climate
change ambitions.
How we engage
Employee directed activities include:
• Regular updates from the ‘Green Team’,
an internal working group
•
Internal promotion of ‘Green Week’
• Promoting video and telephone
conferencing systems between the
international businesses to reduce travel
• Various recycling initiatives across our
offices
• Monthly meetings of our Climate
Change Working Group
Examples of actions taken
In January 2020, the Group’s purpose was
reviewed and updated to include focus on
sustainability including the community and
the environment.
As a result of the Covid-19 pandemic and the
decision for staff to continue to work from
home, where possible, and/or travel less, we
reduced CO2e emissions per employee by
42%, and Group-wide emissions in 2020.
A Climate-Change Related Risks Project
continued to research trends, to better
understand the risks arising from climate
change, to understand disclosure
requirements, and to determine how to
incorporate climate-related risks into
business as usual risk management.
Digital improvements
driving
environmental
benefits
Digital customer solutions increasingly enable us to improve our customer
proposition whilst reducing our impact on the environment.
In our Spanish insurance operation, Admiral
Seguros, initiatives have been implemented
such as video-loss adjustment processes and
geo-localisation for road assistance. Our Italian
insurance operation, ConTe, similarly incentivise
loss adjusters to rely on digital tools to avoid
physical investigations where possible. ConTe
also aims to primarily rely on digital document
solutions, rather than postal services, by
collaborating with software providers to
provide digital alternatives. Combined, these
initiatives render customer processes both
more efficient and environmentally friendly.
77
There are no material exclusions from
this data. Exclusions included figures
for air conditioning from all sites because
the information was not available from
the managing agents of the Group’s
multiple office locations. 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.
In 2020, we became a member of the Institutional
Investors Group for Climate Change (IIGCC).”
• We enhanced our disclosure in line
with the Task Force on Climate-related
Financial Disclosures (TCFD) to provide
better transparency around the ways in
which climate change will impact Admiral
Group now and in the future. Further
information can be found on page 91.
•
In 2020, we became a member of the
Institutional Investors Group for Climate
Change (IIGCC), working to align our
investment practices with targets set out
in the 2015 Paris Agreement.
• Admiral Group’s Carbon Emissions data
was validated by an external third-party
for the first time, increasing transparency
around our carbon emissions reporting
and Admiral purchased carbon credits to
offset these carbon emissions.
How we monitor the impact
of our actions
• Our facilities department measures and
monitors key aspects of our environmental
performance and regularly reviews progress
• We track and measure CO2e emissions per
employee and at Group level
• Our Cardiff and Newport offices are
rated BREEAM Excellent for exceeding
sustainability benchmarks above
regulatory requirements
• 91% of our staff believe we are working
to reduce our environmental footprint
• Ensuring our asset managers are
signed up to the PRI guidelines.
Greenhouse Gas Emissions
The annual level of greenhouse gas
emissions, resulting from activities for
which the Group is responsible, was 2,044
CO2e (2019: 3,833 CO2e), equivalent to 0.21
tonnes (2019: 0.36 tonnes) per employee*1.
In accordance with GHG Protocol Scope 2
guidance released 20 Jan 2015, Admiral is
exempt from reporting greenhouse gas
emissions from electricity supply to the
three largest UK offices which meets the
GHG Protocol Corporate Standard. Note
that, L’olivier in France and Elephant in the
US, have been unable to provide data for
2019 and are excluded from the results in
this and future reports until they are able
to do so. LeLynx in France is also excluded
but is immaterial to the overall view
due to its size.
*1
Average employee number excludes
employees from offices for which data
could not be collected.
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).
CDP
disclosure
In 2020, Admiral completed a full disclosure to the Carbon Disclosure Project (CDP)
detailing the commitments we have in place to manage our impact on the environment.
The CDP is a not-for-profit charity which for the past 20 years has led the way in creating
comparable, transparent disclosure for companies, cities, states and regions around
climate change. Admiral Group received a C- score in 2020, which is just below the global C
average and puts Admiral in the Awareness score
band. We are committed to improving our climate
governance in line with feedback received and
will continue to provide updated CDP disclosures
annually going forward.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 78
Admiral Group plc · Annual Report and Accounts 2020
Our environment continued
Streamlined Energy and Carbon
Reporting (SECR)
Group carbon emissions
Environmental impact of our operations
Type of Emission
Between 2019 and 2020, the overall
Group CO2 emissions decreased by 47%.
All operations showed a decrease in their
emissions output, and our emissions
per employee decreased by 42% in the
same period. This decrease in emissions
output is largely a reflection of the shift
to homeworking due to the Covid-19
pandemic. The emission levels of our
building operations and travel are expected
to remain low in 2021 as pandemic-related
uncertainties remain.
Energy
Scope 1
Company Van
Gas
Air conditioning/refrigeration
Total Scope 1
Scope 2
Purchased electricity
Total Scope 2 – market based
Total Scope 2 – location based
Our Cardiff offices (including Group
headquarters Ty Admiral) and Newport
offices are rated BREEAM Excellent for
exceeding sustainability benchmarks above
regulatory requirements. Since 2015 all
electricity that we have purchased in the
UK is from 100% renewable sources. Solar
panels have also been installed on the
Cardiff and Newport offices providing direct
solar powered electricity.
Scope 3
T&D - electricity
Employee Business Travel
Domestic flight, average class
Short-haul int. Flight,
average passenger (with RF)
Flights: Long Haul
average Passenger (with RF)
Average car
Regular Taxi
National rail
International rail
Light rail and tram
London Underground
Waste
Mix Recycling
Paper and board: board
Paper and board: paper
EfW
Landfill
Water
Water supply
Water Treatment
Total Scope 3
Combined Total
Water
Our building operations incorporate smart
technology to reduce any unnecessary
amount of water usage in our offices.
Our headquarters, Ty Admiral, relies on
electronic sensor driven taps to stop
excessive use and flood control. Similar
technology solutions to minimise water
waste are in place across our operations.
Paper
The increasing transition towards
digitalisation, largely driven by shifts to
homeworking in 2020, is expected to help
continue to drive a reduction in paper usage
going forwards. Initiatives such as offering
customers option to access their policy
documents online rather than via the post,
and relying on recycled printer paper in our
offices, form additional means by which we
work to reduce paper consumption.
Waste
We actively work to reduce waste wherever
possible and encourage staff to recycle
across our building operations. In the UK,
100% of our non-recyclable waste is sent
to an incinerator where it is converted
into energy.
2020
Total CO2e (ton)
2019
Total CO2e (ton)
Movement –
Total
175
430
–
605
909
909
–
298
4
45
111
11
8
19
–
–
–
3
–
1
2
–
9
19
530
2,044
4
671
–
675
1,243
1,243
–
367
27
144
1,010
177
–
147
–
–
–
2
–
3
5
–
11
22
1,915
3,833
171
(241)
(70)
(334)
(334)
–
(69)
(23)
(99)
(899)
(166)
8
(128)
–
–
–
1
–
(2)
(3)
–
(2)
(3)
(1,385)
(1,789)
79
Total purchased UK electricity
from renewable sources
100%
Operational scopes – calculation approach,
conversion tools and emission factors
The carbon emissions linked to the activities
listed above have been determined on the
basis of measured or estimated energy
and fuel use, multiplied by relevant carbon
conversion factors. The large majority of
our fuel and energy consumption is based
on actual mileage data, purchase invoices
and information supplied by the managing
agents of our leased buildings. However, it
has been necessary to make estimations
in some circumstances, where this form
of evidence has not been available. In
particular, we have made estimations when
monthly invoices have not been available for
the full reporting period. Where this was the
case, an average of available invoices was
applied to the months for which invoices
were unavailable. This process of estimation
represents less than 10% of data.
We have calculated emissions using the
2020 carbon conversion factors from
the DEFRA website. Overseas electricity
conversion factors have been taken from
IEA online data service and are valid for the
2020 reporting year.
Green tariffs
All of the electricity tariffs we control in
the UK use energy from green sources.
Our current green electricity tariffs have
been renewed in 2020. Our international
offices either select their own tariffs or use
those selected by the managing agents of
the buildings they reside within. However,
data is not available on the number of
international sites using green tariffs.
CO2e per Employee*1
Measuring and Reporting
2018
0.39
2019
0.36
2020
0.21
*1 Average employee number excludes employees from
offices for which data could not be collected.
Geographical breakdown
CO2e (Ton)
UK
Spain
US
India
France
Halifax
Italy
2020
728
184
–*1
606
24
150
352
2019
2,433
281
146
374
29
135
435
Combined Total
2,044
3,833
*1 In 2019, the US reflect carbon data from Compare.
com, as data was not available from Elephant.
In 2020, data was not available from Compare.com
or Elephant. This does not materially impact the
carbon disclosures for the Group.
Assurance statement
Our 2019 Group carbon emissions were
verified by Carbon Trust, an external-third
party assurance provider. Based on the
work undertaken and evidence provided,
no details emerged to suggest that
information was not provided in accordance
with the relevant reporting criteria. The full
assurance statement can be accessed on
our corporate website.
Carbon emissions – methodology
The carbon emissions reporting process is
centralised at our UK head office and our
international businesses send their data to
the team each month. This way, our people
can be engaged in recording and monitoring
their environmental impact and encourage
each of our sites to make continual
improvements. The data is reviewed
annually and reported to Group CEO
Milena Mondini, our Sustainability Board
representative. We’ve never been subject
to prosecution or fines as a result of non-
compliance with environmental reporting
regulations. We have a cross functional
team in place to monitor and report on our
annual greenhouse gas emissions, including
employees from our Finance and Facilities
departments.
We follow UK government guidance on
how to measure and report greenhouse gas
emissions. In particular, 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
DEFRA. Admiral’s three largest UK offices
meet the GHG Protocol Corporate Standard
and, therefore, Admiral is exempt from
reporting greenhouse gas emissions from
electricity supply, which is in accordance
with GHG Protocol Scope 2 guidance
released 20th Jan 2015.
Greenhouse gases
All GHG emissions figures are in tonnes
of carbon dioxide equivalents (CO2e) and
include all six GHGs covered by the Kyoto
Protocol.
Organisational boundary
We have chosen to use the operational
control approach because we maintain the
ability to direct the operating policies of
each of our organisations, with a view to
achieving economic benefits. Specifically
excluded from the organisational boundary
is our outsourced contact centre in
Bangalore, India, which we do not have
control over.
Operational scopes
All Scope 1 (direct GHG emissions), Scope
2 (indirect GHG emissions) and significant
Scope 3 emissions have been reported
for operations within the organisational
boundary, with the exception of exclusions
listed below. Where appropriate, emissions
from multi-occupancy offices are
determined on the basis of the recharge
statement provided to the Group by the
relevant managing agents.
Exclusions to operational scopes
Excluded from our Scope 1 emissions are
air conditioning emissions produced by
all of our operations. We are continuing
to work with the managing agents to
obtain this data, however, it is likely
we will continue to exclude this from
reporting for the foreseeable future.
Elephant and compare.com, in the US, AECS
in Spain and LeLynx in France have been
unable to provide data for 2020 but their
impact is small and immaterial on our full
group reported figures. As part of our focus
on improved data collection we will work to
include these in the future.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 80
Admiral Group plc · Annual Report and Accounts 2020
Non-financial
information statement
The non-financial reporting requirements contained in sections 414CA
and 414CB of the Companies Act 2006 are addressed within this section
by means of cross reference, in order to indicate where they are located
within the strategic narrative and to avoid duplication.
For more information on policies, please refer to our website
www.admiralgroup.co.uk.
Environmental Matters
Responsible Investments
Non-financial information
Responsible Investments
TCFD
Environment
People
Communities
Business model
Risks
KPIs
Pages
103
91 to 93
76 to 79
64 to 69
72 to 75
18
85 to 90
28 and 29
As of 2020, Admiral Group
PLC received an MSCI ESG
Rating of A
Our Responsible Investment Policy is applicable to all investments and the purpose of the Policy is to mitigate Environmental Social and
Governance (ESG) related risks and achieve more sustainable long-term returns. The Policy requires ESG considerations to be integrated
into each step of investment decision-making. This includes monitoring the ESG risks, reviewing the ESG capabilities of external asset
managers and consideration of ESG factors when implementing new asset types. We ensure all our asset managers are signatories
of the UN Principles for Responsible Investment (PRI) and thoroughly review their ESG processes. In 2020 we became a member of
the Institutional Investors Group for Climate Change (IIGCC) as we look to adopt formal carbon intensity reduction targets and align
ourselves to the goals of the 2015 Paris Agreement.
Task Force on Climate-related Financial Disclosures (TCFD)
In 2019, Admiral began to report in line with requirements set out by the TCFD. Our commitment to disclose in line with TCFD
requirements aims to provide better transparency around the ways in which climate change will impact Admiral Group now and in the
future. In 2020 we have increased our disclosure to further align our reporting with the TCFD’s published recommendations around
governance, risk management, strategy, metrics, and targets.
Environmental Management
We continuously aim to reduce our environmental footprint and encourage responsible behaviour across our operations. We have offset
our operational emissions to become carbon neutral through the purchase of carbon credits. Our Cardiff offices (including the Group
headquarters Ty Admiral) and Newport offices are rated BREEAM Excellent for exceeding sustainability benchmarks above regulatory
requirements. Since 2015 all electricity that we have purchased in the UK is from 100% renewable sources. Our building operations
incorporate smart technology to reduce any unnecessary water usage in our offices. We actively work to reduce waste wherever
possible and encourage staff to recycle across our building operations. In the UK, 100% of our non-recyclable waste is sent to
an incinerator where it is converted to into energy.
Employees
Diversity and Inclusion
Our Equality, Diversity and Dignity at Work Policy confirms that Admiral is committed to ensuring that any type of unfair discrimination
is not accepted. This policy outlines the standards of behaviour that are expected from all members of staff, to ensure that everyone
at Admiral is treated with dignity and respect. This policy explains that all managers should be alert to potential discrimination and
harassment and actively prevent them from occurring, communicate this policy to all staff, and be responsive and supportive to anyone
who makes a complaint.
General Standards of Conduct
Our General Standards of Conduct outline the conduct standards that all staff must adhere to regardless of their role. These standards
require staff to act with integrity in relation to all the policies that govern their responsibilities, conduct and behaviour. Staff must act
with due skill, care and diligence, to carry out their duties in a way that reflects our approach for caring for our customers. Under these
general standards of conduct, staff must be open and co-operative with our regulators.
Health and Safety
Our Health and Safety Policy outlines our commitment to ensuring the health and safety of staff and anyone affected by our business
activities, and our commitment to providing a safe environment for those attending our premises. This policy confirms that all staff
have a responsibility towards health and safety at work. We carry out general workplace risk assessments periodically, in order to assess
the risks to health and safety of all those on our sites and to identify any measures that need to be taken to control these risks.
81
Social Matters
Community Engagement
Our community objectives are focused on supporting the local communities in which we are based and supporting the charities
and organisations directly connected with our employees. These objectives are achieved through long-term community initiatives
such as the Community Chest and the Ministry of Giving, and several partnerships with organisations, for example those focus on
promoting employability.
Volunteering
We have a strong ethos of supporting local and national charities and organisations and encourage all our staff to take part in charity or
voluntary work should they wish to do so. Under our Volunteering Policy, we support volunteering by providing employees with two days
of paid leave each year to volunteer. Employees who have worked for Admiral for three years or more are entitled to one-month unpaid
leave to carry out charity work and this repeats every three years.
Human Rights
Modern Slavery
Our Anti-Slavery, Exploitation and Human Trafficking Policy confirms Admiral’s zero tolerance approach to modern slavery, outlines
our ongoing commitment to eliminating unethical working practices, and provides guidance to employees on reporting any problems
identified at work or in the community. Ultimate responsibility for the prevention of Modern Slavery and adherence to this policy
rests with the Admiral Group Board; the People Services (HR) department has day-to-day responsibility for implementing this policy,
monitoring its use and effectiveness, and dealing with any queries. We release an annual Modern Slavery Statement in line with the
Modern Slavery Act 2015.
Procurement and Outsourcing
Our Group Procurement and Outsourcing Policy confirms that all employees who engage in procurement activity are expected to
enhance and protect the standing of the business, maintain the highest standard of integrity in all business relationships, promote
the eradication of unethical business practices, and ensure full compliance with laws and regulations. Each supplier or outsourced
arrangement is monitored on an on-going basis throughout the lifecycle of the agreement.
Anti-Corruption and Anti-Bribery
Tax
Our Tax Strategy documents our approach to taxation. The strategy confirms that the Group’s primary objective is to be compliant
with all tax legislation requirements in all the territories in which we operate. This includes making timely and accurate returns and
meeting our obligation to pay the amount of tax legally due in each country, according to the law and the activity of the Group in that
territory. The key tax risks are assessed and recorded annually as part of the annual risk review performed by the Group Risk function
and appropriate controls are put in place to mitigate the key risks identified as part of this process.
Anti-Bribery
Our Anti-Bribery Policy strictly prohibits the solicitation or acceptance of any bribe, to or from any person or company, by an individual
employee, Board member, agent or other person or body on Admiral’s behalf, in order to gain any commercial, contractual, or regulatory
advantage for Admiral in an unethical way or to gain any personal advantage for the individual or anyone connected with the individual.
The prevention, detection and reporting of bribery is the responsibility of all employees throughout Admiral.
Gifts and Gratuities
Our Gifts and Gratuities Policy recognises that sometimes customers, suppliers or business associates offer gifts or gratuities to staff
and confirms that all such gifts must be made and received openly and fairly. Employees who are offered or sent any gift or gratuity
should notify their line manager, who will advise on whether the gift should be accepted. If an employee has any doubt about whether
something falls into the category of a gift or gratuity, they should refer this matter to their line manager or People Services.
Whistleblowing
Our Whistleblowing Policy encourages and enables employees to raise any concerns they have about serious malpractice or wrongdoing.
The policy is designed to ensure that an employee can raise their concerns without fear of victimisation, subsequent discrimination,
disadvantage, or dismissal. This policy details internal and external reporting lines for any employee concerns.
Financial Crime
Our Financial Crime Policy ensures that robust systems and controls are in place to detect, prevent and deter financial crime across the
Group and ensures we remain compliant with applicable laws and regulations in our operational jurisdictions. All areas of financial crime
are captured by this policy, including money laundering, market abuse and insider trading, sanctions regime, modern slavery, tax evasion
and Bribery and Corruption.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 82
Admiral Group plc · Annual Report and Accounts 2020
Section
172(1) statement
The Board of Directors confirm that during the year under review, it has acted to promote the long-term
success of the Company for the benefit of shareholders, whilst having due regard to the matters set out in
section 172(1)(a) to (f) of the Companies Act 2006, being:
(a) the likely consequences of any decision in the long term
(b) the interests of the Company’s employees
(c) the need to foster the Company’s business relationships with suppliers, customers and others
(d) the impact of the Company’s operations on the community and the environment
(e) the desirability of the Company maintaining a reputation for high standards of business conduct
(f) the need to act fairly between members of the Company
During 2020, the Board reviewed the Group Stakeholder Map
and reaffirmed that the six stakeholder groups, listed below,
each continued to be strategically important to the long-term
success of the Group’s operations.
As part of the review, the Board considered the current approach
to corporate governance and engagement in relation to the
interests of our customers, people, communities, shareholders,
external partners and our impact on the environment. In
preparation for the review, discussions were held with the
internal relationship owners within Admiral Group, on our key
information feeds, existing engagement methods, feedback
processes and the activities and plans for the year.
A Board agenda planner sets out the matters to be considered
by the Board during the year, and this was subsequently
reviewed and updated at each Board meeting in 2020. All
Board papers during the year were accompanied by a separate
document outlining which stakeholders could be affected
or impacted by the paper, along with an explanation of how
stakeholder interests had been considered prior to the raising
of the matter at the Board meeting. The accompanying papers
also shared the likely consequence of any Board decision on
each stakeholder group identified, and how the impact on
stakeholders could be monitored.
Connecting with our
six stakeholder groups
s172 factor
Relevant disclosure
Page
Long term
success
Purpose
Business model
Strategy
Dividend policy
Consequences
of decisions
CEO statement
Board Governance
Employees
Non-financial reporting statement
Our people
Diversity and inclusion
Employee engagement
Business
relationships
Anti-bribery & corruption
Modern slavery
Community &
environment
Community investment
Carbon disclosure project
TCFD disclosures
Reputation
Culture and values
Fairness
between
members
Awards and recognition
Shareholder engagement
Shareholder consultation
Annual General Meeting
4
18
20
33
14
96
80
64
130
68
158
81
72
77
91
19
27
71
108
108
Our people
Our communities
Our environment
Our customers
Our investors
Our partners
83
Stay at Home Refund & Other Customer Initiatives during the Covid-19 pandemic
During the first national lockdown in 2020, the Board considered what it could do to help its UK customers at a time of economic
uncertainty brought about by the pandemic. Together with management, the Board discussed the best approach and concluded
that it was appropriate to offer UK motor customers a premium refund (‘Stay at Home Refund’), alongside several other initiatives,
totalling £190 million of support.
refund
The Board considered the views
of its regulators and undertook
stress testing to ensure that the
financial position of the group
remained strong.
Rationale
• The UK Business wished to recognise
that customers were driving less and
experiencing challenging economic
conditions in the lockdown.
• The way the refund was structured was
simple for customers to understand and
was an option that did not require the
customer to ‘opt in’ to receive
the rebate.
•
It was relatively straight forward and
quick to implement, so money could be
paid to customers that might be in need,
as quickly as possible.
The £25 rebate per vehicle was considered
to be an appropriate amount, given the
significant reduction that people were
driving during lockdown, and was based on
average premium across the customer base
in April and May.
Stakeholders
As part of the decision-making process, the
Board considered the views or likely views
of each of its stakeholders and the potential
impact on them.
Customers
We consulted consumers using two
anonymous external surveys, the results
of which indicated a clear preference in
this particular circumstance for receiving
a rebate.
Staff
A staff survey was conducted at the
beginning of April 2020 to gauge views
on the proposed options. The survey
had 3,900 responses and provided
the following insights:
• 60% were still driving but driving less
(all Admiral staff, so no Key Workers
according to the respective definition
used in the first UK national lockdown)
• The majority of people thought we should
do something.
• All options for giving back were of
interest, with the £25 rebate being the
slight preference.
Community
The Board also considered the impact on
the community, for which the following
information was available at the time:
• 18% of businesses had temporarily closed.
• Around half of companies had planned to
furlough at least half of their workforce.
• Almost a million people had applied for
Universal Credit in a fortnight.
• A survey by Consumer Intelligence had
shown that of the consumers due to
renew car or home insurance in the next
month, 36% said they were worried about
being able to afford their premiums.
Shareholders
The Board considered the potential
reaction of the Group’s shareholders not
receiving this pay out via a dividend and
also considered the decision in the context
of the dividend decision the Board made
around that same time (referred to below).
On balance, the Board recognised that
Admiral’s long-term sustainable success is
based on helping customers, supporting
local communities and protecting the
wellbeing of staff.
Regulators
In order to approve the Stay at Home
Refund, the Board considered the views
of its regulators and undertook stress
testing to ensure that its financial position
remained strong, both from a liquidity and
solvency perspective.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 84
Admiral Group plc · Annual Report and Accounts 2020
Section 172(1) statement continued
Wow, @AdmiralUK
have waived my excess
after my car was stolen
this week due to me
being a key worker.
Really grateful for this
after an awful week.
Thank you.”
UK Motor Customer, 2020
Other Customer Initiatives
As part of Admiral’s considerations about what it could do to help its customers at
a time of economic uncertainty arising from the pandemic, it decided to:
• Support customers who were in financial
hardship as a result of the pandemic, by
being flexible with customers struggling with
monthly payments for insurance and personal
loans. The cancellation windows and fee free
periods were also extended.
• Waive any motoring excess fees for NHS
or emergency service workers and support
NHS volunteers by guaranteeing cover for
customers using their vehicle to transport
people, deliver medical supplies and
equipment, or items to people who were
self-isolating.
• Show its support for NHS and emergency
service workers by giving them a free courtesy
vehicle if their vehicle was stolen, undriveable
after an accident, or declared a total loss, to
keep them on the road during the lockdown.
Sale of Penguin Portals
In December 2020, the Group announced that it had reached an agreement with ZPG Comparison
Services Holdings UK Limited (‘RVU’) for RVU to purchase Penguin Portals Group (‘Penguin Portals’,
comprising online comparison portals Confused.com, Rastreator.com and LeLynx.fr
and the Group’s technology operation Admiral Technologies) and its 50% share of Preminen Price
Comparison Holdings Limited ‘Preminen’1. The transaction is subject to customary regulatory
and competition authority approvals and is expected to complete in the first half of 2021.
Having considered that the transaction would
create good value in the interests of shareholders
and in light of the strong solvency and liquidity
position of the Group, the Board agreed to
return a majority of the net proceeds of sale to
shareholders, with a portion retained to support
investment in new business development over the
coming years.
In considering the potential sale of Penguin
Portals, the Board assessed the impact of the
sale on key stakeholders including customers,
employees and shareholders. The Board and
management considered that Penguin’s insurance
comparison strengths, combined with RVU’s
strengths beyond insurance and experience in
growth through acquisition, would provide a
solid foundation for the combined businesses
to grow and prosper which ultimately would
benefit customers and employees. The Board
also considered that as comparison remains
the key distribution channel for insurance, this
ability for the channel to grow would lead to an
ultimate benefit for all businesses. Furthermore,
although it would be difficult for the Group to
part company with the Penguin employees, the
Board was mindful of the exciting opportunity to
partner with businesses with an aligned mission,
and that as these businesses grow and learn from
each other, the Penguin teams would benefit from
many interesting and worthwhile opportunities
being created going forward.
*1
Other entities within the
Preminen Price Comparison
Holdings Limited Group include:
Preminen Price Comparison
Holdings Limited Sucursal en
Enspana (Spain); Preminen
Mexico Sociedad Anonima de
Capital Variable; Preminen
Dragon Price Comparison
Limited and Long Yu Science &
Technology Beijing Company
Limited; Preminen MENA
Price Comparison W.L.L.; and
Preminen Price Comparison India
Private Limited.
85
Principal risks
and uncertainties
The Board, with support from the Group Risk Committee and the Group Risk function,
undertakes a regular and robust assessment of the principal and emerging risks
facing the Group. These risks have been summarised as those which would threaten
its business model, future performance, liquidity and solvency.
The table overleaf sets out the principal risks which Admiral has identified through its Enterprise Risk Management
Framework (ERMF). The impact of those risks and actions taken to mitigate them are explained below. This section
also includes a description of Admiral’s approach to identify, manage and govern emerging risks.
Identification of risks
Principal risks (A–K)
Group Risk:
P r i n c ipal Risks
Principal risks have been
considered against each of our
strategic objectives. Risks that
could impact investing in our
core include:
Insurance Risk:
A
B
C
D
Reserving Risk in the UK and
international insurance
Premium Risk and Catastrophe
Risk
Reduced availability of
co-insurance and reinsurance
arrangements
Potential diminution
of other revenue
E
F
G
Erosion of competitive
advantage in UK Motor Insurance
Failure of geographic and/or
product diversification
Reliance on the UK
Comparison channel
Credit Risk:
H
Credit Risk
Market Risk:
I
Market Risk
Operational Risk:
J
K
Legal and Regulatory Risk
Operational Risk
Operational
Risk
K
J
Insurance
Risk
C
B
D
A
Market Risk
I
Group Risk
E
F
G
Credit Risk
H
Linking risks to our strategic objectives For more information refer to pages 20 to 23
Investing in core positioning:
Investing in future businesses:
Ensuring Admiral remains a great place to work:
1
2
Sustained competitive advantage
Continued growth and profitability
5
International insurance growth
8
People driven workplace
6 New product diversification
Investing in core transformation:
Investing in motor evolution:
3
Strong digital, data and tech capabilities
7
Evolution of motor book
4 SMART working
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 86
Admiral Group plc · Annual Report and Accounts 2020
Principal risks and uncertainties continued
Insurance Risk
A. Reserving risk in the UK and international insurance
Possible impact on our strategy
Risk
Mitigating Factors
Admiral is exposed to reserving risk through its
underwriting of motor, household and other insurance
policies. Claims reserves in the Financial Statements may
prove inadequate to cover the ultimate cost of claims
which are by nature uncertain.
This is a particular risk for motor insurance liabilities,
where the amount payable for bodily injury claims
(particularly large claims) can change significantly during
the lifetime of the claim as a result of external risks such
as changes in Ogden rates and impacts of increased levels
of Periodical Payment Orders (PPOs).
Impact
Adverse run-off leading to higher claims costs in the
Financial Statements.
PPO claims are capital intensive owing to increased
uncertainty of the cost of significant claims over
a longer term.
The Group continues to reserve conservatively, setting claims
reserves in the Financial Statements well above actuarial best
estimates to create a margin held to allow for unforeseen adverse
development.
Best estimate reserves are estimated both internally and externally
by independent actuaries.
For very large claims Admiral purchases excess of loss reinsurance,
which mitigates a portion of the loss.
Regular reviews of both settled and potential PPO cases are
undertaken by the Claims and Actuarial teams, with independent
actuarial analysis provided as part of the external reserving process.
Admiral’s investment strategy is the result of a structured,
disciplined and transparent investment process. Long-dated
inflation linked assets are held to partly hedge the risks associated
with PPO claims.
B. Premium risk and catastrophe risk
Possible impact on our strategy
Risk
Mitigating Factors
The Group is exposed to the risk that inappropriate
premiums are charged for its insurance products leading
to either insufficient premiums to cover claims cost or
uncompetitive rates leading to reduced business volumes.
The risk of increased claim costs and/or reduced business
volumes could be driven by potential economic, social,
environmental, regulatory or political change such as
the Covid-19 pandemic or the UK’s withdrawal from the
European Union.
Admiral is exposed to the risk of higher losses than
anticipated due to the occurrence of man-made
catastrophes or natural weather events, potentially
increased in frequency and severity due to climate change.
There are a number of aspects which contribute to Admiral’s strong
UK underwriting results, including:
• Experienced and focused senior management and teams in key
business areas including pricing and claims management;
• Highly data-driven and analytical approach to regular monitoring
of claims and underwriting performance;
• Capability to identify and resolve underperformance promptly
through changes to key performance drivers, particularly pricing;
• Continuous appraisal of and investment in staff, systems and
processes; and
• Monitoring the impact arising from Climate Change risks, covering
both physical and transitional risks, as well as other Emerging Risks
which may impact premium or catastrophe drivers.
Impact
Higher claims costs, reduced business volumes and/
or higher loss ratios, resulting in reduced profits or
underwriting losses.
A large flood or windstorm, causing extensive property
damage (both motor and household) to a significant
proportion of the portfolio, could lead to a larger than
anticipated total claims cost.
Admiral purchases excess of loss reinsurance, designed to mitigate
the impact of very large individual or catastrophe event claims.
C. Reduced availability of co-insurance and reinsurance arrangements
Possible impact on our strategy
Risk
Mitigating Factors
Admiral mitigates the risk to its reinsurance arrangements by
ensuring that it has a diverse range of financially secure partners.
Admiral continues to enjoy a long-term relationship with a number of
different reinsurers, some of which are amongst the world’s largest.
These long-term arrangements are in place throughout the UK and
International businesses.
Admiral uses proportional co-insurance and reinsurance
across its insurance businesses to reduce its own capital
needs (and increase the return on the capital it does
hold) and to mitigate the cost and risk of establishing
new operations. There is a risk that support will not be
available or that it will be available at an uneconomical
price in the future if the results and/or future prospects
of either the UK businesses or (more realistically) one or
more of the newer operations are not satisfactory to the
co- and/or reinsurers.
Impact
A potential need to raise additional capital to support an
increased underwriting share. This could be in the form
of equity or debt.
Return on capital might reduce compared to
current levels.
87
Linking risks to our strategic objectives For more information refer to pages 20 to 23
Investing in core positioning:
Investing in future businesses:
Ensuring Admiral remains a great place to work:
1
2
Sustained competitive advantage
Continued growth and profitability
5
International insurance growth
8
People driven workplace
6 New product diversification
Investing in core transformation:
Investing in motor evolution:
3
Strong digital, data and tech capabilities
7
Evolution of motor book
4 SMART working
D. Potential diminution of other revenue
Possible impact on our strategy
Risk
Mitigating Factors
Admiral earns other revenue from a portfolio of products
and services in addition to the core insurance products.
The level of this revenue could diminish due to: political,
regulatory, legal, social/customer behaviour, strategic,
market or economic changes.
Impact
Lower profits from business operations and lower return
on capital.
Admiral continuously assesses the value to its customer of the
products it offers and makes changes to ensure the products
continue to meet customer needs and offer good value.
Admiral seeks to minimise reliance on any single source by earning
revenue from a range of products. This would mitigate the impact
of regulatory or market changes, or changes in consumer behaviour,
which might affect a particular product or income stream.
Admiral works closely with its regulators and other key
industry bodies.
Group Risk
E. Erosion of competitive advantage in UK Motor Insurance
Possible impact on our strategy
Risk
Mitigating Factors
Admiral’s focus remains on the wide range of factors that contribute
to Admiral’s combined ratio outperformance of the UK Motor
market. Some are set out earlier in the Strategic Report, but in
addition:
• Track record of innovation and ability to react quickly to market
conditions and developments; and
• Keen focus on maintaining a low-cost infrastructure and efficient
acquisition costs.
Admiral typically maintains a significant combined
ratio advantage over the UK market. This advantage
and/or the level of underwriting profit (and associated
profit commission) could be eroded. This risk could
be exacerbated by: irrational competitor pricing, new
technologies used within the insurance market and/or
regulatory market intervention. It may arise from new or
existing competitors.
Impact
A worse UK Motor Insurance result and lower return on
capital employed.
A sustained and uncorrected erosion of competitive
advantage could affect the ability of Admiral to maintain
its reinsurance arrangements, which might in turn require
Admiral to hold more capital.
F. Failure of geographic and/or product expansion
Possible impact on our strategy
Risk
Mitigating Factors
As per the Group’s diversification strategy, Admiral
continues to develop the UK Household business, other
insurance operations, non-insurance operations such as
Loans, and its overseas operations. It has also created
Admiral Pioneer which is the vehicle for developing and
launching of new products and services, other than those
already covered by existing established Group businesses.
Admiral’s approach to expansion and product development remains
conservative, applying the ‘test and learn’ philosophy that has
proven successful for previous operations. International insurance
businesses have generally executed cautious launch strategies
and are usually backed by proportional reinsurance support which
provides substantial mitigation against start-up losses in the
early years.
The Directors are mindful of management stretch and regularly
assess the suitability of the infrastructure and management
structure in place for Admiral’s new UK and international operations.
One or more of the operations could fail to become a
sustainable, profitable long-term business.
Product expansion into new areas could lead to
unprofitable business, could increase regulatory risk, and
may introduce new risks into the Group.
Growth in developing businesses could exceed the scale of
infrastructure of the operation.
Impact
Higher than planned losses (and potentially closure costs)
and distraction of key management.
A collective failure of these businesses would threaten
Admiral’s objective to diversify its earnings by expanding
into new markets and products, though any single failure
of product or geography is likely to be tolerable.
The core business, which continues to perform strongly, is
largely unaffected by this risk.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 88
Admiral Group plc · Annual Report and Accounts 2020
Principal risks and uncertainties continued
Group Risk continued
G. Reliance on UK Comparison distribution channel
Possible impact on our strategy
Risk
Mitigating Factors
Admiral contributes materially to the revenues of all four major UK comparison
businesses, and has a strong brand presence, and therefore it is not considered
probable that a material source of new business would be lost.
Admiral continues to grow its multicover and multicar products. It also has a
direct offering to new and existing customers, with continuing investment made
to improve its online/digital offering.
Admiral is dependent on the four main UK
comparison websites as an important source
of new business and growth. Growth in this
distribution channel could slow, cease or
reverse, or Admiral could lose one or more of
the websites as a source of customers.
Impact
A potentially material reduction in UK
insurance new business volumes, in particular
for UK Motor.
However, a more competitive market might
benefit the insurance businesses through
lower acquisition costs.
Credit Risk
H. Credit risk
Possible impact on our strategy
Risk
Mitigating Factors
Admiral is primarily exposed to credit risk
in the form of: (a) default of reinsurer;
or (b) failure of a banking or investment
counterparty. One or more counterparties
could suffer significant losses leading to a
credit default.
AFSL exposes the Group to credit risk
in relation to customer defaults on its
unsecured personal loan and car
finance business.
Impact
The impact of a major credit event could be
losses and reduced capital, dependent on its
nature and severity.
Admiral would also need to ensure that it
continues to have sufficient liquid assets to
meet its claims and other liabilities as they
fell due.
Increased defaults could impact future
profitably and lending capabilities.
Admiral only conducts business with reinsurers of appropriate financial strength.
In addition, major reinsurance contracts are operated on a funds-withheld basis,
which substantially reduces credit risk, as Admiral holds the cash received
as collateral.
Credit risk is managed through diversification and appointing high-quality
third-party asset managers. Limits on counterparties and certain credit ratings
ensure that credit risk is managed within risk appetite, and produces a high
quality credit portfolio. The Group invests in a range of liquidity funds which hold
a wide range of short duration, high quality securities, and in fixed income funds
holding primarily investment grade assets. Cash balances and deposits are placed
only with highly rated counterparties. Most long-term investments are held in
Government bonds to further mitigate the exposure to credit risk.
Admiral considers counterparty exposure frequently and in significant detail, and
has in place appropriate triggers and limits to mitigate exposure to individual
investment counterparties.
Admiral continuously monitors the credit quality of our counterparties within
Board approved limits, adjusting its credit rules and pricing accordingly.
Continuous monitoring of the credit quality of our counterparties within
approved set limits.
AFSL’s credit risk appetite is set to ensure that the risk taken is commensurate
to the expected returns. AFSL continuously monitors the performance of its
portfolio and manages borrowers in arrears to achieve the optimal outcome.
Market Risk
I. Market risk
Possible impact on our strategy
Risk
Mitigating Factors
Market risk arises as a result of fluctuations
in the value of market prices of investment
assets and liabilities, or the income from our
investment portfolio.
The investment strategy focuses on preservation of the amount invested, low
volatility of returns and strong liquidity. The majority of the portfolio is invested
in high quality fixed income and other debt securities, and money market funds
and other similar funds in order to achieve these objectives.
Impact
Market volatility (notably very significant
reductions in risk free interest rates or
material increases in credit spreads) can
adversely impact the value of the Group’s
assets. The Group’s solvency can also be
adversely impacted due to an increased
regulatory valuation of claims liabilities,
in particular in relation to longer-dated
potential PPO claims.
The Group’s mitigation for interest rate risk resulting from long duration PPO
liabilities includes reinsurance cover and a continuing focus on investment
strategies. This includes consideration of hedging options for these liabilities,
including of certain risks associated with PPO claims. Continued growth of the
Group’s non-UK businesses has altered the exposure to net assets and liabilities
in currencies other than pounds sterling, though the exposure to the Group from
net assets in currencies other than pounds sterling remains relatively low.
89
Linking risks to our strategic objectives For more information refer to pages 20 to 23
Investing in core positioning:
Investing in future businesses:
Ensuring Admiral remains a great place to work:
1
2
Sustained competitive advantage
Continued growth and profitability
5
International insurance growth
8
People driven workplace
6 New product diversification
Investing in core transformation:
Investing in motor evolution:
3
Strong digital, data and tech capabilities
7
Evolution of motor book
4 SMART working
Operational Risk
J. Legal and regulatory risk
Possible impact on our strategy
Risk
Mitigating Factors
Regular review of the Group’s compliance with current and proposed
requirements and interaction with regulators by Executive Management
and the Board.
Assurance is gained through external reviews and benchmarking exercises
ensuring Admiral is compliant with legal and regulatory requirements.
Strong project governance is a key control in managing regulatory change.
Legal and Regulatory risk may arise where
Admiral fails to fully comply with legal or
regulatory requirements and/or changes in
an accurate, timely manner. Examples include
potential post-Brexit changes to Solvency II
requirements, or complying with outcomes
of the FCA review in General Insurance Pricing
Practices, both of which may have far-reaching
consequence for the whole industry. This risk
may also arise where previous industry and/
or Admiral regulatory or legal compliance
standards are revisited with negative
consequences, applied retrospectively, for the
industry and/or the Group. As Admiral operates
globally, across business lines and products,
it is exposed to a number of differing legal
jurisdictions and regulators.
Impact
Exposure to regulatory intervention, censure
and/or enforcement action through fines and
other sanctions.
K. Operational risk
Possible impact on our strategy
Risk
Mitigating Factors
Operational Risk arises within all areas of
the business. The principal categories of
operational risk for Admiral are: Conduct Risk;
Physical Security Risk; IT Systems; Information
Security/Cyber Risk; Business Continuity;
Processes; Change Risk; People; and,
Outsourcing and Procurement Risk.
Impact
Potential customer detriment and/or
potential regulatory censure/enforcement
and/or reputational damage as a result of
Admiral’s action or inaction.
Admiral being unable to service its customers
or making poor business decisions due to lack
of system availability, data integrity and/or
data confidentiality.
The risk of reductions in earnings and/or
value, through financial or reputational
loss, from inadequate or failed internal and
outsourced projects, processes and systems,
or from people related or external events.
Risk to Admiral occurs through the losses
that could materialise if the internal control
framework managing business processes fails.
Admiral operates the three lines of defence model, and internal controls are in
place and are monitored to mitigate risks. The control framework is regularly
reviewed, and the internal audit function has an agreed cycle of testing of the
adequacy and effectiveness of controls.
Specific operational risks are mitigated by:
• Monitoring, managing and reporting on customer outcomes in order to mitigate
customer detriment;
• Regular Executive Management and Board review of the effectiveness of the
Group’s IT capability;
• Continuing to invest in Information Security in order to mitigate Information
Security risks, including evolving Cyber risk;
• Staffing a major incident team within IT which is tasked with maintaining system
availability, with business continuity and disaster recovery plans in place which
are regularly tested;
• Backing up data to allow for its recovery in the event of corruption;
• Employing enhanced project governance and oversight of new systems
implementations, with external specialist review and assurance where required;
• Attracting, retaining and motivating quality staff to deliver superior customer
service and to achieve business objectives;
• Employing targeted recruitment and identifying potential leaders through
internal development, talent management and retention processes for the
purposes of succession planning;
• Monitoring outsourced and offshore activities through ongoing supplier
relationship and performance management, and with regular due diligence
reviews.
Admiral also purchases a range of insurance covers to mitigate the impact of a
number of other operational risks.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 90
Admiral Group plc · Annual Report and Accounts 2020
Principal risks and uncertainties continued
Emerging Risks are identified via horizon
scanning, involving a desk-based review,
coupled with interviews with stakeholders
and subject matter experts, and input
from internal working groups. Admiral uses
an internally-developed framework for
monitoring Emerging Risks, which covers
qualitative and quantitative assessment
and evaluation of the potential impact
to Admiral via existing Principal Risks and
Uncertainties or via new risks. It also
covers the precautionary deployment
of management actions and
mitigating controls.
Emerging Risks are represented graphically,
capturing an assessment of their impact
and date of crystallisation ranging from
less than one year to greater than five
years, while also categorising them into
the following four broad segments: (a) legal
and regulatory risks, such as ePrivacy; (b)
socio-political and economic risks, such as
consumer expectations; (c) environmental
risks, such as physical and transition climate
change risks; and (d) technology risks,
capturing advances in vehicle technology.
Reporting on such Emerging Risks, as well
as the opportunities that they present, is
provided to the GRC and relevant Boards, is
incorporated into the Group ORSA Report,
and is discussed with senior management of
Group entities as well as entity risk teams.
Covid-19
Covid-19, which was declared a pandemic
by the World Health Organisation on 11
March 2020, has impacted in all jurisdictions
in which Admiral Group operates. It has
caused, and continues to cause, impacts
on individuals, on businesses, and on the
real economy. Covid-19 has not introduced
any new principal risks into the business,
but has instead acted as a driver of existing
principal and emerging risks.
The initial impact from the pandemic saw
an increase in operational risk as offices
shut and working from home capacity
rapidly expanded, with related increases
in IT, change and security risks. It also
impacted premium risk, due to changing
driving patterns, and market risk, due to
declining markets and increased volatility,
amongst other principal risks. Covid-19
has also inherently increased credit risk.
During the initial months of the pandemic
weekly Board reporting was initiated, with
updates on operational impacts, business
plan reforecasting, as well as solvency
and liquidity monitoring and forecasting.
To aid risk oversight, the Group Risk
Committee also increased frequency of
meetings to fortnightly. With the increase
in home-working, more controls were being
performed by staff while working from
home (e.g., call monitoring). The internal
control environment was continuously
assessed and monitored throughout, and
regular communication issued through local
business unit emergency response teams,
business unit risk management committees
and Boards, and Group committees and
Group Board.
As the pandemic has continued, many of
these initial impacts have abated, most
notably operational risk, as remote-working
solutions become more robust and as
the business becomes used to a hybrid
way of working, with a mix of office- and
home-based workers. There could be,
however, a potential risk to Admiral’s
culture if staff do not work regularly in
close proximity for an extended period.
With the emergence of subsequent waves,
local, regional and national lockdowns have
been or will be enacted, meaning that there
remains increased uncertainty regarding
driving patterns, claims experience and
market volatility. With the UK expected
to see recessionary conditions and
increasing unemployment, there could be
a deterioration in credit performance at
AFSL. Risks continue to be monitored and
reported on as per the ERMF.
Covid-19 has also impacted emerging risks.
It led to some delays to emerging legal
and regulatory risks, as the focus has been
on pandemic response, while emerging
social, political and economic risks may be
accelerating, driven by changing customer
behaviours and expectations, in particular.
The impact on the environment and climate
change is unknown, given competing drivers.
Emerging Risks
Admiral Group monitors Emerging Risks,
issues which may be potentially significant,
but may not be fully foreseen, assessed
or allowed for in strategic and business
decisions. By their very nature, Emerging
Risks are many and varied, the timescale of
their impact is unknown, but frequently is
for longer than standard business planning
cycles. They are considered to have
potentially significant impact to the Group,
with a high degree of uncertainty around
the likelihood of occurrence, severity and/
or timescales.
The management of Emerging Risks is a
key element of Admiral’s strategic risk
management. Emerging Risks, and the
opportunities that they may present, may
lead to a change in strategy, a change in
management behaviour, a change in ways
of working or risk management, which
may lead to a more robust business which
delivers on its commitments to customers,
employees and shareholders.
91
Task force on
Climate-related
financial disclosures (TCFD)
Climate Change
Risks and disclosures
are reviewed
and discussed at
Group Board and at
several Group Board
Committees, including
the Group Risk
Committee and by
the Sustainability
Working Group.”
Whilst the Group Board maintains ultimate
oversight, the GRC retains primary oversight
responsibility for climate change risk, as it has
delegated authority from the Group Board for
overseeing risk management activities. It advises
the Group Board on Admiral’s Principal Risks and
Uncertainties (PR&U), as well as on Emerging
Risks, and reviews the Group’s management of
these risks. Climate change risks are reported
quarterly within the Consolidated Risk Report
(CRR). Furthermore, internal initiatives in place to
reduce the environmental impact of the Group’s
operations and to support the transition to a
low-carbon economy are monitored by a newly
implemented Sustainability Working Group,
which encompasses relevant individuals from the
Risk, Finance, Facilities and Investor Relations
departments. Regulatory developments and
emerging best practice are also considered in
this forum. The Group CEO periodically attends
the working group.
Climate Change Risk
In 2019, Admiral began to report in line with
the Task Force on Climate-related Financial
Disclosures (TCFD), in order to provide better
transparency around the ways in which climate
change will impact the Group now and in the
future. During 2020 the Group has increased its
disclosure to further align reporting with the
TCFD’s published recommendations concerning
governance, risk management, strategy, metrics
and targets. Alongside the increased reporting,
Admiral Group has completed the full Carbon
Disclosure Project (CDP) disclosure, has signed
up to the Institutional Investors Group on
Climate Change (IIGCC), and has taken part
in industry-wide initiatives related to climate
change risk reporting.
Governance
The Admiral Group Board has ultimate oversight
of climate change-related issues. Climate Change
Risks and disclosures are reviewed and discussed
at Group Board and at several Group Board
Committees, including the Group Risk Committee
(GRC). It is also considered at the Sustainability
Working Group.
The Group CEO is the
appointed corporate
social responsibility (CSR)
representative for the
Group, which includes
Sustainability and
Climate Change
Risk within its remit.
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Admiral Group plc · Annual Report and Accounts 2020
Taskforce on climate-related financial disclosures (TCFD) continued
This monitoring and
reporting processes
ensure that the
highest level of
company management
are aware of the
risks posed by
climate change, so
that both risks and
opportunities can be
accounted for in future
business planning and
strategy setting.”
It is anticipated that climate change risk will
remain an Emerging Risk for the foreseeable
future. Emerging Risks are monitored and
updated (as required) on a monthly basis.
However, if the current impact is deemed
material enough, the effects from climate change
will be included in Admiral’s PR&U, which are
continuously monitored, are updated on a semi-
annual basis, and are captured by the Enterprise
Risk Management Framework (ERMF).
Risk management
Climate change risks, and any opportunities
that may arise from initiatives to tackle climate
change, are categorised as Emerging Risks and
are identified, assessed and mitigated using an
internally developed framework for monitoring
Emerging Risks. Specific impacts of climate
change which may be beginning to crystallise
now are captured in the ERMF.
Identification
There is no one definitive source for climate
change risks: different geographical regions,
different industries, and different companies will
have differing expectations of the impacts that
they will face in the future. Therefore, Admiral
Group’s identification of climate change risks,
and any resulting opportunities, follows a multi-
stage process which attempts to incorporate
internal viewpoints and forecasts (e.g., from
departmental expertise, insight from working
groups, committees and boards) with those from
external sources, both insurance-specific and
more broadly. A robust view of potential future
risks should be the outcome of this process; no
risk-types are excluded in the analysis.
As per the TCFD, Transition Risks – those risks
which come about from transitioning to a low
carbon economy – include policy and legal risks,
technology risk, market risk, and reputation
risk. Given the Group’s core business of car
insurance, Admiral Group is potentially exposed
to any significant move away from traditional car
ownership and usage models.
Physical Risks can be broken down into acute
risks (the direct risk from changes in weather,
such as more severe flood events in the UK or
more frequent hail events in the south east of the
US) and chronic risks (arising from longer-term
changes in climate patterns, such as rising sea
levels or increased surface temperatures). The
Group is potentially exposed to both risks in all
lines of business.
Assessment
Given the highly uncertain nature of climate
change risks – the magnitude of their impact,
the certainty of their impact, the effect of their
impact, and the timing of that impact – they do
not sit naturally in standard risk measurement
and management processes. Instead a hybrid
approach, which comprises both qualitative and
quantitative approaches, must be utilised.
Climate change risks, and any resulting
opportunities, are initially evaluated qualitatively,
leveraging SME-knowledge to assess the
potential magnitude and timing of impact. Where
appropriate a quantitative approach to analysis
and evaluation is also taken: several scenarios
which considered the effects of both Physical
and Transition Risks were included as part of
the stress and scenario testing section of the
Group’s Own Risk and Solvency Assessment
(ORSA) submission.
Both risk types will potentially affect the Group’s
assets as well as its liabilities.
Mitigation
Climate change risks and opportunities are
reported on quarterly to the GRC via the CRR, and
annually as part of the Group’s ORSA submission.
They are also reported on to the Group Board, and
to subsidiary Boards, as required. This monitoring
and reporting ensures that the highest level of
company management is aware of the risks, can
account for them in future business planning and
strategy setting, and can devise management
actions to mitigate their effects or to capture any
resulting opportunities.
93
The impact of climate
change on the Group’s
strategy is informed
by regular stress tests.
Admiral Group took
part in the PRA’s 2019
General Insurance
Stress Tests, and
considered several
climate change-
related scenarios as
part of the 2020
ORSA process.”
Strategy
Acknowledging the growing scientific consensus
that the window to tackle climate change is
rapidly diminishing, climate change has been
discussed at the Admiral Group Board, and at
the Sustainability Working Group to ensure
consideration in broader ESG topics. Climate
change is currently primarily integrated into
strategic decisions covering the Group’s
investment portfolio management as guided by
the Responsible Investment Policy. This year the
Group also increased engagement with climate
change-focused forums as it signed up to the
Institutional Investors Group on Climate Change
(IIGCC) and will aim to align ambitions with those
of IIGCC.
The Group’s product diversification strategy
is partly driven by considering climate change
transition risks which may affect the Group’s
Motor and Household businesses. Transition
Risks will likely affect the size, profitability and
make-up of both of these markets, and so Admiral
Group is considering ways to mitigate these
pressures, while exploring other markets which
show a low correlation and are less impacted by
(or indeed positively impacted by) climate change
risks. Admiral Pioneer, which has been set up this
year, will be key in exploring these markets.
The Group considers the relative climate
change merits of the companies it works with.
In particular, reinsurers are perhaps subject to
an even greater level of Climate Change Risks
than Admiral. Admiral works to ensure that
the appropriate level of reinsurance is bought
given the underlying risk, from a range of
strong reinsurers.
The impact of climate change on the Group’s
strategy is further informed by regular stress
tests. Admiral Group took part in the PRA’s 2019
General Insurance Stress Tests, which included
climate scenarios, and considered several climate
change-related scenarios as part of the 2020
ORSA process. The Group Risk function will look
to expand on this capability during 2021.
Metrics and targets
2020 progress
Progress has been made in 2020 with regards to
measurement and disclosure of climate metrics.
During 2020 the Group:
• Enhanced transparency around the Group’s
direct carbon emissions through the
attainment of a third-party verification
statement with Carbon Trust.
• Became carbon neutral through offsetting
for our operations.
• Put initiatives in place to further reduce
specified scope 1-2-3 emissions, such as
purchasing carbon credits.
• Completed CDP submission.
• Established transparency around the Group’s
fixed income mandates’ ESG profiles (including
climate-related indicators).
• Become a member of the Institutional
Investors Group for Climate Change.
2021 priorities
2021 priorities are being defined in conjunction
with third parties, and will include enhancing
management and disclosure of risks, in line with
the FCA’s new listing rule for year-end 2021.
Priorities include:
•
Instituting regular reporting of KRIs and KPIs
to the GRC, to cover assets, liabilities and the
macro environment;
• Developing targets for a subset of metrics,
including for investment portfolio carbon
intensity reduction and Paris Agreement
alignment; and
• Aligning stress and scenario testing capabilities
to emissions pathways.
By order of the Board
Milena Mondini de Focatiis
Group Chief Executive Officer
3 March 2021
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Admiral Group plc · Annual Report and Accounts 2020
Governance
95
Introduction from the Chair
96 Board of Directors
100 Governance report
114 The Audit Committee
121 The Group Risk Committee
128 The Nomination and Governance Committee
132 The Remuneration Committee
136 Remuneration at a glance
137 Directors’ remuneration policy
146 Annual report on remuneration
158 Directors’ report
Peoplewho
like what they do,
do itbetter
90%
of employees said that Admiral
is a great place to work*1
*1
Based on Group-wide results for the 2021 Great Place to Work Survey,
data surveyed in 2020.
Chair’s
introduction
to
governance
On behalf of the Board,
I am pleased to present the
Group’s Governance Report
for the financial year ended
31 December 2020.”
95
The Board is committed to ensuring that it provides effective leadership by requiring
that good governance principles and practices are adhered to throughout the Group.
Governance has continued to be a key area of focus for the Board, given the changes to the
corporate governance landscape and the impact that the Covid-19 pandemic has had on all
businesses. The Board and the business have adapted swiftly to remote ways of working
to ensure that the Group’s governance framework and standards of good corporate
governance continue to align with best practice and the requirements set out in the Code.
During the year, the Board, on the
recommendation of the Nomination and
Governance Committee, approved the
appointment of Milena Mondini de Focatiis
(CEO Designate) as an Executive Director of
the Board, as part of the ongoing CEO
transition process. Further details in this
regard are set out on page 110. The Board
and Nomination and Governance Committee
also led a comprehensive and transparent
selection process for a new independent
Non-Executive Director with the aim of
enhancing the Board’s technology expertise
and existing skills. Following suitable
candidate interviews, Jayaprakasa (JP)
Rangaswami was selected as the preferred
candidate. Further details of the selection
process are set out later in this report on
page 110.
The Board reviewed and agreed an amendment
to the Group’s purpose, which sets out the
Group’s values and strategy, to ensure that
it appropriately reflected the Group’s focus
on sustainability from both a community
and environmental perspective, and that it
continued to align with the Group’s culture
and support the Group’s long-term sustainable
strategy. The Board reflected on the Group’s
unique culture and reviewed the measures that
had been put in place to make sure it continued
to be appropriately monitored and remained
aligned with the Group’s purpose and values.
The Board considered how the Group’s purpose
and values had been embedded in the Group’s
policies and procedures and were satisfied
that management had taken the appropriate
steps to communicate values and expected
behaviours widely and clearly across the Group
and that reward structures provided appropriate
incentives that encourage desired behaviours
and responsible risk taking. The Group’s purpose
is set out on page 4.
The Board reflected on the importance of
its key stakeholder groups and reviewed the
Stakeholder Map, including the engagement
with each and to ensure that the views of
stakeholders were properly considered in
decisions made by the Board in compliance with
s172(1) of the Companies Act 2006: that the
Directors should take stakeholder concerns into
account in their decision making. The customer
remains central to our culture and we strive
to ensure fair outcomes for all of the Group’s
customers and empower front-line staff to
meet the needs of individual customers. The
Board received updates on the treatment of
existing customers and customer outcomes as
part of the strategic updates during the year.
The updates provided the Board with valuable
insight into how the needs of customers
were evolving and how the development
of customer experience and oversight was
being monitored to ensure that our customer
centric culture is maintained.
During the year, the Board received an
update on the effectiveness of the Employee
Consultation Group, which was established
in 2019. Further detail on the outcome of
the review and the operation of the ECG is
outlined in the Directors’ Report on page 68
and the s172 statement on page 82.
Succession planning and diversity remain
key areas of focus for the Board and the
Nomination and Governance Committee
as we seek to ensure that the composition
and balance of the Board is reviewed and
refreshed where necessary; that continuity
is maintained, and that Directors with the
appropriate skills and experience and from a
diverse range of backgrounds join the Board
to bring fresh perspective and challenge to
the Group’s strategy in the markets in which
it operates. Following an appointment made
during 2020, the Group Board comprises one
Board member of colour, which meets one of
the Parker Review’s key recommendations
for FTSE 100 companies for 2021. The Board
continues to focus on promoting diversity of
gender and social and ethnic background to
enhance diversity across its employees and
executive pipeline.
During the year, an internally facilitated
evaluation of the Board’s performance
was completed to ensure that the Board
continued to operate effectively and that it
was acting on the recommendations from its
previous reviews. A summary of the outcomes
of the Board’s discussion and consideration
of the results of the evaluation are set out in
more detail at page 112 of this report.
The Board reviewed its objectives in
December to ensure that they remained
appropriate and that the Board’s time could
be allocated to those areas that will be most
important to the Group in the coming year.
The objectives will be kept under regular
review to ensure that they remain appropriate
for the challenges and issues that will need
to be addressed as the business continues to
evolve and develop.
Annette Court
Group Chair
3 March 2021
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Admiral Group plc · Annual Report and Accounts 2020
Board of
Directors
A diverse Board with a breadth
of skills and experience.
Committee Membership
Audit Committee
member
Group Risk
Committee member
Remuneration
Committee member
Nomination and Governance
Committee member
Committee
Chair
Senior Independent
Director
Annette Court
Chair
Milena Mondini de Focatiis
Chief Executive Officer
Geraint Jones
Chief Financial Officer
Current Appointments
Non-Executive Director
of Sage Group plc
–
–
Board Gender Diversity
Background and experience
Male
54.5%
Female
44.5%
CEO of Europe General Insurance
for Zurich Financial Services
and a member of the Group
Executive Committee from
2007-2010.
Former CEO of Direct
Line Group (formerly RBS
Insurance) and member of
the RBS Group Executive
Management Committee.
Previously a member of the
Board of the Association of
British Insurers (ABI).
Milena joined Admiral in 2007,
she became CEO of ConTe.
it in 2008 and Head of UK and
European Insurance in 2019.
Milena was appointed as Group
CEO in 2021.
Before joining Admiral, Milena
worked as a consultant for Bain
& Co and Accenture. She holds an
MBA from INSEAD.
Geraint joined Admiral in 2002
and held several senior finance
positions including Head of
Finance, before being promoted
to Deputy Chief Financial
Officer in January 2012 and
Chief Financial Officer in August
2014. Geraint is responsible
for finance, investments and
investor relations. A Fellow
of the Institute of Chartered
Accountants in England and
Wales, Geraint spent the
early part of his career
as an external auditor at
Ernst & Young and KPMG.
Appointed
Appointed to the Board in
2012, appointed to Chair
in 2017.
Appointed in 2020.
Appointed in 2014.
97
Mike Brierley
Non-Executive Director
Karen Green
Non-Executive Director
Justine Roberts, CBE
Non-Executive Director
Owen Clarke
Non-Executive Director
Chair of Admiral Financial
Services Limited (AFSL)*1
Non-Executive Director of
Phoenix Group Holdings plc
CEO & Founder, Mumsnet.com
& Gransnet.com
Chairman of Equistone Partners
Europe, ‘Equistone’ (formerly
Barclays Private Equity, ‘BPE’)
Non-Executive Director of
The Open Data Institute
Non-Executive Director of
Nottingham Building Society
Mike was CFO of Metro Bank
PLC between 2009 and 2018,
helping lead the business from
start-up to listing on the FTSE.
He spent seven years at Capital
One Europe in various roles
including CFO Europe, CFO UK
and Chief Risk Officer Europe.
He has also served as CFO for
Royal Trust Bank, Financial
Controller at Industrial Bank of
Japan, London Branch, Director
Business Risk at Barclaycard
and was co-founder and Deputy
Managing Director/CFO of Gentra
Limited. In 2020, Mike joined the
Nottingham Building Society as a
Non-Executive Director and also
chairs their Audit Committee.
Mike is a Fellow of the Institute
of Chartered Accountants in
England and Wales.
Council Member, Lloyd’s of London
Non-Executive Director of Asta
Managing Agency Ltd
Vice President, Insurance
Institute of London
Karen Green was previously CEO
of Aspen UK, which comprised
the principal UK insurance and
reinsurance companies of Aspen
Insurance Holdings from 2010
to 2017.
Other senior Aspen positions
included Group Head of Strategy,
Corporate Development, Office
of the Group CEO and she was a
member of the Group Executive
Committee for 12 years.
Prior to that, she held various
corporate finance, M&A and
private equity roles at GE Capital
Europe and Stonepoint Capital
having started her career in
investment banking at Baring
Brothers and Schroders.
Justine founded Mumsnet in
2000 and is responsible for
creation, strategic direction
and overall leadership. In May
2011, Justine founded Gransnet,
a sister site to Mumsnet, for the
over-50s.
Before that Justine was a
freelance football and cricket
journalist for the Times and Daily
Telegraph, after working for
Deutsche Bank, managing the
South African equity operation
in the US.
Owen was Chief Investment
Officer of Equistone from 2011
to 2017. He previously led several
management buy-outs for BPE
in the insurance and consumer
finance sectors, including BPE’s
participation in the Management
Buy Out of Admiral, and was a
Director of Admiral from 1999
to 2004. He also led BPE’s own
buy out from Barclays to form
Equistone in 2011.
Appointed in 2018.
Appointed in 2018.
Appointed in 2016.
Appointed in 2015.
*1 Admiral Group Subsidiary entity.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 98
Admiral Group plc · Annual Report and Accounts 2020
Board of Directors continued
Jean Park
Non-Executive Director
Manning Rountree
Non-Executive Director
Andy Crossley
Non-Executive Director
Jayaprakasa (JP) Rangaswami
Non-Executive Director
Current Appointments
Non-Executive Director of Murray
Income Trust plc
Non-Executive Director of the
National House Building Council
Chief Executive Officer and
Director of White Mountains
Insurance Group, Ltd
Director of Build America
Mutual Assurance Company
Chair of EUI Limited*1
Non-Executive Director and Chair
of Audit Committee at Vitality
Health Ltd and Vitality Life Ltd
Non-Executive Director of
Allfunds Bank
Non-Executive Director of
Daily Mail and General Trust
Non-Executive Director of
National Bank of Greece
Non-Executive Director of
EMIS Group plc
Manning joined White Mountains
in 2004 and is the former
President of White Mountains
Advisors and White Mountains
Capital. Prior to joining White
Mountains, Manning spent two
years with Putnam Investments
and three years with McKinsey
& Company.
Andy was Chief Financial Officer
at Domestic & General Group
from 2014 to 2017. He spent
14 years at Prudential plc from
2000 as Director, Group Finance;
Group Chief Risk Officer; and
CFO and Deputy Chief Executive
Officer of Prudential UK. He
previously held senior manager
roles at Legal & General Group
plc, as Group Financial Controller,
and Lloyds Bank plc. Andy is
a Fellow of the Institute of
Chartered Accountants in
England and Wales.
JP Rangaswami was Chief
Information Officer with
Dresdner Kleinwort from 2001
to 2006. He spent four years
as Managing Director/Chief
Scientist at BT Group from 2006
to 2010. JP was Chief Scientist
with Salesforce from 2010 to
2014 and was Chief Data Officer
and Group Head of Innovation
with Deutsche Bank from 2015
to 2018. JP is also a former
global CIO of the Year as well as
European Innovator of the Year.
Background and experience
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.
Appointed
Appointed in 2014.
Appointed in 2015.
Appointed in 2018.
Appointed in 2020.
*1 Admiral Group Subsidiary entity.
Board skills and experience
99
Board gender diversity
Non Executive Board tenure
Non Executive Director skills mix
Male (54.5%)
Female (44.5%)
>8 years
6–8 years
3–5 years
<3 years
Finance (9)
Risk (7)
Insurance (5)
Commercial (9)
Marketing/
Retail (1)
City (7)
International (4)
Tech/Digital (3)
Operations (8)
Entrepreneurial (4)
Loans (2)
Non-Executive Directors skills matrix
Non-Executive Directors
Finance
Risk
Insurance
Commercial
Marketing/
City
International
Technology/
Operations
Entrepreneurial
Loans
Retail
digital
Annette Court (Chair)
Jean Park
Manning Rountree
Owen Clarke
Justine Roberts
Andy Crossley
Mike Brierley
Karen Green
JP Rangaswami
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information
100
Admiral Group plc · Annual Report and Accounts 2020
Governance
report
Applying the principles and related provisions of the
UK Corporate Governance Code during the year.
Compliance with the UK Corporate Governance Code
Implementing best practice corporate governance contributes to the successful delivery of strategy and is, therefore, important to the
Board. An effective corporate governance framework helps the Board and management to deliver the strategy within the scope of the
relevant legal and regulatory landscapes. It ensures, amongst other things, that:
• The Board is composed in an appropriately balanced way which promotes diversity and enables it to operate effectively. Having
appropriate divisions of responsibility between Executive and Non-Executive roles provides external challenge to the internal view.
Similarly, diversity on the Board and at a senior management level avoids ‘Group-think’ and offers different perspectives.
• The Board and management maintain two-way relationships with the Group’s key stakeholders. Not only should the Board act in a
way which promotes the success of the company for the benefit of its shareholders, but it should also have regard to its other key
stakeholders for which the Board’s decisions are likely to impact. It is important that two-way engagement is maintained to enable key
stakeholders to influence the Group’s actions, again, providing different perspectives.
• The Group has a clear purpose and strategy and that its culture aligns. Messaging and tone from the top are crucial and should be
consistent so that everyone is clear about the goal and, therefore, works towards the same thing.
• Remuneration is proportionate and supports long-term success, therefore, generating the right behaviours and outcomes.
All of the mechanisms described throughout the Corporate Governance Report are intended to demonstrate how the Group’s corporate
governance framework contributes to the delivery of the strategy.
This particular section outlines how the Group has applied the principles and complied with the provisions of the UK Corporate Governance
Code 2018 (‘UK Code’) by reference to the location of the descriptions in the different sections of the Annual Report.
Board Leadership and Company Purpose
UK Code Principle
Description
References
Principle A
Principle B
Principle C
Principle D
Principle E
A successful company is led by an effective
and entrepreneurial board, whose role is to
promote the long-term sustainable success of
the company, generating value for shareholders
and contributing to wider society.
• Corporate Governance Report – ‘Role of the Board’
• See the ‘Stakeholder sections’ on pages 56 to 79 of the Strategic
Report for the Group’s generation of value for shareholders
and its contribution to wider society
The board should establish the company’s
purpose, values and strategy, and satisfy
itself that these and its culture are aligned.
All directors must act with integrity, lead by
example and promote the desired culture.
The board should ensure that the necessary
resources are in place for the company to
meet its objectives and measure performance
against them. The board should also establish
a framework of prudent and effective controls,
which enable risk to be assessed and managed.
• See pages 4 and 19 to 29 of the Strategic Report for ‘Admiral’s
Purpose, Values and Strategy’
• Corporate Governance Report – first paragraph under ‘Role of the
Board’
• Nomination and Governance Committee Report – Last paragraph
of Chair Introduction
• Directors Report – last paragraph of ‘Going concern’
• Corporate Governance Report – second paragraph within
‘Meetings and attendance’
• Audit Committee Report – third paragraph under ‘Internal Audit’
• Group Risk Committee – third bullet under ‘Duties and
Responsibilities of the Group Risk Committee’
• Directors Report – ‘Reporting, Accountability and Audit’, fourth
paragraph under ‘UK Corporate Governance Code’
• Group Risk Report – ‘Risk Management and Internal Control
Systems’
In order for the company to meet its
responsibilities to shareholders and
stakeholders, the board should ensure effective
engagement with, and encourage participation
from, these parties.
• See the ‘Stakeholder sections’ on pages 56 to 76 of the Strategic
Report for details of the Group’s stakeholder engagement
mechanisms and the Board’s oversight
• Corporate Governance Report – ‘Stakeholder engagement’
The board should ensure that workforce
policies and practices are consistent with the
company’s values and support its long-term
sustainable success. The workforce should be
able to raise any matters of concern.
• See the Strategic Report, ‘Employee policies’ on page 80
• Corporate Governance Report – ‘Whistleblowing’
101
Division of Responsibilities
UK Code Principle
Description
References
Principle F
Principle G
Principle H
Principle I
The chair leads the board and is responsible
for its overall effectiveness in directing the
company. They should determine objective
judgement throughout their tenure and
promote a culture of openness and debate.
In addition, the chair facilitates constructive
board relations and the effective contribution
of all Non-Executive Directors, and ensures that
directors receive accurate, timely and clear
information.
The board should include an appropriate
combination of executive and Non-Executive
(and in particular, independent Non-Executive)
Directors, such that no one individual or
small group of individuals dominates the
board’s decision-making. There should be a
clear division of responsibilities between the
leadership of the board and the executive
leadership of the company’s business.
Non-Executive Directors should have sufficient
time to meet their responsibilities. They should
provide constructive challenge, strategic
guidance, offer specialist advice and hold
management to account.
• Corporate Governance Report – ‘Division of Responsibilities’
for the Role of the Chair
• Corporate Governance Report – ‘Board composition,
balance and independence’
• Corporate Governance Report – ‘Division of Responsibilities’
for the Role of Chair vs Role of CEO
• Nomination and Governance Committee Report – last paragraph
under ‘Board composition, appointments and time commitments’
• Corporate Governance Report – see Directors Biographies for
details of external commitments
• Corporate Governance Report – sixth paragraph within
‘Board composition, balance and independence’
• Corporate Governance Report – ‘Division of Responsibilities’
The board, supported by the company
secretary, should ensure that it has the policies,
processes, information, time and resources
it needs in order to function effectively and
efficiently.
• Corporate Governance Report – third paragraph within
‘Meetings and attendance’
• Corporate Governance Report – fifth bullet under ‘2020 Board
Evaluation’
• Corporate Governance Report – ‘2020 Board Evaluation’
Composition, Succession and Evaluation
UK Code Principle
Description
References
Principle J
Principle K
Principle L
Appointments to the board should be subject
to formal, rigorous and transparent procedure,
and an effective succession plan should be
maintained for board and senior management.
Both appointments and succession plans should
be based on merit and objective criteria and,
within this context, should promote diversity
of gender, social and ethnic backgrounds,
cognitive and personal strengths.
• Nomination and Governance Committee Report – second paragraph
under ‘Board Composition, Appointments and Time Commitments’
• Nomination and Governance Committee Report – ‘Succession
planning and talent management’
• Corporate Governance Report – fourth paragraph under the table
within ‘Board composition, balance and independence’
The board and its committees should have
a combination of skills, experience and
knowledge. Consideration should be given to
the length of service of the board as a whole
and membership regularly refreshed.
• Corporate Governance Report – Chair Introduction
• Corporate Governance Report – first paragraph under ‘Board
composition, balance and independence’
• Corporate Governance Report – table under ‘Board composition,
Annual evaluation of the board should consider
its composition, diversity and how effectively
members work together to achieve objectives.
Individual evaluation should demonstrate
whether each director continues to
contribute effectively.
balance and independence’
• Audit Committee Report – ‘Membership’
• Corporate Governance Report – first and second bullets under
‘2020 Board Evaluation’
• Corporate Governance Report – ‘Individual Director Evaluation’
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 102
Admiral Group plc · Annual Report and Accounts 2020
Governance report continued
Audit, risk and internal control
UK Code Principle
Description
References
Principle M
The board should establish formal and
transparent policies and procedures to
ensure the independence and effectiveness
of internal and external audit functions and
satisfy itself on the integrity of financial
and narrative statements.
Principle N
Principle O
The board should present a fair, balanced and
understandable assessment of the company’s
position and prospects.
The board should establish procedures to
manage risk, oversee the internal control
framework, and determine the nature and
extent of the principal risks the company is
willing to take in order to achieve its long-term
strategic objectives.
• Audit Committee Report – first, fourth and eighth bullets under
‘Roles and Responsibilities’
• Audit Committee Report – ‘Non-audit fees’
• Audit Committee Report – ‘Effectiveness of the external audit
process’
• Audit Committee Report – second paragraph under ‘Internal Audit’
• Directors Report ‘Directors Responsibilities’ and ‘Responsibility
statement’
• Principal Risks and Uncertainties – third paragraph under ‘Risk
Management and Internal Control Systems’
• Directors Report – ‘Reporting, Accountability and Audit’, third
paragraph under ‘UK Corporate Governance Code’
• Audit Committee Report – ‘Internal Audit’
• Strategic Report – ‘Principal Risks and Uncertainties’
• Directors Report – ‘Reporting, Accountability and Audit’, fourth
paragraph under ‘UK Corporate Governance Code’
Remuneration
UK Code Principle
Description
References
Principle P
Remuneration policies and practices should
be designed to support strategy and promote
long term sustainable success. Executive
remuneration should be aligned to company
purpose and values and be clearly linked to the
successful delivery of the company’s long-term
strategy.
Principle Q
A formal and transparent procedure for
developing policy on executive remuneration
and determining director and senior
management remuneration should be
established. No director should be involved in
deciding their own remuneration outcome.
Principle R
Directors should exercise independent
judgement and discretion when authorising
remuneration outcomes, taking account of
company and individual performance, and wider
circumstances.
• Remuneration Report – last paragraph under ‘Recap of
remuneration structure at Admiral’
• Remuneration Report – last paragraph under ‘Business context:
Admiral’s business performance and how we responded to the
impact of Covid-19’
• Remuneration Report – fourth paragraph and last paragraph under
‘2020 Remuneration Policy Review’
• Directors Remuneration Policy – ‘2021 Remuneration Policy table’,
‘Post termination shareholding requirement’ under ‘Purpose and
link to strategy’ column.
• Directors Remuneration Policy – ‘Key Principles of Admiral
Remuneration Arrangements’ and ‘2021 Remuneration Policy
table’
• Directors Remuneration Policy – ‘Non-Executive Directors’ and
‘Approach to Remuneration Relating to New Executive Director
Appointments’
• Annual Report on Remuneration – ‘Remuneration Committee
Membership in 2020’
• Annual Report on Remuneration – ‘Incentive Outcomes
for Financial Year to 31 December 2020’
• Directors Remuneration Policy - Last paragraph under
‘2021 Remuneration Policy table’ under ‘DFSS’ and
‘Other benefits’; the paragraph following that table;
‘Service Contracts and Leaver/Change of Control Provisions’;
and ‘Non-Executive Directors’.
103
Statement of Compliance
The Group complied with the provisions of the UK Code except for part of provision 36 that relates to the introduction of a post-
employment shareholding policy. The Group will be seeking shareholder support for a revised Remuneration Policy at the 2021 AGM and as
part of these proposed changes, the intention is to adopt a post-employment shareholding policy. Further details are outlined within the
Remuneration Report on page 132.
For 2021, our investment priorities include
setting carbon intensity reduction targets
for our investment portfolio, exclusions
for climate change laggards, and minimum
allocations to securities with clear positive
impacts (for example, providing climate
solutions or progress towards the UN
Sustainable Development Goals).
Responsible Investment
Admiral’s Responsible Investment
approach was fully integrated in 2019
and is applicable to all investments. We
aim to mitigate Environmental, Social and
Governance (ESG) related risks and achieve
more sustainable long-term returns.
In particular, we require ESG considerations
to be integrated into each step of investment
decision-making. This includes monitoring
the ESG risks, reviewing the ESG capabilities
of external asset managers and consideration
of ESG factors on implementing new asset
types. Our initial focus has been on the Group’s
fixed income mandates, which represent over
50% of our total assets, with the remaining
exposure (c.45%) in cash and money market
funds. Within these mandates:
• Average ESG rating of ‘A’ (MSCI Rating).
• Minimum average ESG rating
requirements in our portfolios
(either using MSCI or internal
asset manager ratings).
• No energy firms deriving >10% revenue
from coal or tar sands, and no cluster
munitions.
• Requested our external asset managers
to favour green bonds when they offer a
similar financial profile to other issues.
• Carbon Emissions Intensity (aggregate
emissions financed for every million
dollars invested in the companies) below
pre-determined benchmark.
During 2020, we have continued to ensure all
our asset managers are signatories of the UN
Principles for Responsible Investment (PRI)
and thoroughly review their ESG processes,
with all Admiral’s asset managers scoring an
A or A+ in relevant responsible investment
categories. We engaged with asset managers
to define methodology which will assess our
portfolios against the 2015 Paris Agreement,
and we became a member of the Institutional
Investors Group for Climate Change (IIGCC),
as we look to formally adopt targets for
reducing carbon intensity and alignment
to the Paris Agreement.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 104
Admiral Group plc · Annual Report and Accounts 2020
Governance report continued
Board leadership and company purpose
Board Committees
The Board has delegated authority to several 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 and Governance all
comply fully with the requirements of the Code.
All Committees are chaired by an independent Non-Executive
Director, except the Nomination and Governance Committee,
which is chaired by the Chair of the Board, and comprise a majority
of independent Non-Executive Directors. In accordance with the
UK Code, all members of the Audit Committee are independent
Non-Executive Directors. Appointments to the Committees are
made on the recommendation of the Nomination and Governance
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. An
evaluation of the performance of each Committee against the
duties set out in each terms of reference is carried out annually.
Board activity during 2020
Due to the Covid-19 pandemic social distancing restrictions
and lockdown measures, the Board had to adapt to meeting
remotely for the majority of 2020. Despite holding less face to
face meetings and more virtual meetings in the year, this has
not hampered the effectiveness of the Board. The Board met
on twelve occasions during the year with all these meetings
being held over one or two days and one of the meetings being
a separate strategy meeting.
Role of the Board
The Board is responsible for promoting the long-term, sustainable
success of the Group and its shareholders and 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 has
determined the Group’s purpose which represents its values and
strategy and is satisfied that it is aligned with the culture of the
Group. Part of the Board’s role is to promote the Group’s culture
and, in particular, ensure that its uniqueness is safeguarded in such
times of change.
The Board is responsible for organising and directing the affairs of
the Group in a manner that generates and preserves value over the
long term. Through the strong governance framework that it has in
place, the Board is able to deliver on its strategy of providing strong
sustainable financial and operational performance. The Board is also
accountable 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 accountable 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.
Matters reserved to the Board
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 to 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
105
Principal areas of focus for the Board during 2020
Governance
Regulatory Updates
On the agenda for 2021
• Considered progress made in
completing the actions arising
from the 2019 external Board
Effectiveness Review
• CEO transition updates
• Succession planning and Group
talent management update
• Reviewed and approved
revised Matters Reserved for
the Board
•
Internal Model Application Process
(IMAP) updates
• Own Risk and Solvency Assessment
Report (ORSA) review
• PRA attended the October Board
• Consideration of the potential
impact of the FCA pricing review of
General Insurance products
Operational Performance
• Updates on the impact of the
Covid-19 pandemic, including topics
relating to response and risk, travel
insurance, financial projections,
possible long-term consequences
and emergency cover plans
• Updates on cyber security and the
measures in place across the Group
• Presentation from the Group’s
European Insurance businesses
• Presentation from the Group’s US
insurance and Comparison business
• Comparison update
• Presentation from the Group’s Loans
business
• Presentation from Admiral Pioneer
• Consideration and approval of the
Group’s 5 Year Plan
During the year, the Board received
assurance from management that it
had effectively embedded the Group’s
purpose within operational processes
and policies and the alignment of
value to rewards and incentives. This
is achieved through a framework of
embedding that considers Group
policies, procedures and processes
to determine how the Group
purpose is delivered, how outcomes
are monitored and reported, and
performance reviewed by the Board.
The Board was also satisfied that the
incentives, rewards and promotion
were aligned with the Group’s values.
Stakeholders
• Updates from the Chair of
the Employee Consultation
Group, including on the ECG
effectiveness review
• Update on culture
and people
• Updates on gender and
diversity
• An update on Group talent
management
• Board session in March
on the impact of climate
change and its importance
for the Group
• Updates on responsible
investing and ESG
• An update on climate
change
• Consideration of the
stakeholder map that
identified the Group’s
main stakeholders and
engagement processes
and mechanisms that were
in place
Strategy
• Strategy review updates
• Group Strategy Review at
the Group strategy session in
October which also considered
product diversification
• Sale of price comparison
businesses under the Penguin
Portals umbrella
• Continue to stay close to how the Group’s
employees are thinking and feeling and ensure
that the Employee Consultation Group continues
to embed in the UK and internationally. Oversee
the evolution of Admiral’ culture post-Covid-19,
whilst ensuring that its uniqueness is preserved
with introduction of a more permanent flexible
working approach for all. Continue to ensure that
the views of the staff are fully considered by the
Board and that there is appropriate interaction
between the Board and the members of the
ECG to ensure that the views of staff on matters
raised at the ECG are properly considered by the
Board in decisions that are made by it. Ensure
that Admiral remains a Best Company to work for.
• Continue to devote Board time to the
consideration of the views of the Group’s
other key stakeholders in implementing the
Group’s strategy, and ensure there is regular
engagement through appropriate channels.
• Ensure Diversity and Inclusion objectives are
embedded in the Group and that work continues
to ensure that there is a diverse pipeline of talent
available for succession planning for senior roles.
• Ensure that Board dynamics evolve to
encompass a post-lockdown way of working.
• Provide support to and approve a sustainability
strategy and monitor progress against agreed
metrics.
• Continue to oversee the Group’s exploration of
opportunities to diversify beyond car insurance.
• Oversee and challenge the delivery of Admiral
2.0, including keeping under review the Group’s
technology and digital capabilities to ensure
they are appropriate as the Group looks to
explore opportunities beyond car insurance.
• Ensure that the IT strategy across the Group has
sufficient focus on resilience, agility, economies
of scale and risk management.
• Gain a deeper understanding of external
risk factors, notably competitors, industry
regulatory and technology threats/
opportunities, developments and disruptors,
including the impact of the FCA’s general
insurance pricing review.
• Continue to maintain a focus on cyber security.
• Continue to evaluate the Group’s response to
the Covid-19 pandemic to distil lessons learned
and how these can be applied to future planning.
• Continue to oversee work on the IMAP and
preparation for its submission to the regulator
for approval
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 106
Admiral Group plc · Annual Report and Accounts 2020
Governance report continued
At each scheduled meeting, the Board receives updates from
the Chief Executive Officer and Chief Financial Officer as to the
financial and operational performance of the Group and any specific
developments of which the Board should be aware. In addition,
there is an update provided at each Board on the matters discussed
and considered at each of the Group’s principal subsidiary Board
meetings. An annual schedule of agenda items is reviewed and
updated at each meeting to ensure that items 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. The Group CEO Designate (until her appointment to the
Board in August) and the CEO of UK Insurance (respectively Milena
Mondini de Focatiis and Cristina Nestares) together with the Chief
Risk Officer (James Armstrong) are invited to attend every Board
meeting and regular Board dinners, when these can take place.
This has proved an effective means of ensuring that senior
managers below Board level have exposure to and gain
experience of the operation of the Board.
In addition to the regular consideration of financial and operating
performance, and risk management and compliance, the Board
received presentations on a variety of topics including updates
from the management teams of each of the Group’s businesses and
regular reviews of Solvency II related activities such as progress of
the Internal Model Application Process (IMAP).
The Board Chair, although not being able to continue her in-person
visits to each of the Group’s overseas operations during the year,
has visited the Group’s overseas operations virtually. The Non-
Executive Directors were invited to join her on the virtual visits.
Non-Executive Directors also attended virtual briefing sessions
on different aspects of the Group’s UK business.
The Non-Executive Directors and the Chair met virtually during
the year without the Executive Directors being present, including
before each Board meeting.
In order to increase their understanding of the depth and breadth
of management across the Group below Board level, the Non-
Executive Directors and the Chair also attended a dinner with
members of the Group’s senior management team without the
Executive Directors being present. When management teams
present to the Board on their operations, they are usually invited to
join the Board for dinner, which gives the opportunity for informal
interaction between Directors and management. However, these
opportunities have not always been able to take place during the
year, as a result of the various Covid-19 restrictions which have
been in place. As this has been the case since March 2020, the Chair
has continued to hold one-to-one meetings with members of the
Group’s senior management team on a virtual basis.
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 Chair 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 2020 is provided in the table below. In
addition to the seven scheduled Board meetings held during the
year, there was one additional Board meeting held in February to
discuss CEO succession, three in April 2020 to discuss the dividend
and ‘Stay at Home’ refund to customers and one in December 2020
to consider and approve the sale of Penguin Portals. Similarly, the
nine Audit Committee meetings set out in the table below, includes
one additional Audit Committee meeting that was called at short
notice. The large increase in Group Risk Committee meetings was a
result of the increased oversight required of the Group’s risks and
controls as a result of the Covid-19 pandemic and to oversee the
Internal Model Application Process (IMAP).
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 structured by the Chair
in consultation with the Company Secretary and Chief Executive
Officer. Routine Board 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.
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
Chair, 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.
Culture: Monitoring and Assessment
It is critical that Admiral’s culture evolves and adapts as the
business environment changes but it is also critical that those parts
of our culture which have given us a competitive advantage and
been a driver of success in the past are maintained. The culture of
providing our customers with great products and services whilst
caring for our employees and other key stakeholders in the business
is key to what we do. Our culture is embedded and reinforced
by the Four Pillars (Communication; Reward and Recognition;
Fun and Equality) which are built into the fabric of our training,
communication and the way we do business. We recognise the
need to ensure that our employees are highly skilled and motivated
and have a recognition culture where our employees can thrive, be
innovative and contribute to the future success of the Group.
In December, the Board received an update on culture and people
which considered the Great Place to Work and Best Companies
survey results, headlines from local surveys that had run through
the year and the impact of Covid-19 and remote working on
Admiral’s culture and the additional support that had been
provided to staff during the year.
107
Board meetings
Audit Committee
meetings
Group Risk
Committee meetings
Nomination
and Governance
Committee meetings
Remuneration
Committee meetings
Total meetings held
Annette Court (Chair)
David Stevens*2 (Chief Executive Officer)
Geraint Jones (Chief Financial Officer)
Owen Clarke
Karen Green
Jean Park
Manning Rountree
Justine Roberts
Andy Crossley
Michael Brierley
Jayaprakasa (JP) Rangaswami
Milena Mondini de Focatiis
12
12
12
12
12
12
12
12
12
12
12
5*6
3*7
9
9
9
8*5
17
6*1
17
14*3
11*1
6
6
6
6
12
12
12
4*4
8*4
*1 Annette Court stepped down as a member of the Group Risk Committee and Andy Crossley became a member on 29 April 2020.
*2 David Stevens stepped down from the Board and his role as Group CEO on 31 December 2020.
*3 Due to prior commitments, Manning Rountree was unable to attend the ad-hoc Group Risk Committee meetings held on 26 February 2020, 11 May 2020 and 26 November 2020.
*4
Justine Roberts stepped down as a member of the Group Remuneration Committee and Michael Brierley became a member on 4 March 2020.
*5 Due to a prior commitment, Mike Brierley was unable to attend an additional Group Audit Committee meeting held on 6 February 2020.
*6
JP Rangaswami was appointed to the Board during the meeting held on 29 April 2020.
*7 Milena Mondini de Focatiis was appointed to the Board at the meeting held on 11 August 2020.
The Board received updates on the variety of initiatives that are in
place to support the Group’s culture including: a compensation and
promotion structure based on meritocracy, star lunches where staff
are recognised for their performance and are invited to attend a
lunch with a senior manager, Group Top 10 competition in which all
departments compete in a highly contested Group-wide competition
to present to a panel of senior managers on a different subject each
year in order to be awarded the best department, Annual Manager
Awards, local reward and recognition programmes and High five
feedback programmes where employees can submit feedback on
colleagues across departments who have given great service.
In addition to staff participation in regular monthly staff surveys
together with an annual employee engagement survey – Best
Companies and Great Places to Work survey, there are a number
of other mechanisms that the Group uses to monitor culture,
including regular culture audits conducted by Internal Audit
that include survey results, policies and processes; ‘Meet the
Manager’ meetings; ‘Ask Milena’ scheme and regular online
manager chats. All are felt to be valuable methods of capturing the
mood of employees and to gauge the health of our culture. Pulse
survey results during the Covid-19 pandemic demonstrated that
employees continued to feel well supported by their managers,
the majority enjoyed working from home and communication was
scored highly.
The Board continues to keep under review the monitoring of Group
culture to ensure that it is aligned with the Group’s purpose, values
and strategy as the business continues to evolve and develop. In
December, the Board received an update on the culture scorecard,
which aims to provide a benchmark to monitor culture across the
Group, to ensure that it continued to align with our purpose and
values and provide greater insight to the Board. The scorecard
matrix is produced quarterly and reported through the Group’s
Conduct Risk Framework and subsequently shared with the Board
for challenge and review. The scores are supported by comments
made by staff relating to specific survey questions to provide
further insight. Tolerances are set at a level to ensure we continue
to work hard to maintain our great culture and challenge us to
improve. The Board recognised that it had not been possible
to adequately monitor three of the nine measures within the
scorecard for the majority of 2020, as a result of the challenges
posed by Covid-19, but was satisfied that mitigating activity
had been put in place to monitor the areas covered by the three
measures in the interim. The aim is to resume reporting on these
measures in the usual way in 2021.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information
108
Admiral Group plc · Annual Report and Accounts 2020
Governance report continued
Stakeholder engagement
During the year, the Board has focused on ensuring that there is
effective engagement with its stakeholders. Detailed information
is set out in the Strategic Report as to how the Board has discharged
its duties under s172(1), particularly as regards how the Group has
sought to engage with its employees.
Communication and interaction with shareholders remain very
important and engagement with them occurs on a regular basis.
Open and frequent dialogue with investors enables them to fully
understand 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 and on
other occasions such as roadshows and conferences. Due to the
Covid-19 pandemic, such meetings, briefings and conferences
with investors have taken place virtually since early 2020.
In addition, the Chair, Senior Independent Director (SID) and
CEO Designate held individual meetings during the year with
major shareholders to understand their views on governance
and performance against strategy and reported to the Board on
any significant issues raised with them.
This is supplemented by feedback to the Board on meetings
between management and investors. The Investor Relations team
also regularly produces a report on their activities in the previous
quarter which 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 SID has specific responsibility to be available to investors
who have any issues or concerns, and in cases where contact with
the Chair, Chief Executive Officer and Chief Financial Officer has
either failed to resolve their concerns, or 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), unless circumstances such as the Government’s
Covid-19 lockdown restrictions prevent public gatherings. Given
the Covid-19 outbreak earlier in the year and the UK Government
prohibition on public gatherings of more than two people, it was not
possible for shareholders to attend the 2020 AGM in person. The
2020 AGM went ahead as a functional meeting to comply with the
Company’s articles of association, relevant legal requirements and
to enable shareholders to vote on the important customary annual
business. Shareholders were encouraged to submit questions to the
Board in advance of the AGM. The Board considered the questions
received and written responses were provided following the AGM.
The Chairs of the Audit, Remuneration, Nomination and Governance
and Group Risk Committees usually 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, or in advance, if there are restrictions in place on
public gatherings. 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 in the Directors Report on page 159.
The regular channels of communication with both the FCA and
PRA that existed throughout the year were supplemented by the
FCA and PRA being invited to attend Board meetings in 2020. The
PRA attended the Board in October 2020, which gave the Board
an opportunity to hear directly the views of the regulator and to
understand, and challenge them on, the rationale for their decisions
to the extent that they impact the Group. The Board is also kept up
to date with the regular communications between the AIGL Board
and the Gibraltar Financial Services Commission.
Whistleblowing
The Board has in place arrangements by which members of staff
can raise concerns in confidence and if necessary, anonymously.
During the year, the Board reviewed the Group’s whistleblowing
arrangements and was satisfied that they were proportionate for
independent investigation of the matters raised and supported an
ethical business culture where employees felt safe raising concerns.
In addition, the Board received regular updates from the Chair
of the Audit Committee (the Group’s regulatory Whistleblowing
Champion) in respect of reports arising from matters that had been
raised by employees under the Whistleblowing Policy.
Group 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 Group has put in place a Conflicts of
Interest Policy to deal with conflicts of interest and this was
reviewed and approved by the Board in October 2020. The Policy
sets out the process and procedure by which the Board manages
potential conflicts of interest that may arise at Board level and
within Board Committees, and within the Group’s Subsidiary
Boards. Following this review, the Board concluded that the
process continued to operate effectively.
In addition, each Board member is asked to complete, annually, a
conflicts 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.
109
The results of our board evaluation review concluded that
the Board continues to operate effectively.
Division of responsibilities
The Chair is primarily responsible for leading the Board, setting
its agenda, promoting a culture of openness and debate and
monitoring its effectiveness. The Chair is supported by the SID, who
acts as a sounding board and serves as an intermediary for the other
Directors. Neither are involved in the day-to-day management of
the Group. Save for the matters reserved for the Board, the Chief
Executive Officer (with the support of the Executive Directors and
the senior executives) 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 Board
decisions. It is the Non-Executive Directors’ role to provide
constructive challenge, strategic guidance, offer their respective
specialist advice and hold management to account.
The Board has approved a statement that sets out the clear division
of responsibilities between the Chair, Chief Executive Officer
and SID. This and matters reserved for decision by the Board are
reviewed annually.
Chair
Senior Independent Director
Chief Executive Officer
• Supports the Chair in the delivery of
• Runs the Group’s business and delivers
their objectives.
its commercial objectives.
• Acts as a sounding board for the Chair
and serves as an intermediary for the
other Directors.
• Available to shareholders if they have
concerns that cannot be resolved
through the normal channels.
• Proposes and develops the Group’s
strategy, in close consultation with the
Group’s senior management, the Chair
and the Board.
•
Implements the decisions of the Board
and its Committees.
• Works with the Chair and other
• Ensures operational policies and
Directors/shareholders to resolve
significant issues where necessary.
practices drive appropriate behaviour,
in line with the Group’s culture.
• Leads the annual performance
evaluation of the Chair.
• Leads the communication programme
with key stakeholders, including staff.
• Ensures management provides the
Board with appropriate information
and necessary resources.
• Runs the Board and sets its agenda,
with an emphasis on strategic issues.
• Ensures the Board has effective
decision-making processes,
demonstrating objective judgement
and applying sufficient challenge to
proposals.
• Facilitates constructive Board
relations, including effective
contribution from Non-Executive
Directors.
• Ensures the Board has an appropriate
balance of skills, knowledge,
experience and diversity.
• Leads the induction and development
plans for new and existing Board
members.
• Communicates with major
shareholders and ensures the Board
understands their views.
• Ensures the Board receives accurate,
timely and clear information.
• Leads the annual Board evaluation.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 110
Admiral Group plc · Annual Report and Accounts 2020
Governance report continued
Composition, succession and evaluation
Board Succession
Further to her appointment as CEO Designate and in line with the
Group’s succession and development planning processes, Milena
Mondini de Focatiis has continued to prepare for her succession
to the role of Group CEO on 1 January 2021. There has been a
comprehensive CEO transition process in place during 2020 which
has been closely monitored by the Nomination and Governance
Committee, with regular updates also provided to the Board. As
part of the process, Milena Mondini de Focatiis was appointed as
an Executive Director of the Board on 11 August 2020.
Following an external search for a candidate that could enhance
the Board’s technology expertise and existing skills, JP Rangaswami
was appointed as an independent Non-Executive Director with
effect from 29 April 2020. JP Rangaswami has a wealth of
large-scale technology experience gained through his roles as
Chief Information Officer (CIO) with Dresdner Kleinwort (2001
to 2006) and Managing Director/Chief Scientist at BT Group
(2006 to 2010). JP has also been Chief Scientist with Salesforce
(a US cloud-based software company) and was Chief Data Officer
(CDO) and Group Head of Innovation with Deutsche Bank (2015 to
2018). He has operated in financial services for over ten years and
understands the challenges of working in a regulated environment.
JP is also a former global CIO of the Year as well as European
Innovator of the Year. He is currently a Non-Executive Director of
Allfunds Bank and Daily Mail and General Trust (DMGT). Further
details on the appointment process are located in the Nomination
and Governance Committee Report on page 128.
As reported in last year’s Annual Report, the Chair will reach her
nine year tenure as a Non-Executive Director on the Group Board in
March 2021 and the Board had considered the position of the Chair
remaining in post for a period beyond the nine year term. Having
consulted shareholders, it remains the Board’s intention that,
subject to annual approval by shareholders, Annette Court
will remain as Chair of the Group Board for up to three years beyond
March 2021 with the expectation that she would serve two years.
We believe that there is a particularly strong rationale to extend
the Chair’s tenure beyond the 9 years recommended by the UK
Code, which is based on ensuring Board continuity following David
Stevens, a founder of Admiral, stepping down from his role as
CEO, coupled with an uncertain external environment due to the
ongoing impact of the Covid-19 pandemic. The SID, together with
the support of the Board, intends to commence the search for a
replacement Chair during 2022.
Board composition, balance and independence
Careful consideration continues to be given to the independence,
composition and balance of the Board. As a result, 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. In addition, the Directors are
aware of their legal duties to act in a way they consider, in good
faith, will be most likely to promote the success of the Company
for its shareholders, as well as considering the interests of
other stakeholders.
The table below details the length of service of the Chair and
each of the Non-Executive Directors and illustrates the balance
of experience and fresh perspectives.
Prior to David Stevens stepping down from the Board, the Board
comprised twelve Directors: the Chair (who was independent on
appointment), three Executive Directors, and eight independent
Non-Executive Directors. As can be seen from the Directors’
biographies on pages 96 to 98, the Directors have a broad range of
skills and experience and can bring independent judgement to bear
on issues of strategy, performance, risk management, resources
and standards of conduct which are integral to the success of
the Group.
Director
Annette Court
Jean Park
Manning Rountree
Owen Clarke
Justine Roberts
Andy Crossley
Mike Brierley
Karen Green
JP Rangaswami
Date of appointment
21 March 2012
17 January 2014
16 June 2015
19 August 2015
17 June 2016
27 February 2018
5 October 2018
14 December 2018
29 April 2020
Current length of service as a Non-Executive
Director at 31 December 2020
8 years 9 months
6 years 11 months
5 years 6 months
5 years 4 months
4 years 6 months
2 years 10 months
2 years 3 months
2 years
8 months
111
Appointments to the Board are the responsibility of the Board
as a whole, acting on the advice and recommendations of the
Nomination and Governance Committee. The Nomination
and Governance Committee seeks to balance the retirement
and recruitment of Non-Executive Directors ahead of their
replacement so as to avoid dislocation of Board process by losing
experience and skills. The Board is mindful of the need to promote
diversity in appointments to the Group Board and across the
Group. Appointments are made on merit and against objective
criteria, having due regard to the benefits of diversity, with a view
to ensuring the Board has the appropriate mix of personality,
skills, and experience. Further information on the process used in
relation to appointments and the approach to succession planning
and how both support the development of a diverse pipeline
are set out in the report of the Nomination and Governance
Committee at page 128.
Manning Rountree is the Chief Executive Officer for White
Mountains Insurance Group Limited (White Mountains) and acts as
Board Observer for White Mountains on the Board of the Group’s
US price comparison subsidiary, in which White Mountains has
a minority shareholding. Given the relatively small size of White
Mountains’ shareholding in an overseas Group subsidiary company,
the Board has determined that Manning Rountree remains
independent in character and judgement and that his attendance
at Inspop USA LLC Board meetings does not affect his ability to
present an objective, rigorous and constructive challenge to the
assumptions and viewpoints presented by management and the
Board. A process for managing any potential conflicts has been
agreed by the Board such that Manning Rountree will recuse
himself from any Group Board discussions where a potential
conflict of interest with his role with White Mountains has
been identified.
The Board, having given thorough consideration to the matter,
considers the eight Non-Executive Directors to be independent
and is not aware of any relationships or circumstances, other than
the above, 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 have sufficient time
available to perform their duties and 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.
Owen Clarke was the SID for the year under review. The Board is
satisfied that Owen has the requisite knowledge and experience
gained through his Board position, his Chairmanship of the
Remuneration Committee, and his membership of the Nomination
and Governance Committee. In addition, Owen has financial services
experience, gained through his appointment as Chairman, and
formerly Chief Investment Officer of Equistone Partners Europe.
Owen is available to shareholders if they have concerns that
contact through the normal channels of Chair, Chief Executive
Officer, or Chief Financial Officer have failed to resolve or for
which such contact is inappropriate. As Chair of the Remuneration
Committee, Owen is also available to discuss remuneration
matters with shareholders. He is also responsible for leading the
Board’s discussion on the Chair’s performance and will lead on the
appointment of a new Chair, when appropriate.
As set out in the Group’s Articles of Association, all Directors
will retire and offer themselves for re-election at each AGM, in
accordance with the UK Corporate Governance Code and the
Company’s current practice. Therefore, all Directors will be
submitting themselves for election or 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.
Further details can be found in each of the biographies. The
Directors are given access to independent professional advice at
the Group’s expense, should they deem it necessary to carry out
their responsibilities.
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
usually supplemented by visits to the Group’s head office in Cardiff
and certain overseas offices, and meetings with members of the
senior management team and their departments. During 2020, the
Non-Executive Director induction programme has required some
adaptation to take account of the Covid-19 pandemic lockdown
restrictions, with much of it being facilitated virtually to ensure
that the induction experience matches the former face to face
experience. Feedback to date on the updated induction programme
has been positive.
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.
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. This has been facilitated virtually
during 2020.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 112
Admiral Group plc · Annual Report and Accounts 2020
Governance report continued
Board Evaluation
Progress with 2019 Board Evaluation Recommendations
The externally facilitated Board evaluation, performed by Ian White (who had no other connections with the Group or its Directors) in
2019, made a number of key recommendations to enhance the effectiveness of the Board and its Committees. These included, but were
not limited to:
Key Recommendation
Progress Update
Increased focus on the need to enhance the Board’s expertise
in technology.
Developing a better understanding of Admiral’s technology and
digital capabilities was one of the Board’s objectives for 2020.
As well as relevant sessions having been scheduled for the Board
throughout 2020, on 29 April 2020, JP Rangaswami was appointed
to the Group Board following an external search. Further details
about his expertise in technology can be found in his Board
biography. The UK insurance business also appointed a Chief
Information Officer and a Chief Digital Officer to strengthen senior
management in these areas.
Ensuring that there continued to be appropriate challenge from
the Board on the matters discussed and consideration given to
ways this could be enhanced.
One of the Board’s objectives for the year was to challenge
management on the delivery of transformation of the core
business and, to facilitate this, additional updates on different
aspects of the project were arranged throughout the year.
Increasing the number of scheduled NED only sessions to ensure
that there was appropriate opportunity for the NEDs to discuss
matters affecting the Group without management present.
Non-Executive only sessions are scheduled at the start of each
Board meeting and also arranged separately, as required.
Continued focus on using Board and Committee time more
effectively through making sure that Board papers and meeting
agendas are drafted appropriately to allow for effective
consideration of the matters to be discussed.
The setting of the Board’s agenda is a collaborative process between
the Company Secretary, the Chair and senior management. Agenda
planners are used to help prioritise agenda items.
Further enhancement in the use of Board paper templates and
existing guidelines for the production of Board papers to ensure
that the Board’s time was used effectively.
The Board’s expectations in respect of format, content, length and
timing of papers have been documented and will continue to be
reviewed, where appropriate.
Existing induction plans for new Board Directors should be tailored
to ensure they are appropriate for the level of experience of the
new Board members.
Induction sessions for new Board Directors are tailored depending
on their background and experience. For example, additional
sessions with UK insurance management were arranged as part of
JP Rangaswami’s induction to help develop a good understanding
of the business.
The number of Board education and training sessions should be
regularly reviewed to ensure that the needs of the Board in certain
areas was being addressed.
A Board Education Programme has been developed and is updated
in accordance with feedback received throughout the year.
113
The relationship between the Executive and the Non-Executive Directors continues to
be good, with ‘trust and openness’ and ‘working with management’ questions scored highly.
2020 Board Evaluation
Having last carried out an external Board evaluation in 2019 in
accordance with the Code requirement that FTSE 350 companies
should carry out an externally facilitated evaluation of the Board
at least every three years, the 2020 Board evaluation process was
facilitated internally with use of a questionnaire developed by
Independent Audit, who have no other connection with the Group
or its Directors. The online questionnaire was sent to all Board
members and regular Board attendees and considered:
• Board composition together with the utilisation of the
experience, skills and expertise, as well as diversity of
Board members.
• Board dynamics and the interaction between the Chair,
Non-Executive Directors and management to achieve
the Board’s objectives.
The relationship between the Executive and the Non-Executive
Directors continues to be good, with ‘trust and openness’ and
‘working with management’ questions scored highly. The change to
virtual meetings was felt to have been competently dealt with and
had not adversely impacted the effectiveness of meetings.
The Board has a good understanding of the risks within the
business. However, Environmental, Social and Governance (ESG) was
highlighted as an area which the Board thought there was room
to better understand the strategic opportunities and risks from
emerging technology, as well as ensuring that the right information
was available to monitor our ESG performance. A Board education
session on ESG monitoring has been proposed for 2021. IT security
was another area highlighted as a continued area of focus and
a Board education session to test the Group’s processes and
procedures in respect of crisis management was proposed for 2021.
• Leadership and succession planning including the oversight
2020 Board Committee Effectiveness Reviews
of the Group’s processes for managing, developing and
retaining talent.
Further information on each of the Board Committees’ evaluations
can be found within the respective Board Committee reports.
• Understanding by the Board of the prevailing culture within
Individual Director Evaluation
the Group.
• Quality, timeliness of delivery and presentation of Board papers
and Board support.
• Time management and operational performance of Board and
Committee meetings.
• Risk management and the effectiveness of the Board in
considering the Group’s risk management framework and
internal controls.
• The effectiveness of the Board’s strategic and
operational oversight.
• Priorities for change that would enhance Board performance.
The results of the evaluation were discussed at the January 2021
Board meeting and showed a board that appeared to be functioning
well, with some identified opportunities for improvement.
Consideration was given to the skills, characteristics and diversity
needed on the Board to underpin the strategy and will continue
to be kept under regular review as part of the work of the Group
Nomination and Governance Committee.
The performance of the Chief Financial Officer is appraised annually
by the Chief Executive Officer, to whom he reports. The Chair,
taking into account the views of the other Directors, reviews the
performance of the Chief Executive Officer. The Chair also carries
out the performance assessments of each of the Non-Executive
Directors. Each of the Directors were determined to have continued
to effectively contribute to the work of the Board in 2020. The
performance of the Chair is reviewed by the Board led by the SID.
Following the latest review, the SID considered and discussed with
the Chair the comments and feedback that had been received from
the Directors as part of the Chair’s evaluation questionnaire and
was able to confirm that the performance of the Chair is effective
and that she demonstrates appropriate commitment to her role.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 114
Admiral Group plc · Annual Report and Accounts 2020
The
AuditCommittee
Committee members
Karen Green (Chair)
Mike Brierley
Andy Crossley
Number of meetings
9
Focus for the year
Alongside considering the impact of Covid-19 on the
Group’s processes, control environment, financial
reporting and key accounting judgements, the
Committee’s focus this year has been on:
• Challenging the key reserving assumptions and
judgements, movements, emerging trends and
analysis of uncertainties underlying the analysis
of outstanding claims proposed by management
alongside that of the Group’s external
independent actuarial advisers.
• Leading the external audit services tender
process and making a recommendation to the
Group Board.
• Focusing on management’s preparedness for the
introduction of IFRS 17 and the implications for
the Group to ensure these are well understood
and operationalised.
Dear Shareholder,
I am pleased to set out in this report
an update on the main activities of the
Committee in 2020.
Providing support to the Board in its
oversight of financial reporting and the
control environment across the Group
remained a key area of focus of the
Committee during the year. The Covid-19
pandemic is a significant, ongoing,
worldwide event and the Committee has
considered its impact across the Group’s
processes, control environment, financial
reporting and key accounting judgements,
including the Going Concern status of the
Group and its material subsidiaries.
The setting of insurance claims reserves
in accordance with the Group’s agreed
reserving methodology is a key accounting
judgement in the Group’s Financial
Statements (as set out in note 5 to the
Financial Statements), and the Committee
continues to place considerable focus on
this area. The Committee challenged the
key reserving assumptions and judgements,
movements, emerging trends and analysis
of uncertainties underlying the analysis
of outstanding claims proposed by
management alongside that of the Group’s
external independent actuarial advisers. In
2020, this included the impact of Covid-19
on both claims frequency and claims
severity in addition to the ongoing focus
on claims settlement patterns post the
2019 Ogden discount rate change and the
potential impact of Covid-19 in this regard.
Karen Green
Chair of the Audit Committee
115
The Committee considered and reviewed
the Group’s whistleblowing policy and
received quarterly updates on the use of the
policy and the instances of whistleblowing
that had been raised across the Group
during the year. During the year, the
Board concluded that the Group’s current
whistleblowing arrangements were an
appropriate means by which staff could
raise concerns in confidence
and anonymously.
In addition, the Committee continued to
monitor the appropriateness of the Group’s
system of risk management and internal
control and reviewed the Group’s Minimum
Control Standards’ Framework to ensure
that these continued to develop in line with
the business and that a consistent approach
to the control frameworks was deployed
across the Group.
The Committee received a report from
management on the circumstances that
led to the dividend rectification process, as
referenced in the Directors’ Report, which
included proposed enhancements to the
process so that the issue is not repeated in
the future.
Finally, the Committee also continued to
keep under review the proposed changes
to the external audit market following
the publications of the CMA, Kingman and
Brydon reviews.
I hope you find the above summary, and
the more detailed report, both useful and
informative.
Karen Green
Chair of the Audit Committee
3 March 2021
As referenced in the 2019 report, the
Committee continued to review and
subsequently approved management’s
proposals to transition to using Admiral’s
internal actuarial estimates for UK Car
Insurance best estimate claims reserves.
As part of this process, the Committee
received a report from an external
consultant following a review of the internal
reserving team’s processes and controls.
The transition was implemented ahead of
the Group’s 2020 interim financial reporting,
with the Group’s external actuarial advisors
continuing to provide an external estimate
on a consistent basis to previous periods but
as validation of Admiral’s internal estimate
rather than an input to the financial
statement reserving process.
The Committee also considered the
impact of the pandemic on other key
accounting judgements and the Group’s
control environment. In relation to critical
accounting judgements and key sources
of estimation uncertainty, this included
the impact on the Group’s loans business,
Admiral Financial Services Limited (AFSL) in
particular, the implications for the IFRS 9
provision for expected credit losses, and the
detailed work supporting the Group’s Going
Concern and Viability disclosures set out
in the 2020 interim and year-end financial
statements. This included consideration
by the Committee of the detailed work
undertaken by the Group Risk Committee
in respect of the Group’s solvency and
liquidity position including stress and
scenario testing as set out in the Group Risk
Committee Report.
The Committee received reports from
both the finance and internal audit teams
in relation to the design and effectiveness
of material controls in the context of the
move to remote working that arose as a
result of Covid-19. This included specific
consideration of the 2020 year-end
financial reporting process, potential risks
and challenges arising from the remote
working environment and steps taken by
management to mitigate those risks.
The Committee continued to spend time
considering the valuation and carrying
value of the parent company’s investment
in its subsidiaries and the results of
management’s impairment testing,
in particular the appropriateness of the
underlying assumptions and forecasts used,
and the stresses applied to the forecasts.
Impairment testing considerations in
relation to the Group’s US businesses,
Compare.com and Elephant, and the Group’s
loans business, AFSL, received particular
attention during the year as the Committee
reviewed management’s recommendation
to recognise further small impairments in
the carrying value of the parent company’s
investment in Elephant and Compare.com.
The Committee undertook a comprehensive
evaluation of the performance of the
external auditor and concluded that
Deloitte continued to work effectively as
external auditor. The Committee spent time
considering the audit fee proposed for 2020
and discussed with Deloitte the rationale for
the year-on-year increase.
As referenced in the 2019 report of the
Audit Committee, the Committee led an
external audit tender process during the
year. The Committee evaluated seven audit
firms in accordance with an agreed set of
criteria, including independence, audit
quality indicators, geographical location and
reach, and industry experience. Following
this process, Deloitte, KPMG and PwC were
invited to participate. Following completion
of the process, and on the recommendation
of the Committee, the Board approved the
proposal to recommend to shareholders, the
reappointment of Deloitte as the Group’s
external auditor, at the 2021 AGM. Further
details of the tender process are included
later in this report.
Although the introduction of the new
insurance accounting standard, IFRS 17
Insurance Contracts has been deferred to
January 2023, the Committee has continued
to focus on management’s preparedness
for its introduction and, the implications
for the Group to ensure these are both
well understood and operationalised. In
this context, the Committee received
several updates on the introduction of
IFRS 17, including an initial financial impact
assessment. The Committee also had a
separate education session facilitated by
Deloitte, recapping on the implementation
of IFRS 9 and considered the Group’s
financial assets, including loans, within
its scope.
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Admiral Group plc · Annual Report and Accounts 2020
The Audit Committee continued
Membership
Membership of the Committee at the end
of the year was: Karen Green (Chair), Andy
Crossley and Mike Brierley. Two of the
Committee’s members are Fellows of the
Institute of Chartered Accountants in England
and Wales. Given the insurance and financial
services experience of the members of the
Committee, the Board considers that they
have a broad range of skills, experience and
knowledge of the insurance sector, which
represents the principal market in which the
Group operates, and also the area of consumer
lending in which the Group has a small but
emerging business, such that they are able to
effectively analyse, challenge and debate the
issues that fall within the Committee’s remit.
The Board is satisfied that the Committee as a
whole has competence relevant to the sectors
in which the Group operates and further
considers that a number of its members have
recent and relevant financial experience. The
Company Secretary acts as Secretary to the
Committee. The Committee meets at least
six times per year and has an agenda linked to
events in the Company’s financial calendar and
other important issues that arise throughout
the year, which fall for consideration by the
Committee under its remit.
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, Chief
Actuary 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 and are reviewed annually
by the Committee.
Other individuals such as the Chair of
the Board, Chief Executive Officer,
Chief Financial Officer, Chief Risk Officer,
Chief Actuary, Heads of 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 Chair of the Audit Committee meets
with the Group Head of Internal Audit on a
regular basis and the Committee also held
two private meetings with the Group Head
of Internal Audit, who was appointed to the
role on 1 April 2020.
The external auditor was invited to attend
all of the Committee’s meetings held in 2020
and in relation to the 2020 year end process,
excepting those agenda items when its
own performance/appointment was to
be reviewed or where any other conflict
was identified. In addition, two private
meetings were held between members of
the Committee and the auditor. The Chair
also met regularly with the auditor during
the year.
Role and Responsibilities
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
which they contain, including that of the
Group’s Going Concern status;
• Provide advice (where requested by the
Board) on whether the Annual Report
and Accounts, taken as a whole, is fair,
balanced and understandable, and
provides the information necessary
for shareholders to assess the Group’s
position and performance, business
model and strategy;
• Keep under review the effectiveness
of the Company’s internal financial
controls, internal control and risk
management systems;
• 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;
• Review the Group’s procedures for
handling allegations from whistleblowers;
• Conduct the tender process 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;
• Approve the remuneration and
terms of engagement of the
Group’s external auditor;
• Review and monitor the Group external
auditor’s independence and objectivity,
and the effectiveness of the audit
process taking into consideration
relevant UK professional and
regulatory requirements;
• Review the policy on the engagement
of the Group external auditor to provide
non-audit services, ensuring that there
is prior approval of non-audit services,
considering the impact this may have on
independence and taking into account
the relevant ethical guidance in this
regard; and
• Reporting to the Board on how it has
discharged its responsibilities.
Summary of key activities
during 2020
The agenda for the meetings taking
place during the year are agreed by the
Committee Chair. There were seven
scheduled Committee meetings held during
the year (with two of these meetings
focused on reserving matters in conjunction
with the half year and full year reporting). In
addition, two additional meetings were held
during the year, one was called to review a
trading statement issued during the year,
and the second to consider the transition to
using the Admiral internal reserving team’s
actuarial projections as a basis for financial
reporting. The majority of the Committee’s
meetings in 2020 were held remotely, again
as a result of the Covid-19 pandemic. The
agendas are updated regularly to allow for
new items to be included.
During the year the Committee reviewed
the following:
• The Group Annual Report, trading
statement and interim results
announcement, including key accounting
judgements and disclosures;
• Parent company financial statements
(both annual and interim), including key
accounting judgements and disclosures;
• Financial statements for the Group’s
UK insurance entity, Admiral Insurance
Company Limited, including key
accounting judgements and disclosures;
117
• The Group Solvency and Financial
Condition Report (‘SFCR’), including
disclosures specific to Admiral Insurance
Company Limited;
• Reports from the Internal Audit
departments within the Group on
the effectiveness of the Group’s risk
management and internal control
procedures, approval of the 2021 Audit
Plan including resourcing levels, details of
key audit findings, and actions taken by
management to manage and reduce the
impact of the risks identified;
• Performance and effectiveness of the
Internal Audit department;
• A summary of the key findings from all
reports from Internal Audit including
management responses to the
conclusions set out in the reports;
• Reports from the external auditor
including the management letter
highlighting system and control
recommendations, key accounting and
audit issues and conclusions on the half
year and full year reporting;
• A report from an external consultant
reviewing Admiral’s reserving process
and controls ahead of the transition to
using Admiral’s internal actuarial reserve
estimates as a basis for the Group’s
financial reporting;
• A Report from the Chair of the Group Risk
Committee on the principal risks faced
by the Group and the work undertaken by
the Group Risk Committee to ensure risk
is appropriately managed;
• Presentations from the Group’s external
actuaries and internal actuarial team to
assist the Committee in concluding on
the adequacy of the Group’s reserves;
• Reports prepared by management
demonstrating risk transfer within
reinsurance contracts in line with the
requirements of IFRS 4;
• Reports from Deloitte, the external
auditor, on their proposed audit scope
and plan;
• Proposed external audit fee and the
drivers of the year-on-year increase;
• Confirmation of the external auditor’s
independence;
• The effectiveness of the Group’s
Whistleblowing Policy which sets out the
arrangements for raising and handling
allegations from whistleblowers and
receiving regular reports on instances of
whistleblowing that have been raised;
• Reports on the controls in place, including
any breaches or incidents, in respect of
the Group’s overseas subsidiaries;
• European Insurance Internal Audit
updates, including an update from the
Chair of the European Audit Committee
(of the Group’s subsidiary Admiral
Europe Compañía de Seguros, S.A.,
which underwrites the Group’s European
insurance businesses) on the activities of
that committee;
• An update from the Chair of the US Audit
Committee (of the Group’s subsidiary
Elephant Insurance Services) on the
activities of that Committee;
• Presentations and papers on a range of
important issues including: the impact
of the forthcoming IFRS 17 accounting
changes, an accounting update on the
Group’s loans business focused on the
requirements of IFRS 9, an education
session delivered by the Group’s external
auditors, recapping on the implementation
of IFRS 9, the implementation of the Group
Minimum Control Standards framework,
Solvency II Technical Provisions and other
Solvency II reporting, and consideration
of areas of the year end processes
subject to heightened risk as a result of
remote working;
• A paper from management noting the
outcome of the review of the process
and controls in relation to the dividend
rectification issues, as referenced within
the Directors’ Report;
•
•
Its own Terms of Reference;
Its own effectiveness;
• Meetings held with the external
auditors and also with the Group Head
of Internal Audit without management
being present.
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 the valuation of gross
insurance, and reinsurance claims reserves,
and the calculation of the IFRS 9 provision
for expected credit loss (ECL).
These significant issues were discussed with
management during the year and with the
external auditor at the time the Committee
reviewed and agreed the external auditor’s
Group audit plan; when the external auditor
reviewed the interim Financial Statements
in August 2020 and also at the conclusion
of the external audit of these full year
Financial Statements.
Valuation of gross insurance and
reinsurance claims reserves
The Committee continued to spend
significant time reviewing and challenging
the approach, methodology and key
assumptions adopted by management in
setting reserves for insurance liabilities
and reinsurance recoveries in the Financial
Statements to ensure consistency with the
Group’s stated reserving approach to set
reserves at a prudent level.
In this context, the Committee challenged
management on the important judgements
and assumptions used in estimating
outstanding claims and reinsurance
recoveries. Further information is set out
in more detail in the critical accounting
estimates section of Note 1 to the
financial statements.
In 2020, a number of specific issues relating
to the valuation of claims reserves and
reinsurance recoveries were focused on
by the Committee. The first of these was
management’s proposal to transition from
using an external actuarial best estimate
projection of claims reserves and recoveries,
to Admiral’s internal actuarial reserving
team’s projected best estimate, as a basis
for financial statement reserving for the
UK Car Insurance business. Having reviewed
initial proposals during the previous
financial year, the Committee reviewed
management’s formal transition proposal
during the first half of 2020, which included
a summary of:
• Enhancements made to process and
control documentation in preparation for
the transition;
• A presentation by an external consultant
on findings of a ‘review and recommend’
engagement on the reserving processes
and controls, including recommendations
for future enhancement;
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Admiral Group plc · Annual Report and Accounts 2020
The Audit Committee continued
• Recommendations for appropriate
thresholds for differences between
Admiral’s internal best estimate reserve
projections and that of the Group’s
external actuarial advisors who will
continue to provide a best estimate
reserve projection in a validation
capacity;
• The impact of the transition from the
external best estimate to the internal
best estimate in absolute terms;
• The ongoing scope of the external
actuarial review as validation of the
internal best estimate;
• Minor enhancements to existing
reserving governance processes;
• Risks arising from enacting the transition,
ahead of the half-year, given the
impact of the Covid-19 pandemic, and
appropriate mitigations.
The Committee was satisfied that
management’s proposal was robust and
had appropriately considered all relevant
material risks and mitigations, and approved
the transition, which was successfully
implemented through the 30 June interim
financial reporting process.
As in previous periods, the Committee
held meetings specifically focused on
reserving, receiving presentations from
the internal UK car reserving team and
the external actuaries. At these meetings
management provided further information
on the projected best estimate gross
claims reserves and associated reinsurance
recoveries, as well as the margin to be
held above best estimate in the financial
statements, and were challenged by the
Committee as to their adequacy and the
consistency of the level of prudence with
prior periods.
The Committee reviewed and discussed
the impact of Covid-19 on both claims
frequency and claims severity as well as
changes in claims settlement patterns
after the new Ogden discount rate was
announced in 2019, and as a result of
Covid-19. The Committee also reviewed
management’s assessment of the level of
uncertainty inherent in the claims reserves
and changes to that assessment from
previous periods.
Whilst acknowledging that the setting of
reserves for claims which will settle in the
future is a complex and judgemental area
and having had the opportunity to challenge
management’s proposal in respect of both
best estimate reserves and margin held
above best estimate to cover unforeseen
deteriorations in the best estimate,
the Committee is comfortable that an
appropriate process has been followed, that
the transition from external to internal best
estimate has been managed effectively,
and that there has been sufficient scrutiny,
challenge and debate to give confidence
that the reserving levels set provide an
appropriate margin above best estimate,
noting the consistency in the level of
prudence in the reserves.
The Committee also received an update
from the Group’s external auditor,
Deloitte, as part of the audit, regarding
work performed in relation to the
transition to using internal UK Car
actuarial estimates, including focus on
the completeness and accuracy of claims
and exposure data from underlying
systems; the design, implementation and
operating effectiveness of key controls
governing the actuarial models; and the
accuracy of the output of those models.
In addition, the Committee received an
update on challenges raised in relation to
management’s qualitative and quantitative
justifications for gross claims reserves
and reinsurance recoveries included in
the financial statements. Based on this
work, the auditor was satisfied that the
financial statement reserves remain
appropriate and consistent with the
Group’s accounting policy.
IFRS 9 provision for expected credit losses
In 2020, the Committee has placed
an increasing focus on reviewing and
challenging the IFRS 9 provision for
expected credit loss arising through the
Group’s loans business, AFSL, as a result
of both the increasing materiality of the
provision through growth in the Loans
business to early 2020 and subsequently
the impact of the Covid-19 pandemic on
default experience, the assessment of
circumstances indicating a significant
increase in credit risk, and underlying
forward-looking economic assumptions.
The Committee reviewed and challenged
management’s recommendation for the
provision for expected credit losses,
focusing on enhancements made to the
provisioning methodology during the
year, updates of data based on default
experience before and during the pandemic,
and macro-economic assumptions, including
unemployment forecasts underpinning the
forward-looking element of the provision.
Further information on the provision and
key assumptions are found in note 7 to the
financial statements.
The Committee received a report from
Deloitte, the external auditor in respect
of work performed in relation to the AFSL
expected credit loss (ECL) model, and in
particular in respect of management’s key
judgements in selecting macro-economic
scenarios and key assumptions within the
provision. Based on the work performed, the
auditor was satisfied that management’s
judgements remain appropriate within the
current climate.
Impairment testing on the Group’s
investment in subsidiaries
The Committee reviewed and challenged the
results of management’s impairment testing
of the Group’s investment in subsidiaries,
performed where indicators of impairment
were present. A total impairment charge
of £10.5 million has been recognised in
relation to the Group’s investments in its
US insurance business, Elephant Auto (£9.1
million) and its US comparison business,
Compare.com (£1.4 million).
The impairment of Elephant Auto of
£9.1 million reflected an impairment
of £6.3 million in the first half of 2020
following a change in the results of
discounted cash-flow forecasts for the
business, primarily as a result of Covid-19.
The resulting valuation at this stage
was £33.6 million and equivalent to net
asset value of the company. Subsequent
movements of £2.8 million during the
second half of the year relate to changes in
this net value asset only.
119
The impairment in Compare.com of
£1.4 million reflected movement in the
net asset value (considered to be the
‘recoverable amount’ as defined by the
accounting standard).
The Committee also considered an
impairment analysis in relation to the
parent company’s investment in the Group’s
loans business, AFSL. Management’s
recommendation was that no impairment
in the carrying value of the Group’s
investment in AFSL was required as the
value in use of the business, calculated using
a discounted cash-flow approach, remained
higher than the carrying value of the
investment. The Committee was satisfied
with management’s recommendation
after discussion and challenge of the
key assumptions and scenario analysis
underpinning the impairment analysis.
The Committee was comfortable that
management performed a thorough and
robust process in line with the relevant
accounting standard.
Further information is set out in the critical
accounting judgements section of Note 3 to
the parent company financial statements.
Misstatements
No material unadjusted audit differences
were reported by the external auditor. The
Committee confirms that it is satisfied that
the auditor has fulfilled its responsibilities
with diligence and appropriate
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
sources of estimation uncertainty (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
The Committee reviewed and approved its
policy on non-audit services in August 2020
and was satisfied that it was aligned with
current regulatory guidance, including the
changes introduced in the Revised Ethical
Standard 2019 which came into effect in
March 2020.
Under the policy, the Group’s statutory
auditor would only be engaged to carry
out non-audit services in exceptional
circumstances or where there was a
regulatory request and where agreed by
the Committee, in order to safeguard
the independence and objectivity of the
external auditor.
Unless required by law or regulation, any
non-audit services will: a) be subject to
ratification by the Committee if the cost
does not exceed £15,000, or be subject to
prior approval from the Committee where
the cost exceeds £15,000 or such costs
in the aggregate exceed £30,000 and b)
in aggregate and where applicable, shall
not cost more than 70% of the average
statutory audit fee for the past three
financial years. In considering whether
to approve such non-audit services, the
Committee shall consider whether:
•
It is probable that an objective,
reasonable and informed third party
would conclude that the understanding
of the Group obtained by the auditor for
the audit of the financial statements is
relevant to the service; and
• The nature of the service would
compromise auditor independence.
The Committee will continue to monitor
regulatory developments in this area to
ensure that its policy on non-audit fees
adheres to current guidance.
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 handled the key accounting and
audit judgements. As part of its review,
the Committee considered, inter alia,
the following: the output of an online
questionnaire completed by all Committee
members and relevant members of
the Group’s Finance and Internal Audit
functions; the findings of the FRC Audit
Quality Reviews (AQR) published in
September 2020 and the external auditor’s
firm wide transparency report, an updated
version of which was published in 2020.
Following this review, the Committee
concluded that the auditor, Deloitte LLP,
remained independent and and carried out
an effective external audit process.
Mark McQueen has been Deloitte’s senior
statutory audit partner for the Group
since Deloitte were appointed the Group’s
external auditors in April 2016. In line with
the FRC rules on audit partner rotation, this
will be Mark McQueen’s final year in the role
of senior statutory audit partner for the
Group and he will rotate off after the 2020
year end.
Audit fee
During 2020, the Committee reviewed and
approved the audit fee proposal for the
2020 year end Group audit. The agreed fee
for the audit and other assurance related
services for 2020 is £1.6 million (2019:
£1.3 million), with the increase reflecting
changes to the scope of the audit, resulting
from growth in and changes to the Group’s
businesses, an increased hourly rate, the
audit having to be performed remotely in
response to the Covid-19 pandemic and
the introduction of additional procedures
relating to going concern, for example,
also as a response to Covid-19, as well
as revisions to International Standards
on Auditing.
The Committee approved the fee increase
having discussed with the auditor the
rationale for the proposal and any potential
inefficiencies within the audit process.
Audit tender
The Group last completed an audit tender
in 2015 when, following the completion of a
transparent and independent audit tender
process, Deloitte LLP were recommended
to shareholders as the Group’s auditor at the
AGM in April 2016 and a resolution passed to
that effect.
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Admiral Group plc · Annual Report and Accounts 2020
The Audit Committee continued
In last year’s Annual Report and Accounts,
it was reported that a recommendation
had been put to the Board for a tender
process to be initiated in Q2 2020 for an
appointment (or reappointment) to be
made with effect from 2021, coinciding
with the rotation of the current audit
partner. Pursuant to its responsibility
for conducting the tender process and
making recommendations to the Board
regarding the appointment, reappointment
and removal of the external auditor, the
Committee led the tender process during
2020. As part of the process, Committee
members attended regular Audit Tender
Steering meetings with management to
discuss and agree matters including, but
not limited to, the evaluation criteria; the
tender timetable; the FRC’s 2020 AQR; and
the equivalent reviews published by ICAEW,
in assessing and determining potential firms
to invite to participate in the tender.
The Group’s major shareholders were
consulted early in the tender process to
obtain their views on the background
and proposed timing of the tender,
the evaluation criteria and selection
mechanism, as well as the firms that the
Group intended to invite to participate in
the tender.
Following an assessment of key criteria
that included independence, audit quality
indicators and industry experience, the
Group’s auditors, Deloitte, were invited
to tender, together with KPMG and PwC.
The tender process involved (i) a formal
written submission from each firm, having
identified that each firm had the right
level of experience and resource, as well as
being independent, (ii) each firm holding
individual meetings with key members of
management and members of the Audit
Committee, which were conducted mainly
virtually and (iii) a virtual presentation from
each of the tendering firms, which focused
on the Group’s key business risks, their
proposed audit approach, expected changes
in the audit market and included two
scenario based questions provided to the
firms in advance of the presentations.
Following completion of this robust and
independent audit tender process, and on
the recommendation of the Committee,
the Board approved that Deloitte should
be recommended to shareholders as
the Group’s auditors at the 2021 AGM.
A resolution to that effect will be
proposed at the AGM.
The Committee confirms it is in compliance
with the provisions of the Statutory Audit
Services for Large Companies Market
Investigation Order 2014.
Internal Audit
Following a thorough handover process
from his predecessor, the Group Head of
Internal Audit was appointed to the role
on 1 April 2020. He attended all scheduled
Audit Committee meetings and provided a
range of presentations and papers to the
Committee, through which the Committee
monitors the effectiveness of all of the
Group’s material internal controls, including
financial, operational and compliance
controls on behalf of the Board. The Group
Head of Internal Audit also carries out an
annual review of the effectiveness of the
Group’s systems of internal control and risk
management and reports on the outcome
of this review to the Committee. In February
2021, the Group Head of Internal Audit
reported an adequate level of assurance in
relation to the Group’s arrangements for
risk management, control infrastructure,
governance and fraud prevention controls.
The Committee reviewed and approved
the Group Internal Audit Policy which
includes the Group Internal Audit Terms of
Reference setting 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. The Group
Head of Internal Audit continues to have
responsibility to ensure the quality of 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, including
the rating, and related recommendations.
The Committee approves the Internal Audit
plan 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.
The overseas operations in Spain, Italy,
France and the US have their own locally
based internal auditors, who report to
their respective country heads. 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.
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 at its meeting in
February 2021 and concluded that, overall,
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. Areas
identified for improvement included
ensuring that the resolution of audit
findings was discussed with management
owners, rather than addressed to the Group
Head of Internal Audit, the consistency and
delivery of Committee papers, and it was
agreed that further education sessions
should be arranged in respect of IFRS 17, the
use of cloud and agile methods within the
business and audit market reform.
The Group
RiskCommittee
Committee members
Jean Park (Chair)
Andy Crossley
Cristina Nestares
Manning Rountree
Number of meetings
17
Focus for the year
As well as ongoing consideration of Admiral Group’s
risk strategy, risk appetite and risk monitoring; key
developments and areas of focus for the Committee
during 2020 have included:
• The ongoing oversight of the Group’s response to
the Covid-19 pandemic, and the appropriateness
of the steps taken to manage its impact on
Admiral’s principal risks and uncertainties;
• Monitoring the work undertaken throughout the
Group to ensure that the business was prepared
to meet the challenges of Brexit; and
• Overseeing the development and enhancement
of the Admiral Internal Model.
121
Dear Shareholder,
As Chair of the Group Risk Committee, I am
pleased to present the Committee’s report
for 2020.
As a consequence of the wide-ranging
implications of, and in response to, the
Covid-19 pandemic’s impacts on the Group’s
risk profile the Committee met much more
frequently in 2020.
The Committee has received updates
on the UK Insurance business as well as
developments within the other businesses
as a key part of the Group’s Enterprise Risk
Management Framework (‘ERMF’). Key
developments included: the impact of
Covid-19; ensuring the business was prepared
to meet the challenges of Brexit; and the
development of the Admiral Internal Model.
During the year the Committee reviewed
the Board’s risk strategy and risk appetite
across the Group. The Committee also
considered a refresh of the suite of Key
Risk Indicators with associated triggers and
limits, reflecting the updates to the Group
Risk Appetite.
During 2020 the Committee has received
and challenged regular updates from the
Group and its subsidiaries in relation to the
impact of Covid-19 on Admiral’s principal
risks and uncertainties, as well as the steps
taken to appropriately manage these risks.
• The Committee has supported the
Group’s very cautious approach to the
reopening of its offices. During this
process, the Committee has sought to
ensure the careful management of staff
physical wellbeing and mental health, as
well as continuing to provide a high level
of service to our customers;
Jean Park
Chair of the Group Risk Committee
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Admiral Group plc · Annual Report and Accounts 2020
The Group Risk Committee continued
The on-going focus on monitoring and
reporting customer outcome risks has been
further enhanced through the continued
embedding of the Group Conduct Risk
Framework. Similarly, the Group minimum
standards continue to be enhanced to
reflect the growth of non-UK insurance
businesses.
The Committee also continues to focus on
key operational risks that affect the Group.
The governance of the risk event process
continues to improve, providing greater
assurance to the Committee regarding
the management of major risk events. The
Committee has continued to spend time
reviewing material risk events reported
during the year.
Jean Park
Chair of the Group Risk Committee
3 March 2021
A significant amount of time has been
spent overseeing the development of the
Admiral Internal Model (‘AIM’) which is
used to capture and quantify all material
risks within the Group and to calculate the
solvency capital requirement. Much of 2020
has been focused on the enhancement of
the model following feedback from previous
independent validation cycles.
The Group continues to maintain a
regulatory capital add-on to cover risks
not captured within the Standard Formula.
The Committee has reviewed the Group’s
proposed dividend level, capital plan and
capital buffer in line with the Capital Policy.
The review considered several sensitivities,
stress tests and scenarios including
assessing the uncertainty around Covid-19
impacts. The Group continues to make use
of Undertaking Specific Parameters (USPs)
for AIGL and the Volatility Adjustment (VA)
for AICL and AIGL.
Throughout 2020 the Committee
challenged and reviewed the setting of, and
outputs from, regular stress and scenario
testing and reverse stress testing, with
continued focus on the principal risks
and uncertainties facing the Group. The
output was incorporated into the ‘ORSA
Update Report (Coronavirus)’ produced
earlier in 2020, as well as the annual Group
ORSA Report for 2020, both of which
the Committee reviewed prior to Board
approval.
The Group’s project governance framework
has enabled the Committee to have
oversight of the material projects and
change programs within the Group. The
Committee oversaw key developments
to these projects, with regular updates
provided throughout the year. Detailed
project reviews were facilitated as required
by the Committee, in particular those
related to Brexit, cyber security and the use
of Cloud based technology.
• The Committee has continued to
challenge management’s focus on
enhancing operational resilience, IT
and information security, including the
risk implications of the hardware and
software rollout to support remote
working. This focus also includes wider
considerations of other operational
changes made to enable Admiral to
continue to provide quality customer
service remotely;
• The Committee has reviewed the
Group solvency and liquidity positions
in response to market volatility and
wider economic uncertainty, including
the review of the ‘ORSA Update Report
(Coronavirus)’, prior to Board approval,
and providing review of and insight into
the decision to provide an ‘Admiral Stay at
Home Refund’; and
• The Committee receives regular updates
on key Group projects, including the
close monitoring of any impact that
Covid-19 has had, with appropriate focus
and resource dedicated to ensuring that
significant projects continue to progress.
While the impact of Covid-19 on a number
of Admiral’s principal risks and uncertainties
has reduced as we have moved through
2020, the Committee will continue to
monitor the impact of any further local
or national lockdowns as well as other
measures put in place to tackle Covid-19.
Following the announcement of the Brexit
deal, but subject to a deep understanding of
the implications of the deal, the Committee
continues to monitor the position and
receives regular updates on the work being
completed throughout the Group. This
is focussed on monitoring supply chain
changes, albeit these are mitigated in the
short term due to stockpiling by suppliers,
and communication to customers via direct
communication and FAQ. Whilst there is
limited business travel, due to Covid-19
restrictions, this is another area that is
being monitored to ensure that there is
clarity on the rules for travel to and from
the EU nations. The agreement of a data
adequacy bridging period of 6 months
has allowed more time to ensure that
appropriate controls are in place.
123
Composition of the
Group Risk Committee
Membership at the end of the year was: Jean
Park (Chair), Andy Crossley, Cristina Nestares,
and Manning Rountree, with Mark Waters
acting as Secretary to the Committee.
The Committee held five scheduled
meetings, with a further thirteen additional
meetings taking place, predominantly
dedicated to Covid-19 and the Admiral
Internal Model.
Duties and Responsibilities
of the Group Risk Committee
The duties and responsibilities of the
Committee are set out in the Committee’s
Terms of Reference, that were reviewed and
approved by the Admiral Group Board.
The responsibilities of the Committee can
be summarised as:
• Overseeing the development,
implementation and maintenance of
the Group’s overall Risk Management
Framework and ensure that it is in line
with emerging regulatory, corporate
governance and best practice guidelines.
• Considering and recommending to
the Board for approval the Group’s risk
appetite, as well as ongoing monitoring
and review of the Group’s risk exposures.
• 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.
• Reviewing the Group’s proposed interim
and final dividend payments.
• Reviewing the annual Group ORSA Report
and any required interim ORSA Report,
with recommendations being provided to
the Board for approval.
• Reviewing and approving the Solvency
II Actuarial Function Reports on
Reinsurance and Underwriting each year.
• Reviewing the Group’s progress to IMAP
implementation.
• Monitoring the adequacy and
effectiveness of the Group’s Risk and
Compliance functions.
• Approving the annual plans for the
Group Risk and Compliance functions
which include reviewing regulatory
developments and any planned meetings
between the PRA and FCA and the
business.
• Reviewing any significant risk issues that
have a material impact on the customers
of the business and/or concern the
regulator.
• Ensuring the adequacy and effectiveness
of the Group’s systems and controls for
the prevention of financial crime, and
data protection systems and controls.
• Reviewing the Group’s compliance with
Solvency II.
• Considering the annual process for the
review and appraisal of adherence to
Group Minimum Standards.
• Reviewing compliance with Group
policies, including the Group’s
Reinsurance Policy, the Group ORSA
Policy, and Group Underwriting Policy.
• Reviewing and approving the
remuneration report from the CRO
prior to Remuneration Committee sign
off, as well as providing feedback on
the Directors Remuneration Policy, and
commenting on remuneration metrics to
help ensure there is no conflict with risk
management objectives.
• Reviewing reports from the Group Risk,
Group Compliance, Group Data Protection
and Privacy, and Group Internal Audit
functions.
The Committee Chair reports formally to
the Board on the Committee’s 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 annually.
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. At each meeting, the Risk
Management Committees consider
notable: movements in the operation’s
risk profile; risk events; and emerging
risks. Risk Management Committees also
assess and monitor regulatory issues,
ensuring that their resolution and the
action taken are appropriately recorded.
The Risk Management Committees receive
regular information on Conduct Risk, such
as complaint handling reports and other
related management information. The
Group Risk Management function reviews
and collates information from across the
Group for consideration by the Committee.
Principal Risks and Uncertainties
The Board of Directors confirms that it
has performed a robust assessment of the
Group’s principal and emerging risks. These
risks, along with explanations of how they
are being managed and mitigated, are
included in the Strategic Report, page 85.
Risk Management and
Internal Control Systems
The system of risk management and
internal control over Admiral’s insurance,
operational, market, credit and group risks
is designed to manage rather than eliminate
the risk of failure to achieve business
objectives and breaches of risk appetites.
Furthermore, risk management can only
provide reasonable and not absolute
assurance against material misstatement
or loss. The Group Board is ultimately
responsible for the Group’s system of risk
management and internal control and, the
Group Audit Committee (GAC) has reviewed
the effectiveness of this system.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 124
Admiral Group plc · Annual Report and Accounts 2020
The Group Risk Committee continued
The Group Board has
delegated the development,
implementation and
maintenance of the Group’s
overall risk management
framework to the Group
Risk Committee.”
The Group Board is of the view: that there
is an ongoing process for identifying,
evaluating and managing the Group’s risks
and internal controls; that it has been in
place for the year ended 31 December 2020;
and that, up to the date of approval of the
Annual Report and Accounts, it is regularly
reviewed by the Group Board and accords
with the internal control guidance for
Directors provided in the 2018 UK Corporate
Governance Code.
The Subsidiary Boards, GRC, and entity
Risk Committees receive reports setting
out key performance and risk indicators
and consider possible control issues
brought to their attention by early warning
mechanisms that are embedded within
the operational units. They, together with
the GAC, also receive regular reports from
the Internal Audit function, which include
recommendations for improvement of the
control and operational environments.
The Group Board confirms that it has
performed a robust assessment of the
Group’s principal and emerging risks. These
risks, along with explanations of how
they are being managed and mitigated,
are included in the strategic report on
page 85. The Group Board is responsible
for determining the nature and extent
of the principal risks it is willing to take
in achieving its strategic objectives. This
assessment supports the Group Board in
monitoring the integrity of the Group’s
reported financial statements.
The Group Board meets at least seven times
a year to discuss the direction of the Group
and to provide oversight of the Group’s risk
management and internal control systems.
The Group Board has delegated the
development, implementation and
maintenance of the Group’s overall risk
management framework to the Group Risk
Committee (GRC). The GRC reports on its
activities to the Group Board and the GAC,
supporting the overall assurance provided
by the GAC that the Group’s internal control,
risk management and compliance systems
continue to operate effectively.
The Group Board has delegated to the
GAC the review of the adequacy and
effectiveness of the Company’s internal
financial controls, and internal control and
risk management systems.
An annual assessment of the completeness
of the risk management reviews and testing
of internal controls is supported by the
production of an Integrated Assurance
Map, summarising the reviews performed
and assurance provided by all three lines of
defence, in relation to the key risks facing
the Group. The Integrated Assurance Map is
reported to the GRC at least annually.
The Chair of the GRC provides a written
report to the Group Board of the activities
carried out by the Committee on an annual
basis. In addition, the Group Board receives
reports from the Chair of the GAC as to
its activities, together with copies of the
minutes from Subsidiary Board meetings,
the GRC and the GAC.
The GAC’s ability to provide assurance to
the Group Board depends on the provision
of periodic and independent confirmation,
primarily by Group Internal Audit, that the
controls established by Management are
operating effectively and where necessary
provides a high-level challenge to the steps
being taken by the GRC to implement the
risk management strategy.
Statement of Assurance
Based on the conclusions of our work, as
detailed above and including the oversight
and review of the 2020 Group ORSA Report,
the Group Risk Committee can provide
the Group Board with an adequate level of
assurance in relation to its arrangements for
risk management.
125
The Group operates a ‘three lines of defence’ approach to Risk and Internal Control.
Line of Defence
Line of Defence
1st
1st Line of Defence: The Group
Board recognises that the
day-to-day responsibility for
implementing policies for risk
identification, assessment
and management lies with the
senior management, whose
operational decisions must take
into account risk and how it can
be controlled effectively.
3rd
Line of Defence
3rd Line of Defence: The ‘third
line of defence’ comprises
the independent assurance
provided by the GAC and the
Group Internal Audit function.
Internal Audit undertakes
a programme of risk-based
audits covering all aspects of
both the first and second lines
of defence. The findings from
these audits are reported to all
three lines, i.e. Management,
the Executive and oversight
Committees, and the GAC.
2nd
2nd Line of Defence: The ‘second line of
defence’ is led by the Group Chief Risk Officer
and comprises the Corporate Governance
functions and Committees that are in
place to provide oversight of the effective
operation of the internal control framework.
The Corporate Governance functions
facilitate the oversight and operation of the
Group Policy Framework and Group Minimum
Standards, covering risk management and
controls for all material risks to the Group.
The Corporate Governance functions perform
second line reviews, including reviews of
the capital modelling and business planning
processes to support the Group Board’s
assessment of the Group’s on-going viability.
Regular reviews of all risks are undertaken in
conjunction with senior management, with
the results of these reviews recorded in risk
registers and reported to the appropriate
governance forums and Boards.
Viability statement
In accordance with provision 31 of the
2018 UK Corporate Governance Code, the
Directors have assessed the prospect of
the Company over a longer period than the
12 months required by the ‘Going Concern’
statement. The Board reviews five-year
financial projections twice a year, three-year
solvency projections at least three times
a year and approves a one-year financial
budget for the forthcoming twelve months
on an annual basis.
At least annually, the Group undertakes an
‘Own Risk and Solvency Assessment’ (ORSA),
which sets out a detailed consideration of
the Principal Risks and Uncertainties facing
the Group over a three-year time horizon
and considers current and projected levels
of solvency and liquidity over the period.
The ORSA is the main source of evidence
used by the Board to assess viability. Given
the additional uncertainty inherent in
projecting beyond a three-year period, the
assessment of viability has been performed
over a three-year period.
Quantitative and qualitative assessments
of risks are performed as part of the ORSA
process. The quantitative assessment
considers how the regulatory capital
requirements, economic capital needs, own
funds and solvency position of the Group
is projected to change over the three-year
horizon, with a requirement to maintain a
solvency ratio above the approved capital
risk appetite buffer throughout the
projection. The assessment also includes
a series of sensitivity, stress and scenario
tests and reverse stress tests which assess
the Group’s principal risks and uncertainties,
identifying and quantifying the operational,
financial and solvency impacts of these
stresses alongside potential mitigating
factors and management actions.
The results of the ORSA stress tests also
form part of the process to set the Group’s
capital risk appetite, which ensures that
a buffer is held on top of the Group’s
regulatory capital requirement to protect
its regulatory capital position against
potential shocks and stresses.
Key strategic decisions including the
setting of dividend payments, consider the
solvency impact against the Board approved
capital risk appetite of 130%, which is a
key criterion for the Board in assessing
viability. Refer to the Strategic Report for
information on sensitivities to the reported
2020 solvency ratio position.
The principal risks and uncertainties faced
by the Group are set out on pages 85 to
93, and note 6 to the financial statements
sets out the Group’s objectives, policies and
procedures for managing financial assets and
liabilities. During the year, the key risk drivers
impacting Admiral Group’s principal risks and
uncertainties are Covid-19 and Brexit:
Covid-19
• The Admiral Group Board and Group Risk
Committee, as well as Subsidiary Boards and
other governance forums throughout the
Group have undertaken coordinated action
to monitor and control Admiral’s response
to the Covid-19 pandemic. Allowing the
Group to appropriately manage impacts
to its principal risks and uncertainties and
ensure that customers continue to receive
a high quality of service.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information - Communications to customers of the
changes that they would need to be
aware of via direct communications and
FAQ pages.
- Communicating changes to staff in
terms of ‘right to work’, including
settlement schemes, and business
travel between the UK and Europe for
UK and European staff.
Based on the results of this analysis, the
Directors have a reasonable expectation
that the Group will be able to continue in
operation and meet its liabilities as they
fall due, for the period up to and including
December 2023.
126
Admiral Group plc · Annual Report and Accounts 2020
The Group Risk Committee continued
• Admiral has closely monitored and
• The Committee received regular updates
managed the operational impacts of
the Covid-19 pandemic. Throughout the
pandemic the Group has prioritised the
physical, mental and financial wellbeing
of its staff; initially asking all but a small
number of staff to work from home. A
very cautious approach to the re-opening
of certain offices was taken in accordance
with all relevant local and national
regulation and legislation; this approach
has been continuously monitored as local
Covid-19 situations developed.
• As part of asking staff to work remotely
Admiral has undergone a large roll out
of IT hardware and software. While this
has positively impacted operational
resilience, it has also necessitated system
and process changes to mitigate new
or specific changes in risk. For example,
this includes processes to ensure social
distancing of staff collecting hardware,
as well as Covid-19-secure processes for
hardware that needs to be returned. The
Group has driven forward these positive
technological enhancements, while also
considering the wider implications that
these developments and other factors
may have for the future of work in 2021
and beyond.
• Admiral has also closely monitored and
managed impacts to its solvency and
liquidity, including monitoring the Group’s
compliance with applicable FCA and PRA
requirements resulting from Covid-19.
In June 2020, as part of the Group’s
response to the Covid-19 pandemic an
‘ORSA Update Report (Coronavirus)’ was
undertaken which included updated
capital requirements and a forward-
looking assessment of risk and capital.
• The ‘ORSA Update Report (Coronavirus)’
included the setting of, and outputs
from, regular stress and scenario
testing and reverse stress testing, with
continued focus on the principal risks and
uncertainties facing the Group.
on AFSL’s decision to initially pause
lending in March 2020 and then cautiously
return to lending towards the end of
the year; receiving subsequent updates
regarding AFSL’s forward-looking plans in
light of market developments.
• The Committee also provided review of
and insight into the decision to delay the
2019 final special dividend payment as
announced in April, in light of regulatory
guidance to insurers urging restraint on
the payments of dividends due to the
uncertainty of the economic environment
caused by the Covid-19 pandemic. The
Group continues to closely monitor
market movements, with regular reviews
by the Group’s Investment Committee.
• The Committee continues to meet more
frequently to monitor and assess the
continuing challenges of Covid-19 to
Admiral Group and its subsidiaries.
Brexit
• With regards to Brexit planning, Admiral
took a prudent approach and prepared
for a ‘no-deal’ outcome at the end of the
transition period (31 December 2020).
As part of these preparations Admiral
has sought to minimise any current and
potential future impact of a ‘no-deal’
scenario on its customers, operations and
staff. Examples of key actions in achieving
this include:
- Establishing the Group’s European
insurance and price comparison
businesses in Spain and France,
ensuring that the Group can continue
to service European customers.
- Early and ongoing communication with
UK suppliers to identify, and mitigate,
any potential supply chain risks
through identifying and stockpiling
key products.
127
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.
Summary of key Group Risk Committee activities in 2020
During the year the Committee:
Reviewed the Group’s updated
risk strategy, risk appetite and
associated triggers and limits
in the context of the Group’s
agreed strategic objectives.
Received and challenged regular updates related to
Covid-19, including: impact on the Group’s principal
risks and uncertainties; staff health and wellbeing;
return to office plans; IT and information security
updates; operational resilience; and the impact on
subsidiaries within the Group.
Reviewed and provided insight into
the Group’s decision to dispose of
Penguin Portals and Preminen to
RVU, as announced to the market
on 29 December 2020.
Reviewed the Group’s proposed
dividend level, capital plan and
capital buffer in line with the capital
policy. This included consideration
of the deferred dividend in light
of regulatory guidance and the
‘Admiral Stay at Home Refund’.
Received regular
monitoring reports on
customer outcome risk
and reviewed updates
to the Group Minimum
Standards and Policy
Framework.
Recommended the ‘ORSA
Update Report (Coronavirus)’
and the ‘2020 Group ORSA
Report’ for Board approval
prior to submission to the
regulator and approved the
ORSA Policy.
Received regular
updates on AFSL’s
decision to pause
lending (March to
July 2020).
Reviewed the Group’s
regulatory capital add-
on application as part
of Solvency II capital
requirements.
Considered in-depth analysis of
a number of the Group’s most
significant risk areas, via stress
and scenario testing and reverse
stress testing.
Considered the adequacy of
risk mitigation measures and
contingency plans including
a review of the Group’s
reinsurance arrangements.
Received regular risk
monitoring reports on
performance of Key Risk
Indicators within the overall
risk management framework.
Received updates
on the impact
of risk events
throughout 2020.
Received regular updates in
relation to key programmes
of work including Brexit,
Information Security, IT, GI
Pricing Practices as part of
the Group’s enhanced project
governance framework.
Dedicated a significant amount
of time to developing the Admiral
Internal Model, receiving regular
updates on the progress of the IMAP
project and providing challenge
to key project work streams, in
particular the model validation.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 128
Admiral Group plc · Annual Report and Accounts 2020
The
Nomination and Governance
Committee
Committee members
Annette Court (Chair)
Owen Clarke
Justine Roberts
Number of meetings
6
Focus for the year
The Committee’s main focus in 2020 was on the
CEO transition following the comprehensive
process to select the CEO Designate, Milena Mondini
de Focatiis, who was appointed as an Executive
Director to the Board in August. The Committee
also focused on:
• Conducting an external search for an additional
Board member to enhance the Board’s technology
expertise, which led to the appointment of
Jayaprakasa (JP) Rangaswami as an independent
Non-Executive Director.
• Ensuring that the Group’s policy on diversity
and inclusion, gender balance of the Group’s
senior management and their direct reports
and the approach to succession planning were
appropriately considered.
Dear Shareholder,
The main focus of the Nomination and
Governance Committee during the year
was the CEO transition following the
comprehensive process to select the CEO
Designate, Milena Mondini de Focatiis (the
details of which were disclosed in the 2019
Annual Report). Having made significant
progress in achieving the transition plan,
Milena Mondini de Focatiis was appointed
as an Executive Director to the Board in
August. We also conducted an external
search for an additional Board member to
enhance the Board’s technology expertise,
existing skills, breadth of experience and
diversity. Following a robust and transparent
recruitment process led by the Committee,
Jayaprakasa (JP) Rangaswami was appointed
as an independent Non-Executive Director.
The Committee received updates on
the recommendations designed to
strengthen the Group’s existing governance
arrangements, which included a review
of the functions at Group level and the
interaction of these functions across the
wider Group’s businesses.
Annette Court
Chair of Nomination and
Governance Committee
129
The Committee also focused its time on
ensuring that the Group’s policy on diversity
and inclusion, gender balance of the Group’s
senior management and their direct reports
and the approach to succession planning
were appropriately considered by the
Committee during the year. It remains a
priority to oversee the development of
talent from within Admiral as well as attract
talent externally in order to obtain specific
skills where required.
In line with the requirements of Solvency
II, the Senior Insurance Manager Regime,
and in accordance with the Group’s Senior
Managers & Certification Regime Policy,
I also carried out the process of assessment
for Group Non-Executive Directors, the
Chairs of the Group’s material subsidiaries
and the CEO to ensure they meet the
requirements in terms of qualifications,
capability, honesty and integrity.
Annette Court
Chair of Nomination and
Governance Committee
3 March 2021
Membership
The membership of the Committee at
the year-end was Annette Court (Chair),
Owen Clarke and Justine Roberts. The
Company Secretary acts as Secretary to
the Committee. The Committee invites the
Chief Executive Officer and/or the Chief
Financial Officer to attend meetings when
it deems appropriate. The Committee met
formally on six occasions in 2020.
In addition, 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.
Board Composition
Board Composition, Appointments
and Time Commitments
The Committee reviews the leadership
and succession needs of the Board and
ensures appropriate procedures are in place
for nominating, training and evaluating
Directors. It leads the process for making
appointments to the Board or where the
appointee is likely to become a Board
member. The policy on Board appointments
involves the Committee developing an
appropriate specification that identifies
the required skills and experience for
the role and, in most instances, engaging
external recruitment consultants, to lead
the recruitment process and identify
suitable candidates. Interviews of the
shortlisted candidates are held with the
Chair and members of the Committee.
After consideration by the Committee, a
recommendation is made to the Board to
appoint the preferred candidate.
The Committee is satisfied that this
constitutes a formal, rigorous and
transparent process for the appointment
of new Directors to the Group Board and
its subsidiaries embracing a full evaluation
of the skills, knowledge and experience
required of Directors.
As a result of the 2019 Board Evaluation
recommendation on Board composition,
the Committee engaged external
recruitment consultants, MWM Consulting,
to complete an external search for a
candidate that could enhance the Board’s
technology expertise and existing skills,
as well as enhance its diversity. MWM
Consulting has no other connection
with the Group or its directors. Having
completed the process outlined above,
some of which was carried out remotely,
the Board, on the recommendation of the
Committee, appointed Jayaprakasa (JP)
Rangaswami as an independent Non-
Executive Director with effect from 29
April 2020. Further information about his
experience and skills is detailed on page
110 of the Corporate Governance Report.
Further to her appointment as CEO
Designate in March 2020 and in line with
the Group’s succession and development
planning processes, the Board, on the
recommendation of the Committee,
appointed Milena Mondini de Focatiis as
an Executive Director of the Board on
11 August 2020. The Committee and the
Board received regular updates on the CEO
transition plan and progress made against
it, along with progress updates on Milena
Mondini de Focatiis’ personal development
plan. The transition plan comprised
different phases to, amongst other things,
gradually increase Milena’s visibility through
communications to the workforce, transfer
reporting lines, increase her attendance at
Board Committee meetings, particularly
the Group Remuneration Committee and
the Group Nomination and Governance
Committee, and commence chairing the
Group Executive Committee meetings.
Through Milena’s personal development
plan, she has increased her exposure to
the Group’s key stakeholders, undertaken
a strategic review and enhanced her
understanding of the business areas and
the other business lines within the Group in
order to equip her for the role of Group CEO.
As part of the normal rotation of Committee
membership, the Committee considered
and recommended to the Board for
approval, the appointment of Andy
Crossley to the Group Risk Committee
and the stepping down of Annette Court,
and the appointment of Michael Brierley
to the Group Remuneration Committee
and the stepping down of Justine Roberts.
The Committee also considered the
appointment of Cristina Nestares as
a non-director member of the Group
Risk Committee and recommended her
appointment based on the valuable
contributions she has made to those
meetings as an attendee.
During the year, the Committee reviewed
the skills matrix that identifies the skills
of current Board members and informs
individual Board member training needs and
succession planning. The time commitments
required of Non-Executive Directors
were also considered by the Committee
and the conclusion reached that each
Director was able to devote sufficient time
and commitment to the performance of
their duties.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 130
Admiral Group plc · Annual Report and Accounts 2020
The Nomination and Governance Committee continued
Succession planning and
talent management
The Committee 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 Officer. Talent management
continues to be a key area of focus. At its
meeting in June 2020, the Board considered
talent management and succession
planning within the Group, recognising
that, whilst Admiral’s succession planning
promoted diversity of all kinds, there
was further work required to detail the
extent of diversity within those succession
plans. The Board was also updated on the
creation of the new Group People Talent and
Development function. It is intended that
this new Group function will focus on the
talent development and succession planning
for Admiral’s senior leaders but will also
provide support to cross-country initiatives.
Effective internal talent management
ensures that Admiral’s unique culture is
preserved as far as possible.
The Committee remains satisfied that
effective succession plans for Directors
and senior management are in place to
ensure the continued ability of the Group to
implement strategy and compete effectively
in the markets in which it operates.
Diversity and Inclusion
Diversity and the variety of perspectives
that it brings has been proven in studies to
increase innovation and creativity, and, as
a result, improves performance. It also has
other positive impacts, such as providing
greater awareness, widens the talent pool
and challenges the views or practices
that have become embedded over time.
Admiral’s strategy depends on all of these
things, which are enhanced by diversity,
and supports our goals to provide good
value financial products; an excellent and
convenient service; a great place to work;
good returns for its shareholders; and a
sustainable business for the long-term.
In June, the Committee reviewed the
Group’s Board Diversity and Inclusion Policy
and discussed the appropriateness of the
measurable targets to increase diversity
and inclusion across the Group.
The Policy sets out the approach to Board
diversity for Boards within the Admiral
Group and supports the principle of
boardroom diversity and inclusion and the
promotion of diverse board composition.
Measures that are covered under the
Policy, including progress updates
against each, include:
(i)
Having one member of the senior
executive team who is responsible
and accountable for gender diversity
and inclusion. Cristina Nestares (EUI
CEO) replaced David Stevens as the
accountable executive for gender
diversity following his stepping down
as Group CEO on 31 December 2020.
(ii) Setting internal targets for gender
diversity in senior management.
Progress against the Group’s target of
40% of women in senior management
by 2023 is detailed below.
(iii) Publishing progress annually against
these targets in reports on the Group’s
website. Progress updates on the
Group’s progress against the HM
Treasury’s Women in Finance Charter
commitments are provided on an annual
basis on the Group’s corporate website.
(iv) Linking the pay of the CEO to the
progress made against these internal
targets on gender diversity. The
remuneration of the former Group
CEO, David Stevens, was linked to
our UK internal diversity targets
until he stepped down from the role
on 31 December 2020. The Group
Remuneration Committee will be
re-introducing the link between the
diversity targets and the CEO’s reward,
specifically for the UK as a first stage.
As Cristina Nestares (EUI CEO) is replacing
David Stevens as the accountable
executive for gender diversity, the
Group Remuneration Committee and
the EUI Board will consider introducing a
criteria of progress against the Women
in Finance target within the non-financial
performance measures of the EUI CEO,
and work on this will progress in 2021.
The Committee seeks to ensure that a
clear recruitment strategy for Board
appointments is in place and is aligned
to this Policy.
Gender Diversity
The Group has exceeded the target set by
both Lord Davies in his report: Women on
Boards, and the Hampton Alexander Review
(that builds on the Davies Review) which
encourages FTSE 350 companies to achieve
at least 33% women on Boards by 2020 as
women already constituted 42% of our plc
Board on 31 December 2020.
During the year, the Committee reviewed
the gender balance of those in senior
management and their direct reports and
considered the initiatives that have been
proposed to focus on improving gender
balance. The Hampton Alexander Review
target of 33% female representation has
been achieved across our UK operation, with
females representing 57% of our Senior
Executives and 34% of their direct reports.
Globally, females represent 47% of our Senior
Executives and 28% of their direct reports.
The Committee will continue to monitor the
initiatives in progress to increase diversity
in the pipeline of talent available.
The Group also continued to focus on
achieving the goals of the Women in
Finance Charter during the year, which the
Group signed up to in 2018. The Charter is
a government initiative that encourages
participating firms in the financial services
sector to support the progression of
women into senior roles by focusing on the
executive pipeline and the mid-tier level of
management. The Group remains committed
to at least maintaining its position against
the target of 40% women in the Senior
Executive team by December 2023
Ethnic Diversity
The Board continues to monitor the
requirements of the Parker Review’s
report on ethnic diversity in the context
of the composition of its Group and
subsidiary Boards, the initiatives that are
being implemented to increase diversity
and discuss how measures to develop a
diverse pipeline of talent as regards Board
appointments could be developed and
monitored. The Group Board comprises
one Board member of colour, which
meets one of the Parker Review’s key
recommendations for FTSE 100 companies
by 2021. Further information on how the
Group is developing candidates for the
pipeline is outlined in the Diversity Forum &
Diversity Project section below.
131
The Group remains committed to providing equal opportunities, eliminating discrimination,
and encouraging diversity amongst its employees both in the UK and overseas.
The Group remains strongly supportive of
the principle of boardroom diversity, of
which gender and ethnicity are important,
but not the only, aspects. 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 gender, and not just
to achieve an externally prescribed number.
Diversity Forum & Diversity Project
In June, the Committee received an update
on the activities of the Group’s Diversity
Forum that meets regularly with the
purpose of exploring ways to further
improve diversity and inclusion across the
Group. The Diversity Forum is made up of six
workstreams focusing on: gender, ethnicity,
disability, LGBT+, age and social mobility.
There are several initiatives that continue to
be progressed under each workstream and
examples of the progress made to improve
diversity in the talent pipeline include:
• A representative of the Diversity Forum is
invited to Employee Consultation Group
meetings to ensure consideration is
given to diversity matters when forming
views and recommendations, specifically
relating to personal development and
career progression.
• We are working with Business in the
Community and, in 2018, signed the Race
to Work Charter having committed to
achieving its 5 Calls to Action by the end
of 2020. Further information on how we
have achieved the 5 Calls to Action is
outlined within our Sustainability Report.
• Communicating to search firms our
commitment to making progress in both
gender diversity and to meeting the
Parker recommendations when engaging
them to recruit middle and senior levels
of talent, without compromising calibre.
•
In May 2020, the Diversity 2020 Project
initiated a cross border piece of research
to determine and analyse the measures
taken at all levels of recruitment within
the various business entities in the group
to promote and ensure diversity in the
recruitment process.
• Other initiatives to improve our
communications about Admiral being an
open and diverse employer include the
sponsorship of Black History Month, working
closely with Race Council Cymru, hosting an
exhibition of Welsh Black Icons and working
with local community BAME groups.
The Board and senior management
recognise that longer term remote working
brought about by the Covid-19 pandemic,
could make it more difficult to recognise
discrimination and support those that may
be impacted. Admiral is committed to adapt
to the new environment and ensure that it
provides an equal workplace for all our staff.
The Group remains committed to
providing equal opportunities, eliminating
discrimination, and encouraging diversity
amongst its employees both in the UK and
overseas. A breakdown of the gender of
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 Strategic
Report on page 69.
Committee Effectiveness Review
As part of the Committee’s annual
review of its performance and processes,
each Committee member completed
a questionnaire designed to provide
objective assessment of the Committee’s
performance, including its effectiveness in
monitoring Board composition, considering
Executive and Non-Executive succession,
overseeing talent management, succession
planning and developing directors’
knowledge. The Committee discussed
the results of the review at its meeting in
January 2021 and concluded that, overall,
the Committee remained effective. Areas of
focus and improvement for the Committee
in 2021 were identified as including better
oversight of senior talent development and
succession plans, and of the governance
arrangements in place between the Group
and subsidiary functions.
Jigsaw Pieces
Part of the bigger picture
Admiral’s culture is underpinned by four equally important pillars:
communication, equality, reward & recognition, and fun.
For many years, in line with this unique
culture, Admiral co-founders and former
CEO’s Henry Engelhardt and David Stevens
gave all employees a jigsaw piece when they
first joined the business. The tradition of
the jigsaw piece symbolises the importance
of togetherness and unity at Admiral, as
a jigsaw cannot be completed unless you
have all the necessary pieces connected
together correctly.
2020 was a year like no other, and our
employees have swiftly adjusted to all
the changes throughout the year, whilst
continuing to fully support our customers,
our communities and each other. Our
jigsaw theme is a reminder that despite the
upheaval of 2020, the Admiral culture remains
as strong and important as ever before, and a
reminder that we are stronger when united,
and can accomplish our goals together.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 132
Admiral Group plc · Annual Report and Accounts 2020
The
Remuneration
Committee
Committee members
Owen Clarke (Chair)
Mike Brierley
Jean Park
Number of meetings
12
Focus for the year
As well as considering the impact of Covid-19
on the Group’s remuneration arrangements, the
Committee’s focus this year has been on:
• Reviewing our Remuneration Policy to ensure that
it takes into account developments in corporate
governance and best practice, whilst maintaining
the distinctive approach which has supported our
success to date, and consulting with our major
shareholders on this.
• Determining appropriate remuneration
arrangements within the Policy for Milena Mondini
de Focatiis as she takes over the role of CEO on
the retirement of David Stevens - a significant
transition from leadership of the business by
founders, who retain a substantial personal
shareholding, to the next generation of leadership.
Admiral has a simple remuneration structure
which reinforces our unique culture and creates
strong alignment with our shareholders.”
Owen Clarke
Chair of the Remuneration Committee
Dear Shareholder,
I am pleased to introduce the Directors’
Remuneration Report for the year ended 31
December 2020, which has been prepared
by the Remuneration Committee (the
‘Committee’) and approved by the Board.
I would like to thank shareholders for
supporting Admiral’s Annual Report on
Remuneration at the April 2020 Annual
General Meeting (AGM) which was
approved by 99.5% of shareholders.
As part of this report the Committee
is introducing our new Directors’
Remuneration Policy for shareholders to
consider at the 2021 AGM in April. The
current Policy was approved by shareholders
in 2018. A summary of the changes proposed
is included in this statement, and the full
policy is detailed on pages 137 to 145 of
this report.
During the year the Committee has
consulted with a number of Admiral’s
larger shareholders and proxy agencies.
The engagement indicated strong support
whilst helping to inform what the Board
believes is an appropriate renewal of
our Policy.
I look forward to welcoming you at our AGM
in 2021 and to your continued support for
both remuneration resolutions in this
year’s meeting.
133
Business context: Admiral’s business
performance and how we responded
to the impact of Covid-19
2020 represented another strong set of
results given the challenging circumstances,
with a 2% increase in Group turnover and a
21% increase in the Group’s share of pre-tax
profit to a record level of £638.4 million. The
proposed final dividend for 2020 is 86.0p per
share (2019: 77.0p per share), representing a
normal dividend (65% of post-tax profits) of
63.6 pence per share and a special dividend
of 22.4 pence per share.
The past year has been dominated by
the Covid-19 pandemic, and whilst the
disruption created many challenges, Admiral
maintained its commitment established
early in the pandemic to support and invest
in customers, staff, emergency workers,
partners and local communities.
Our continued focus on doing the right thing
saw us respond quickly to the crisis as it
developed, to ensure that we could provide
the necessary support to our stakeholders.
Our actions highlighted two of our key
strengths – agile and competent execution
in the short term, and building a sustainable
business for the long term.
Our Customers
We continued to provide quality service to
our customers remotely. We gave back £110
million through the premium rebate in the
UK and made further substantial pricing
reductions across our operations to reflect
the lower frequency as a result of less driving
during lockdowns. Pricing reductions were
also made in the international operations
to recognise the lower claims frequency
trends as customers stayed at home and
drove less during the Covid-19 lockdowns.
We also provided additional support to our
customers and key workers across the UK and
international operations. Further information
on our key worker initiatives can be found in
the Sustainability section of this report on
page 62.
We have long-standing customer
initiatives and processes which seek to
measure how our customers feel about our
services, reward staff who perform above
expectations and make our customers smile.
This was reflected as Admiral UK was named
the 2020 Direct to Consumer Business of the
Year in The Insurance Times Awards.
Our People
We placed the health and well-being of
our people at the centre of our response,
as we facilitated homeworking and took a
cautious approach to reopening our offices.
Various initiatives were implemented
to optimise staff working from home
capabilities, including providing staff with
all the necessary equipment to excel in their
respective roles. Staff engagement levels
were continually monitored to ensure we
were providing staff with all the support
they required. This included prioritising the
mental health and wellbeing of our staff,
which we promoted through our Ecare
programme and a range of other initiatives.
In addition, staff in the UK received an extra
5 days of annual leave. Employees were
paid their full salaries and no support was
received from government schemes*1, with
the exception of a small number of staff
in our French insurance business who were
furloughed and whose salaries were paid
through a French government
support scheme.
Our Community
We launched the Admiral Support Fund with
£6 million committed to support our local
communities. Through this fund, alongside
contributing to the Covid-19 Support
Fund established by the UK insurance and
long-term savings industry, we have been
able to support our local communities
in Wales and across our international
operations. The fund responds to staff
requests, which has enabled us to cater to
a wide variety of community needs. A full
overview of the Admiral Support Fund and
the actions we have taken to support our
local communities in Wales and across our
international operations can be found on
page 75 of this report. During 2020, our
local community support in response to
Covid-19 was provided alongside our regular
community activities, such as sponsoring
Pride Cymru and working to promote
employability across our local communities.
On page 74 of this report, you will find more
information on how we stood by our long-
term community commitments that were
affected by Covid-19, and examples of how
we promoted employability across our UK
and international operations.
2020 Awards
We are very proud of our achievements this
year, particularly receiving the Lifetime
Masters award by the Great Place to Work
Institute (UK), achieving 5th place in
The Great Place to Work Institutes’ Best
Workplaces for Women for Super Large
Organisations (UK), achieving 8th place in
the Great Place to Work Institute’s Europe’s
Best Workplaces awards and ranking 14th
best Workplace in the World on the annual
25 World’s Best Workplaces list. For a full
list of our awards and achievements in 2020,
please refer to page 27 of this report.
In March 2020 the Board announced that
David Stevens had informed the Board of
his intention to retire following an amazing
contribution to the Group over the last 28
years and that Milena Mondini de Focatiis
had been appointed as CEO-Designate.
Subsequently in August Milena was formally
appointed as an Executive Director. Having
been through a comprehensive and robust
succession process, the Board is confident
that in Milena we have a natural successor
and a leader for the next generation.
Milena brings a deep appreciation of the
special Admiral culture, entrepreneurial
spirit, commercial track record and people
development skills.
The Committee and I would like to note the
generous gift to Admiral staff from David
and Heather Stevens on David’s retirement
of £10 million, with full-time employees
receiving £1,000 each and part-time
employees £500. Although this is a personal
gift rather than from the company, the
payment is in line with Admiral’s unique
culture of sharing the significant value
created since our founding 28 years ago
with our employees.
The Remuneration Policy aims to align with
and support this unique culture.
*1
Fewer than 15 staff in our French insurance business, L’oliver, who were unable to work during the Covid-19 crisis due to caring responsibilities,
were furloughed and were paid at 90% of their base salary through French government support schemes.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 134
Admiral Group plc · Annual Report and Accounts 2020
The Remuneration Committee continued
Recap of remuneration
structure at Admiral
Admiral has a simple remuneration structure
which reinforces our culture and creates
strong alignment with shareholders:
• Base salaries are targeted at the lower
end of our peer group.
• Pensions for the executive directors are
fully aligned with that offered to the
workforce, and have been for some time,
set at a maximum level of 6% of base
salary subject to an overall maximum
employer contribution of £15,000.
• Executives are encouraged to build up
significant shareholdings in the Group
to maximise shareholder alignment.
Our main incentive plans are the Share
Incentive Plan (‘SIP’), which encourages
wide share ownership across our
employees, and the Discretionary Free
Share Scheme (‘DFSS’). DFSS primarily
incentivises Earnings per Share growth,
Return on Equity and Total Shareholder
Return vs. the FTSE 350 (excluding
investment companies) over a three-year
period. For Executive Directors, vesting is
also dependent on performance against
a scorecard of metrics which have been
developed over time to now include risk
and customer outcomes and performance
against strategic objectives.
• Shareholder alignment is reinforced by
granting DFSS awards as a fixed number
of shares, ensuring the value at grant
is directly aligned with the shareholder
experience. The Committee reviews
award sizes annually, taking into account
factors such as the shareholder dilution
impact of all employee share schemes
and share price movement since the last
award, in particular whether a material
share price increase has resulted from
general market, or other external, factors.
• Admiral pays a bonus (the ‘DFSS bonus’)
that is equivalent to the actual dividends
paid out to shareholders calculated on
the number of unvested DFSS awards
held. It is important to note that this is in
place of, not additional to, a conventional
cash bonus scheme. This approach is
aligned to Admiral’s culture by prioritising
collective, longer term success over
short term, individual performance and
also provides a direct link to shareholder
pay-outs. The DFSS bonus payable to
Executive Directors is subject to a +/-
20% adjustment based on performance
against a scorecard of metrics which
have been developed over time to now
include risk and customer outcomes and
performance against strategic objectives.
month EPS growth vs. LIBOR, TSR vs. FTSE
350 (excluding investment companies),
ROE and the average outcomes of the
scorecards of risk and customer measures
used to assess DFSS bonus adjustments
over the performance period. Further
details can be found on page 149.
The Committee recognises that some
aspects of the structure of pay at Admiral
are unusual compared to the typical
practice at other large UK-listed companies,
but we believe that the structure
contributes to our culture of focussing
on collective success, and is aligned with
Admiral’s philosophy around the efficient
use of capital and distribution of surplus
profits, all of which aligns to shareholder
interests.
Decisions made by the
Remuneration Committee in
2020 on Executive Director
compensation
Taking into account the approved
remuneration structure and Admiral’s
business performance, the Committee made
the following decisions during 2020:
• Based on performance to 31 December
2020, 98.5% and 83.3% of the DFSS award
granted in 2018 will vest to Geraint
Jones and Milena Mondini de Focatiis,
respectively. The full details of this are
on page 149.
• Geraint Jones and Milena Mondini de
Focatiis also received a DFSS bonus of
£252,703 and £150,796 respectively. This
bonus is equivalent to dividends that
would have been paid during the year on
all outstanding DFSS and salary shares
awarded but not yet vested plus a +/- 20%
adjustment for performance against a
set of risk and customer measures. In
addition, the DFSS bonus was subject
to an overall adjustment to take into
account any trigger events which were
considered to have a material customer,
regulatory or financial impact. The full
details of the DFSS bonus calculations
are on page 149.
• During the course of 2020, Geraint Jones
was granted awards under the DFSS of
45,000 shares. This is the equivalent to
£1,231,650 or 477% of Geraint’s cash
salary. These awards will vest on three-
• Milena Mondini de Focatiis’ base salary
was set at a level of £695,000 from the
date of her appointment as CEO. Our
Remuneration Policy allows for salary
progression for a newly appointed
executive director, but we would note
that the Committee set this base salary
without an expectation of applying
significant future salary progression as
Milena establishes herself in the role
(whilst it is expected that normal salary
increases will be considered each year as
otherwise set out in the Policy).
• Geraint Jones’ cash base salary was
increased by 2% in January 2021 below
the average increase for other employees
of 5%. In line with the existing Policy,
Geraint Jones received an award of 5,000
salary shares, equivalent to £117,450
during 2020. Further details on these
shares can be found on page 152. Under
the new Policy Geraint Jones will no longer
continue to receive salary shares and the
value of these has been converted into
base salary (on a neutral basis), giving a
2021 salary level of £404,660. This change
is proposed to structure Geraint’s fixed
remuneration consistently with Milena’s
following her appointment and to simplify
our remuneration arrangements. It should
be noted that this has no impact on
Geraint’s pension entitlement.
• The Committee reviewed the metrics
that will apply to DFSS awards and DFSS
bonus awards for 2021. Further details
are shown on page 149. In particular,
the Committee considered the use of
Environmental, Social and Governance
(‘ESG’) measures. Whilst the DFSS already
comprises a number of measures within
the ESG agenda, covering customers,
our people, risk and governance, the
Committee intends to carry out a more
substantive review of how we most
appropriately incorporate ESG into our
remuneration arrangements, in line with
our strategy in this area (see page 93), and
implement any new approach in the next
twelve months.
135
2020 Remuneration Policy Review
The Remuneration Policy was last
approved by shareholders at the 2018
AGM, effective for a maximum of three
years. Consequently, the Committee is
seeking shareholder support for a revised
Remuneration Policy at the 2021 AGM.
During 2020, the Committee reviewed the
existing Remuneration Policy and consulted
with major shareholders to discuss
proposed changes.
The key context to the review was the CEO
change announced in March 2020, with
Milena Mondini de Focatiis taking over the
role on the retirement of David Stevens.
This represents a significant transition
from leadership of the business by founders
(David, and before him, Henry Engelhardt),
who retain a substantial personal
shareholding, to the next generation
of leadership.
David Stevens chose not to participate
in the DFSS due to his substantial
shareholding. The Committee considers it
a priority to ensure alignment of Milena’s
interests with Admiral’s shareholders
through an appropriate package, including
her participation in the DFSS, as she takes up
the role of CEO.
The Committee believes that our existing
approach to remuneration as reflected
in our 2018 Policy has been effective
in contributing to the Group’s success
and therefore, we are proposing modest
adjustments rather than fundamental
changes to the 2018 Policy. The proposed
Policy is set out in full on pages 137 to 145,
with changes from the 2018 Policy noted.
However, the key points to highlight are:
• Base Salary: No change to the Policy,
save that salary shares will no longer be
awarded to Geraint Jones and the value
will be converted into base salary (on a
value neutral basis).
• Discretionary Free Share Scheme (DFSS):
No change to our overall approach, save as
mentioned above, Milena will participate
in the plan where David has not. The
maximum opportunity will be amended
from 600% of salary / £2,000,000 to
500% of salary (no absolute GBP limit).
The absolute GBP limit is removed to
accommodate share price fluctuations,
with this change balanced by the lower %
limit – note that we are not proposing to
make awards at this maximum level. Due
to the phase out of LIBOR, the intention is
to express future EPS targets as absolute
growth levels.
• In-employment and post-termination
shareholding requirements: We are
proposing to increase our in-employment
shareholding requirement from
300% to 400% of salary, reinforcing
our commitment to our approach of
encouraging executives to build up
significant shareholdings in the Group.
We are also introducing a new post-
termination requirement under which
executive directors will be required
to hold 400% of salary in shares (or
shareholding level held at time of
termination if less than this) for a period
of two years.
The proposed Remuneration Policy will
be put to shareholders at the AGM in
2021 (subject to a binding vote). Both the
Committee and the Board strongly believe
that the proposed Remuneration Policy will
continue to best serve the Group’s strategic
ambitions and incentivise executives to
create value for our shareholders. The
Annual Report on Remuneration (subject
to an advisory vote) will also be put to
a shareholder vote at the AGM. The
Committee and I do hope that you vote in
favour of both the report and Policy. I am
available to discuss our Remuneration Policy
and Annual Report on Remuneration with
shareholders.
Owen Clarke
Chair of the Remuneration Committee
3 March 2021
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Admiral Group plc · Annual Report and Accounts 2020
Remuneration at a glance
I would like to thank our shareholders
for approving our
Annual Report on Remuneration
at the April 2020 AGM which was
approved by 99.5%
of our shareholders.”
10 year TSR performance: Admiral vs. FTSE100 and FTSE350 indices
Growth in the value of a hypothetical £100 holding over ten years to 31 December 2020
£400
£300
£200
£100
£0
How did we perform in 2020?
Earnings per share (EPS) (pence)
179.5p
(2019: 148.3p)
Return on Equity (ROE) (%)
52%
(2019: 52%)
Full year dividend per share (pence)
156.5p
(2019: 140.0p)
1 year Total Shareholder Return (TSR)
42%
Admiral
FTSE 100
FTSE 350
Dec 10
Dec 11
Dec 12
Dec 13
Dec 14
Dec 15
Dec 16
Dec 17
Dec 18
Dec 19
Dec 20
What did our Executive Directors*1 earn in 2020?
• Salary for CFO includes 5,000 ‘salary shares’.
• Pension, benefits and SIP includes 2020 pension contribution
of £1,345, £6,705 and £14,949 for the CEO, CEO-Designate
and CFO, respectively.
• DFSS bonus of £150,796 and £252,703 for the CEO-Designate
and CFO, including an adjustment for performance against
scorecards of risk and customer measures.
• DFSS value for the CEO-Designate and CFO relates
to 83.3% and 98.5% of their 2018 DFSS awards
vesting, respectively.
£2k
£419k
£1,393k
£253k
£19k
£375k
£849k
£151k
£9k
£234k
Salary
Pension, benefits and SIP
DFSS bonus
DFSS shares
*1
Chief Executive Officer, David Stevens, did not participate in any
incentive plan given his significant shareholdings.
CEO
CEO-
designate
CFO
137
Directors’ remuneration policy
The Group is committed to the primary objective of maximising shareholder value over time in a way
that also promotes effective risk management and excellent customer outcomes, and ensuring that
there is a strong link between performance and reward.
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 2018, the Companies (Directors’
Remuneration Policy and Directors’
Remuneration Report) Regulations 2019
and other relevant requirements of the
FCA Listing Rules. In addition, the Board has
adopted the principles of good corporate
governance set out in the UK Corporate
Governance Code (the Code) and the
guidelines issued by its leading shareholders
and bodies such as ISS, the Investment
Association, and the Pensions and Lifetime
Savings Association.
Unless otherwise stated, information
contained within this Remuneration Report
is unaudited.
The following Remuneration Policy (the
‘2021 Policy’) will come into effect, subject
to shareholder approval, from the April 2021
AGM. The policy table below summarises
the changes from the Remuneration Policy
approved at the 2018 AGM (the ‘2018
Policy’). These changes are relatively minor
in nature and include the removal of salary
shares, adjustment to the DFSS award limit,
increase in the in-employment shareholding
requirement and introduction of a
post-employment shareholding requirement.
• Significantly share-based – our base
salaries are targeted towards the lower
end of market, but are combined with
meaningful annual share awards that
vest on long-term performance to ensure
strong alignment with shareholders and
the long-term interests of the Group.
Executives are also encouraged to build
up significant shareholdings in the Group
to maximise shareholder alignment;
• Long-term perspective – a significant
part of senior executives’ remuneration is
based on the achievement of stretching
performance targets that support
the delivery of the Group’s strategy
and shareholder value. The extended
performance and vesting horizons
promote a long-term perspective that is
appropriate to the insurance sector;
• Effective risk management – incentives
are designed to ensure they do not
encourage excessive risk-taking. They
are aligned with the delivery of positive
customer outcomes and reinforce the
Group’s risk policy;
• Open and honest culture – the Group has
a strong culture of focussing on collective
success, whilst still recognising individual
contribution to the Group’s performance,
and this is reflected in our remuneration
structure across the business; and
• Transparency to stakeholders – the
remuneration structure is designed to
be simple and easy to understand, and
all aspects are clear to employees and
openly communicated to employees,
shareholders, and regulators.
Key Principles of Admiral
Remuneration arrangements
The Group is committed to the primary
objective of maximising shareholder value
over time in a way that also promotes
effective risk management and excellent
customer outcomes, 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 total 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 remuneration
framework and 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 total package – the Group
aims to deliver total remuneration
packages that are market-competitive,
taking into account the role, job size,
responsibility, and the individual’s
performance and effectiveness.
Prevailing market and economic
conditions and developments in
governance are also considered, as are
general salary levels throughout the
organisation;
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Admiral Group plc · Annual Report and Accounts 2020
Directors’ remuneration policy continued
2021 Remuneration Policy table
This table describes the key components of the remuneration arrangements for Executive Directors.
Purpose and link to strategy
Operation
Opportunity and performance metrics
Change from 2018 Policy
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.
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.
Any salary increases are applied in line
with the outcome of the review.
In respect of existing Executive
Directors, it is anticipated that
increases in cash salary will not
normally exceed 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.
Under the 2018 Policy, in
addition to his cash salary
the CFO received an
annual award of ‘salary’
shares. Salary shares will
no longer be awarded
under the new Policy.
However, salary shares
awarded in previous
years will be allowed to
continue to vest on the
same basis as previously:
awards vest after
three years subject to
continued employment,
and an additional two-
year holding period
applies, during which
time shares may not
be sold, save to meet
income tax, NI or other
regulatory obligations.
Malus and clawback
provisions apply
during the vesting
and holding periods.
No change.
Pension
To provide retirement
benefits.
Other Benefits
To provide competitive
benefits.
The Group operates a personal
pension plan, a defined contribution
scheme.
This is available to all employees
following completion of their
probationary period.
In the UK, the Group matches employee
contributions up to a maximum of 6%
of base salary subject to an overall
maximum employer contribution of
£15,000, or provides the equivalent
value in cash. Base salary is the only
element of remuneration that is
pensionable.
Includes (but not limited to):
Benefits may vary by role.
No change.
• Death in service scheme.
• Private medical cover.
• Permanent health insurance.
• Relocation, at the Committee’s
discretion.
All benefits are non-pensionable.
None of the existing Executive
Directors received total taxable
benefits exceeding 5% of base salary
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 healthcare
insurance premiums).
139
Purpose and link to strategy
Operation
Discretionary Free Share Scheme (DFSS)
Opportunity and
performance metrics
Change from
2018 Policy
Change in
maximum
opportunity
from limit of
£2,000,000 /
600% of base
salary under
2018 Policy to
500% of base
salary.
No change.
Maximum opportunity: A
maximum face value on award
of 500% of base salary applies.
Threshold performance will result
in vesting of up to 25% of the
maximum award.
DFSS shares are granted as a fixed
number of shares (subject to the
quantum limits of the plan, as
described above). The number
granted is reviewed and may
be adjusted by the Committee,
for example, if there has been a
significant change in share price.
Vesting of DFSS awards is subject
to the Group’s performance over
a three-year performance period.
The performance measures may
include EPS growth, ROE, relative
TSR and a scorecard of strategic,
customer and other non-financial
metrics, or other measures
selected by the Committee,
as appropriate. Details of the
measures, weightings and
performance targets used for
specific DFSS grants are included
in the relevant year’s Annual
Report on Remuneration.
Maximum opportunity: sum
equal to the dividends payable
during the year on awarded but
unvested DFSS shares, subject
also to a possible 20% upwards
or downwards adjustment based
on performance against a set of
strategic, customer and other
non-financial metrics.
No bonus is payable unless
dividends are payable on Admiral
shares.
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 equivalent
bonuses.
Executive Directors may be granted awards annually at
the discretion of the Committee.
Awards may be in the form of nil or nominal priced
options or conditional shares. Awards are normally
granted on an annual basis and vest after a minimum
of three years subject to Group performance and
continued employment.
A two-year holding period applies to vested awards,
during which time Executive Directors may not sell the
vested awards except to cover tax liabilities.
Awards are subject to malus and clawback provisions,
i.e. forfeiture or reduction of unvested awards and
recovery of vested awards. Events which may lead
to the application of malus and clawback are set out
in the Group’s Malus and Clawback Framework and
include material financial misstatement, responsibility
for conduct which results in significant losses, material
failure of risk management, misconduct, reputational
damage and corporate failure.
The Remuneration Committee has discretion to adjust
the formulaic vesting outcome to ensure the final
outcome is a fair and true reflection of underlying
business performance.
To incentivise shareholder value creation and
efficient use of capital, management participates 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.
The DFSS bonus is subject to a +/- 20% adjustment
based on performance against targets based on a
set of strategic, customer and other non-financial
metrics. Whilst the bonus may be adjusted upwards
or downwards by up to 20% in any given year, it is not
anticipated that the adjustment will increase the
Executive Directors’ remuneration on average over the
long term.
The DFSS bonus is subject to malus and clawback
provisions, i.e. forfeiture or reduction of unvested
awards and recovery of vested awards. Events which
may lead to the application of malus and clawback are
set out in the Group’s Malus and Clawback Framework
and include material financial misstatement,
responsibility for conduct which results in significant
losses, material failure of risk management,
misconduct, reputational damage and corporate failure.
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Admiral Group plc · Annual Report and Accounts 2020
Directors’ remuneration policy continued
Purpose and link to strategy
Operation
Opportunity and performance metrics
Change from 2018 Policy
Approved Free Share Incentive Plan (SIP)
To encourage share ownership
across all employees, using HMRC
approved schemes for eligible UK
employees.
All eligible UK employees
participate in the SIP after
completing a minimum 12
months’ service. 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.
No change.
In-employment Shareholding Requirement
To align interests of Executive
Directors with shareholders.
Guideline to be met within
five years of the later of the
introduction of the guidelines
and an Executive Director’s
appointment.
Post-termination shareholding requirement
To further align the interests
of Executive Directors with
shareholders and encourage a
focus on long-term sustainable
performance
Shareholding required to
be maintained at the in-
employment requirement
(or number of shares held at
time of termination, if lower)
for a period of two years post
termination.
400% of base salary.
Requirement increased
from 300% of base salary.
400% of base salary (or number of shares
held at time of termination, if lower).
New requirement.
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 changes required to satisfy legal or regulatory requirements and other non-
significant changes to the Remuneration Policy without reverting to shareholders.
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 2021
Remuneration Policy. This includes all outstanding awards under the previous 2015 and 2018 Remuneration Policies, or any awards made
prior to appointment to the Board. Details of any such payments will be set out in the Annual Report on Remuneration as they arise.
Selection of Performance Measures
Vesting under the DFSS is linked to financial metrics including growth in EPS, ROE, and relative TSR.
Growth in EPS has been selected as a performance measure 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.
EPS targets have previously been expressed as growth in excess of three-month LIBOR. Due to the phase out of LIBOR, it is intended in
future to express EPS targets as absolute growth levels.
ROE has been selected as the Committee believes that a returns metric reinforces the focus on capital efficiency and delivery of strong
returns for our shareholders, thereby further strengthening the alignment of incentives with Admiral’s strategy.
Relative TSR vs. the FTSE 350 (excluding investment companies) has been selected to reflect value creation for Admiral’s shareholders as
compared with the general market.
For 2019 awards onwards, vesting of DFSS awards is also linked to non-financial measures which may include strategic, customer and
other measures. The Committee believes that the additional emphasis on these measures reinforces Admiral’s focus on our customers
and on other non-financial Group priorities, whilst also more clearly demonstrating alignment of Group remuneration practices with the
requirements of Solvency II.
141
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 taking into account broker forecasts for Admiral and its insurance peers, the Company’s strategic priorities
and the economic environment in which the Company operates. The Committee believes that the performance targets set are stretching
and motivational, and that maximum outcomes are available only 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.
Around 3,300 employees from across the Group, as well as the Executive Directors, participate in the DFSS. The Committee determines
DFSS awards for those executives within its remit and on an aggregate basis for all other participants in the DFSS. For the Executive
Directors, all DFSS share awards are subject to performance conditions. For other senior managers and employees at lower organisational
levels, a proportion of awards (ranging from half to two-thirds) is subject to performance, with performance conditions either in line
with those described above, or set based on key performance drivers of the individual’s relevant business unit, and the remainder 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 and an assessment of both financial and non-financial individual and business unit performance.
All holders of DFSS awards receive the DFSS bonus, with the bonus for a number of senior managers being adjusted for performance
against a scorecard of customer, risk and other non-financial metrics.
All UK employees who have served a minimum tenure at Admiral are eligible to participate in the SIP on the same terms. Most overseas
employees receive an equivalent award to the UK SIP awards and these awards have no performance measures attached.
The Company operates a personal pension scheme which is available to all employees once they have completed their probationary period.
For all employees, including the Executive Directors, the Company matches the employee contribution up to a maximum of 6% of salary,
subject to an overall maximum of £15,000 or provides the equivalent value in cash.
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.
Executive Director
Geraint Jones
Milena Mondini de Focatiis
Date of appointment
Contract duration
13 August 2014
11 August 2020
Rolling contract, 12-month notice period
Rolling contract, 12-month notice period
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. The Executive Directors’ service contracts are available to view at the Company’s registered office.
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Admiral Group plc · Annual Report and Accounts 2020
Directors’ remuneration policy continued
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
Treatment of awards
Timing of vesting
Awards lapse under most circumstances e.g.
dismissal for cause or resignation.
n/a
Death, injury or disability,
redundancy, retirement or any
other reasons the Committee may
determine.
Change of control
Normal vesting date.
Immediately
Any unvested award will be pro-rated for
time with reference to the proportion of the
vesting period remaining at termination,
and performance, unless the Committee
determines otherwise.
Unless the Committee determines otherwise,
any unvested award will be pro-rated for time
with reference to the proportion of the vesting
period remaining at change of control, 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
n/a
Death, injury or disability,
redundancy, retirement or any
other reasons the Committee may
determine.
Not payable after the event.
Change of control
Not payable after the event.
n/a
n/a
n/a
n/a
Salary shares
(CFO only, awards
under 2018 Policy)
Resignation
Awards lapse under most circumstances e.g.
dismissal for cause or resignation.
Death, injury or disability,
redundancy, retirement or any
other reasons the Committee
may determine.
Any unvested award will be pro-rated for time
with reference to the proportion of the vesting
period remaining at termination, unless the
Committee determines otherwise.
Normal vesting date,
with Committee
discretion to
accelerate.
Change of control
Unless the Committee determines otherwise,
any unvested award will be pro-rated for time
with reference to the proportion of the vesting
period remaining at the point
of change of control.
Immediately.
For all leavers (with the exception of in the event of termination for cause), in respect of vested DFSS and vested salary share awards that
are still subject to a holding period, awards will normally be released in full at the end of the holding period, though the Committee has
discretion to determine otherwise, taking into account the circumstances at the time.
143
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.
Initial date of appointment
Commencement of current contract
Notice period
NED
Annette Court
Michael Brierley
Owen Clarke
Andy Crossley
Karen Green
Jean Park
Term
3 years
3 years
3 years
3 years
3 years
3 years
21 March 2012
5 October 2018
19 August 2015
26 April 2020
5 October 2018
19 August 2018
27 February 2018
27 February 2021
14 December 2018
14 December 2018
17 January 2014
17 January 2020
Jayaprakasa Rangaswami
3 years
29 April 2020
Justine Roberts
Manning Rountree
3 years
3 years
17 June 2016
16 June 2015
29 April 2020
17 June 2019
16 June 2018
Three months
One month
One month
One month
One month
One month
One month
One month
One month
The NEDs are not eligible to participate in the SIP, DFSS or DFSS bonus scheme and do not receive any pension contributions.
Details of the 2021 Policy on NED fees are set out in the table below:
Purpose and link to strategy
Operation
To attract and retain NEDs
of the highest calibre with
experience relevant to the
Company.
Fees are reviewed annually.
The Group Chair fee is determined by the Committee
after consultation with the Executive Directors. The NED
fees are determined by the Group Chair 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).
Fees are paid in a mix of cash and Company shares for the
Company Chair, and in cash for other Non-Executive Directors.
The Board retains discretion to vary the mix or determine
that fees are paid entirely in cash or Company shares.
Opportunity and performance metrics
Fee levels are set by reference to NED
fees at companies of a similar size and
complexity.
In the event that there is a material
misalignment with the market or a
change in the complexity, responsibility
or time commitment required to fulfil
a NED role, the Board has discretion to
make an appropriate adjustment to the
fee level.
The maximum aggregate annual fee for
NEDs is capped at the limit provided for in
the Company’s Articles of Association.
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Admiral Group plc · Annual Report and Accounts 2020
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 four different performance scenarios: ‘Minimum’, ‘On-target’, ‘Maximum’ and ‘Maximum
with share price growth’.
As described above, Admiral’s DFSS bonus is directly aligned with dividends received by our shareholders, with an adjustment for
performance on a selection of non-financial measures. Whilst the Executive Directors’ final DFSS bonus outcome may be adjusted upwards
or downwards for these measures by up to 20% in any given year, it is anticipated that the average adjustment over the long term will be
close to 0%.
£6m
£5m
£4m
£3m
£2m
£1m
£0
76%
68%
30%
29%
41%
42%
58%
13%
19%
10%
14%
41%
59%
29%
29%
42%
Fixed Remuneration
DFSS bonus
DFSS
76%
10%
14%
68%
13%
19%
Minimum
On-target
Maximum
Milena Mondini de Focatiis
On appointment as CEO
Maximum
with share price
growth
Minimum
On-target
Maximum
CFO: Geraint Jones
Maximum
with share price
growth
The value of DFSS awards is calculated based on the average share price in the last three months of 2020 (£28.30) and the number of DFSS
shares awarded in 2020 (45,000 shares). There are no salary shares to be awarded to the CFO from 2021 onwards.
Component
‘Minimum’
‘On-target’
‘Maximum’
‘Maximum with share price growth’
Base salary
• Annual cash salary for 2021
Pension
Benefits
DFSS
• £15,000 annual contribution for CEO and CFO
• Taxable value of annual benefits provided (Estimated value based on Geraint Jones’ disclosed figure for 2020)
• 0% vesting
• 25% average vesting
• 100% vesting
• 100% vesting plus 50%
share price appreciation
DFSS bonus
• Based on the DFSS bonus paid to Geraint Jones in 2020 scaled pro-rata based on the size of DFSS awards proposed to
be awarded in 2021.
145
Approach to remuneration relating to new Executive Director 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
set out in the Policy Table. The Committee’s policy is to set the remuneration package for a new Executive Director in accordance with the
approved Remuneration Policy at the time of the appointment.
In determining the appropriate remuneration for a new Executive Director, the Committee will consider all relevant factors to ensure that
arrangements are in the best interests of the Company and its shareholders. Where an individual is appointed on an initial base salary that
is below market, any shortfall may be managed with phased increases over a period of time, subject to the individual’s performance and
development in the role. This may result in above-average salary increases during this period.
The Committee may also make an award in respect of a new Executive Director 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 the forfeited awards and the likelihood of those conditions being met to ensure that the value of the buy-out award is no greater than
the fair value of the awards it replaces. The Committee may also avail itself of Listing Rule 9.4.2 R if appropriate in respect of buy-out
incentive arrangements.
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 above. 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.
Other Directorships
Executive Directors are permitted to accept appointments as Non-Executive Directors of companies with prior approval of the Group
Board. Approval will be given only where the appointment does not present a conflict of interest with the Group’s activities, and where
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.
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 the Remuneration Policy and will continue to monitor trends and developments
in corporate governance and market practice to ensure the remuneration structure for our Executive Directors remains appropriate. In
developing the new 2021 Remuneration Policy, the Committee consulted with the Company’s major shareholders and took their feedback
into account. Shareholders consulted during this process were overall supportive of the proposed approach.
Considerations of Regulatory Requirements
The Committee regularly reviews the Remuneration Policy and structure in the context of Solvency II remuneration guidance, and
EBA, PRA, and FCA expectations regarding the supervision of insurance firms. The Chief Risk Officer periodically attends Committee
meetings as part of this process and provides support to the Committee in understanding any risk-related implications of remuneration
decisions. Whilst the Remuneration Policy includes several features which help ensure compliance with current regulatory guidance,
the Committee reserves the discretion to adjust the Remuneration Policy, and its execution, to take into account any developments in
such regulatory guidance.
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Admiral Group plc · Annual Report and Accounts 2020
Annual report
on
remuneration
This section of the report provides details of how Admiral’s Remuneration Policy was
implemented in 2020 and how the Remuneration Committee intends to implement
the proposed Remuneration Policy in 2021 (subject to shareholder approval).
Remuneration Committee Membership in 2020
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 implementation of the Remuneration Policy. Its remit includes recommending the
remuneration of the Group Board Chair and the Executive Directors; approving the remuneration of senior management; and determining
the composition of and awards made under the performance-related incentive schemes.
At the end of 2020 the Committee consisted of Owen Clarke, Jean Park and Michael Brierley. The Committee met 12 times during the year.
The Group Chair, CEO, CEO-Designate (as was during 2020), CFO and CRO are invited to meetings where the Committee considers it
appropriate to obtain their advice on Group strategy and performance and senior executive pay strategy. No director is involved in
deciding their own remuneration outcome. 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.
Committee activities
During the year ended 31 December 2020, in addition to its regular activities, the Committee also:
• Reviewed the Remuneration Policy in anticipation of the upcoming binding vote by shareholders at the AGM in 2021;
• Reviewed the remuneration arrangements for the appointment of Milena Mondini de Focatiis to the Board as CEO-Designate, and for
her subsequent appointment as CEO;
• Reviewed the strategic, customer and ESG metrics introduced for adjustment of variable pay.
As mentioned in the Governance Report, during the year ended 31 December 2020, the Committee also performed its regular activities:
• Reviewed the DFSS vesting and bonus arrangements for Executive Directors, senior management and relevant staff (Material Risk
Takers) covered under Solvency II;
• Reviewed workforce remuneration, including alignment of the Group’s current remuneration structure with the Living Wage;
• Reviewed Admiral’s Gender Pay Gap reporting statistics;
• Reviewed risk events and their impact on variable pay;
• Undertook an evaluation of the Committee’s performance during the year;
• Reviewed the Committee’s terms of reference;
• Reviewed the Group’s Malus and Clawback Framework;
• Reviewed external remuneration trends and market conditions.
Committee Effectiveness Review
As part of the Committee’s annual review of its performance and processes, each Committee member completed a questionnaire
designed to provide objective assessment of the Committee’s performance, including in respect of the activities and general operation
of the Committee. The Committee discussed the results of the review at its meeting in January 2021 and concluded that, overall, the
Committee remained effective. Several areas of focus and improvement were identified for 2021, including oversight of reward strategy,
the setting of both financial and non-financial performance targets at an individual and business level, the quality of information available
on the pay of the wider workforce and Committee support.
Advisors to the Committee
During the year, in order to enable the Committee to reach informed decisions, advice on market data and trends was obtained
from independent consultants, Mercer Kepler, FIT Remuneration Consultants and, following a review of advisors in July, Willis Towers
Watson. Mercer Kepler, FIT Remuneration Consultants and Willis Towers Watson reported directly to the Committee Chair, and
each of the firms are signatories to and abide by the Code of Conduct for Remuneration Consultants (which can be found at www.
remunerationconsultantsgroup.com). Other than advice on remuneration, no other services were provided by Mercer Kepler to the
Company. Willis Towers Watson also provided advice to the Company in relation to the adoption of IFRS 17. The fees paid to Mercer Kepler,
FIT Remuneration Consultants and Willis Towers Watson in respect of work carried out in relation to the Committee in 2020 (based on time
and materials) totalled £70,503, £16,731 and £95,100, respectively.
147
The Committee undertakes due diligence periodically to ensure that advisors remain independent of the Company and that the advice
provided is impartial and objective. The Committee is satisfied that the advice provided by Mercer Kepler, FIT Remuneration Consultants
and Willis Towers Watson is independent.
The Company Secretary also circulates market survey results as appropriate.
Summary of Shareholder Voting at the 2020 AGM
The table below shows the results of the advisory vote on the 2019 Annual Report on Remuneration at the 2020 AGM.
Annual Report on
Remuneration (2020 AGM)
Total number of votes
237,823,727
1,285,199
239,108,926
824,413
For
Against
Total votes cast
Abstentions
% of votes cast
99.46%
0.54%
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 years ended 31 December 2020
and 31 December 2019.
Executive Director
1. Base
salary
2. Benefits
3. Pension
Total
fixed pay
4. SIP
5. DFSS
6. DFSS
bonus
Total
variable pay
Total
remuneration
Geraint
Jones
David
Stevens*1
Milena Mondini
de Focatiis
2020
£375,450
£425
£14,949
£390,824
£3,606
£1,393,775
£252,703
£1,650,084
£2,040,908
2019
£358,400
£471
£14,976
£373,847
£3,583
£1,160,616
£201,600
£1,365,799
£1,739,646
2020
£419,515
2019
£409,283
2020
£233,750
2019
–
£425
£471
£163
–
£1,345
£421,285
£3,970
£413,724
–
–
–
–
–
–
–
£421,285
–
£413,724
£6,705
£240,618
£1,795
£848,606
£150,796 £1,001,197
£1,241,815
–
–
–
–
–
–
–
*1 David Stevens does not participate in any incentive plan given his significant shareholdings.
The figures have been calculated as follows:
1.
Base salary/fee: amount earned for the year. For Geraint Jones, this also includes 2,500 salary shares awarded on each of 13 March 2020
and 2 September 2020 with a value of £51,450 and £66,000 which have been valued using the average closing share price over the five
days prior to the date of grant of £20.58 and £26.40, respectively. The 2019 values include 2,500 salary shares awarded on each of 18
March 2019 and 30 August 2019 with a value of £53,650 and £53,625 which have been valued using the average closing share price
over the five days prior to the date of grant of £21.46 and £21.45, respectively. Neither David Stevens nor Milena Mondini de Focatiis
received salary shares during 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.
6.
7.
DFSS: the value at vesting of shares vesting on performance over the three-year periods ending 31 December 2020 and 31 December
2019. For the 2020 figures, given that vesting occurs after the 2020 Directors’ Remuneration Report is finalised, the figures are based
on the average share price in the last three months of 2020 (£28.30). The 2019 figures have been trued up based on the market price
on vest (£26.14). For 2020, favourable movements of £389,075 and £236,890 are included in the DFSS value, attributable to an increase
in the share price over the vesting period for Geraint Jones and Milena Mondini de Focatiis, respectively. For 2019, £356,976 of the
DFSS value is attributable to share price appreciation over the vesting period.
DFSS bonus: the bonus equivalent to dividends that were paid during the year on all outstanding DFSS shares awarded but not yet
vested. The bonus is paid in two tranches annually.
Milena Mondini de Focatiis was appointed to the Board as CEO-Designate on 11 August 2020. Her 2020 remuneration includes salary,
pension and benefits in respect of her service as CEO-Designate, DFSS bonus received after appointment and DFSS vesting on
performance over the three-year period ending after her appointment.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 148
Admiral Group plc · Annual Report and Accounts 2020
Annual report on remuneration continued
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 years ended 31 December 2020 and
31 December 2019.
Director
Annette Court*1
Owen Clarke*2
Karen Green
Jean Park*3
Justine Roberts*4
Manning Rountree
Andy Crossley*5,8
Michael Brierley*6,8
Jayaprakasa Rangaswami*7
Total fees
2020
2019
Fees
Taxable benefits*9
Fees
Taxable benefits
£326,218
£102,460
£86,000
£116,000
£71,742
£77,600
£126,095
£125,858
£43,826
£513
£286
£163
£887
£98
£4,899
£1,218
£2,699
–
£318,249
£104,125
£81,500
£106,500
£70,500
£73,100
£113,100
£113,100
–
£1,177
–
£265
£1,026
£284
£729
£1,281
£1,262
–
*1 The 2020 fee for Annette Court is £326,218 (a cash fee of £228,353 and a share fee of £97,865).
*2
*3
Owen Clarke was appointed Senior Independent Director on 31 December 2019. His fee for undertaking this role is £13,500 which was paid on top of his base fee and Committee
fees. A payment of £40 in respect of Owen’s annual fee for 2020, was paid in 2021.
Jean Park’s fees for 2019 and 2020 include additional fees relating to her position as Chair of the Group Risk Committee and is in recognition of the increased time commitment
required of her as a consequence of the Solvency II regulations and the Internal Model Application Process.
*4
Justine Roberts stepped down as a member of the Group Remuneration Committee on 4 March 2020.
*5 Andy Crossley was appointed to the Group Risk Committee on 29 April 2020.
*6 Michael Brierley was appointed to the Group Remuneration Committee on 4 March 2020.
*7
Jayaprakasa Rangaswami was appointed to the Board on 29 April 2020.
*8
*9
The fees for Andy Crossley and Michael Brierley include additional fees in relation to their positions as Chairman of the EUI Limited Board of Directors and Admiral Financial
Services Limited Board of Directors, respectively.
Taxable benefits represent those expense reimbursements relating to travel, accommodation and subsistence in connection with the attendance at Board, Subsidiary and
Committee meetings during the year, which are deemed by HMRC to be taxable. The amounts in the table are ‘grossed-up’ to include the UK tax paid by the Company on behalf of
the non-executive directors. Non-taxable expense reimbursements have not been included in the table.
Incentive Outcomes for Financial Year to 31 December 2020 (audited)
DFSS Awards Vesting on Performance to 31 December 2020
On 26 September 2018, Geraint Jones was granted an award under the DFSS of 50,000 shares with a value at the date of award of
£1,020,000 (based on a grant date share price of £20.40).
Vesting of the award was based on the achievement of performance conditions, being EPS growth vs. three-month LIBOR, TSR vs. FTSE 350
(excluding investment companies), and ROE, weighted equally and all measured over the three-year period 1 January 2018 to 31 December
2020. Over this period, the returns to our shareholders were strong, with TSR above upper quartile versus FTSE 350 companies and with
ROE of 53%. The combination of these shareholder returns and EPS growth contributed to a vesting level of 98.5%. The Committee
reviewed this vesting outcome and concluded that it was appropriate.
149
The table below details the Company’s performance against targets and the resulting vesting outcome.
Performance measure
Threshold
Maximum
Vesting schedule
Performance range
Actual
outturn
Vesting outcome
(% of maximum)
EPS growth vs. LIBOR
(weighted 33%)
Growth in line
with LIBOR
Growth of 36 points
(equivalent to 10%
p.a.) in excess of
LIBOR
10% for achieving
threshold with straight line
relationship to 100% for
maximum performance
51.3 points
in excess of
LIBOR
TSR vs. FTSE 350 (excluding
investment companies) (33%)
Median
Upper quartile
Return on Equity (ROE) (33%)
25%
55%
25% for median, with
straight line relationship to
100% for upper quartile
25% for achieving
threshold with straight line
relationship to 100% for
maximum performance
100%
100%
Above upper
quartile
53.2%
95.6%
Total vesting
98.5%
Based on performance, the total amount that will vest to Geraint Jones in September 2021 will therefore be 98.5% (i.e. 49,250 shares),
subject to his continued employment on the vesting date.
On 26 September 2018, Milena Mondini de Focatiis was granted an award under the DFSS of 36,000 shares with a value at the date of award
of £734,400 (based on a grant date share price of £20.40). This award and the applicable performance conditions related to her previous
divisional role rather than her role of CEO-Designate and Executive Director.
Vesting of the award was based 67% on the achievement of performance conditions and 33% on a time basis. The performance portion
was based on growth in turnover and combined ratio performance in our Italian, Spanish and French motor insurance businesses.
Based on performance, the total amount that will vest to Milena Mondini de Focatiis in September 2021 will be 83.3% (i.e. 29,986 shares),
subject to her continued employment on the vesting date. The Committee reviewed this vesting outcome and concluded that it was
appropriate.
Vested DFSS awards are subject to clawback provisions. Events which may lead to the application of clawback are set out in the Group’s
Malus and Clawback Framework and include material financial misstatement, responsibility for conduct which results in significant losses,
material failure of risk management, misconduct, reputational damage or corporate failure.
DFSS bonus in respect of 2020
In line with the Remuneration Policy, the Group paid a bonus to all holders of DFSS shares in 2020, which was equivalent to the dividend
payable on all outstanding DFSS shares awarded but not yet vested. The 2020 bonus for Executive Directors also includes a potential +/-
20% adjustment to the DFSS bonus based on performance of a set of risk and customer metrics, which for 2020 was grouped into four
categories measured over two six-month periods as follows:
Category
What was considered
Conduct Risk Management
Information (CRMI) metrics
11 different metrics covering claim settlement times, complaint volumes, complaint
handling times, and % of fair customer outcomes identified through monitoring in respect
of the UK Insurance business.
Customer feedback
Admiral business benchmarking survey outcome in respect of the UK Insurance business.
Governance outcomes
Metrics covering risk event escalation, staff attrition, % of activity plans completed for
Group Risk, Group Audit and Group Compliance, audit report outcomes and support of
initiatives.
Weighting
25%
25%
25%
Internal stakeholder feedback
Internal stakeholder feedback on the Executive Directors’ performance relating to risk and
customer outcomes.
25%
For the first three categories, quantitative data was assessed for various measures of performance relevant to the category and an overall
outcome is determined for that category. For the stakeholder feedback element of the scorecard, input was obtained from a number of
individuals within Admiral based on their assessment of the Executive Directors’ performance to determine the outcome of this element.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 150
Admiral Group plc · Annual Report and Accounts 2020
Annual report on remuneration continued
Details of the measures used in the scorecard and outcomes are summarised in the table below:
Category
Metrics
Target
Max
H1
H2
H1
H2
Outcomes
Milena Mondini
de Focatiis
Geraint
Jones
s
c
i
r
t
e
m
e
c
n
a
m
r
o
f
r
e
p
p
u
o
r
G
• Sales, renewals and post sales servicing
Customer
outcomes
• Claims
• Complaints
•
IT key risk indicators
12.5%
25%
6.3%
15.8%
6.3%
15.8%
Customer
feedback
• Measured through the Admiral
Business Benchmarking survey
12.5%
25%
20.0%
17.5%
20.0%
17.5%
Governance
measures
• Strategic objectives
• Risk event escalation
• Attrition
• % completion of activity plans
• Risk Register
• Audit report outcomes
12.5%
25%
17.8%
18.3%
17.8%
18.3%
l
a
u
d
i
v
i
d
n
I
s
c
i
r
t
e
m
Stakeholder
feedback
•
Individual stakeholder feedback score
12.5%
25%
19.0%
19.0%
19.0%
19.0%
Total
50%
100%
63.0%
70.5%
63.0%
70.5%
Overall scorecard multiplier
100%
120%
105.2%
108.2%
105.2%
108.2%
The overall outcome of the scorecard was assessed to be a 105.2% multiplier to the DFSS bonus paid for H1 2020 and a 108.2% multiplier
to the DFSS bonus for H2 2020 (to be paid in 2021).
In addition, the Executive Directors’ DFSS bonus is subject to a further relevant trigger adjustment (negative only) to take into account
relevant trigger events which are considered to have a material customer, regulatory or financial impact.
During the year, and in addition to the above, the Committee took into account relevant trigger events as part of the established risk
adjustment process, and determined to apply a 6.4% reduction in the H2 DFSS bonus outcome for the CFO, to give an overall outcome of
101.3%. This was due to circumstances that led to the dividend rectification process. Given the ultimate responsibility for this rests with
the CFO the Committee determined that this amendment in outturn was proportionate and sufficient. The overall DFSS bonus paid to
Geraint Jones for 2020 was £252,703. The DFSS bonus paid to Milena Mondini de Focatiis in 2020 following her appointment to the Board
was £150,796.
David Stevens did not receive DFSS bonus as he did not participate in the DFSS.
DFSS bonus payments are subject to malus and clawback provisions.
151
Scheme interests granted in 2020 (audited)
DFSS
In September 2020, Geraint Jones was granted an award under the DFSS of 45,000 shares (unchanged from 2019) with a value at the date of
award of £1,231,650 (based on share price of £27.37, equivalent to 477% of cash base salary).
The three-year period over which performance will be measured is 1 January 2020 to 31 December 2022. The award is eligible to vest on
the third anniversary of the date of grant (i.e. September 2023), subject to performance and to continued employment. Vested awards will
be subject to an additional two-year post-vest holding period.
David Stevens again declined to be included given his significant shareholding.
The award will vest on three-year EPS growth vs. three-month LIBOR, TSR vs. FTSE 350 (excluding investment companies), ROE and a
scorecard of strategic, customer and other non-financial measures. The performance conditions are summarised in the table below.
Performance measure
Weighting
Threshold
Maximum
Vesting
Performance range
EPS growth vs. LIBOR
26.67%
Growth in line
with LIBOR
Growth of 36 points
(equivalent to 10%
p.a.) in excess of LIBOR
10% for achieving threshold with straight line
relationship to 100% for maximum performance
TSR vs. FTSE 350
(excluding investment
companies)
26.67%
Median
Upper quartile
25% for median, with straight line relationship to
100% for upper quartile
Return on Equity (ROE)
26.67%
25%
55%
25% for achieving threshold with straight line
relationship to 100% for maximum performance
Scorecard of strategic,
customer and other non-
financial measures
20%
Vesting of between 0% and 100% of this element is based on the aggregate outcomes of
the scorecards used to determine the DFSS bonus adjustments over the 3-year performance
period. Further details of the aggregation of these scorecards will be provided upon vesting
DFSS awards are subject to malus and clawback provisions, i.e., forfeiture or reduction of unvested awards and recovery of vested awards.
Events which may lead to the application of malus or clawback are set out in the Group’s Malus and Clawback Framework and include
material financial misstatement, responsibility for conduct which results in significant losses, material failure of risk management,
business failure, misconduct, reputational damage and corporate failure.
SIP
In March 2020, Geraint Jones was granted an award under the SIP of 88 shares with a face value of £1,811, which will vest on 13 March 2022,
subject to continued employment.
In September 2020, Geraint Jones and Milena Mondini de Focatiis were granted awards under the SIP of 68 shares each with a face value of
£1,795, which will vest on 2 September 2023, subject to continued employment.
David Stevens again declined to be included given his significant shareholding.
Exit Payments (audited)
No exit payments were made to an Executive Director during the year.
Payments to Past Directors (audited)
No payments were made to a past Director during the year.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 152
Admiral Group plc · Annual Report and Accounts 2020
Annual report on remuneration continued
Implementation of Remuneration Policy for 2021
Executive Directors
Salary, pension and benefits
Salaries for the Executive Directors in 2021 have been determined in line with the proposed Remuneration Policy, subject to shareholder
approval. Milena Mondini de Focatiis’ salary was increased by 16.8% to £695,000, effective 1 January 2021, on her appointment as CEO.
Geraint Jones’ cash salary was increased by 2% effective 1 January 2021 to £263,160. This increase was below the average increase for the
overall employee population. In previous years, Geraint has received awards of 5,000 salary shares p.a. Under the proposed Remuneration
Policy, salary shares will no longer be awarded and the value of these will be built into base salary. For this purpose, the value of the salary
shares was calculated based on the average share price over the last three months of 2020, £28.30. The total base salary effective 1
January 2021 was therefore £404,660. This change is proposed to simplify our remuneration arrangements. It should be noted that this has
no impact on Geraint’s pension entitlement.
The Executive Directors will continue to participate in the Group Personal Pension Plan on a consistent basis as other employees, where
employee contributions are matched up to a maximum 6% of base salary with a cap on the maximum employer contribution of £15,000
p.a. The Company will offer individuals a choice between pension contributions and cash in lieu. Both Executive Directors will continue to
receive benefits in line with the Policy.
DFSS
The Committee intends to make awards under the DFSS to Milena Mondini de Focatiis and Geraint Jones in September 2021 of 90,000
and 52,500 shares, respectively. The intention to increase Geraint’s award from the 45,000 shares awarded in 2020 follows a review of his
overall remuneration package including consideration of internal and external relativities. The Committee will confirm the size for each of
the 2021 DFSS awards closer to the award date. In determining whether the award size should differ from the above number of shares, the
Committee will consider any large share price change over the prior year, and in particular whether this is due to external factors out of
management control. The actual 2021 DFSS awards will be disclosed in the 2021 Annual Report on Remuneration.
It is currently anticipated that the vesting of 2021 DFSS awards for Milena Mondini de Focatiis and Geraint Jones will continue to be
assessed across the three-year performance period depending 80% on three-year EPS growth (although due to the phase out of LIBOR,
we intend in future to express targets as absolute growth levels), TSR vs. FTSE 350 (excluding investment companies) and ROE, and 20%
on a scorecard of strategic, customer and other non-financial metrics. As per award size, the Committee will confirm the performance
conditions and targets to be attached to the 2021 DFSS award closer to the award date and will disclose them in the 2021 Annual Report
on Remuneration.
The Committee is mindful of the potential impact of the forthcoming implementation of the IFRS 17 accounting standard on the Group’s
reported financial results. At this stage the nature and degree of any such impact has not been determined. For DFSS awards which will
straddle the change in accounting standard, the Committee intends to set targets on the current basis. However, it will keep these under
review and apply its discretion to ensure that the targets remain no more or less stretching than originally anticipated as a result of the
accounting change.
The table below summarises the strategic, customer and other non-financial metrics which will apply to 2021 DFSS awards. There will also
be the potential for downwards adjustment subject to an assessment of adherence to the enterprise risk management framework.
Strategic Pillar
Measures
Customer – 35%
Customer outcomes
Customer feedback
Strategy – 30%
1. Progress towards Admiral 2.0 (data and analytics goal)
2. Diversification – existing non-motor product development
(both top line and KPIs), in particular Household and Loans
3. Diversification – development of new products
4. Progress towards defining motor mobility strategy
People – 20%
Great Place to Work Trust Index
Environmental, Social
and Governance – 15%
Governance measures
Weighting %
17.5%
17.5%
12.5%
7.5%
5.0%
5.0%
20.0%
15.0%
153
Whilst the DFSS already comprises a number of measures within the ESG agenda, covering customers, our people, risk and governance,
the Committee intends to carry out a more substantive review of how we most appropriately incorporate ESG into our remuneration
arrangements, in line with our strategy in this area (see page 93), and to implement any new approach in the next twelve months.
DFSS bonus
As in prior years, Milena Mondini de Focatiis and Geraint Jones will be eligible to receive DFSS bonus in 2021. The bonus is calculated to
be equivalent to dividends that would have been payable during the year on all outstanding DFSS shares and any salary shares awarded
but not vested. The DFSS bonus will include a +/- 20% adjustment based on performance against a set of risk and customer metrics. The
details of the metrics and any adjustment applied will be provided in the 2021 Annual Report on Remuneration.
The same non-financial measures as above will apply, as will the potential for downwards adjustment subject to an assessment of
adherence to the enterprise risk management framework.
Chair and Non-Executive Directors
Fees for the Board Chair and other Non-Executive Directors were reviewed in January 2021 having previously been last reviewed in 2020.
Increases were made, effective 1 January 2021, to the Board and Committee Chair fees (other than the Nomination and Governance
Committee) to reflect the increased time commitment of these roles.
Chair
NED base fee
Additional fee for chairing:
• Audit Committee
• Group Risk Committee
• Remuneration Committee
• Nomination and Governance Committee
Additional fee for membership of:
• Audit Committee
• Group Risk Committee
• Remuneration Committee
• Nomination and Governance Committee
Additional fee for being Senior Independent Director
2021 fee (p.a.)
2020 fee (p.a.)
£336,004*1
£65,000
£326,218*1
£65,000
£23,000
£43,000*2
£23,000
£10,000
£12,600
£12,600
£10,000
£5,000
£13,500
£21,000
£41,000*2
£19,000
£10,000
£12,600
£12,600
£10,000
£5,000
£13,500
*1
The 2021 fee for the Board Chair increased by 3% from £326,218 to £336,004 and comprises a cash fee of £235,203 and a share fee of £100,801 with which the Chair is required
under a Share Agreement entered into with the Group to use the net proceeds in two equal instalments to purchase Group shares after the Group’s Full Year Results and Half Year
Results are announced each year. The Board Chair does not receive any additional fees (e.g. for committee membership) as these are included in the overall Chair fee.
*2
The fee payable for 2021 to Jean Park continues to include an additional fee of £20,000 per annum in recognition of the increased time commitment required as a consequence
of the Internal Model Application Process.
Payments to Past Directors
Following stepping down from the role of CEO on 31 December 2020, David Stevens will continue as an adviser to the Group in a part-time
capacity, with a salary of £70,000 per annum. No other payments were or will be made to him in connection with leaving employment.
CEO and CFO pay ratio
The table below sets out the pay ratios for the CEO and CFO for the periods ended 31 December 2019 and 31 December 2020.
CEO Pay Ratio
CFO Pay Ratio
Year
2020
2019
Method
Option A
Lower
quartile
15:1
17:1
Median
13:1
15:1
Upper
quartile
9:1
10:1
Year
2020
2019
Method
Option A
Lower
quartile
74:1
62:1
Median
62:1
54:1
Upper
quartile
42:1
38:1
The lower quartile, median and upper quartile employees were determined using calculation methodology A which involved calculating
the actual full-time equivalent remuneration for all UK employees for 2020. From this analysis, three employees were then identified as
representing the 25th, 50th and 75th percentile of the UK employee population. Admiral chose this method as it is the preferred approach
of the government and that of investor bodies and Admiral had the systems in place to undertake this method. It is also consistent with
the approach used to calculate the ratios for 2019 and 2018.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information
154
Admiral Group plc · Annual Report and Accounts 2020
Annual report on remuneration continued
The Committee has considered the pay data for the three employees identified and believes that it fairly reflects pay at the relevant
quartiles amongst our UK workforce. The three individuals identified were full-time employees during the year. None received an exceptional
incentive award which would otherwise inflate their pay figures. No adjustments or assumptions were made by the Committee with the total
remuneration of these employees calculated in accordance with the methodology used to calculate the single figure of the CEO and CFO.
The employee pay levels for 2020 are detailed below:
Salary*1
Total Remuneration*2
CEO
£419,515
£421,285
CFO
P25 (lower quartile)
P50 (median)
P75 (upper quartile)
£375,450
£2,040,908
£20,545
£27,431
£19,600
£33,015
£21,097
£48,419
*1
*2
As noted above, the lower quartile, median and upper quartile employees were identified on a total remuneration basis. It is the case that the median employee on a total
remuneration basis has a lower base salary than the lower quartile and upper quartile individuals, with the other pay elements making up the remainder of the package.
The single figure of remuneration for the CEO and CFO includes actual salary and pension costs paid during 2020, in line with The Companies (Miscellaneous Reporting)
Regulations 2018. For other employees, salary and pension costs are included on an FTE basis, in line with the legislation. While the basis of calculation differs between
CEO/CFO and other employees, management considers this a fair comparison of remuneration.
The pay ratios for 2020 vs. 2019 have remained consistent. As David Stevens declined to participate in the share schemes, movements
in his remuneration and hence the CEO pay ratio are relatively modest. A significant proportion of the CFO’s remuneration is dependent
on the company’s performance and therefore it may vary more materially, resulting in movements in the CFO pay ratio from year to year.
However, the reward policies and structures applying to the CFO are broadly aligned with those of the wider workforce and therefore
consistent performance is likely to lead to a broadly consistent CFO pay ratio, as evident in 2020.
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 2019 to the financial year ended 31 December 2020.
Distribution to shareholders
Employee remuneration
2020
£m
453
456
2019
£m
401
419
%
change
13%
9%
The Directors are proposing a final dividend for the year ended 31 December 2020 of 86.0 pence per share bringing the total dividend for
2020 to 156.5 pence per share (2019: 140.0 pence per share).
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 and
FTSE 350 indices, of which the Company is a constituent, over the ten-year period to 31 December 2020. The Directors consider these
to be the most appropriate indices against which the Company should be compared. TSR is defined as the percentage change over the
period, assuming reinvestment of income.
10-Year TSR Performance: Admiral vs. FTSE 100 and FTSE 350 indices
Growth in the value of a hypothetical £100 holding over the 10 years to 31 December 2020
£400
£300
£200
£100
£0
Dec 10
Dec 11
Dec 12
Dec 13
Dec 14
Dec 15
Dec 16
Dec 17
Dec 18
Dec 19
Dec 20
Admiral
FTSE 100
FTSE 350
155
CEO
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Incumbent
CEO single figure
of remuneration
DFSS vesting
outcome
(% of maximum)
Henry
Engelhardt
Henry
Engelhardt
Henry
Engelhardt
Henry
Engelhardt
Henry
Engelhardt
Henry
Engelhardt*1
David
Stevens*2
David
Stevens
David
Stevens
David
Stevens
David
Stevens
£358,199
£373,759
£387,546
£393,260
£397,688
£148,776
£246,023
£395,019
£403,662
£413,724
£421,285
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
CFO
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Incumbent
Kevin
Chidwick
Kevin
Chidwick
Kevin
Chidwick
Kevin
Chidwick
Geraint
Jones*3
Geraint
Jones
Geraint
Jones
Geraint
Jones
Geraint
Jones
Geraint
Jones
Geraint
Jones
CFO single figure
of remuneration £1,048,130 £1,431,218 £1,444,443 £1,204,164
£363,551
£539,704
£599,139 £1,184,445 £1,461,813 £1,739,646*4 £2,040,908
DFSS vesting
outcome
(% of maximum)
100%
100%
100%
70%
85%
69%
50%
and 0%
74.2%
87.6%
88.8%
98.5%*5
*1 Henry Engelhardt stepped down from the Board on 13 May 2016. His 2016 remuneration includes salary and benefits in respect of his service as CEO.
*2 David Stevens was appointed as the CEO on 13 May 2016. His 2016 remuneration includes salary, pension and benefits in respect of his service as CEO.
*3
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.
*4 This figure has been trued up since the 2019 report for the value of the 2017 DFSS based on the actual share price on vest (£26.14).
*5 98.5% of Geraint Jones’ 2018 DFSS award will vest in September 2021 subject to his continued employment on the vesting date.
There are no annual bonus outcomes to report in the table as the Admiral DFSS bonus is not structured as a traditional annual bonus
scheme and consequently a vesting outcome (as a percentage of maximum) is meaningless.
Annual change of each Director’s pay to the annual change in average employee pay
The following table summarises the annual percentage change of each Director’s remuneration compared to the annual percentage
change of the average remuneration of the Company’s employees, calculated on a full-time equivalent basis.
Financial year ended 31 December
2020 (% change)
Percentage change in Director’s remuneration
Base salary/fees
Taxable benefits*1
DFSS bonus
Executive Directors
David Stevens
Geraint Jones
Milena Mondini de Focatiis
Non-Executive Directors
Annette Court
Owen Clarke
Karen Green
Jean Park
Jayaprakasa Rangaswami
Justine Roberts
Manning Rountree
Andy Crossley
Michael Brierley
Percentage change in employees’ remuneration*2
2%
4%
n/a
2%
-2%
6%
9%
n/a
2%
6%
6%
11%
5%
-10%
-10%
n/a
-56%
n/a
-38%
-14%
n/a
-65%
572%*3
-5%
114%
12%
n/a
25%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
18%
*1
Taxable benefits represent those expense reimbursements relating to travel, accommodation and subsistence in connection with the attendance at Board, Subsidiary and
Committee meetings during the year, which are deemed by HMRC to be taxable. The amounts in the table are ‘grossed-up’ to include the UK tax paid by the Company on
behalf of the Non-Executive Directors. Non-taxable expense reimbursements have not been included in the table.
*2 Due to unavailability of data the employee figures above exclude a small number of individuals in our US businesses.
*3 The 2020 taxable benefits for Manning Rountree include a transatlantic flight.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 156
Admiral Group plc · Annual Report and Accounts 2020
Annual report on remuneration continued
Dilution
The Company currently uses newly issued shares to fund the DFSS, SIP and salary shares. The Company has controls in place to ensure
that shares awarded under the incentive 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. It is currently anticipated that a combination
of attrition and actual vesting will result in dilution of less than 10%. As required by the rules of our share schemes, the Company will in any
event ensure that the actual dilution level does not exceed 10% in any rolling ten-year period by funding of any vested (and future) share
scheme awards as appropriate with market purchased shares.
Interests held by Directors (audited)
The Company has adopted Executive Director shareholding guidelines whereby all Executive Directors are required to acquire and retain a
beneficial shareholding in the Company equal to at least 300% of base salary (excluding salary shares, where applicable), which can be built
up over a period of five years from the later of the introduction of the guidelines and the individual’s date of appointment. Our proposed
2021 Remuneration Policy would, if approved, increase this guideline from 300% to 400% of base salary. Geraint Jones currently meets
the 300% shareholding guidelines and Milena Mondini de Focatiis currently has five years to build up a shareholding to meet Admiral’s
shareholding guidelines.
As at 31 December 2020, the Directors held the following interests:
Shares held
Director
Geraint Jones
David Stevens
Milena Mondini de Focatiis
Annette Court
Owen Clarke
Jean Park
Jayaprakasa Rangaswami
Justine Roberts
Manning Rountree
Andy Crossley
Michael Brierley
Karen Green
Beneficially
owned outright
Subject to
continued
employment only
Subject to
performance
conditions
Shareholding
requirement (% of
2020 salary)
Current
shareholding (%
of 2020 salary)
Requirement
met?*4
64,250*2
–
90,000
–
30,171*3
121,000
300%
300%
300%
> 300%
> 300%
< 300%
Y
Y
N*5
83,994*1
8,672,950
51,301*1
10,905
142,852
4,000
–
–
–
1,079
3,413
–
*1 Total includes SIP shares both matured and awarded.
*2
Total reflects shares from the 2018 DFSS award (performance test has been applied, and award is due to vest in September 2021) and salary shares awarded in 2018, 2019 and 2020.
*3 Total reflects shares from the 2018 DFSS award (performance test has been applied, and award is due to vest in September 2021) and SIP-equivalent shares awarded in 2018.
*4
The final column in the above table relates to meeting the current Remuneration Policy requirement of 300% of salary. Subject to shareholder approval at the AGM, the
new policy will increase the requirement to 400% of salary.
*5 Milena Mondini de Focatiis has five years from her appointment as Executive Director (11 August 2020) to meet the guidelines.
There have been no changes to Directors’ shareholdings since 31 December 2020.
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.
157
Executive Directors’ interests in shares under the DFSS and SIP and salary share awards (audited)
At start
of year
Awarded
during year
Vested/
matured
during year
At end of
year
Price at
award (£)
Value at
award date
(£)
Value at
31 Dec 2020 or
maturity (£)
Date of
award
Final vesting/
maturity date
Type
Geraint Jones
DFSS
DFSS
DFSS
DFSS
Salary Shares
Salary Shares
Salary Shares
Salary Shares
Salary Shares
Salary Shares
SIP
SIP
SIP
SIP
SIP
SIP
SIP
SIP
DFSS
DFSS
DFSS
DFSS
SIP equivalent
(through DFSS)
SIP equivalent
(through DFSS)
SIP
SIP
SIP
SIP
Milena Mondini de Focatiis
50,000
50,000
45,000
–
–
–
–
45,000
2,500
2,500
2,500
2,500
–
–
95
85
96
87
84
83
–
–
36,000
36,000
36,000
–
–
–
–
2,500
2,500
–
–
–
–
–
–
88
68
–
–
–
–
85,000
96
87
84
83
–
–
–
–
–
–
88
68
44,400
–
£18.10
£905,000
£1,160,616
26/09/2017 26/09/2020
–
–
–
–
–
–
–
–
–
95
85
–
–
–
–
–
–
50,000
45,000
45,000
2,500
2,500
2,500
2,500
2,500
2,500
–
–
96
87
84
83
88
68
£20.40 £1,020,000
£1,453,000 26/09/2018 26/09/2021
£21.00
£945,000
£1,307,700 26/09/2019 26/09/2022
£27.37 £1,231,650
£1,307,700 24/09/2020 24/09/2023
£18.70
£20.59
£21.46
£21.45
£20.58
£26.40
£19.08
£21.08
£18.70
£20.59
£21.46
£21.45
£20.58
£26.40
£46,750
£51,475
£53,650
£53,625
£51,450
£66,000
£1,813
£1,792
£1,795
£1,791
£1,803
£1,780
£1,811
£1,795
£72,650 09/03/2018 09/03/2021
£72,650 24/08/2018 24/08/2021
£72,650 18/03/2019 18/03/2022
£72,650 30/08/2019 30/08/2022
£72,650 13/03/2020 13/03/2023
£72,650 02/09/2020 02/09/2023
£2,120
17/03/2017
17/03/2020
£2,293
18/08/2017 18/08/2020
£2,790 09/03/2018 09/03/2021
£2,528 24/08/2018 24/08/2021
£2,441 18/03/2019 18/03/2022
£2,412 30/08/2019 30/08/2022
£2,557 13/03/2020 13/03/2023
£1,976 02/09/2020 02/09/2023
33,298
–
£18.10
£651,600
£870,410
26/09/2017 26/09/2020
–
–
–
–
–
–
–
–
–
36,000
36,000
85,000
£20.40
£734,400
£1,046,160 26/09/2018 26/09/2021
£21.00
£756,000
£1,046,160 26/09/2019 26/09/2022
£23.08 £1,961,800
£2,470,100 24/04/2020 24/04/2023
96
87
84
83
88
68
£18.70
£1,795
£2,790 09/03/2018 09/03/2021
£20.59
£1,791
£2,528 24/08/2018 24/08/2021
£21.46
£21.45
£20.58
£26.40
£1,803
£1,780
£1,811
£1,795
£2,441 18/03/2019 18/03/2022
£2,412 30/08/2019 30/08/2022
£2,557 13/03/2020 13/03/2023
£1,976 02/09/2020 02/09/2023
The value at maturity relates only to shares vested. For SIP and Salary Shares the price at award reflects the average closing share price
over the five days prior to the award date.
The closing price of Admiral shares on 31 December 2020 was £29.06 per share.
By order of the Board,
Owen Clarke
Chair of the Remuneration Committee
3 March 2021
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 158
Admiral Group plc · Annual Report and Accounts 2020
Directors’
report
Further information
Employee polices
on page 80
Customers
on page 58
Business Model
on page 18
Stakeholder Engagement
on page 108
Our People
on page 64
Being a responsible business
on page 76
Remuneration report
on page 146
Strategic report
on page 9
Corporate Governance report
on page 100
SECR
on page 78
The Directors present their Annual Report and the audited
Financial Statements for the year ended 31 December 2020.
Statutory disclosures
Group results and dividends
The profit for the year, after tax but before
dividends, amounted to £527.8 million (2019:
£428.4 million). The Directors declared and
paid dividends of £425.7 million during 2020
(2019 £367.8 million). Refer to note 12b for
further details.
The Directors have proposed a final dividend
of £250.4 million (86.0 pence per share).
Subject to shareholders’ approval at the
2021 Annual General Meeting (AGM), the
final dividend will be paid on 4 June 2021 to
shareholders on the register at the close of
business on 7 May 2021.
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.
Engagement with key stakeholders
Detailed information on the Group’s
engagement with its key stakeholders is
set out in the Strategic Report on pages
58 to 79.
Diversity
The Group’s gender diversity information
for the financial year, together with an
explanation of the policies related to
diversity are set out in the Strategic Report
on page 69.
Anti-Bribery
The Group’s Anti Bribery policy strictly
prohibits the solicitation or the acceptance
of any bribe, whether cash or inducement,
to or from any person or Company, wherever
they are situated and whether they are a
public official or body or private person or
Company, by any individual employee, Board
member, agent or other person or body on
the Group’s behalf. The Group’s Anti Bribery
Policy is reviewed and approved by the
Board on an annual basis to ensure that the
arrangements in place to prevent bribery
are operating effectively and that the Policy
supports the development of a culture
where business is conducted fairly, honestly
and openly.
All staff receive compulsory anti-bribery
training when they join the Group and
refresher training is provided on an
annual basis. In addition, the Group has
various forums that allow employees to
communicate directly with managers on an
informal, and, if necessary, an anonymous
basis, that helps to create an environment
where staff feel comfortable raising
matters that are of concern to them.
Contractual arrangements
The Group considers its co-insurance and
reinsurance contracts, as described in the
Strategic Report, to be essential to the
running of the Group’s business. A number
of these arrangements include features
that allow for reinsurers to recover losses
incurred under certain scenarios considered
remote by the Group Board. 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 6j to
the Financial Statements.
Directors and their interests
The present Directors of the Company are
shown on pages 96 to 98 of this Report,
whilst Directors’ interests in the share
capital of the Company are set out in the
Remuneration Report on page 156. A list
of Directors in the financial period to 31
December 2020 is shown on page 107.
Greenhouse gas emissions
Disclosures related to greenhouse gas
emissions are set out in the Strategic Report
on page 77.
Going concern
Under Provision 30 of the 2018 UK
Corporate Governance Code, the Board is
required to report on whether the business
is a going concern. In considering this
requirement, the Directors have taken into
account the following:
• The Group’s projections for the next
12 months and beyond, in particular
the profit forecasts, regulatory capital
surpluses and levels and sources of
liquidity.
159
• The risks included on the Group’s risk
register that could impact on the Group’s
financial position and performance, levels
of liquidity and solvency over the next 12
months.
• The risks on the Group’s risk register
that could be a threat to the Group’s
business model and capital adequacy.
The Group’s business activities, together
with the factors likely to affect its future
development, performance and position
are set out in the Strategic Report.
The Strategic Report also includes the
Group’s principal risks and uncertainties.
In addition, the Group Risk Committee
report includes the Directors’ statement
on the viability of the Group over a three-
year period.
Following consideration of the above, the
Directors have reasonable expectation
that the Group has adequate resources to
continue in operation for the foreseeable
future, a period of not less than 12 months
from the date of this report, and that it is
therefore appropriate to adopt the going
concern basis in preparing the Financial
Statements.
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 31 January 2021, 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:
Number of
Shares
%
There are no restrictions on the transfer of
ordinary shares in the Company other than:
Munich Re
30,099,400 10.1%
• Certain restrictions may from time to
Henry Engelhardt &
Diane Briere de l’Isle
27,105,472
9.1%
time be imposed by laws and regulations
(for example, insider trading laws).
BlackRock, Inc.
16,397,268
5.5%
• Pursuant to the Listing Rules of the FCA
Moondance
Foundation
Mawer Investment
Management Ltd.
11,900,000
4.0%
11,317,609
3.8%
FMR LLC
10,459,454
3.5%
N.M. Rothschild
& Sons Ltd.
David & Heather
Stevens
9,676,785
3.3%
8,672,950
3.0%
The interests of Directors and Officers and
their connected persons in the issued share
capital of the Company are given in the
Remuneration Report.
Further information on the rights attaching
to shares under the employee share
schemes are provided in the
Remuneration Report.
Additional information for shareholders
The following provides the additional
information required for shareholders in
accordance with the Takeovers Directive
and the respective UK law.
At 31 December 2020, 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 12d. The rights
and obligations attached to the Company’s
ordinary shares are set out in the Articles of
Association of the Company, copies of which
can be obtained from Companies House.
If a poll is called at a general meeting, 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.
whereby certain employees and directors
of the Company require the approval of
the Company to deal in the Company’s
securities.
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 (entered into
in the normal course of business). None are
considered to be significant in terms of
their impact on the business of the Group as
a whole.
Power to issue shares
At the last Annual General Meeting,
held on 30 April 2020, authority was
given to the Directors to allot unissued
relevant securities in the Company up to
a maximum of £196,024, representing the
Investment Association’s Guidelines limit of
approximately two thirds of the issued share
capital as at 23 March 2020. This authority
expires on the date of the Annual General
Meeting to be held on 30 April 2021 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 30 April 2021 and the
Directors will seek to renew this authority
for the following year.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 160
Admiral Group plc · Annual Report and Accounts 2020
Directors’ report continued
In line with the principles published by the
Pre-Emption Group in March 2015, and
their template resolutions published in May
2016, allowing a company the ability to seek
authority over a further 5% of the issued
ordinary share capital on a non-pre-emptive
basis subject to certain conditions, it is the
intention of the Company, at the AGM on 30
April 2020, to seek this additional authority
by special resolution and will confirm in
the Notice of AGM that such additional
shares are only issued in connection with a
specified acquisition or capital investment.
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 and
Governance Committee, any appointment
must be recommended by the Nomination
and Governance Committee for approval
by the Board of Directors. At the Group’s
AGM on 26 April 2018, new Articles of
Association were approved by shareholders
which provide that all Directors will retire
and offer themselves for re-election at each
AGM, in accordance with the UK Corporate
Governance Code and the Company’s
current practice. Therefore, all Directors
will be submitting themselves for either
election or re-election by shareholders at
the forthcoming AGM.
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 and
buyback of shares are also included in the
Articles and such authorities are renewed by
shareholders at the Annual General Meeting
each year.
Directors’ indemnities and insurance
Directors and Officers insurance cover is
in place for all Directors to provide cover
against certain acts or omissions on behalf
of the Company. A Deed Poll of Indemnity
was executed in October 2015, indemnifying
each of the Directors, and Company
Secretary, in relation to certain losses and
liabilities that they might incur in the course
of acting as Directors of the Company. The
Deed Poll of Indemnity is categorised as
qualifying third party provisions as defined
by Section 234 of the Companies Act 2006
and remains in force for all past and present
Directors of the Company.
The Board is of the view that it is in the
best interests of the Group to attract
and retain the services of the most able
and experienced Directors by offering
competitive terms of engagement,
including the granting of such indemnities.
Neither the Deed Poll of Indemnity nor
insurance cover would provide any coverage
in the event that a Director is proved to have
acted fraudulently or dishonestly.
Annual General Meeting (AGM)
It is proposed that the next AGM be held
at the company’s registered office of Tŷ
Admiral, David Street, Cardiff, CF10 2EH on
Friday 30 April 2021 at 2.00pm, notice of
which will be sent to shareholders with the
Annual Report.
Distributions
In 2020, the Board became aware of certain
procedural issues in respect of payments
of interim dividends on 2 October 2020,
20 October 2010 and 21 October 2009
(together, the Relevant Distributions) which
means that the Relevant Distributions had
been made otherwise than in accordance
with the requirements of the Companies
Act 2006.
At the AGM to be held on 30 April 2021,
a resolution will be proposed which will,
if passed, authorise the appropriation of
distributable profits to the payment of the
Relevant Distributions and the entry by the
Company into two deeds of release. One
deed of release will release shareholders
from all claims which the Company has or
may have in respect of the payment of those
Relevant Distributions and the second deed
of release will waive any rights the Company
has or may have to make claims against
former Directors and Directors in respect
of the Relevant Distributions. The entry
by the Company into each deed of release
constitutes a related party transaction (as
defined in the Listing Rules). The overall
effect of the proposed resolution is to
return all parties to the position they would
have been in had the Relevant Distributions
been made in full compliance with the
Companies Act 2006.
The Company is also putting in place new
procedures relating to all distributions
which will ensure that relevant legal
requirements are complied with in the
future, including a filing and compliance
automated reminder system and additional
training to relevant employees in respect of
the Company’s filing obligations.
Reporting, accountability and audit
UK Corporate Governance Code
Admiral is subject to the UK Corporate
Governance Code (the Code), published by
the Financial Reporting Council (FRC) in July
2018 and available on their website, www.
frc.org.uk. The Company’s Annual Report
and Accounts, taken as a whole, addresses
the requirements of the 2018 Code.
The UK Corporate Governance Code 2018
(the Code) was applicable for the Group
during the year under review, and the Group
has applied the principles and complied
with the provisions of the Code except with
regard to non-compliance with provision
36 as set out in the Corporate Governance
Report on page 103.
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
position and performance, business model
and strategy.
161
The Board is ultimately responsible for the
Group’s system of risk management and
internal control and, through the Audit
Committee, has reviewed the effectiveness
of the Group’s internal control and risk
management arrangements relating to the
financial reporting process and the principal
risks facing the business. The Board is
satisfied that the Group’s internal control
and risk management framework is prudent
and effective and that, through the Audit
Committee and Group Risk Committee, risk
can be assessed, managed and assurance
given that all material controls are reviewed
and monitored.
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 IFRSs adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the
European Union and applicable law and have
elected to prepare the parent company
financial statements in accordance with UK
Accounting Standards, including FRS 101
Reduced Disclosure Framework.
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. In preparing each of
the Group and parent company financial
statements, the Directors are required to:
• select suitable accounting policies and
then apply them consistently;
• make judgements and estimates that
are reasonable and prudent;
• for the parent company financial
Disclosure of information to auditor
statements, state whether applicable
UK Accounting Standards, including FRS
101 Reduced Disclosure Framework, have
been followed, subject to any material
departures disclosed and explained in the
parent company financial statements.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the parent
company’s transactions and 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
complies 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 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
Following completion of the tender
for the Group’s audit services and the
Board’s approval of the Audit Committee’s
recommendation to re-appoint the
Company’s auditor, Deloitte 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
3 March 2021
Responsibility statement
The Directors confirm that to the best of
their knowledge:
Geraint Jones
Chief Financial Officer
3 March 2021
• 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
• for the Group Financial Statements, state
• the Directors’ Report and the Strategic
whether they have been prepared in
accordance with IFRS as adopted by the
EU; and
Report include a fair review of the
development and performance of the
business and the position of the issuer
and the undertakings included in the
consolidation taken as a whole, together
with a description of the principal risks
and uncertainties that they face.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information
162
Admiral Group plc · Annual Report and Accounts 2020
Financial Statements
163 Independent Auditor’s Report
174 Consolidated Income Statement
176 Consolidated Statement of Comprehensive Income
177 Consolidated Statement of Financial Position
178 Consolidated Cash Flow Statement
179 Consolidated Statement of Changes in Equity
180 Notes to the Financial Statements
248 Parent Company Financial Statements
251 Notes to the Parent Company Financial Statements
260 Consolidated Financial Summary (unaudited)
We
believe
in the
test and learn
approach
Independent Auditor’s Report
to the Members of Admiral Group plc
163
Report on the audit of the financial statements
1. Opinion
In our opinion:
• the financial statements of Admiral Group plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) give a true and fair
view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2020 and of the Group’s profit for the
year then ended;
• the Group financial statements have been properly prepared in accordance with International Accounting Standards in
conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards (IFRSs) as
adopted by the European Union;
• the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice, including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements which comprise:
• the Consolidated and Parent Company Income Statements;
• the Consolidated and Parent Company Statements of Comprehensive Income;
• the Consolidated and Parent Company Statements of Financial Position;
• the Consolidated Cash Flow Statement;
• the Consolidated and Parent Company Statements of Changes in Equity;
• the related notes 1 to 14 to the Group financial statements, excluding the capital adequacy disclosures in note 12e calculated in
accordance with the Solvency II regime which are marked as unaudited; and
• the related notes 1 to 15 to the Parent Company financial statements.
The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law,
International Accounting Standards in conformity with the requirements of the Companies Act 2006 and IFRSs as adopted by the European
Union. The financial reporting framework that has been applied in the preparation of the Parent Company financial statements is
applicable law and United Kingdom Accounting Standards, including FRS 101 ‘Reduced Disclosure Framework’ (United Kingdom Generally
Accepted Accounting Practice).
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report.
We are independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit
of the financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed public
interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services
provided to the Group for the year are disclosed in note 9c to the financial statements. We confirm that the non-audit services prohibited
by the FRC’s Ethical Standard were not provided to the Group or the Parent Company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
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Admiral Group plc · Annual Report and Accounts 2020
Independent Auditor’s Report continued
to the Members of Admiral Group plc
3. Summary of our audit approach
Key audit
matters
The key audit matters that we identified in the current year were:
• Valuation of gross insurance claims reserves;
• Change in reserving process to use internal projections; and
• Assessing the scenarios and assumptions used in the determination of loan loss provision.
Within this report, key audit matters are identified as follows:
Newly identified
Increased level of risk
Similar level of risk
Decreased level of risk
Materiality
The materiality that we used for the Group financial statements was £31.8 million which was determined on the basis
of 5% of profit before tax (‘PBT’).
Scoping
We identified eight reporting components which we determined should be subjected to full scope audits this year.
Specific audit procedures were completed in respect of seven further components which, although not financially
significant, did present some specific audit risks which needed to be addressed.
The components within the scope of our audit procedures account for 98% of the Group’s profit before tax, 97% of
the Group’s revenue and 97% of the Group’s net assets.
Significant
changes in
our approach
In 2020, management has changed the UK motor reserving process, using an internally projected best estimate. Given
the UK motor reserves are one of the largest and most judgemental balances in the Group financial statements, we
have identified an additional key audit matter related to this change.
Following developments in the Admiral Loans business, including further growth of the book and the economic
impacts of the Covid-19 pandemic, we have included the calculation of the loan loss provision as a key audit matter
for the current year. Specifically, the key audit matter relates to the macro-economic scenarios and assumptions
driving the future expected credit losses.
We previously identified a key audit matter associated with the valuation of projected excess of loss reinsurance
recoveries following an enhancement to the methodology applied in calculating such recoveries during 2019. As there
has been no further change in the methodology, and we did not identify any material findings related to this risk in
the prior period, this no longer forms a key audit matter.
Furthermore, we previously identified a key audit matter in respect of the Parent Company financial statements
related to the valuation of its investment in the Group’s US insurance subsidiary, Elephant Insurance Company LLC
(‘Elephant’). Given the estimation uncertainty in the valuation is no longer considered to be as significant, we no
longer consider it to be a key audit matter.
165
4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation
of the financial statements is appropriate.
Our evaluation of the Directors’ assessment of the Group’s and Parent Company’s ability to continue to adopt the going concern basis of
accounting included:
• We obtained an understanding of the relevant controls relating to management‘s going concern assessment process.
• We evaluated management’s going concern assessment in light of Covid-19; this included obtaining evidence such as underlying
business plans and forecasts to support the key assumptions.
• We assessed management’s reverse stress testing and the likelihood of the various scenarios that could adversely impact upon the
Group’s liquidity and solvency headroom.
• We inspected the Group ORSA (‘Own Risk and Solvency Assessment’) to support our understanding of the key risks faced by the Group,
its ability to continue as a going concern, and the longer-term viability of the Group.
• We obtained and inspected correspondence between the Group and its regulators, the FCA and PRA, as well as reviewing the Group Risk
Committee meeting minutes, to identify any items of interest which could potentially indicate either non-compliance with legislation
or potential litigation or regulatory action held against the Group.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the Group’s and Parent Company’s ability to continue as a going concern for a period of at
least twelve months from when the financial statements are authorised for issue.
In relation to the reporting on how the Group has applied the UK Corporate Governance Code, we have nothing material to add or draw
attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered it appropriate to
adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of
this report.
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Admiral Group plc · Annual Report and Accounts 2020
Independent Auditor’s Report continued
to the Members of Admiral Group plc
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)
that we identified. These matters included those which had the greatest effect on: the overall audit strategy; the allocation of resources
in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters.
5.1. Valuation of gross insurance claims reserves
Key audit
matter
description
The Group’s gross insurance claims reserves total £2,920 million as at 31 December 2020 (2019 year-end:
£2,899 million). The judgements which are made by management in determining the valuation of claims reserves
are by far the most significant, in terms of their impact on the Group’s financial position. Setting these claims
reserves is an inherently subjective exercise and small changes in underlying assumptions may have a material
impact on the overall year-end result reported.
How the scope
of our audit
responded to
the key audit
matter
Specifically, our significant areas of focus are management’s selection of the frequency and severity assumptions
for large bodily injury claims arising in the UK Car Insurance business. These particular claims result in higher
individual claims reserves and are more judgemental, in terms of the development of the ultimate losses, due to the
longer-term nature of the Group’s exposure (compared to property damage claims).
In line with the Group’s accounting policy, management adds a margin to the actuarial best estimate to arrive at the
booked gross claims reserves. This margin reflects the inherent uncertainty in estimating the ultimate losses on
claims, over and above that which can be projected actuarially based on underlying claims development data. This
is a significant area of management judgement and, therefore, a focus of our audit.
Specifically, the consistency of the level of prudence within the margin for the UK Car Insurance reserves, related
to large bodily injury claims, is our key area of focus.
Refer to page 117 in the Audit Committee report where this is included as a significant issue and note 3 and note 5d
in the financial statements which refer to this matter.
We obtained an understanding and tested the operating effectiveness of relevant controls relating to the key
actuarial assumptions identified and the setting of the management margin applied as an uplift on the projected
actuarial best estimate.
We obtained and inspected the reports from both management, and management’s external expert actuary,
and have involved our actuarial specialists to challenge management’s key assumptions. We also assessed the
objectivity and competence of management’s expert.
We benchmarked management’s frequency assumptions against available industry data and considered the
comparison in the context of the risk profile of the Group’s portfolio and the year-on-year changes in these
assumptions.
We undertook a graphical analysis of incurred development patterns to assess and challenge management’s
severity assumptions. We benchmarked the average cost per claim assumptions against available third party
industry data in the context of this incurred development analysis.
We challenged management’s qualitative and quantitative justifications for the margin held over the actuarial
best estimate reserves through review of management’s accounting judgement papers and testing the key
internal controls governing the claims distribution model. We analysed the consistency of prudence within the
booked margin against previous reporting periods in the context of the underlying uncertainty in incurred claims
development and challenged management’s support for the booked position.
Key
observations
Based on the procedures described above, we consider that the booked reserves remain appropriate and in line
with the Group’s prudent accounting policy.
167
5.2. Change in reserving process to use internal projections
Key audit
matter
description
In 2020, management transitioned from using a best estimate produced by an external actuarial expert to using an
internal projection as a basis for financial statement reserving for the UK Car insurance business. Management’s
external actuarial expert continues to provide an external estimate on a consistent basis to previous periods, but as
validation of Admiral’s internal estimate rather than an input to the financial statement reserving process.
Our audit work over the change in the reserving process required significant input from our actuarial specialists
and was the focus of a significant amount of audit effort; therefore, we considered this a key audit matter.
Specifically, we focussed on the risk that the methodology was not applied as designed and intended, through
either errors or omissions in the internal models and processes used.
Refer to page 117 in the Audit Committee report where this is included as a significant issue and note 3 and note 5d
in the financial statements which refer to this matter.
How the scope
of our audit
responded to
the key audit
matter
We obtained an understanding and tested the operating effectiveness of relevant controls governing the actuarial
models. This included involving our IT specialists to test the general IT controls in respect of the actuarial models
utilised by the Group’s internal reserving function.
Furthermore, we involved our actuarial specialists to reproduce the output from management’s reserving models
for all material classes of claims for UK motor business, including bodily injury, to assess whether the models used
by management accurately implement the methodology described in management’s actuarial papers.
Key
observations
Based on the procedures described above, we consider management’s UK Car Insurance reserving model to be
appropriate and in line with the Group’s accounting policy.
5.3. Valuation of loan loss provision
Key audit matter
description
The loan loss provision recognised totals £42.0 million as at 31 December 2020 (2019 year-end: £24.0 million).
The valuation of the loan loss provision represent a significant area of judgement in the financial statements.
Given the Group does not have through-the-cycle historical loss information, and places a high level of reliance
on management judgement, we focused our work around the selection of macro-economic scenarios, such as the
effect of unemployment in terms of the increase in the provision should the economy worsen due to the on-going
impact of Covid-19.
Key assumptions applied in the model include the Significant Increase in Credit Risk (SICR) indicators applied in the
model, the correlation between the movement in the economy and the expected defaults and the judgements that
are included in the calculation of the probabilities of default.
Our challenge of management’s selection of macro-economic scenarios and weightings applied to the IFRS 9 model
represents an area where we focus significant audit time and effort. As such, we consider this a key audit matter.
Refer to page 118 in the Audit Committee report where this is included as a significant issue and note 3 and note 7b
in the financial statements which refer to this matter.
How the scope
of our audit
responded to the
key audit matter
We obtained an understanding of relevant controls governing the macro-economic selections and the IFRS 9
model, including any model adjustments applied.
With the assistance of our internal IFRS 9 credit modelling specialist team, we challenged whether the model was
compliant with the requirements of IFRS 9 and established market practice. Furthermore, we benchmarked the
macro-economic scenarios to market peers and, with the assistance of our internal economists, challenged areas
of inconsistency.
We also tested the model mechanics to assess whether it is operating in line with management’s documentation.
We did this through review of the model, comparison to the methodology and reperformance of the determination
of probabilities of default, losses given default and SICR where necessary.
Key observations Based on the procedures described above, we consider management’s selection of scenarios and assumptions used
in the determination of loan loss provision to be appropriate.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information
168
Admiral Group plc · Annual Report and Accounts 2020
Independent Auditor’s Report continued
to the Members of Admiral Group plc
6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions
of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work
and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Parent company financial statements
Materiality
£31.8 million (2019: £26.1 million)
£2.9 million (2019: £3.0 million)
Basis for
determining
materiality
Rationale for
the benchmark
applied
5% (2019: 5%) of profit before tax (‘PBT’) from
continuing and discontinued operations.
3% (2019: 3%) of two-year average of net assets.
We consider profit before tax to be the critical
benchmark of the performance of the Group and
consider this benchmark to be suitable having compared
to other benchmarks: our materiality equates to 1% of
gross earned premium and 3% of equity (2019: 1% of
gross earned premium and 3% of equity).
The Parent Company primarily exists as the holding
company which carries investments in Group subsidiaries
and is the issuer of listed securities. We consider that net
assets is the critical benchmark for the Company. The
measure uses a two-year average of net assets which
we consider appropriate given the inherent volatility
associated with the timing of dividend payments.
PBT £637.6m
PBT
Group materiality
Group materiality
£31.8m
Component materiality
range £2.6m to £25.1m
Audit committee
reporting threshold £1.3m
6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected
misstatements exceed the materiality for the financial statements as a whole.
Performance
materiality
Basis and
rationale for
determining
performance
materiality
Group financial statements
Parent company financial statements
70% (2019: 70%) of Group materiality
70% (2019: 70%) of Parent Company materiality
In determining performance materiality, we considered factors including:
• our risk assessment, including our assessment of the Group’s overall control environment and that we consider it
appropriate to rely on controls over a number of business processes;
• our past experience of the audit, which has indicated a low number of uncorrected misstatements identified in
prior periods; and
• the fact that Admiral Group plc is a publicly listed entity where there is exposure to significant media coverage.
169
6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £1.3 million (2019:
£1.0 million), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to
the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.
7. An overview of the scope of our audit
7.1. Identification and scoping of components
The eight financially significant components of the Group which were identified in our audit planning are Admiral Insurance (Gibraltar)
Limited, Admiral Insurance Company Limited, EUI Limited, Inspop.com Limited, Admiral Financial Services Limited, Admiral Europe
Compañía de Seguros, Elephant Insurance Company and the Admiral Group plc parent entity. This is consistent with our scoping in 2019.
Each of these significant components was subjected to a full-scope audit, completed to individual component materiality levels which ranged
from £2.6 million to £25.1 million (2019: £1.7 million to £18.6 million) dependent upon the relative significance of each individual component.
Additionally, we have completed specific audit procedures, designed to address specific audit risks, for seven (2019: two) further
components.
The components within the scope of our audit procedures account for 98% (2019: 97%) of the Group’s profit before tax, 97% (2019: 95%)
of the Group’s revenue and 97% (2019: 94%) of the Group’s net assets.
For the remaining components, which were not subject to audit or specified audit procedures, we performed analysis at an aggregated Group
level to re-assess our evaluation that there were no significant risks of material misstatement presented by any of these components.
Revenue
Profit before tax
Net assets
Full audit scope (94%)
Specified audit
procedures (3%)
Full audit scope (98%)
Specified audit
procedures (1%)
Full audit scope (92%)
Specified audit
procedures (5%)
Review at Group level (3%)
Review at Group level (1%)
Review at Group level (3%)
7.2. Working with other auditors
We engaged local component auditors, being Deloitte member firms in the US and Spain, to perform the audit work in these respective
territories on our behalf. Typically, each year we visit the operations in Rome, Madrid, Seville and Richmond but, given the presence of
Covid-19, this was not possible for 2020. In response to this limitation, we directed and supervised the work of the component auditors by
increasing the frequency of phone calls with the component audit teams, participating in videoconferences and viewing certain key audit
documentation remotely.
8. Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor’s
report thereon. The Directors are responsible for the other information contained within the annual report. Our opinion on the financial
statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express
any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to
a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
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Admiral Group plc · Annual Report and Accounts 2020
Independent Auditor’s Report continued
to the Members of Admiral Group plc
9. Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement, the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary
to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to continue
as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
10. Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditor’s report.
11. Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud is detailed below.
11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and
regulations, we considered the following:
• the nature of the industry and sector, control environment and business performance including the design of the Group’s remuneration
policies, key drivers for Directors’ remuneration, bonus levels and performance targets;
• results of our enquiries of management, internal audit and the Audit Committee about their own identification and assessment of the
risks of irregularities;
• any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures relating to:
– identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance,
including the interim dividend that was not made in accordance with the Companies Act 2006 (see page 160 of the Directors’ Report);
– detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;
– the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations; and
• the matters discussed among the audit engagement team including significant component audit teams and involving relevant internal
specialists, including tax, actuarial, IT, and industry specialists regarding how and where fraud might occur in the financial statements
and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and
identified the greatest potential for fraud in the following areas: valuation of gross insurance claims reserves for UK Car Insurance and
valuation of loan loss provision. In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond
to the risk of management override.
171
We also obtained an understanding of the legal and regulatory frameworks that the Group operates in, focusing on provisions of those
laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements.
The key laws and regulations we considered in this context included the UK Companies Act, Listing Rules, PRA and FCA regulations, and
relevant tax legislation.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but
compliance with which may be fundamental to the Group’s ability to operate or to avoid a material penalty. These included the Group’s
operating licence and regulatory solvency requirements.
Audit response to risks identified
As a result of performing the above, we identified the valuation of gross insurance claims reserves, the change in reserving process to
use internal projections and the valuation of loan loss provision as key audit matters related to the potential risk of fraud. The key audit
matters section of our report explains the matters in more detail and also describes the specific procedures we performed in response to
those key audit matters.
In addition to the above, our procedures to respond to risks identified included the following:
• reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of
relevant laws and regulations described as having a direct effect on the financial statements;
• enquiring of management, the Audit Committee and in-house legal counsel concerning actual and potential litigation and claims;
• performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement
due to fraud;
• reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing correspondence with
HMRC, the Financial Conduct Authority and the Prudential Regulation Authority;
•
•
in response to the identified instance of non-compliance with Section 836 of the Companies Act 2006, in relation to distributable
reserves (see page 160 of the Directors’ Report), we assessed the Directors’ response to ascertain whether any further steps should be
taken, including inspecting relevant legal advice received by the Group; and
in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other
adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating
the business rationale of any significant transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including
internal specialists and significant component audit teams, and remained alert to any indications of fraud or non-compliance with laws
and regulations throughout the audit.
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Independent Auditor’s Report continued
to the Members of Admiral Group plc
Report on other legal and regulatory requirements
12. Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the Directors’ report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
• the strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the Parent Company and their environment obtained in the
course of the audit, we have not identified any material misstatements in the strategic report or the Directors’ report.
13. Corporate Governance Statement
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of the
Corporate Governance Statement relating to the Group’s compliance with the provisions of the UK Corporate Governance Code specified
for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial statements and our knowledge obtained during the audit:
• the Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material
uncertainties identified set out on page 158;
• the Directors’ explanation as to its assessment of the Group’s prospects, the period this assessment covers and why the period is
appropriate set out on page 125;
• the Directors’ statement on fair, balanced and understandable set out on page 160;
• the Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 123;
• the section of the annual report that describes the review of effectiveness of risk management and internal control systems set
out on page 123; and
• the section describing the work of the Audit Committee set out on page 116.
14. Matters on which we are required to report by exception
14.1. Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• 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 are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
14.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of Directors’ remuneration have not been
made or the part of the Directors’ remuneration report to be audited is not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
173
15. Other matters which we are required to address
15.1. Auditor tenure
Following the recommendation of the Audit Committee, we were appointed by shareholders’ approval at the Annual General Meeting
on 30 April 2020 to audit the financial statements for the year ending 31 December 2020. The period of total uninterrupted engagement
including previous renewals and reappointments of the firm is five years, covering the years ending 31 December 2016 to
31 December 2020.
15.2. Consistency of the audit report with the additional report to the Audit Committee
Our audit opinion is consistent with the additional report to the Audit Committee we are required to provide in accordance with ISAs (UK).
16. Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Mark McQueen (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
3 March 2021
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information
174
Admiral Group plc · Annual Report and Accounts 2020
Consolidated Income Statement
For the year ended 31 December 2020
Continuing operations
Insurance premium revenue
Insurance premium ceded to reinsurers
Net insurance premium revenue
Other revenue
Profit commission
Interest income
Interest expense
Net interest income from loans
Investment return – interest income at effective interest rate
Investment return – other
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
Expected credit losses
Net operating expenses and share scheme charges
Total expenses
Operating profit
Finance costs
Finance costs recoverable from co- and reinsurers
Net finance costs
Profit before tax from continuing operations
Taxation expense
Profit after tax from continuing operations
Profit before tax from discontinued operations
Taxation expense
Profit after tax from discontinued operations
Profit after tax from continuing and discontinued operations
Year ended
Note
31 December
2020
£m
Re-presented
31 December
2019
£m
5
8
5
7
7
6
6
5
5
9
9
6, 9
6
6
10
13
13
2,265.3
(1,513.7)
751.6
329.4
134.0
36.8
(7.2)
29.6
33.9
26.8
1,305.3
(1,318.6)
1,025.4
(293.2)
(814.6)
456.6
(33.6)
(391.6)
(684.8)
620.5
(14.3)
2.0
(12.3)
608.2
(106.2)
502.0
29.4
(3.6)
25.8
527.8
2,198.4
(1,489.0)
709.4
324.3
114.9
30.8
(6.3)
24.5
36.4
(0.7)
1,208.8
(1,568.1)
1,208.8
(359.3)
(758.9)
441.2
(14.2)
(331.9)
(691.2)
517.6
(14.5)
2.0
(12.5)
505.1
(89.2)
415.9
17.5
(5.0)
12.5
428.4
175
Profit after tax attributable to:
Equity holders of the parent
Non-controlling interests (NCI)
Earnings per share – from continuing operations
Basic
Diluted
Earnings per share – from continuing and discontinued operations
Basic
Diluted
Dividends declared and paid (total)
Dividends declared and paid (per share)
Year ended
Note
31 December
2020
£m
Re-presented
31 December
2019
£m
528.8
(1.0)
527.8
170.7p
170.4p
179.5p
179.2p
425.7
147.5p
432.4
(4.0)
428.4
143.7p
143.4p
148.3p
148.0p
367.8
129.0p
12
12
12
12
12
12
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 176
Admiral Group plc · Annual Report and Accounts 2020
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2020
Profit for the period – from continuing and discontinued operations
Other comprehensive income
Items that are or may be reclassified to profit or loss
Movements in fair value reserve
Deferred tax charge in relation to movement in fair value reserve
Exchange differences on translation of foreign operations
Movement in hedging reserve
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
2020
£m
31 December
2019
£m
527.8
428.4
40.6
(1.8)
3.5
(2.4)
39.9
567.7
568.6
(0.9)
567.7
34.6
(1.5)
(8.9)
(0.9)
23.3
451.7
456.1
(4.4)
451.7
Consolidated Statement of Financial Position
As at 31 December 2020
ASSETS
Property and equipment
Intangible assets
Corporation tax asset
Reinsurance assets
Loans and advances to customers
Insurance and other receivables
Financial investments
Cash and cash equivalents
Assets associated with disposal group held for sale
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 contract liabilities
Subordinated and other financial liabilities
Trade and other payables
Lease liabilities
Deferred income tax
Current tax liabilities
Liabilities associated with disposal group held for sale
Total liabilities
Total equity and total liabilities
The accompanying notes form part of these financial statements.
177
As at
Note
31 December
2020
£m
31 December
2019
£m
11
11
10
5
7
6
6
6
13
12
12
5
6
6, 11
6
10
10
13
140.4
166.7
22.9
2,083.2
359.8
1,182.0
3,506.0
298.2
83.0
7,842.2
0.3
13.1
94.9
1,004.4
1,112.7
10.7
1,123.4
4,081.3
488.6
1,991.2
122.8
0.9
–
34.0
6,718.8
7,842.2
154.4
160.3
–
2,071.7
455.1
1,227.7
3,234.5
281.7
–
7,585.4
0.3
13.1
55.1
840.9
909.4
9.2
918.6
3,975.0
530.1
1,975.9
137.1
0.4
48.3
–
6,666.8
7,585.4
These financial statements were approved by the Board of Directors on 3 March 2021 and were signed on its behalf by:
Geraint Jones
Chief Financial Officer
Admiral Group plc
Company Number: 03849958
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 178
Admiral Group plc · Annual Report and Accounts 2020
Consolidated Cash Flow Statement
For the year ended 31 December 2020
Profit after tax – from continuing and discontinued operations
Adjustments for non-cash items:
– Depreciation of property, plant and equipment and right-of-use
assets
– Impairment of property, plant and equipment and right-of-use assets
– Amortisation and impairment of intangible assets
– Movement in expected credit loss provision
– Share scheme charges
– Accrued interest income from loans and advances to customers
– Interest expense on funding for loans and advances to customers
– Investment return
– Finance costs, including unwinding of discounts on lease liabilities
– Taxation expense
Change in gross insurance contract liabilities
Change in reinsurance assets
Change in insurance and other receivables
Change in gross loans and advances to customers
Change in trade and other payables, including tax and social security
Cash flows from operating activities, before movements in
investments
Purchases of financial instruments
Proceeds on disposal/maturity of financial instruments
Interest and investment income received
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
Net cash used in investing activities
Cash flows from financing activities:
Non-controlling interest capital contribution
(Repayment of)/proceeds on issue of loan backed securities
Proceeds/(repayments) from other financial liabilities
Finance costs paid, including interest expense paid on funding for
loans
Repayment of 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
2020
£m
527.8
31 December
2019
£m
428.4
23.6
3.1
19.2
25.8
54.0
0.2
7.2
(60.7)
12.4
109.8
106.3
(11.5)
25.1
77.3
40.2
959.8
(2,389.2)
2,203.1
10.1
783.8
(175.0)
608.8
(43.1)
(43.1)
2.4
(46.3)
0.1
(19.2)
(9.4)
(425.7)
(498.1)
67.6
281.7
2.4
351.7
23.8
–
18.7
13.8
53.4
(0.6)
–
(35.3)
12.6
94.2
238.6
(188.2)
(147.0)
(168.7)
174.4
518.1
(2,048.2)
1,847.9
11.6
329.4
(92.8)
236.6
(33.6)
(33.6)
1.6
136.2
(50.3)
(14.0)
(10.6)
(367.8)
(304.9)
(101.9)
376.8
6.8
281.7
Note
11
11
11
6
9
6
10
5
5
6, 11
7
11
6
11
6
6
6, 7
6
12
6
Consolidated Statement of Changes in Equity
For the year ended 31 December 2020
179
Attributable to the owners of the Company
Share
capital
£m
Share
premium
account
£m
Fair value
reserve
£m
Hedging
reserve
£m
Foreign
exchange
reserve
£m
Retained
profit
and loss
£m
Non-
controlling
interests
£m
Total
£m
Total
equity
£m
At 1 January 2019
0.3
13.1
13.5
(0.3)
18.2
713.5
758.3
12.8
771.1
Profit/(loss) for the period – from
continuing and discontinued
operations
Other comprehensive income
Movements in fair value reserve
Deferred tax charge in relation
to movement in fair value reserve
Movement in hedging 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
Changes in ownership interests
without a change in control
Total transactions with equity holders
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
As at 31 December 2019
Balance at 1 January 2020
0.3
0.3
13.1
13.1
Profit/(loss) for the period – from
continuing and discontinued
operations
Other comprehensive income
Movements in fair value reserve
Deferred tax charge in relation
to movement in fair value reserve
Movement in hedging 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
Changes in ownership interests
without a change in control
Total transactions with equity holders
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
34.6
(1.5)
–
–
–
–
–
(0.9)
–
–
–
–
–
(8.5)
432.4
432.4
(4.0)
428.4
–
–
–
–
34.6
(1.5)
(0.9)
(8.5)
–
–
–
(0.4)
34.6
(1.5)
(0.9)
(8.9)
33.1
(0.9)
(8.5)
432.4
456.1
(4.4)
451.7
–
–
–
–
–
–
46.6
46.6
–
40.6
(1.8)
–
–
–
–
–
–
–
–
(1.2)
(1.2)
–
–
–
(2.4)
–
38.8
(2.4)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9.7
9.7
–
–
–
–
3.4
3.4
–
–
–
–
–
–
(367.8)
(367.8)
58.8
58.8
3.2
–
0.8
3.2
–
0.8
(305.0)
(305.0)
840.9
840.9
909.4
909.4
–
–
–
2.2
(367.8)
58.8
3.2
2.2
(1.4)
(0.6)
0.8
9.2
9.2
(304.2)
918.6
918.6
528.8
528.8
(1.0)
527.8
–
–
–
–
40.6
(1.8)
(2.4)
3.4
–
–
–
0.1
40.6
(1.8)
(2.4)
3.5
528.8
568.6
(0.9)
567.7
(425.7)
(425.7)
53.8
53.8
6.6
6.6
–
–
–
–
(365.3)
(365.3)
–
–
–
2.2
0.2
2.4
(425.7)
53.8
6.6
2.2
0.2
(362.9)
As at 31 December 2020
0.3
13.1
85.4
(3.6)
13.1
1,004.4 1,112.7
10.7 1,123.4
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 180
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements
For the year ended 31 December 2020
1. General information
Admiral Group plc is a company incorporated in England and Wales. Its registered office is at Tŷ Admiral, David Street, Cardiff, CF10 2EH
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 accounting
standards in conformity with the requirements of the Companies Act 2006, and international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. The Company has elected to prepare its Parent Company
financial statements in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101).
2. Basis of preparation
The consolidated financial statements have been prepared on a going concern basis. In making this going concern assessment, the
Directors have considered in detail the impact of the Covid-19 pandemic on the Group’s financial position and performance, including
the projection of the Group’s profits, regulatory capital surpluses and sources of liquidity for the next 12 months and beyond.
In particular, as part of this assessment the Board considered updated projections of performance and profitability a number of times
during the pandemic, with some key highlights including:
• The impact of the pandemic on the Group’s profit projections, including:
– The continuation of reduced motor insurance claims frequency when compared to pre-pandemic levels;
– Changes in premium rates and projected policy volumes across the Group’s insurance businesses;
– Potential impacts on the cost of settling claims across all insurance businesses, including those arising from initiatives launched to
help critical worker customers such as excess waivers and free hire cars;
– Projected trends in other revenue generated by the Group’s insurance business from fees and the sale of ancillary products;
– The impact of elevated credit losses in the Group’s Loans business arising from higher unemployment rates, arising from long-term
economic stress;
– Impacts on the projected growth on the Group’s Loan book following the temporary closure to new business;
– A potential increase in ongoing costs arising from the implementation and maintenance of business continuity plans and potential
future hybrid working strategies.
• The Group’s solvency position, which has been closely monitored through periods of market volatility experienced to date. Although
impacted by market movements, and in particular widening credit spreads at the outset of the pandemic, these positions have largely
reversed, with less volatile market movements experienced during the second half of 2020. The Group continues to maintain a strong
solvency position above target levels;
• The adequacy of the Group’s liquidity position after considering all of the factors noted above;
• The results of business plan scenarios and stress tests on the projected profitability, solvency and liquidity positions including the
impact of severe downside scenarios that assume severe adverse economic, credit and trading stresses;
• The operational resilience of the Group’s critical functions, including the ability of the Group to provide continuity of service to its
customers through a prolonged period of stress;
• The stability and security aspects of the Group’s IT systems;
•
Impacts on the Group’s strategic priorities including re-prioritisation of significant Group projects;
• The regulatory environment, in particular focusing on regulatory guidance issued by the FCA and the PRA in the UK and ongoing
communications between management and the regulator;
• A review of the Company’s principal risks and uncertainties and how the assessment of emerging risks may have changed in light of the
pandemic;
• A review of an ad-hoc Covid-specific ‘Own Risk and Solvency Assessment’ (ORSA);
Other material factors considered, outside of the pandemic, include:
• The impacts of the UK-EU Brexit trade agreement that came into effect on 1 January 2021, on the Group’s UK businesses;
• The sale of the Group price comparison businesses, Penguin Portals and Preminen along with the intention to return a majority of net
proceeds back to shareholders after completion of the transaction.
181
Following consideration of all of the above, the Directors have reasonable expectation that the Group has adequate resources to
continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report, and that it is therefore
appropriate to adopt the going concern basis in preparing the consolidated 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. Further information regarding the financial position of the Company,
its cash flows, liquidity position and borrowing facilities are also described in the Strategic Report. In addition, notes 6 and 12 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 fair value
through profit or loss or as fair value through other comprehensive income. The Group and Company financial statements are presented in
pounds sterling, rounded to the nearest £0.1 million.
Cash flows from operating activities before movements in investments include all cashflows in relation to the Group’s insurance and
reinsurance activities, and cash flows in respect of loans and advances issued to customers. Cash flows from financing activities include
the cash flows on issues of loan backed securities, lease liabilities and other financial liabilities.
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 Group has securitised certain loans and advances to customers by the transfer of the loans to a special purpose entity (‘SPE’)
controlled by the Group. The securitisation enables a subsequent issuance of debt by the SPE to investors who gain the security of the
underlying assets as collateral. The SPE is fully consolidated into the Group financial statements under IFRS 10, as the Group controls the
entity in line with the above definition.
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. 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.
Adoption of new and revised standards
The Group has adopted the following IFRSs and interpretations during the year, which have been issued and endorsed:
•
Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform – Phase 2)
• Amendment to IFRS 16 Leases COVID 19-Related Rent Concessions
• Amendments to IFRS 3 Business Combinations
• Amendments to IAS 1 and IAS 8: Definition of Material
• Amendments to References to the Conceptual Framework in IFRS Standards
Other than the impact of the Amendments to IFRS 9 and IFRS 7 in respect of interest rate benchmark reform, further detail of which
is provided below, the application of these amendments has not had a material impact on the Group’s results, financial position
and cashflows.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 182
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
2. Basis of preparation continued
Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
In September 2019, the IASB issued Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7). These amendments
modify specific hedge accounting requirements to allow hedge accounting to continue for affected hedges during the period of
uncertainty before the hedged items or hedging instruments affected by the current interest rate benchmarks are amended as a result
of the ongoing interest rate benchmark reforms. The Group early adopted this standard for the period ending 31 December 2019.
In addition, Phase 2 of the Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 was issued in August 2020, and relates to issues that
could affect financial reporting when an interbank offered rate (IBOR) is replaced with an alternative benchmark interest rate.
The amendments are relevant to the Group given that it applies hedge accounting to its benchmark interest rate exposures. The
application of the amendments impacts the Group’s accounting in the following ways:
• The Group had floating rate debt on its loan backed securities, linked to GBP LIBOR up until 15th June 2020 when those arrangements
were renewed and rebased to SONIA at the same time;
• The floating rate debt and interest rate cashflow hedges that are taken out in relation to the loan backed securities were moved to
arrangements linked to SONIA on 15th June 2020, to align the rebasing with the renewal of the loan backed facilities as set out above.
The Group has chosen to early apply the Phase 2 Amendments for the reporting period ending 31 December 2020, which are mandatory
for annual reporting periods beginning on or after 1 January 2021. Adopting these amendments early enables the Group to reflect
the effects of transitioning from IBOR to alternative benchmark interest rates without giving rise to accounting impacts, such as the
derecognition of the interest rate hedge that was moved from LIBOR to SONIA in the year, that would not provide useful information to
users of financial statements.
See note 6j for further details.
New and revised IFRS Standards in issue but not yet effective
At the date of authorisation of these financial statements, the Group has not applied the following new and revised IFRS Standards that
have been issued but are not yet effective:
•
•
IFRS 17 Insurance Contracts;
IFRS 10 and IAS 28 (amendments) Sale or Contribution of Assets between an Investor and its Associate or Joint Venture;
• Amendments to IAS 1 Classification of Liabilities as Current or Non-current;
• Amendments to IFRS 3 Reference to the Conceptual Framework;
• Amendments to IAS 16 Property, Plant and Equipment – Proceeds before Intended Use;
• Amendments to IAS 37 Onerous Contracts – Cost of Fulfilling a Contract;
• Annual Improvements to IFRS Standards 2018-2020 Cycle: Amendments to IFRS 1 First-time Adoption of International Financial Reporting
Standards, IFRS 9 Financial Instruments, IFRS 16 Leases, and IAS 41 Agriculture.
The directors do not expect that the adoption of the Standards listed above will have a material impact on the financial statements of the
Group in future periods, except as noted below:
IFRS 17 Insurance Contracts
IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts and supersedes
IFRS 4 Insurance Contracts. IFRS 17 outlines a general model, which is simplified if certain criteria are met by measuring the liability for
remaining coverage using the premium allocation approach.
In June 2020, the IASB issued Amendments to IFRS 17 to address concerns and implementation challenges that were identified after IFRS
17 was published. The amendments defer the date of initial application of IFRS 17 (incorporating the amendments) to annual reporting
periods beginning on or after 1 January 2023, requiring a transition balance sheet at 1 January 2022.
The Group continues to assess the impact of IFRS 17 on its results and financial position.
183
3. Critical accounting judgements and key sources of estimation uncertainty
In applying the Group’s accounting policies as described in the notes to the financial statements, the Directors are required to make judgements
(other than those involving estimations) that have a significant impact on the amounts recognised and to make estimates and assumptions
about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions
are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the
revision affects both current and future periods.
Critical accounting judgements
The following are the critical judgements, apart from those involving estimations (which are presented separately below), that the
Directors have made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts
recognised in financial statements.
• 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 insurance and reinsurance contract in order to be able to make this judgement. In particular, all reinsurance contracts (both
excess of loss and quota share contracts) held by the Group have been assessed and it has been concluded that all contracts transfer
significant insurance risk and have therefore been classified and accounted for as reinsurance contracts within these financial statements.
• Consolidation of the Group’s special purpose entity (‘SPE’)
During 2018 the Group set up an SPE in relation to the Admiral Loans business, whereby the Group securitises certain loans by the
transfer of the loans to the SPE. The securitisation enables a subsequent issue of debt by the SPE to investors who gain the security of the
underlying assets as collateral.
The accounting treatment of the SPE has been assessed and it has been concluded that it should be fully consolidated into the Group’s
financial statements under IFRS 10. This is due to the fact that despite not having legal ownership, the Group has control of the SPE, being
exposed to the returns and having the ability to affect those returns through its power over the SPE.
The SPE has therefore been fully consolidated into the Group’s financial statements.
• Classification of disposal group as held for sale, and presentation of discontinued operations
In order for a disposal group to be recognised as held for sale under IFRS 5, a sale has to be considered highly probable and the disposal
group must be available for immediate sale in its present condition subject only to terms that are usual and customary.
As set out in note 13 to these financial statements, on 29th December 2020, the Group announced that it had reached an agreement with
ZPG Comparison Services Holdings UK Limited (‘RVU’) that RVU will purchase the Penguin Portals Group (‘Penguin Portals’, comprising
online comparison portals Confused.com, Rastreator.com and LeLynx.fr and the Group’s technology operation Admiral Technologies)
and its 50% share of Preminen Price Comparison Holdings Limited (‘Preminen’) (including its subsidiaries and associates). Management
considers that, given the announcement which is supported by a signed Sales and Purchase Agreement (SPA), and the expectation that
the sale will be completed in the first half of 2021 subject to regulatory approval, the transaction meets the highly probable criteria and
therefore these businesses are presented as a disposal group held for sale in the financial statements.
The disposal group is also considered to meet the criteria of a discontinued operation, being a part of a single co-ordinated plan to dispose
of a separate major line of business. The results of the discontinued operation have therefore been presented separately on the Income
Statement, with prior year comparatives also re-presented.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 184
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
3. Critical accounting judgements and key sources of estimation uncertainty continued
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting period that may have a significant
risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.
• Calculation of insurance claims provisions and reinsurance assets
The Group’s reserving policy requires management to set provisions for outstanding claims for the purpose of the financial statements,
above the projected best estimate outcome to allow for unforeseen adverse claims development. In the application of this policy,
management applies judgement in:
– calculating the best estimate of the gross ultimate total cost of settling claims that have been incurred prior to the balance sheet date;
– calculating the best estimate of the non-proportional excess of loss reinsurance recoveries relating to outstanding claims; and
– determining where, above the projected best estimate outcomes of gross outstanding claims and reinsurance recoveries, the
insurance claims provisions should sit in line with the Group’s reserving methodology.
Estimation techniques are used in the calculation of the provisions for claims outstanding, which represent a projection of the ultimate
estimated total cost of settling claims that have been incurred prior to the balance sheet date and remain unsettled at the balance sheet
date, along with a margin to allow for unforeseen adverse claims development.
The primary areas of estimation uncertainty are as follows:
1) Calculation of gross best estimate claims provisions
The key area where estimation techniques are used is in the ultimate projected cost of reported claims, which includes the emergence of
claims that occurred prior to the balance sheet date, but had not been reported at that date.
The Group, utilising the internal actuarial team, project the best estimate claims reserves using a variety of different recognised actuarial
projection techniques (for example incurred and paid chain ladders, and initial expected assumptions) to allow an actuarial assessment
of their potential outcome. This includes an allowance for unreported claims. The projection techniques are subject to review by an
independent external actuarial specialist to provide an impartial assessment.
Claims are segmented into groups with similar characteristics and which are expected to develop and behave similarly, for example bodily
injury (attritional and large) and damage claims, with specific projection methods selected for each head of damage. Key sources of
estimation uncertainty arise from both the selection of the projection methods and the assumptions made in setting claims provisions
through the review of historical development of underlying case reserve estimates, overlaid with emerging market trends.
Allowance is made for changes arising from the internal and external environment which may cause future claim cost inflation to
deviate from that seen in historic data. Examples of these factors include:
• Changes in the reporting patterns of claims impacting the frequency of bodily injury claims;
• Emerging inflationary trends on the average cost of bodily injury and damage claims;
• The likelihood of bodily injury claims settling as Periodic Payment Orders;
• Changes in the regulatory or legal environment that lead to changes in awards for bodily injury claims and associated legal costs;
• Changes to the underlying process and methodologies employed in setting and reviewing case reserve estimates.
Implicit assumptions in the actuarial projections include average cost per claim and average claim numbers by accident year, future rates
of claims inflation and loss ratios by accident year and underwriting year. These metrics are reviewed and challenged as part of the process
for making allowance for the uncertainties noted.
2) Calculation of excess of loss reinsurance recoveries
The Group uses excess of loss reinsurance in order to mitigate the impact of large claims. The reinsurance is non-proportional and
recoveries are made on individual claims above the relevant thresholds.
As for the underlying gross claims, actuarial teams project the best estimate excess of loss reinsurance recoveries using a variety of actuarial
projection techniques that focus on both the ultimate frequency of reported recoveries and the average size of the recovery.
Key sources of estimation uncertainty arise from both the selection of the projection methods and the assumptions made in calculating
the recoveries through the review of historical development of underlying case reserve estimates, overlaid with emerging market trends.
The most significant element of the estimation relates to large bodily injury claims. The key assumption in the calculation of excess
of loss recoveries relates to the numbers of large claims in the Group’s core UK Motor insurance business that will attract recoveries,
where the high retention means that a small number of additional large claims would potentially result in a material increase in the
excess of loss recoveries.
185
3) Calculation of the margin held for adverse development
A wide range of factors inform management’s recommendation in setting the margin held above actuarial best estimates, which is subject
to approval from the Group’s Reserving and Audit Committees, including:
• Reserve KPIs such as the level of margin as a percentage of the ultimate reserve;
• Results of stress testing of key assumptions underpinning key actuarial assumptions within best estimate reserves;
• A review of a number of individual and aggregated reserve scenarios which may result in future adverse variance to the ultimate best
estimate reserve;
• Qualitative assessment of the level of uncertainty and volatility within the reserves and the change in that assessment compared to
previous periods.
In addition, for the Group’s core UK Car Insurance business, the Group’s internal reserve risk distribution is used to determine the
approximate confidence level of the recommended booked reserve position which enables comparison of the reserve strength to previous
periods and demonstration of the compliance with IFRS 4.
For sensitivities in respect of the claims reserves, refer to note 5d(ii) of the financial statements. Note that these sensitivities are provided
based on booked loss ratios, as it is impracticable to disaggregate the assumptions further, but for the disaggregated assumptions
it is reasonably possible, on the basis of existing knowledge, that outcomes within the next financial year that are different from the
assumption could require a material adjustment to the carrying amount.
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.
• Calculation of expected credit loss provision
The Group is required to calculate an expected credit loss (ECL) allowance in respect of the carrying value of the Admiral Loans book in
line with the requirements of IFRS 9. Due to the size of the loan book and the increased uncertainty given the impact of Covid-19, the
calculation of the ECL is deemed to be a critical accounting judgement and includes key sources of estimation uncertainty. Management
applies judgement in:
• Determining the appropriate modelling solution for measuring the ECL;
• Calibrating and selecting appropriate assumptions;
• Setting the criteria for what constitutes a significant increase in credit risk;
•
Identification of key scenarios to include and determining the credit loss in these instances.
The key areas of estimation uncertainty are in the calculation of the Probability of Default (PD) in the base scenario for stage 1 and 2
assets, and the determination, impact assessment and weighting of the forward-looking scenarios.
Refer to the analysis in note 7 to the financial statements for further detail on the Group’s ECL methodology applied in the period.
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 all entities controlled by the Company,
being its subsidiaries and SPE (together referred to as the Group), for the year ended 31 December 2020 and comparative figures for
the year ended 31 December 2019. The financial statements of the Company’s subsidiaries and its SPE are consolidated in the Group
financial statements.
The Company controls 100% of the voting share capital of all its principal subsidiaries, except Admiral Law Limited, Inspop USA LLC,
comparenow.com Insurance Agency LLC (indirect holding), Rastreator.com Limited, Rastreator Comparador Correduría De Seguros S.L.U.
(indirect holding), Preminen Price Comparison Holdings Limited and the indirect holdings in Preminen Dragon Price Comparison Limited,
Preminen Mexico Sociedad Anonima de Capital Variable, and Preminen Price Comparison India Private Limited.
The SPE is fully consolidated into the Group financial statements under IFRS 10, whereby the Group has control over the SPE.
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.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 186
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
4. Group consolidation and operating segments continued
(ii) Foreign currency translation
Items included in the financial records 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 pounds
sterling, the Group’s presentational currency, rounded to the nearest £0.1 million.
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.
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 monthly 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 five 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.
Note that as a result of the planned sale of the comparison businesses (other than compare.com) and growth of the Admiral Loans
business, the Group’s reportable segments have changed, so that compare.com is now presented within ‘Other’ and Admiral Loans is
presented as a separate segment. Accordingly, the Group has restated the previously reported segment information for the year ended
31 December 2019.
UK Insurance
The segment consists of the underwriting of car insurance, van insurance, household insurance, travel insurance and other products that
supplement these insurance policies within the UK. It also includes the generation of revenue from additional products and fees from
underwriting 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.
International Insurance
The segment consists of the underwriting of car and home 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 Assurance 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.
Discontinued (Comparison)
As set out in note 13 to the financial statements, on 29 December 2020 the Group announced its planned sale of the majority of its
comparison businesses. As such, these operations are considered a disposal group and are presented as discontinued operations in both
2020 and 2019.
The segment relates to the Group’s comparison businesses: Confused.com in the UK, Rastreator in Spain, LeLynx in France, and the
Preminen entities, which have a head office in Spain and operations in Mexico and India, and Penguin Portals, the intermediate holding
company of Confused.com, LeLynx and Rastreator.
Each of the comparison businesses are operating in individual geographical segments but are grouped into one reporting segment, as
none of the operating segments individually meet the reporting segment threshold requirements of IFRS 8.
187
Admiral Loans
The segment relates to the Admiral Loans business launched in 2017, which provides unsecured personal loans and car finance products in
the UK, primarily through the comparison channel.
Other
The ‘Other’ segment is designed to be comprised of all other operating segments that are not separately reported to the Group’s Board
of Directors and do not meet the threshold requirements for individual reporting. It includes compare.com, the US comparison business,
and Admiral Pioneer.
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 2020, by reportable segment, is shown below. The accounting
policies of the reportable segments are materially consistent with those presented in the notes to the financial statements for the Group.
UK
Insurance
£m
International
Insurance
£m
Discontinued
(Comparison)*6
£m
Admiral Loans
£m
Other
£m
Eliminations*2
£m
Total
(continuing)
£m
Total
£m
Year ended 31 December 2020
Turnover*1
2,672.0
648.8
183.9
38.4
Net insurance premium
revenue
Other revenue and
profit commission
Net interest income
Investment return*5
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*3
Consolidated profit
before tax*4
Taxation expense
Consolidated profit
after tax
Other segment items:
– Intangible and tangible
asset additions
– Depreciation and
amortisation
539.8
211.8
–
427.9
–
50.8
1,018.5
(150.2)
(170.0)
27.4
–
–
239.2
(143.0)
(87.4)
183.9
–
–
183.9
–
(151.4)
6.8
–
6.7
–
–
6.7
–
–
1.6
26.7
0.5
28.8
–
(42.6)
(9.8)
(22.2)
3,365.8
3,527.7
–
751.6
751.6
(22.2)
2.9
(3.3)
463.4
625.3
29.6
48.0
29.6
48.0
(22.6)
1,292.6
1,454.5
–
22.2
(293.2)
(293.2)
(309.6)
(439.0)
698.3
8.8
32.5
(13.8)
(3.1)
(0.4)
689.8
722.3
(74.8)
(77.9)
4.9
4.9
(11.7)
(11.7)
608.2
637.6
(106.2)
(109.8)
502.0
527.8
102.8
104.4
100.0
101.8
59.1
57.2
43.0
41.5
1.6
1.8
0.2
0.9
0.5
0.4
*1
*2
*3
*4
Turnover is an Alternative Performance Measure presented before intra-group eliminations and consists of total premiums written (including co-insurers’ share) and other
revenue. Refer to the glossary and note 14 for further information.
Eliminations are in respect of the intra-group trading between the Group’s comparison and UK and International insurance entities and intra-group interest. Of the £22.2 million
elimination of other revenue and profit commission, £22.0 million relates to discontinued operations, with the remaining £0.2 million relating to compare.com
£0.7million of IFRS 16 interest expense (being the Group’s net share of IFRS 16 interest expense) included within finance costs in the income statement has been reallocated to
individual segments within expenses, in line with management segmental reporting.
Profit before tax above of £637.6 million is presented on a statutory basis, being 100% of the result for each entity. This increases to Group’s share of profit before tax of £638.4
million. See note 14f for a reconciliation of the UK Insurance, International Insurance and Comparison turnover and profit before tax to the Strategic Report.
*5
Investment return is reported net of impairment on financial assets, in line with management reporting.
*6 See note 13 for further detail on discontinued operations.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 188
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
4. Group consolidation and operating segments continued
Revenue and results for the corresponding reportable segments for the year ended 31 December 2019 are shown below.
Re-presented Year ended 31 December 2019
UK
Insurance
£m
International
Insurance
£m
Discontinued
(Comparison)*6
£m
Admiral
Loans
£m
Other
£m
Eliminations*2
£m
Total
(continuing)
£m
Total
£m
Turnover*1
2,635.0
623.6
164.3
32.7
Net insurance premium
revenue
Other Revenue and profit
commission
Net interest income
Investment return*5
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*4
Consolidated profit before
tax*3
Taxation expense
Consolidated profit after
tax
Other segment items:
– Intangible and tangible
asset additions
– Depreciation and
amortisation
533.2
176.2
–
–
407.6
–
30.4
971.2
(215.8)
(157.5)
22.5
–
1.5
200.2
(143.5)
(57.6)
164.3
–
–
164.3
–
1.9
21.7
–
23.6
–
(142.4)
(32.0)
(14.0)
7.9
–
7.9
–
–
7.9
–
(19.4)
3,298.5
3,444.1
–
709.4
709.4
(19.4)
2.8
(2.8)
439.2
584.8
24.5
29.1
24.5
29.1
(19.4)
1,202.2
1,347.8
–
19.4
(359.3)
(359.3)
(260.4)
(384.1)
597.9
(0.9)
21.9
(8.4)
(6.1)
–
582.5
604.4
(72.3)
(76.6)
6.2
6.2
(11.3)
(11.4)
505.1
522.6
(89.2)
(94.2)
415.9
428.4
51.7
57.4
34.5
33.1
1.4
1.8
0.8
1.2
–
0.5
–
–
87.0
88.4
92.2
94.0
*1
*2
*3
*4
Turnover is an Alternative Performance Measure presented before intra-group eliminations and consists of total premiums written (including co-insurers’ share) and other
revenue. Refer to the glossary and note 14 for further information.
Eliminations are in respect of the intra-group trading between the Group’s comparison and UK and International insurance entities. Of the £19.4m elimination of other revenue
and profit commission, £18.7m relates to discontinued operations, with the remaining £0.7m relating to compare.com.
Profit before tax above of £522.6m is presented on a statutory basis, being 100% of the result for each entity. This increases to Group’s share of profit before tax of £526.1m. See
note 14f for a reconciliation of the UK Insurance, International Insurance and Comparison turnover and profit before tax to the Strategic Report.
£1.2m of IFRS 16 interest expense (being the Group’s net share of IFRS 16 interest expense) included within finance costs in the income statement has been reallocated to
individual segments within expenses, in line with management segmental reporting.
*5
Investment return is reported net of impairment on financial assets, in line with management reporting.
*6 See note 13 for further detail on discontinued operations.
189
Segment revenues
The UK and International 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 Discontinued (comparison) revenues from transactions with other reportable segments is £22.0 million (2019: £18.7 million)
which has been eliminated on consolidation, along with £0.2 million (2019: £0.7 million) of revenues from compare.com that are also
eliminated on consolidation.
Revenues from external customers for products and services are consistent with the split of reportable segment revenues.
Information about geographical locations
All material revenues from external customers, and net assets attributed to a foreign country, are shown within the International
Insurance reportable segment shown on the previous pages. The revenue and results of the international Comparison businesses,
Rastreator, LeLynx, compare.com and the Preminen entities are not material enough to be presented as a separate segment.
Segment assets and liabilities
The identifiable segment assets and liabilities at 31 December 2020 are as follows:
Reportable segment assets
Reportable segment liabilities
Reportable segment net assets
Unallocated assets and liabilities
Consolidated net assets
As at 31 December 2020
UK
Insurance
£m
International
Insurance
£m
Discontinued
(comparison)
£m
6,446.7
5,359.5
1,087.2
1,006.0
858.4
147.6
112.6
57.0
55.6
Admiral
Loans
£m
427.3
426.5
0.8
Other
£m
226.1
461.4
(235.3)
Eliminations
£m
(702.9)
(654.2)
(48.7)
Total
£m
7,515.8
6,508.6
1,007.2
116.2
1,123.4
Unallocated assets and liabilities consist of other central assets and liabilities, plus deferred and current corporation tax balances. These
assets and liabilities are not regularly reviewed by the Board of Directors in the reportable segment format.
There is an asymmetrical allocation of assets and income to the reportable segments, in that the interest earned on cash and cash
equivalent assets deployed in the UK Insurance, Comparison and International Insurance segments is not allocated in arriving at segment
profits. This is consistent with regular reporting to the Board of Directors.
Eliminations represent inter-segment funding, balances included in insurance and other receivables and deemed loan receivables in
respect of securitised loan receivables.
The segment assets and liabilities at 31 December 2019 are as follows:
Reportable segment assets
Reportable segment liabilities
Reportable segment net assets
Unallocated assets and liabilities
Consolidated net assets
Re-presented as at 31 December 2019
UK
Insurance
£m
International
Insurance
£m
Discontinued
(comparison)
£m
6,282.1
5,232.7
1,049.4
966.7
824.4
142.3
83.8
43.6
40.2
Admiral
Loans
£m
531.4
524.8
6.6
Other
£m
269.8
599.1
(329.3)
Eliminations
£m
(902.9)
(810.7)
(92.2)
Total
£m
7,230.9
6,413.9
817.0
101.6
918.6
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 190
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
5. Premium, claims and profit commissions
5a. Accounting policies
(i) Revenue – premiums
Premiums relating to insurance contracts are recognised as revenue, net of expected cancellations and insurance premium tax,
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 related to unexpired risk are recognised within policyholder
receivables. A corresponding unearned premium provision is recognised (see note 5a(iii)).
In the UK, in 2020 the Group announced a Stay at Home premium refund for all existing motor insurance customers, which amounted to
£97.3 million net of insurance premium tax. The impact of this was to reduce gross insurance premium revenue (i.e. excluding co-insurer
share of total premiums written) by £70.0 million, and to reduce net insurance premium revenue by £21.1 million. The full impact of the
refund has been reflected in the current period. See note 14g for further details.
(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.
Profit commission receivable from reinsurance contracts is accounted for in line with IFRS 4, whereas profit commission receivable from
co-insurance contracts is in line with IFRS 15. Further detail of the policy under IFRS 15 is set out in note 8.
(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. The co-insurer
therefore takes direct insurance risk from the policyholder and is subsequently directly responsible to the claimant for its proportion of
the 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.
191
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 are comprised of 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 insurance premiums written before co-insurance*2
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
2020*1
£m
31 December
2019
£m
2,957.2
2,344.0
(1,555.9)
788.1
(78.7)
42.2
751.6
2,884.4
2,273.7
(1,541.4)
732.3
(75.3)
52.4
709.4
*1 See note 14g for the impact of the Stay At Home premium refund issued to UK motor insurance customers on premiums written and net insurance premium revenue.
*2 Alternative Performance Measures – refer to the end of the report for definition and explanation, and to note 14a for reconciliation to group gross premiums written.
The Group’s share of its insurance business was underwritten by Admiral Insurance (Gibraltar) Limited, Admiral Insurance Company Limited,
Admiral Europe Compania Seguros (‘AECS’) and Elephant Insurance Company. The vast majority of contracts are short term in duration,
lasting for 10 or 12 months.
5c. Profit commission
Underwriting year (UK Motor only)
2015 and prior
2016
2017
2018
2019
2020
Total UK Motor profit commission*1
Total UK Household and International profit commission*1
Total profit commission
31 December
2020
£m
31 December
2019
£m
38.2
25.1
23.3
5.5
20.9
11.7
124.7
9.3
134.0
48.3
27.5
36.4
–
–
–
112.2
2.7
114.9
*1
Of the total UK motor profit commission recognised of £124.7 million, £102.3 million relates to co-insurance arrangements and £22.4 million to reinsurance arrangements.
The UK Household and International profit commission relates solely to reinsurance arrangements.
Sensitivities of the recognition of profit commission to movements in the booked loss ratio are shown in note 5d(ii).
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 192
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
5. Premium, claims and profit commissions continued
5d. Reinsurance assets and insurance contract liabilities
(i) Objectives, policies and procedures for the management of insurance risk
The Group’s primary business is the issuance of insurance contracts that transfer risk from policyholders to the Group and its co-insurance
partners.
Insurance risk involves uncertainty over the occurrence, amount or timing of claims arising on insurance contracts issued. It is primarily
comprised of reserve risk; the risk that the value of insurance liabilities established is insufficient to cover the ultimate cost of claims
incurred at the balance sheet date, and premium risk; the risk that the claims experience on business written but not earned is higher than
allowed for in the premiums charged to policyholders.
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 considers material reserving issues such as large bodily injury claims frequency and severity.
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 below.
Reserve risk
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;
•
Internal actuarial analysis of reserve uncertainty through qualitative analysis, scenario testing and a range of stochastic reserving
techniques;
• Ad hoc external reviews of reserving related processes and assumptions;
• Use of a reserving methodology which informs management’s reserving decisions for the purposes of the Group’s financial statements.
As described in note 3, the methodology determines that reserves should be set above projected best estimate outcomes to allow for
unforeseen adverse claims development.
As noted above, the Group shares a significant amount of the insurance business generated with external underwriters. As well as these
proportional arrangements, excess of loss reinsurance programmes are also purchased to protect the Group against very large individual
claims and catastrophe losses.
Claims reserving
As previously disclosed, the Group’s reserving policy (both within the claims function and in the financial statements) is initially to reserve
conservatively, above internal and independent projections of actuarial best estimates. This is designed to create a margin held in reserves
to allow for unforeseen adverse development in open claims and typically results in the Group making above industry average reserve
releases. The Group’s booked claims reserves continue to include a significant margin above projected best estimates of ultimate claims
costs.
As at 31 December 2020, the level of relative reserve margin is consistent with that at 31 December 2019, albeit remaining prudent when
measured against the internal reserve risk distribution and other market benchmarks.
As profit commission income is recognised in the income statement in line with loss ratios accounted for on the Group’s own claims
reserves, the reserving policy also results in profit commission income being deferred and recognised over time.
193
Premium risk
As noted above, the Group defines premium risk as the risk that claims cost on business written but not yet earned is higher than allowed
for in the premiums charged to policyholders. This also includes catastrophe risk; the risk of incurring significant losses as a result of the
occurrence of man-made catastrophe or natural weather events.
Key processes and controls operating to mitigate premium risk are as follows:
• Experienced and focused senior management and teams in relevant business areas including pricing and claims management;
• A data-driven and analytical approach to regular monitoring of claims and underwriting performance;
• Capability to identify and resolve underperformance promptly through changes to key performance drivers, in particular pricing.
In addition, as mentioned above, excess of loss reinsurance programmes are also purchased to protect the Group against very large
individual claims and catastrophe losses.
Other elements of insurance risk include reinsurance risk; the risk of placement of ineffective reinsurance arrangements, or the economic
risk of reduced availability of co-insurance and reinsurance arrangements in future periods.
The Group mitigates these risks by ensuring that it has a diverse range of financially secure reinsurance partners, including a long-term
relationship with Munich Re and a number of other very large reinsurers.
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 International Insurance, UK Household, UK Travel and UK Van businesses further contribute to the diversification of the Group’s
insurance risk.
Information regarding reinsurance credit risk is provided in note 6j to the financial statements.
(ii) Sensitivity of recognised amounts to changes in assumptions
Underwriting year loss ratios – UK Car Insurance
The following table sets out the impact on equity and post-tax profit or loss at 31 December 2020 that would result from a 1%, 3% and 5%
increase and decrease in the UK Car insurance loss ratios used for each underwriting year for which material amounts remain outstanding.
This includes the impact on profit commission of the respective changes in booked loss ratios, which are also shown separately below.
Total impact on income statement
(including profit commission)
Booked loss ratio
Impact of 1% deterioration in booked loss ratio (£m)
Impact of 3% deterioration in booked loss ratio (£m)
Impact of 5% deterioration in booked loss ratio (£m)
Impact of 1% improvement in booked loss ratio (£m)
Impact of 3% improvement in booked loss ratio (£m)
Impact of 5% improvement in booked loss ratio (£m)
Underwriting year
2017
70%
(14.3)
(43.5)
(71.7)
14.9
44.1
73.2
2018
78%
(11.6)
(31.8)
(52.2)
13.0
42.3
72.1
2019
76%
(8.8)
(28.6)
(39.3)
15.8
44.2
72.5
2020
72%
(3.2)
(9.4)
(14.8)
3.2
9.7
16.6
As above, 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.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 194
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
5. Premium, claims and profit commissions continued
The following table sets out the impact on equity and post-tax profit or loss at 31 December 2020 that would result from a 1%, 3% and 5%
increase and decrease in the UK Car insurance loss ratios used for each underwriting year for which material amounts remain outstanding,
on profit commission only.
Impact on profit commission only
Booked loss ratio
Impact of 1% deterioration in booked loss ratio (£m)
Impact of 3% deterioration in booked loss ratio (£m)
Impact of 5% deterioration in booked loss ratio (£m)
Impact of 1% improvement in booked loss ratio (£m)
Impact of 3% improvement in booked loss ratio (£m)
Impact of 5% improvement in booked loss ratio (£m)
2017
70%
(4.1)
(12.8)
(20.6)
4.7
13.4
22.1
Underwriting year
2018
78%
(2.7)
(5.1)
(7.8)
4.1
15.7
27.7
2019
76%
(6.3)
(21.0)
(26.8)
13.3
36.7
60.0
2020
72%
(1.9)
(5.4)
(8.1)
1.9
5.7
10.0
Sensitivities to key assumptions in the best estimate reserves have not been presented, given the significant and prudent margin held
above best estimate reserves and the co- and reinsurance arrangements that are also considered when determining the net impact on the
income statement. The underwriting year sensitivities presented above are considered to provide relevant and transparent information
on the changes to key inputs to the financial statements.
(iii) Analysis of recognised amounts
Gross
Claims outstanding*1
Unearned premium provision
Total gross insurance liabilities
Recoverable from reinsurers
Claims outstanding
Unearned premium provision
Total reinsurers’ share of insurance liabilities
Net
Claims outstanding*2
Unearned premium provision
Total insurance liabilities – net
31 December
2020
£m
31 December
2019
£m
2,919.9
1,161.4
4,081.3
1,319.3
763.9
2,083.2
1,600.6
397.5
1,998.1
2,899.4
1,075.6
3,975.0
1,354.2
717.5
2,071.7
1,545.2
358.1
1,903.3
*1 Gross claims outstanding at 31 December 2020 is presented before the deduction of salvage and subrogation recoveries totalling £70.5 million (2019: £71.7 million).
*2
The Group typically commutes quota share reinsurance contracts in its UK Car Insurance business 24-36 months following the start of the underwriting year. After commutation,
claims outstanding from these contracts are included in the Group’s net claims outstanding balance. Refer to note (v) below.
195
(iv) Analysis of claims incurred
The following tables illustrate the development of gross and net UK Insurance and International Insurance claims incurred for the past ten
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 and the second shows actual net claims incurred. Figures are presented on an underwriting year basis.
Analysis of claims incurred
(gross amounts)
2011
£m
2012
£m
2013
£m
2014
£m
2015
£m
2016
£m
2017
£m
2018
£m
2019
£m
2020
£m
Total
£m
Financial year ended 31 December
(463.7)
(334.7)
(431.1)
(325.5)
79.4
49.8
58.5
69.2
53.6
(438.2)
(347.1)
3.2
8.6
44.4
25.6
(428.4)
(411.2)
31.2
59.9
34.2
17.1
21.7
(529.4)
(463.7)
27.4
30.3
35.2
52.0
53.3
82.1
17.0
8.5
8.2
15.7
58.0
54.8
8.3
6.3
15.4
22.5
34.0
46.1
(709.8)
(565.8)
(565.6)
(652.4)
(672.6)
(810.1)
–
–
–
–
(691.8)
(615.0)
123.1
79.5 (1,104.2)
–
–
–
(818.8)
(546.9)
52.8 (1,312.9)
–
–
(812.4)
(476.2) (1,288.6)
–
(697.4)
(697.4)
(694.4)
(789.2)
(680.7)
(634.5)
(594.2)
(858.8)
(991.4)
(1,153.5)
(1,074.0)
(908.7)
Underwriting year
(UK Insurance)
2011 and prior
(694.4)
(325.5)
85.1
–
–
–
–
–
–
–
–
–
2012
2013
2014
2015
2016
2017
2018
2019
2020
UK insurance gross claims
incurred
Underwriting year
(International Insurance)
2012
2013
2014
2015
2016
2017
2018
2019
2020
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2011 and prior
(65.6)
(54.2)
1.1
(58.0)
(53.7)
(68.2)
(57.8)
10.8
0.7
3.0
4.0
4.2
(85.2)
(65.5)
4.6
6.0
7.7
4.4
–
–
–
–
1.8
2.6
3.3
5.8
7.7
2.8
2.0
5.8
5.5
3.1
1.6
1.5
1.3
2.0
0.1
6.9
0.4
(93.7)
(0.8)
(95.7)
0.2
(103.5)
(0.4)
(133.4)
(0.1)
(183.4)
3.6
8.6
(242.0)
(296.3)
–
–
–
(204.9)
(165.7)
20.1
(350.5)
–
–
(293.8)
(141.2)
(435.0)
–
(233.6)
(233.6)
(92.6)
(101.6)
(138.9)
(125.3)
11.7
(174.1)
(147.3)
16.5
International insurance
gross claims incurred
Other gross claims
incurred
(65.6)
(112.2)
(120.8)
(131.5)
(146.9)
(217.8)
(278.2)
(321.3)
(429.6)
(343.2)
–
(1.7)
(2.2)
(7.1)
(5.4)
(0.1)
(3.6)
(1.1)
–
–
Claims handling costs
(25.9)
(26.0)
(22.9)
(21.4)
(22.6)
(27.1)
(35.5)
(37.9)
(64.5)
(66.7)
Total gross claims incurred
(785.9)
(929.1)
(826.6)
(794.5)
(769.1)
(1,103.8)
(1,308.7)
(1,513.8)
(1,568.1)
(1,318.6)
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 196
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
5. Premium, claims and profit commissions continued
Analysis of claims incurred
(net amounts)
2011
£m
2012
£m
2013
£m
2014
£m
2015
£m
2016
£m
2017
£m
2018
£m
2019
£m
2020
£m
Total
£m
Financial year ended 31 December
(196.0)
(139.3)
(184.4)
(135.0)
79.4
49.8
57.6
69.2
38.4
22.4
19.4
49.3
(187.0)
(144.1)
(16.4)
37.6
59.1
36.4
25.3
(182.1)
(162.0)
(2.6)
(219.4)
(180.7)
Underwriting year
(UK Insurance)
2011 and prior
(323.6)
(148.3)
81.4
–
–
–
–
–
–
–
–
–
2012
2013
2014
2015
2016
2017
2018
2019
2020
UK insurance net claims
incurred
Underwriting year
(International Insurance)
2012
2013
2014
2015
2016
2017
2018
2019
2020
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2011 and prior
(28.3)
(24.4)
0.3
(24.2)
(22.8)
(26.6)
(23.5)
5.4
(0.8)
1.4
2.0
1.7
(31.6)
(23.3)
(214.3)
(182.9)
(261.0)
(165.2)
–
–
(258.1)
(142.5)
(400.6)
–
(218.5)
(218.5)
19.9
30.6
34.7
38.4
42.6
48.1
1.3
1.0
3.0
2.2
1.3
6.3
17.2
4.9
4.4
17.2
48.2
50.7
77.8
0.7
0.7
0.7
0.8
1.3
2.4
5.5
3.4
8.2
13.7
18.6
26.1
46.6
67.1
40.6
(153.0)
(94.1)
(142.5)
(248.0)
(229.8)
(254.7)
(252.3)
(385.6)
0.3
(40.2)
(0.4)
(41.0)
0.1
(38.9)
(0.1)
(48.4)
–
1.5
3.2
7.8
(65.3)
(81.2)
(103.5)
(121.8)
(71.2)
(58.4)
–
–
(89.6)
(50.1)
(139.7)
–
(95.4)
(95.4)
–
–
–
–
–
–
–
–
2.2
2.2
4.8
1.8
–
–
–
0.9
1.3
0.9
1.8
5.1
–
–
–
–
–
–
–
–
–
–
–
–
–
(33.4)
(39.6)
(47.9)
(43.5)
(60.7)
(51.5)
–
–
–
–
–
–
–
–
–
–
–
–
(323.6)
(344.3)
(242.3)
(192.8)
(161.0)
(306.7)
(239.2)
(229.6)
(202.9)
(136.7)
International insurance
net claims incurred
(28.3)
(48.6)
(49.1)
(50.5)
(51.6)
(76.5)
(94.2)
(107.6)
(135.9)
(133.1)
Other net claims incurred
–
(0.8)
Claims handling costs
(11.9)
(10.8)
(2.1)
(9.5)
(6.9)
(8.9)
(5.4)
(9.4)
(0.2)
(2.6)
(1.1)
–
–
(11.2)
(11.1)
(11.8)
(20.5)
(23.4)
Total net claims incurred
(363.8)
(404.5)
(303.0)
(259.1)
(227.4)
(394.6)
(347.1)
(350.1)
(359.3)
(293.2)
197
The table below shows the development of UK Car Insurance loss ratios for the past six financial periods, presented on an underwriting
year basis.
UK Car Insurance loss ratio development
2015
2016
2017
2018
2019
2020
Financial year ended 31 December
Underwriting year (UK Car only)
2015
2016
2017
2018
2019
2020
87%
–
–
–
–
–
87%
88%
–
–
–
–
83%
84%
87%
–
–
–
77%
77%
83%
92%
–
–
72%
73%
75%
81%
92%
–
69%
68%
70%
78%
76%
72%
(v) Analysis of claims reserve releases
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, other than for the 2019 year which is presented on an accident year basis due to the impact of Covid-19.
Gross
Underwriting year (UK Motor Insurance)
2015
£m
2016
£m
2015 and prior
197.7
135.7
2016
2017
2018
2019
–
–
–
–
–
–
–
–
Financial year ended 31 December
2017
£m
190.3
23.7
–
–
–
2018
£m
174.5
70.6
25.4
–
–
Total gross release (UK Motor Insurance)
197.7
135.7
214.0
270.5
2019
£m
91.2
50.6
110.6
83.2
–
335.6
2020
£m
69.9
46.3
69.8
57.3
54.8
298.1
Total gross release (UK Household
Insurance)
Total gross release (International
Insurance)
Total gross release
–
–
1.6
4.6
8.3
9.2
14.0
211.7
21.0
156.7
23.2
238.8
35.2
310.3
39.1
383.0
53.2
360.5
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 198
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
5. Premium, claims and profit commissions continued
Financial year ended 31 December
Net
Underwriting year (UK Motor Insurance)
2015
£m
2016
£m
2015 and prior
173.4
75.4
2016
2017
2018
2019
Total net release (UK Motor Insurance)
Total net release (UK Household Insurance)
Total net release (International Insurance)
Total net release
Analysis of net releases on UK Motor Insurance:
–
–
–
–
173.4
–
6.5
179.9
–
–
–
–
75.4
–
9.9
85.3
2017
£m
155.9
10.0
–
–
–
165.9
0.5
9.5
175.9
2018
£m
165.9
47.1
8.0
–
–
221.0
1.4
13.5
235.9
2019
£m
91.2
50.6
75.8
25.8
–
243.4
2.5
14.4
260.3
2020
£m
69.9
46.3
67.7
40.7
17.0
241.6
2.8
18.6
263.0
– Net releases on Group net share (UK Motor)
84.6
58.3
92.1
111.4
121.7
104.3
– Releases on commuted quota share reinsurance
contracts (UK Motor)
Total net release as above
88.8
173.4
17.1
75.4
73.8
165.9
109.6
221.0
121.7
243.4
137.3
241.6
The Group 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. Releases on commuted quota share contracts are analysed by underwriting year as follows:
Underwriting year
2015 and prior
2016
2017
2018
Financial year ended 31 December
2016
£m
2017
£m
17.1
73.8
–
–
–
–
–
–
2018
£m
91.9
17.7
–
–
2019
£m
50.7
29.5
41.5
–
2020
£m
40.9
27.0
46.0
23.4
Total releases on commuted quota share reinsurance contracts
17.1
73.8
109.6
121.7
137.3
Profit commission is analysed in note 5c.
199
(vi) Reconciliation of movement in claims provision
Claims provision at start of period
Claims incurred (excluding claims handling costs and releases)
Reserve releases
Movement in claims provision due to commutation
Claims paid and other movements
Claims provision at end of period
Claims provision at start of period
Claims incurred (excluding claims handling costs and releases)
Reserve releases
Movement in claims provision due to commutation
Claims paid and other movements
Claims provision at end of period
(vii) Reconciliation of movement in net unearned premium provision
Unearned premium provision at start of period
Written in the period
Earned in the period
Foreign exchange differences
Unearned premium provision at end of period
Unearned premium provision at start of period
Written in the period
Earned in the period
Unearned premium provision at end of period
Gross
£m
2,899.4
1,612.4
(360.5)
–
(1,231.4)
2,919.9
Gross
£m
2,740.5
1,886.6
(383.0)
–
(1,344.7)
2,899.4
Gross
£m
1,075.6
2,344.0
(2,265.3)
7.1
1,161.4
Gross
£m
995.9
2,273.7
(2,194.0)
1,075.6
31 December 2020
Reinsurance
£m
(1,354.2)
(1,079.6)
97.5
352.7
664.3
Net
£m
1,545.2
532.8
(263.0)
352.7
(567.1)
(1,319.3)
1,600.6
31 December 2019
Reinsurance
£m
(1,220.1)
(1,287.6)
122.7
257.1
773.7
Net
£m
1,520.4
599.0
(260.3)
257.1
(571.0)
(1,354.2)
1,545.2
31 December 2020
Reinsurance
£m
(717.5)
(1,555.9)
1,513.7
(4.2)
(763.9)
31 December 2019
Reinsurance
£m
(663.4)
(1,541.4)
1,487.3
(717.5)
Net
£m
358.1
788.1
(751.6)
2.9
397.5
Net
£m
332.5
732.3
(706.7)
358.1
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 200
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
6. Investment income and costs
6a. Accounting policies
i) Financial assets
Classification and measurement
The classification and subsequent measurement of the financial asset under IFRS 9 depends on:
(a) the Group’s business model for managing the financial assets;
(b) the contractual cash flow characteristics of the financial asset.
Based on these factors, the financial asset is classified into one of the following categories:
• Amortised cost – assets which are held in order to collect contractual cash flows, and the contractual terms of the financial asset give
rise to cash flows which are solely payments of principal and interest on the principal amount outstanding (SPPI), where the asset is not
designated as fair value through profit or loss (FVTPL).
For the Group, these include deposits with credit institutions, cash and cash equivalents, insurance receivables, trade and other
receivables and loans and advances to customers.
The interest income generated from these assets is included in Investment return with the exception of Loans and advances to customers,
where the interest receivable is recognised in Interest income.
Impairment is recognised on these assets using the expected credit loss model.
• Fair value through other comprehensive income (FVOCI) – assets which are held both to collect contractual cash flows and to sell the
asset, where the contractual terms of the financial asset give rise to cash flows which are SPPI, where the asset is not designated as
FVTPL.
For the Group, these assets include government and corporate debt.
In addition, IFRS 9 allows an irrevocable election at initial recognition to designate equity investments at FVOCI that otherwise would be
held at FVTPL, provided these are not held for trading. The Group has made this election for certain equity investments.
Movements in the carrying amount are taken through OCI, with the exception of recognition of impairment gains or losses, interest
revenue and foreign exchange gains or losses which are recognised in profit or loss.
• Fair value through profit or loss (FVTPL) – assets which do not meet the criteria for amortised cost or FVOCI, or which are designated
as FVTPL.
For the Group these assets include liquidity funds investing in short duration assets and derivative financial instruments.
A gain or loss on disposal of an investment measured at FVOCI is presented within ‘Investment return’ in the period in which it arises.
Impairment
The expected credit loss model is used to calculate any impairment to be recognised for all assets measured at amortised cost, as well as
financial investments measured at FVOCI. The general approach, which utilises the three-stage model, is used for Loans and advances to
customers (see note 7) whilst impairment for the remaining assets is measured using the simplified approach.
Derecognition
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 attached substantial risks and rewards relating to the asset to a third party.
ii) Financial liabilities
Classification and subsequent measurement
All financial liabilities are classified as subsequently measured at amortised cost using the effective interest rate (EIR) method, except for
derivatives that are classified at FVTPL and subsequently measured at fair value.
Movements in the amortised cost are recognised through the income statement.
Derecognition
A financial liability is derecognised when the obligation under that liability is discharged, cancelled or expires.
201
iii) Investment return and finance costs
Investment return from financial assets comprises distributions as well as net realised and unrealised gains on financial assets classified as
FVTPL, interest income and net realised gains from financial assets classified as FVOCI, and interest income from financial assets classified
as amortised cost.
Finance costs from financial liabilities comprise interest expense on subordinated notes, loan backed securities, credit facilities and
lease liabilities, calculated using the EIR method. The EIR method calculates the amortised cost of a financial asset or liability (or group of
financial assets or financial liabilities) and allocates the interest income or expense over the expected life of the asset or liability.
6b. Investment return
Investment return
On assets classified as FVTPL
On assets classified as FVOCI*1*3
On assets classified as amortised costs*1
Net unrealised losses
Unrealised losses on forward contracts
Accrual for reinsurers’ share of investment return
Interest receivable on cash and cash equivalents*1
Total investment and interest income*2
31 December 2020
£m
Re-presented*4
31 December 2019
£m
At EIR
Other
Total
At EIR
Other
Total
–
32.5
1.4
–
–
–
33.9
8.5
5.0
–
–
12.9
0.4
26.8
8.5
37.5
1.4
–
12.9
0.4
60.7
–
34.8
1.6
–
–
–
36.4
11.4
0.1
–
(0.1)
(12.9)
0.8
(0.7)
11.4
34.9
1.6
(0.1)
(12.9)
0.8
35.7
*1
Interest received during the year was £10.1 million (2019: £11.6 million).
*2 Total investment return excludes £2.9 million of intra-group interest (2019: £2.8 million).
*3 Realised gains on sales of debt securities classified as FVOCI are £5.0 million (2019: £nil).
*4 2019 Investment return re-presented to show interest expense at EIR separately, and to exclude the movement on expected credit loss provisions now shown as a separate
expense.
6c. Finance costs
Continuing operations
Interest payable on subordinated loan notes and other credit facilities*1*2
Interest payable on lease liabilities*1
Interest recoverable from co- and reinsurers
Total finance costs on continuing operations
*1
Interest paid during the year was £14.0 million (2019: £14.0 million).
*2 See note 7e for details of credit facilities.
31 December
2020
£m
Re-presented
31 December
2019
£m
11.7
2.6
(2.0)
12.3
11.4
3.1
(2.0)
12.5
Finance costs represent interest payable on the £200.0 million (2019: £200.0 million) subordinated notes and other financial liabilities.
Interest payable on lease liabilities represents the unwinding of the discount on lease liabilities under IFRS 16 and does not result in
a cash payment.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 202
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
6. Investment income and costs continued
6d. Expected credit losses
Expected credit losses on financial investments
Expected credit losses on Loans and advances to customers*1
Total expense for expected credit losses
*1
Includes £7.8 million of write-offs, with total movement in the expected credit loss provision being £25.8 million.
See note 6f and note 7b for details of the impairment methodology.
6e. Financial assets and liabilities
The Group’s financial assets and liabilities can be analysed as follows:
Continuing operations
Financial investments measured at FVTPL
Money market and other similar funds
Financial investments classified as FVOCI
Debt securities
Government gilts
Equity investments (designated FVOCI)
Financial assets measured at amortised cost
Deposits with credit institutions
Total financial investments
Other financial assets
Insurance receivables
Trade and other receivables (measured at amortised cost)
Insurance and other receivables
Loans and advances to customers (note 7)
Cash and cash equivalents
31 December
2020
£m
31 December
2019
£m
7.8
25.8
33.6
0.4
13.8
14.2
31 December
2020
£m
31 December
2019
£m
1,339.3
1,160.2
1,912.7
177.3
2,090.0
11.3
2,101.3
65.4
3,506.0
977.9
204.1
1,182.0
359.8
298.2
1,776.3
174.0
1,950.3
7.5
1,957.8
116.5
3,234.5
948.9
278.8
1,227.7
455.1
281.7
Total financial assets from continuing operations
5,346.0
5,199.0
Financial liabilities
Subordinated notes
Loan backed securities
Other borrowings
Derivative financial instruments
Subordinated and other financial liabilities
Trade and other payables*1
Lease liabilities
Total financial liabilities
204.3
260.7
20.0
3.6
488.6
1,991.2
122.8
2,602.6
204.2
304.5
20.0
1.4
530.1
1,975.9
137.1
2,643.1
*1
Trade and other payables total balance of £1,991.2 million (2019: £1,975.9 million) above includes £1,502.6 million (2019: £1,491.3 million) in relation to tax and social security,
deferred income and reinsurer balances that are outside the scope of IFRS 9.
203
The maturity profile of financial assets and liabilities under the scope of IFRS 4 & IFRS 9 at 31 December 2020 is as follows:
On demand
£m
< 1 year
£m
Between
1 and 2 years
£m
> 2 years
£m
Financial investments
Money market funds and derivative financial
instruments
Deposits with credit institutions
Debt securities
Government gilts
Total financial investments
Trade and other receivables
Loans and advances to customers
Cash and cash equivalents
Total financial assets
Financial liabilities
Subordinated notes
Loan backed securities
Other borrowings
Trade and other payables*1
Total financial liabilities
–
–
–
–
–
–
–
298.2
298.2
–
–
–
–
–
1,339.3
55.4
202.7
–
1,597.4
204.1
116.9
–
1,918.4
11.0
102.7
20.3
1,751.4
1,885.4
–
10.0
429.1
–
439.1
–
125.6
–
564.7
11.0
83.8
–
–
94.8
–
–
1,280.9
177.3
1,458.2
–
117.3
–
1,575.5
222.0
86.1
–
–
308.1
*1
Of the £1,751.4 million held within trade and other payables, £1,262.8 million do not meet the definition of a financial liability under IFRS 9 but fall within the scope of IFRS 4
hence are included in the above maturity profile.
The maturity profile of financial assets and liabilities under the scope of IFRS 4 & IFRS 9 at 31 December 2019 was as follows:
Financial investments
Money market funds and derivative financial
instruments
Deposits with credit institutions
Debt securities
Government gilts
Total financial investments
Trade and other receivables
Loans and advances to customers
Cash and cash equivalents
Total financial assets
Financial liabilities
Subordinated notes
Loan backed securities
Other borrowings
Trade and other payables*1
Total financial liabilities
On demand
£m
–
–
–
–
–
–
–
281.7
281.7
–
–
–
–
–
< 1 year
£m
1,145.1
96.5
462.6
–
1,704.2
278.8
128.6
–
2,111.6
11.0
102.3
20.3
1,705.9
1,839.5
Between
1 and 2 years
£m
> 2 years
£m
1.0
20.0
196.6
–
217.6
–
134.2
–
351.8
11.0
90.9
–
–
101.9
14.0
–
1,117.1
174.0
1,305.1
–
192.3
–
1,497.4
233.0
125.7
–
–
358.7
*1
Of the £1,705.9 million held within trade and other payables, £1,221.3 million do not meet the definition of a financial liability under IFRS 9 but fall within the scope of IFRS 4
hence are included in the above maturity profile.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 204
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
6. Investment income and costs continued
The maturity profile of gross insurance liabilities at the end of 2020 is as follows:
Claims outstanding
Unearned premium provision
Total gross insurance liabilities
The maturity profile of gross insurance liabilities at the end of 2019 was as follows:
< 1 year
£m
874.3
1,161.4
2,035.7
< 1 year
£m
813.7
1,075.6
1,889.3
1–3 years
£m
816.3
–
816.3
1–3 years
£m
497.0
–
497.0
FVTPL
£m
471.9
637.0
52.3
31.7
146.4
1,339.3
31 December 2020
FVOCI
£m
889.7
756.7
380.1
–
74.8
2,101.3
Amortised Cost*2
£m
38.8
325.9
52.3
0.1
–
417.1
> 3 years
£m
1,229.3
–
1,229.3
> 3 years
£m
1,588.7
–
1,588.7
Total
£m
1,400.4
1,719.6
484.7
31.8
221.2
3,857.7
Claims outstanding
Unearned premium provision
Total gross insurance liabilities
6f. Financial investments
AAA-AA
A
BBB
Sub BBB
Not rated*1
Total financial investments
*1
The majority (£136.7 million) of the unrated exposure stems from money market funds, which are rated AAA, but the underlying securities are not. These specific exposures are
repurchase agreements. The remaining unrated exposure is a mixture of private debt (£70.3 million) and other holdings (£14.2 million).
*2 Investments held at amortised cost comprise deposits with credit institutions and cash (including cash held by discontinued operations of £53.5 million).
31 December 2019
AAA-AA
A
BBB
Sub BBB
Not rated*1
FVTPL
£m
414.5
441.2
28.5
13.3
262.7
FVOCI
£m
861.0
733.6
304.3
–
58.9
Total financial investments
1,160.2
1,957.8
Amortised Cost
£m
68.7
308.5
20.2
0.1
0.7
398.2
Total
£m
1,344.2
1,483.3
353.0
13.4
322.3
3,516.2
*1
The majority (£234.4 million) of the unrated exposure stems from money market funds, which are rated AAA, but the underlying securities are not. These specific exposures are
repurchase agreements. The remaining unrated exposure is a mixture of private debt (£77.2 million) and other holdings (£10.7 million).
205
Classification and measurement
At initial recognition, the Group measures financial investments at fair value plus or minus, in the case of financial instruments not
measured at FVTPL, directly attributable transaction costs. Transaction costs of financial instruments measured at FVTPL are expensed
to the income statement when incurred.
Money market funds and derivative financial instruments are measured at FVTPL. The regulatory capital within the Group is used to
invest in these instruments in addition to any surplus funds which may be held. Buying and selling activity occurs depending on timing of
different cashflows.
Debt securities are measured at FVOCI and as such fall under the scope of the expected credit loss (ECL) model. These assets are held to match
policyholder liabilities or interest on debt liabilities. If sold before maturity, gains or losses on these assets impact the income statement.
Private equity investments have been designated as being reported through FVOCI due to these being long term, strategic investments.
Dividends are recognised in the income statement whilst a change in fair values will be reflected in other comprehensive income (OCI).
Given the immaterial amount (£11.3 million) of these investments, detailed levelling disclosures have not been provided.
Impairment
All financial investments held at FVOCI and at amortised cost have been assessed for impairment using the ECL model under IFRS 9. The
assessment has been made based on the credit ratings of the entities and externally available credit loss ratios.
The fair value of debt securities is calculated with reference to quoted market valuations and as such take into account future expected
credit losses. As a result, no impairment provision is required against the book value. The calculated impairment loss within the fair
value is recognised through the income statement whilst fair value movements are recognised in OCI. Deposits are held with well rated
institutions and are held at book value, with impairment calculated in a similar manner to debt securities.
All assets which require a calculation of impairment are considered based on an external credit rating agency or an assessment from the
Group’s external asset managers. The credit rating of all assets is regularly monitored. As at the year-end reporting date, the vast majority
of financial assets are of investment grade and considered low risk under IFRS 9. These therefore remain within stage 1 and a 12-month
expected loss is used to calculate the impairment provision required.
Any assets below BBB are considered by the Group to have significantly increased in credit risk, and therefore are stage 2 under IFRS 9.
The impairment provision at 31 December 2020 is £8.7 million (2019: £0.9 million). Given there is no material change in the credit quality or
type of financial assets in the year and the movement in provision is immaterial, no further disclosure has been made.
Fair value measurement
IFRS 13 requires assets and liabilities that are held at fair value to be classified according to a hierarchy which reflects the observability of
significant market inputs, based on three levels.
The table below shows how the financial assets held at fair value have been measured using the fair value hierarchy:
Level One (quoted prices in active markets)
Level Two (use of observable inputs)
Level Three (use of significant unobservable inputs)*1
31 December 2020
31 December 2019
FVTPL
£m
1,339.3
–
–
FVOCI
£m
2,090.0
–
11.3
FVTPL
£m
1,160.2
–
–
FVOCI
£m
1,950.3
–
7.5
Total
1,339.3
2,101.3
1,160.2
1,957.8
*1 No further information is provided due to the immateriality of the balance.
Deposits are held with well rated institutions; as such the approximate fair value is the book value of the investments as impairment of the
capital is not expected.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 206
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
6. Investment income and costs continued
6g. Cash and cash equivalents
Continuing operations
Cash at bank and in hand*1
Short-term deposits
Total cash and cash equivalents
31 December
2020
£m
31 December
2019
£m
298.2
–
298.2
281.7
–
281.7
*1 £4.4 million of cash is ring-fenced via a bank guarantee. See note 11f for further details.
Total cash and cash equivalents, including discontinued operations, is £351.7 million (2019: £281.7 million).
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.
An assessment has been completed for impairment purposes in line with that set out in note 6f above. Given the short-term duration and
low risk of these assets, no impairment provision has been recognised.
For cash at bank and cash deposits and other receivables, the fair value approximates to the book value due to their short maturity.
6h. Other assets
Insurance and other receivables
Continuing operations
Insurance receivables*1
Trade and other receivables
Prepayments and accrued income
Total insurance and other receivables
31 December
2020
£m
31 December
2019
£m
977.9
179.0
25.1
1,182.0
948.9
262.8
16.0
1,227.7
*1
Insurance receivables at 31 December 2020 include £70.5 million in respect of salvage and subrogation recoveries (2019: £71.7 million).
Insurance receivables
Insurance receivables are measured at historic cost. Given the short-term duration of these assets no bad debt provision has been recognised.
Trade and other receivables
Classification
Trade and other receivables are measured at amortised cost, being made up of multiple types of receivable balances.
Impairment
Where a provision is required for these receivables, it is calculated in line with the simplified method for trade receivables per IFRS 9, whereby
lifetime expected credit losses are recognised irrelevant of the credit risk. In this case, the provision is based on a combination of:
(i) aged debtor analysis;
(ii) historic experience of write-offs for each receivable;
(iii) any specific indicators of credit deterioration observed;
(iv) management judgement.
The level of provision is immaterial.
The amortised cost carrying amount of receivables is a reasonable approximation of fair value.
207
Contract balances
The following table provides information about receivables and contract assets from contracts with customers. Both balances are
included in Trade and other receivables.
Continuing operations
Receivables
Contract assets
31 December
2020
£m
13.8
23.7
Re-presented
31 December
2019
£m
22.0
24.8
The contract asset relates to the Group’s right to consideration for work undertaken in the law company on behalf of clients which is
ongoing or where the final fee has not yet been billed. The contract asset is transferred to trade receivables once the fee has been billed.
Significant changes in the contract asset balance during the period are as follows:
Contract asset balance
At 1 January 2020
Revenue recognised
Transferred to trade receivables
Write-backs
At 31 December 2020
31 December
2020
£m
24.8
25.5
(27.8)
1.2
23.7
The amount of revenue recognised in 2020 from performance obligations satisfied (or partially satisfied) in previous periods in relation to
the above contract balances is £nil (2019: £nil). See note 5c for details of profit commission recognised on previous underwriting years.
6i. Financial and lease liabilities
Subordinated
notes
£m
Loan backed
securities
£m
31 December 2020
Other
borrowings and
derivatives
£m
Financial liability at the start of the period
Interest payable per income statement
Cashflows
Foreign exchange and non-cash movements
Transferred to assets associated with disposal group held
for sale
204.2
11.1
(11.0)
–
–
304.5
6.2
(50.0)
–
–
Financial liability at the end of the period
204.3
260.7
21.4
1.6
(1.5)
2.1
–
23.6
Lease
liabilities
£m
137.1
2.6
(12.4)
(0.4)
(4.1)
122.8
Total
£m
667.2
21.5
(74.9)
1.7
(4.1)
611.4
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 208
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
6. Investment income and costs continued
Financial liability at the start of the period
Recognition of lease liabilities under IFRS 16
Interest payable per income statement
Cashflows
Foreign exchange and non-cash movements
Financial liability at the end of the period
Subordinated notes
Subordinated
notes
£m
Loan backed
securities
£m
31 December 2019
Other
borrowings and
derivatives
£m
204.1
–
11.4
(11.0)
(0.3)
204.2
168.3
71.8
–
–
136.2
–
304.5
–
–
(50.3)
(0.1)
21.4
Lease
liabilities
£m
–
149.2
3.2
(13.6)
(1.7)
137.1
Total
£m
444.2
149.2
14.6
61.3
(2.1)
667.2
Financial liabilities are inclusive of £200.0 million subordinated notes issued on 25 July 2014 at a fixed rate of 5.5% with 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 fair value of subordinated notes (Level One valuation) at 31 December 2020 is £222.9 million (2019: £225.1 million).
Other borrowings
The Group holds a credit facility of £20.0 million which expires in August 2021. £20.0 million was drawn under this agreement as at
31 December 2020 (2019: £20.0 million). The Group also hold a revolving credit facility of £200.0 million which expires in June 2021.
As at 31 December 2020, £nil was drawn down on this facility (2019: £nil). Amounts drawn under their respective agreements
are shown within other borrowings in the table above.
The carrying value is a reasonable approximation of fair value.
Loan backed securities
An asset backed senior loan note facility of £400.0 million has been established in relation to the Admiral Loans business (see note 3 for
details of the accounting treatment of the SPE). As at the year end, £260.7 million (2019: £304.5 million) of this facility had been utilised.
The carrying value is a reasonable approximation of fair value.
Lease liabilities
The Group leases various properties, with rental contracts typically for fixed periods of 5 to 25 years although these may have extension
options. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease
agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.
Under IFRS 16, from 1 January 2019, for each lease a right-of-use asset and corresponding lease liability are recognised at the date at which
the leased asset becomes available for use by the Group.
The lease liability is initially measured at the present value of remaining lease payments, which include the following:
• fixed payments (including in-substance fixed payments), less any lease incentives receivable;
• variable lease payments that are based on an index or a rate;
• payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the Group’s incremental
borrowing rate is used, being the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of a similar value in a
similar economic environment, with similar terms and conditions. Generally, the Group uses its incremental borrowing rate as the discount rate.
Subsequently, lease payments are allocated to the lease liability, split between repayments of principal and interest. A finance cost is
charged to the income statement so as to produce a constant period rate of interest on the remaining balance of the lease liability.
209
6j. 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 Group and subsidiary Boards on 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 financial 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, loans and advances to customers and
policyholder receivables.
The Directors consider credit quality and counterparty exposure 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 2020 and
historically, no material credit losses have been experienced by the Group.
The impact on equity of a 100 basis point increase in credit spreads at the relevant valuation date, is as follows:
Reduction in equity
31 December
2020
£m
31 December
2019
£m
53.8
54.8
Also see notes 6f and 7 for further information on credit risk in relation to financial investments and Loans and advances to customers.
Financial investments and cash
Credit and counterparty risk is managed by the Group by investing in high quality money market funds, and setting suitable parameters
for asset managers to adhere to when purchasing debt securities. Cash balances and deposits are placed only with highly rated credit
institutions. The detailed holdings are reviewed regularly by the Investment Committee.
Invested assets
As noted above, the Group primarily invests in the following asset types:
• 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;
• Deposits with well rated institutions and are short in duration (one to five years). These are classified as held at amortised cost.
Therefore neither the carrying value of the asset, nor the interest return will be impacted by fluctuations in interest rates;
• Debt securities are held within segregated mandates and one investment fund. The guidelines of the investments ensure management of credit
risk. Generally, the duration of the securities is relatively short (circa three years) and similar to the duration of the on-book claims liabilities;
• UK Government bonds which are classified as FVOCI.
Reinsurance assets
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 retains the cash received from policyholders as collateral.
Loans and advances to customers
The risk appetite for the Admiral Loans business is set with respect to anticipated loan losses over a 12-month period. Management has
defined an amber and a red loan loss limit, representing points at which action is required. These limits have been defined by management
to reflect the business maturity, the business ambitions and the economic climate. Risk appetite is assessed at least annually, while the
limits are continuously monitored.
Insurance assets
A further 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 amount of bad debt expense relating to policyholder debt charged to the income statement in 2020 and 2019 is insignificant.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 210
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
6. Investment income and costs continued
Trade and other receivables
Trade and other receivables are also subject to credit risk, although this is mitigated by a review of the credit worthiness of all
counterparties prior to them being accepted.
Other assets
All other assets are assessed as low credit risk under IFRS 9, with no significant amounts past due or impaired. No further disclosure is
provided due to this having an immaterial impact on the financial statements.
The Group’s credit risk exposure to assets with external ratings is as follows:
Financial institutions – Credit institutions
Financial institutions – Credit institutions
Financial institutions – Credit institutions
Financial institutions – Credit institutions
UK Government gilts
Reinsurers
Reinsurers
Reinsurers
Rating
AAA
AA
A
BBB and below
AA
AA
A
BBB and below
31 December
2020
£m
31 December
2019
£m
315.8
907.3
1,719.6
737.7
177.3
666.1
144.1
10.2
245.1
925.2
1,483.2
688.7
174.0
688.9
160.6
1.7
The Group’s maximum exposure to credit risk at 31 December 2020 is £5,125.7 million (2019: £4,913.3 million), being the carrying value
of financial investments and cash, the carrying value of loans and advances to customers, 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.
There were no further significant financial assets that were past due at the close of either 2020 or 2019.
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.
The impact on equity of a 50 basis point increase in interest rates at the relevant valuation date, is as follows:
Reduction in equity
Loans and advances to customers
31 December
2020
£m
31 December
2019
£m
47.1
35.4
The Group’s loan portfolio is made up of fixed rate loans which are funded at a floating variable rate. The Group has an interest rate swap
arrangement, the risk management objective of which is to eliminate the majority of the interest rate risk variability in the cashflows payable
on the loan backed securities. This relates to the difference between fixed rate on loans written and floating variable rate on funding.
211
Hedge accounting
Hedge accounting is applied when the criteria specified in IFRS 9 (including amendments, as set out above) are met. In line with IFRS 9, the
gain or loss on the hedged position as at the balance sheet date is recognised through OCI.
This results in a hedging reserve at 31 December 2020 (and at 31 December 2019) in relation to the interest rate swap.
For the Group’s loan backed securities and related interest rate swaps (which are bilateral agreements) the Group has now moved the
relationships with the counterparties to amend the reference benchmark interest rate from GBP LIBOR to SONIA. This was completed on
15 June 2020.
The Group has early adopted ‘Interest Rate Benchmark Reform – Phase 2: Amendments to IFRS 9 Financial Instruments, IAS 39 Financial
Instruments: Recognition and Measurement, IFRS 7 Financial Instruments: Disclosures, IFRS 4 Insurance Contracts and IFRS 16 Leases’. In
ascertaining the accounting implications of the interest rate swap transaction associated with the renewal of the loan backed securities,
the primary driver is whether the risk management objective has changed. The Group has determined that its risk management objective
is unchanged, and therefore judges that the replacement or rollover of its hedging instrument into another hedging instrument is
not an expiration or termination, meaning that hedge accounting is maintained and not de-recognised as a result of the change from
LIBOR to SONIA. As a consequence, there has been no accounting implication associated with the replacement of the interest rate
swap arrangement.
Below are details of the hedging instruments and hedged items in scope of the IFRS 9 amendments due to benchmark interest rate
reform, by hedge type. The terms of the hedged items listed match those of the corresponding hedging instruments.
Hedge type
Instrument type
Maturing in
Nominal Hedged item
Cash flow hedge
Pay sterling fixed, receive SONIA (with
5-day lag)
2025
£377.3m Portfolio cash flow hedges of
interest rate risk on SONIA
In addition, the Group has a number of financial assets and liabilities with interest rates linked to GBP LIBOR that are not included in hedge
accounting relationships. Similarly, there are exposures to non-GBP interest rates.
The Group set up an IBOR transition project in 2019 which includes input from a number of areas of the business including risk
management, investments, legal, accounting and systems. The project is under the governance of the Investment Committee, and
ultimately the Chief Financial Officer who is a member of the Board. The aim of the programme is to understand where IBOR exposures
are within the business and prepare and deliver on an action plan to enable a smooth transition to alternative benchmark rates. The Group
has removed various references to IBOR in 2020 with only a small number of exposures remaining. Generally the reference benchmark has
been moved to SONIA, or has a fallback to SONIA.
As the transition continues, the Group will continue to remove IBOR references as required.
Due to the immateriality of the transaction, no further disclosure is made.
Financial liabilities
The Group also holds a financial liability in the form of £200.0 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.
Other financial assets and liabilities
There is no significant exposure to interest rate risk for other financial assets and liabilities due to these being held at amortised cost.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 212
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
6. Investment income and costs 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 investment 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 borrowings, trade payables and other payables is shown in note 11.
The subordinated notes have a maturity date of July 2024, whereas all trade and other payables will mature within three to six months of
the balance sheet date.
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 £1,503.7 million (2019: £1,442.1 million), £1,175.1 million (2019:
£1,129.6 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 6e. 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 risk
Foreign exchange risk arises from unfavourable movements in foreign exchange rates that could adversely impact the valuation of
overseas assets and liabilities.
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 exposure to net assets and profits in currencies other than the reporting currency is immaterial other than for US dollars and
Euros. The Group’s exposure to net assets held in US dollars at the balance sheet date was £31.5 million (2019: £40.9 million); the exposure
to net assets held in Euros (for both continued and discontinued operations) was £134.7 million (2019: £111.8 million).
The loss before tax derived from business carried out in the US was £8.9 million (2019: £18.5 million). If the Sterling rates with
US dollars had strengthened/weakened by 10%, the Group’s profit before tax for the year would increase/decrease by £0.9 million
(2019: £1.8 million).
The profit before tax derived from business carried out in Euros (for both continued and discontinued operations) was €20.0 million
(2019: €11.9 million). If the Sterling rates with Euros had strengthened/weakened by 10%, the Group’s profit before
tax for the year would increase/decrease by £1.7 million (2019: £1.0 million).
7. Loans and Advances to Customers
7a. Accounting policies
Loans and advances to customers relate to the Admiral Loans business, consisting of unsecured personal loans and car finance products.
Classification
Loans and advances to customers are measured at amortised cost. This is because assets are held in order to collect contractual cash flows
and the contractual terms of the financial asset demand cash inflows which are solely payments of principal and interest on the principal
amount outstanding.
Interest income and expense
Interest income received in relation to loans and advances to customers is calculated using the effective interest method which
allocates interest, direct and incremental fees and costs over the expected lives of the assets and liabilities. There has been no change
in recognition of interest income from the comparative period.
Interest expense is calculated using the process appropriate to each source of funding, which is not linked to individual accounts.
213
Finance leases
Included within Loans and advances to customers are personal contract purchase (PCP) and hire purchase (HP) arrangements which are
classified as finance leases under IFRS 16. A receivable equal to the net investment in the lease has been recognised. The net investment is
equal to the gross investment in the lease discounted at the rate implicit in the lease.
Lease interest income is recognised within interest income in the income statement over the term of the lease using the EIR method.
7b. Loans and advances to customers
Loans and advances to customers – gross carrying amount
Loans and advances to customers – provision
Total loans and advances to customers
Loans and advances to customers are comprised of the following:
Unsecured personal loans
Finance leases
Total loans and advances to customers, gross
Fair value measurement
31 December
2020
£m
31 December
2019
£m
401.8
(42.0)
359.8
479.1
(24.0)
455.1
31 December
2020
£m
31 December
2019
£m
371.3
30.5
401.8
445.8
33.3
479.1
The loans and advances are recognised at fair value at the point of origination and then subsequently on an amortised cost basis. This is
deemed a reasonable approximation of fair value.
Expected credit losses
The expected credit loss model is a three-stage model based on forward looking information regarding changes in the credit quality since
origination. Credit risk is measured using a probability of default (PD), exposure at default (EAD) and loss given default (LGD) defined as follows:
• Probability of Default (PD): The likelihood of an account defaulting; calibrated through analysis of historic customer behaviour. Where
customers have already met the definition of default this is 100%. For customers that are not in default the PD is determined through
analysis of historic data at a credit grade level. A behavioural PD is then used after 6 months based on observed default rates by month
on book and risk grade.
• Exposure at Default (EAD): The amount of balance at the time of default. For loans that are in arrears the EAD is taken as the current
balance, for up to date loans the contractual outstanding balance in each future month is used.
• Loss Given Default (LGD): The amount of the asset not recovered following a borrower’s default, determined through analysis of historic
recovery performance.
The PD is applied to the EAD to calculate the expected loss excluding recoveries. Where customers are up-to-date the EAD is effectively
the sum of the future month-end balances, as such the PD is converted from an annual rate to a monthly rate before applying it to the EAD.
The LGD is then applied to this loss to calculate the total expected loss including recoveries. A forward-looking provision is also calculated,
as set out later in this note.
Loan assets are segmented into three stages of credit impairment:
• Stage 1 – no significant increase in credit risk of the financial asset since inception;
• Stage 2 – significant increase in credit risk of the financial asset since inception;
• Stage 3 – financial asset is credit impaired.
For assets in stage 1, the allowance is calculated as the expected credit losses from events within 12 months after the reporting date.
For assets in stages 2 and 3 the allowance is calculated as the expected credit loss from events in the remaining lifetime of each asset.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 214
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
7. Loans and Advances to Customers continued
Significant increase in credit risk (SICR) (Stage 2)
As explained above, stage 1 assets have an ECL allowing for losses in the next twelve months, stage 2 or 3 assets have an ECL allowing for
losses over the remaining lifetime of the contract. An asset moves to stage 2 when its credit risk has increased significantly since initial
recognition. IFRS 9 does not prescribe a definition of significant increase in credit risk (SICR) but does include a rebuttable presumption
that this does occur for loan assets which are 30 days past due (which the Group does not rebut).
The Group has deemed a SICR to have occurred where:
• the loan is 1 to 3 loan payments in arrears, or
• the loan has been in arrears with the Group in the last 6 months, or
• the customer has a significant level of unsecured debt relative to the point of inception, or
• the risk grading score has fallen outside of current new business risk appetite, or
• the customer has made contact with the business to inform that they have been impacted by Covid-19.
Credit impaired (Stage 3)
The Group does not rebut the presumption within IFRS 9 that default has occurred when an exposure is greater than 90 days past due,
which is consistent with a customer being four or more payments in arrears. In addition, a loan is deemed to be credit impaired where:
a) there is an Individual Voluntary Arrangement (IVA) agreement confirmed or proposed, or
b) customer has started or progressed bankruptcy action, or
c) a repayment plan is in place, or
d) customer is deceased.
Write-off policy
Loans are written off where there is no reasonable expectation of recovery. The Group’s policy is to write off balances to their estimated
net realisable value. Write-offs are actioned on a case by case basis taking into account the operational position and the collections
strategy. Given the relative immaturity of the loans business, and considerations surrounding potential debt sales in the future, the
Group has to-date operationally written off only a small proportion of the book.
Forward-looking information
Under IFRS 9 the provision must reflect an unbiased and probability-weighted amount that is determined by evaluating a range of possible
outcomes. The means by which the Group has determined this is to run scenario analyses.
Management judgement has been used to define the weighting and severity of the different scenarios based on available data without
undue cost or effort.
The key economic driver of the losses from the scenarios is the likelihood of a customer entering hardship through unemployment.
Unemployment forecasts include a risk grade split of PD based on the correlation between grade-level default rates observed relative
to the change in unemployment rates in the previous downturn, adjusted for the unemployment forecast expected in the current
economic environment.
The scenario weighting assumptions used are detailed below, along with the unemployment rate assumed in each scenario at
31 December 2020.
Base
Upturn
Downturn
Severe
31 December 2020
Scenario peak
Unemployment rate
31 December
2020
Weighting
31 December
2019
Weighting
8.2%
7.0%
9.3%
10.7%
40%
5%
25%
30%
50%
25%
20%
5%
The macro economic environment outlook has significantly altered since the prior year due to the Covid-19 pandemic and associated economic
shock. This led to an overall increase in unemployment forecasts, with weightings skewed more towards downturn and severe scenarios.
In addition to unemployment, several customer characteristics including employment status, employment industry, debt levels and
whether the customer has communicated to us an impact due to Covid-19 are considered. For each customer, the sensitivities from each
characteristic are combined to determine an overall sensitivity.
215
Sensitivities to key areas of estimation uncertainty
The key areas of estimation uncertainty identified, as per note 3 to the financial statements, are in the PD and the forward-
looking scenarios.
Base
Upturn
Downturn
Severe
31 December
2020
Weighting
31 December
2020
Sensitivity
£m
31 December
2019
Weighting
31 December
2019
Sensitivity
£m
40%
5%
25%
30%
(2.0)
(4.9)
0.3
3.2
50%
25%
20%
5%
(1.7)
(2.9)
0.8
28.3
The sensitivities in the above tables show the variance to ECL that would be expected if the given scenario unfolded rather than the
weighted position the provision is based on. At 31 December 2020 the implied weighted unemployment rate is 9.2%: the table shows that
in a downturn scenario with a 9.3% unemployment rate the provision would increase by £0.3 million, whilst the upturn would reduce the
provision by £4.9 million, base case reduce by £2.0 million and severe increase the provision by £3.2 million.
The sensitivity to the severe scenario has reduced year on year, but increased against the upturn scenario as the scenarios now have a
narrower range, with a higher weighting towards the downturn and severe cases. This recalibration follows consideration of the Covid-19
pandemic and the resulting macro impact on unemployment.
Stage 1 assets represent 85% of the total loan assets; a 0.1% increase in the stage 1 PD, i.e. from 4.8% to 4.9%, would result in a £0.5 million
(5%) increase in ECL.
Amounts arising from ECL: loans and advances to customers
The Group is exposed to credit risk from the Admiral Loans business.
The following table sets out information about the credit quality of the loans and advances to customers measured at amortised cost.
Credit grades are used to segment customers by apparent credit risk at the time of acquisition. Higher grades are the lowest credit risk
with each subsequent grade increasing in expected credit risk. The Group does not have any purchased or originated credit impaired
(POCI) assets. These tables are inclusive of the finance lease assets which are held by the Group, further analysis of these balances can be
found in note 7c.
All probability of default figures included in this paragraph allow for forward-looking information, i.e. the PDs are a weighted average
from the economic scenarios considered. The average probability of default (PD) in for stage 1 assets is 4.8% (2019: 1.8%) reflecting the
expectation of defaults within 12 months of the reporting date. The average PD for assets in stage 2 is 67.0% (2019: 58.7%) reflecting
expected losses over the remaining life of the assets. The PD for assets in stage 3 is 100.0% (2019: 100.0%) as these assets are deemed to
have defaulted.
Credit Grade*2
Higher
Medium
Lower
Credit impaired
Gross carrying amount
Expected credit loss allowance
Other loss allowance*1
Carrying amount
Stage 1
12- month ECL
£m
Stage 2
Lifetime ECL
£m
Stage 3
Lifetime ECL
£m
31 December
2020
Total
£m
31 December
2019
Total
£m
251.8
77.3
14.1
–
343.2
(10.9)
(0.5)
331.8
17.8
16.8
2.9
–
37.5
(12.7)
–
24.8
–
–
–
21.1
21.1
(17.9)
–
3.2
269.6
94.1
17.0
21.1
401.8
(41.5)
(0.5)
359.8
337.1
114.7
10.9
16.4
479.1
(23.4)
(0.6)
455.1
*1 Other loss allowance covers losses due to a reduction in current or future vehicle value or costs associated with recovery and sale of vehicles.
*2 Credit grade is the internal credit banding given to a customer at origination. This is based on external credit rating information.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 216
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
7. Loans and Advances to Customers continued
The following tables reconcile the opening and closing gross carrying amount and expected credit loss allowance.
2020
Stage 1
12- month ECL
£m
Stage 2
Lifetime ECL
£m
Stage 3
Lifetime ECL
£m
Gross carrying amount as at 1 January 2020
456.2
6.5
16.4
Transfers
Transfers from Stage 1 to Stage 2
Transfers from Stage 1 to Stage 3
Transfers from Stage 2 to Stage 1
Transfers from Stage 2 to Stage 3
Transfers from Stage 3 to Stage 1
Transfers from Stage 3 to Stage 2
Principal redemption payments
Write-offs
New financial assets originated or purchased
Gross carrying amount as at 31 December 2020
(26.5)
(9.5)
0.8
–
–
–
(180.0)
–
102.2
343.2
26.5
–
(0.8)
(2.6)
–
–
(1.3)
–
9.2
37.5
–
9.5
–
2.6
–
–
(1.6)
(7.7)
1.9
21.1
2019
Stage 1
12- month ECL
£m
Stage 2
Lifetime ECL
£m
Stage 3
Lifetime ECL
£m
Gross carrying amount as at 1 January 2019
296.9
8.9
Transfers
Transfers from Stage 1 to Stage 2
Transfers from Stage 1 to Stage 3
Transfers from Stage 2 to Stage 1
Transfers from Stage 2 to Stage 3
Transfers from Stage 3 to Stage 1
Transfers from Stage 3 to Stage 2
Principal redemption payments
Write-offs
New financial assets originated or purchased
Gross carrying amount as at 31 December 2019
(4.5)
(8.2)
2.4
–
–
–
(124.9)
–
294.5
456.2
4.5
–
(2.4)
(2.7)
–
–
(4.5)
–
2.7
6.5
4.6
–
8.2
–
2.7
–
–
(0.8)
(0.5)
2.2
16.4
Total
£m
479.1
–
–
–
–
–
–
(182.9)
(7.7)
113.3
401.8
Total
£m
310.4
–
–
–
–
–
–
(130.2)
(0.5)
299.4
479.1
217
2020
Stage 1
12- month ECL
£m
Stage 2
Lifetime ECL
£m
Stage 3
Lifetime ECL
£m
Expected credit loss allowance as at 1 January 2020
5.6
3.4
14.4
Movements with a profit and loss impact
Transfers
Transfers from Stage 1 to Stage 2
Transfers from Stage 1 to Stage 3
Transfers from Stage 2 to Stage 1
Transfers from Stage 3 to Stage 1
Changes in PDs/LGDs/EADs
New financial assets originated or purchased
Total net profit and loss charge in the period
Write-offs
(0.7)
(0.2)
0.2
0.1
2.4
3.5
5.3
–
1.1
–
(0.4)
–
5.2
3.4
9.3
–
Expected credit loss allowance as at 31 December 2020
10.9
12.7
Other movements with no profit and loss impact
Transfers
Transfers from Stage 2 to Stage 3
Transfers from Stage 3 to Stage 2
–
–
(2.4)
0.1
–
0.4
–
(0.1)
9.3
1.6
11.2
(7.7)
17.9
2.4
(0.1)
2019
Stage 1
12- month ECL
£m
Stage 2
Lifetime ECL
£m
Stage 3
Lifetime ECL
£m
Expected credit loss allowance as at 1 January 2019
4.4
1.4
4.1
Movements with a profit and loss impact
Transfers
Transfers from Stage 1 to Stage 2
Transfers from Stage 1 to Stage 3
Transfers from Stage 2 to Stage 1
Transfers from Stage 3 to Stage 1
Changes in PDs/LGDs/EADs
New financial assets originated or purchased
Total net profit and loss charge in the period
Expected credit loss allowance as at 31 December 2019
Other movements with no profit and loss impact
Transfers
Transfers from Stage 2 to Stage 3
Transfers from Stage 3 to Stage 2
Write-offs
(0.1)
(0.3)
0.1
–
(1.8)
3.3
1.2
5.6
–
–
–
0.2
–
(0.2)
–
0.8
1.2
2.0
3.4
(1.0)
–
–
–
0.5
–
–
7.9
1.9
10.3
14.4
1.0
–
(0.5)
Total
23.4
0.4
0.2
(0.2)
–
16.9
8.5
25.8
(7.7)
41.5
–
–
Total
9.9
0.1
0.2
(0.1)
–
6.9
6.4
13.5
23.4
–
–
(0.5)
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 218
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
7. Loans and Advances to Customers continued
7c. Finance lease receivables
Loans and advances to customers include the following finance leases. The Group is the lessor for leases of cars.
Gross investment in finance leases, receivable
Less than 1 year
Between 1 to 5 years
More than 5 years
Unearned finance income
Net investment in lease receivables
Less impairment allowance
Net investment in finance leases, receivable
Less than 1 year
Between 1 to 5 years
More than 5 years
31 December
2020
£m
31 December
2019
£m
8.4
24.9
–
33.3
(3.3)
30.0
(0.8)
29.2
6.7
23.3
–
30.0
8.1
28.9
–
37.0
(4.2)
32.8
(0.4)
32.4
6.2
26.6
–
32.8
The net investment in finance leases shown above is net of the unguaranteed residual value of £0.5 million (2019: £0.5 million).
7d. Interest income
Loans and advances to customers
31 December
2020
£m
31 December
2019
£m
36.8
36.8
30.8
30.8
Interest receivable on loans and advances to customers is recognised in the Income Statement using the EIR method, which calculates the
amortised cost of the financial asset and allocates the interest income over the expected product life.
7e. Interest expense
Interest payable on loan backed securities
Interest payable on other credit facilities
Total interest expense*1
*1 Interest paid in total during the year was £5.2 million (2019: £6.3 million).
31 December
2020
£m
31 December
2019
£m
6.2
1.0
7.2
5.6
0.7
6.3
Interest expense represents the interest payable on loan backed securities through a SPE of £400.0 million (2019: £400.0 million) of
which £260.7 million was drawn down at 31 December 2020 (2019: £304.5 million), and funding specifically allocated to the Admiral Loans
business, in the form of credit facilities of £120.0 million (2019: £120.0 million) of which £20.0 million was drawn down at 31 December 2020
(2019: £20.0 million). Admiral Group also has a further credit facility of £100.0 million (2019: £100.0 million) of which £nil was drawn down at
31 December 2020 (2019: £nil).
219
8. Other revenue
8a. Accounting policy
(i) Contribution from additional products and fees and Other revenue
Revenue is credited to the income statement over the period matching the Group’s obligations to provide services. Where the Group has
no remaining 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 the provision of insurance intermediary services is credited to revenue on the sale of the underlying insurance policy.
There has been no change in revenue recognition from the comparative period.
(ii) Nature of goods and services
The following is a description of the principle activities within the scope of IFRS 15 from which the Group generates its other revenue.
Products and services
Nature, timing of satisfaction of performance obligations and significant payment terms
Comparison
The performance obligation is the provision of insurance intermediary services, at which point the
performance obligation is met. Revenue is therefore recognised at a point in time.
Fee and commission
revenue: Commission on
underlying products
The performance obligation is the provision of insurance intermediary services, at which point the
performance obligation is met. Revenue is therefore recognised at a point in time. Payment of the
commission is due within 30 days of the period close.
Fee and commission
revenue: Administration
fees
Revenue from law firm
The performance obligation is the change requested being made to the underlying policy, at which point the
performance obligation is met.
Revenue is therefore recognised at a point in time and is collected immediately or in line with direct debit
instalments.
The performance obligation is the pursuit of the compensation from the other side’s insurer on behalf of
the customer. Once the case is settled the performance obligation is fully satisfied. Revenue is therefore
recognised over time using the expected value method. This method values revenue by multiplying
hours incurred on open cases by a 12-month realisable rate. The realisable rate is a probability weighted
transaction price based on settled cases. The expected value method therefore results in revenue
recognised being constrained to that where there is a high probability of no significant reversal.
Revenue is recognised over time because as the Group has an enforceable right to payment for performance
completed to date and the work performed to date has no alternative use to the Group.
A contract asset is recognised equal to the work performed up to the balance sheet date but not yet billed.
Refer to note 6g for further detail of this balance.
Payment is due within 28 days of invoice.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 220
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
8. Other Revenue continued
Products and services
Nature, timing of satisfaction of performance obligations and significant payment terms
Profit commission
from co-insurers
The Group’s profit commission revenue falling within the scope of IFRS 15 Revenue from Contracts with
Customers relates to a contractual arrangement between the Group’s insurance intermediary EUI Limited,
and a third party (external to the Group) co-insurer (Great Lakes) underwriting a share of the UK Car
Insurance business generated by EUI Limited.
The variable consideration, being the profit commission recognised in respect of each underwriting year
at the end of each reporting period, is recognised at a point in time, and calculated based on a number of
detailed inputs, the most material of which are as follows:
• Premiums, defined as gross premiums ceded including any instalment income, less reinsurance premium
(for excess of loss reinsurance);
•
Insurance expenses incurred;
• Claims ratio (more typically referred to as a loss ratio).
Whilst the premiums and insurance expenses related to an underwriting year are typically fixed at the
conclusion of each underwriting year and are not subject to judgement, the claims ratio is calculated from
the underwriting year loss ratios that result from the setting of claims reserves in the financial statements
meaning it is subject to inherent uncertainty. As stated in note 5d, Admiral’s reserving policy is initially
to reserve conservatively, above internal and independent projections of actuarial best estimates. This is
designed to create a margin held in reserves to allow for unforeseen adverse development in open claims.
Admiral’s financial statement loss ratios, used in the calculation of profit commission income, continue to
include a significant margin above projected best estimates of ultimate claims costs. It is this margin for
uncertainty, included in the financial statement loss ratios, which creates the constraint over the recognition
of the variable consideration, as using the booked loss ratio rather than the actuarial best estimate
constrains the profit commission income to a level where there is a high probability of no significant reversal
of the revenue recognised.
The key methods, inputs and assumptions used to estimate the variable consideration of profit commission
are therefore in line with those used for the calculation of claims liabilities, as set out in note 3 to the
financial statements, with further detail also included in note 5. There are no further critical accounting
estimates or judgements in relation to the recognition of profit commission.
Instalment income on insurance premium paid via instalments is using the effective interest rate, and as such is not within the scope of
IFRS 15. Profit commission from reinsurers is within the scope of IFRS 4, and not within the scope of IFRS 15 Revenue from Contracts with
Customers due to the nature of the income.
221
8b. Disaggregation of revenue
In the following tables, other revenue is disaggregated by major products/service lines and timing of revenue recognition. The total
revenue disclosed in the table of £625.3 million (2019: £584.8 million) represents total other revenue and profit commission and is
disaggregated into the segments included in note 4.
UK
Insurance
£m
International
Insurance
£m
Admiral
Loans
£m
Other
£m
Total
(continuing)
£m
Comparison
(discontinued)*2
£m
Year ended 31 December 2020
Major products/service line
Comparison*1
Instalment income
Fee and commission revenue
Revenue from law firm
Other
Total other revenue
Profit commission
Total other revenue
and profit commission
Timing of revenue recognition
Point in time
Over time
Revenue outside the
scope of IFRS 15
Major products/service line
Comparison*1
Instalment income
Fee and commission revenue
Revenue from law firms
Other
Total other revenue
Profit commission
Total other revenue
and profit commission
Timing of revenue recognition
Point in time
Over time
Revenue outside the
scope of IFRS 15
Re-presented
Year ended 31 December 2019
UK
Insurance
£m
International
Insurance
£m
Admiral
Loans
£m
Other
£m
Total
(continuing)
£m
Comparison
(discontinued)*2
£m
–
102.4
155.3
26.7
11.1
295.5
132.4
427.9
267.1
28.4
132.4
427.9
–
4.0
21.8
–
–
25.8
1.6
27.4
21.8
–
5.6
27.4
–
–
1.6
–
–
1.6
–
1.6
1.6
–
–
1.6
5.9
–
–
–
0.6
6.5
–
6.5
6.5
–
–
6.5
5.9
106.4
178.7
26.7
11.7
329.4
134.0
463.4
297.0
28.4
138.0
463.4
–
85.3
162.0
32.9
13.4
293.6
114.0
407.6
267.8
35.9
103.9
407.6
–
2.9
18.7
–
–
21.6
0.9
22.5
18.7
–
3.8
22.5
–
–
1.9
–
–
1.9
–
1.9
1.9
–
–
1.9
6.6
–
–
–
0.6
7.2
–
7.2
7.2
–
–
7.2
6.6
88.2
182.6
32.9
14.0
324.3
114.9
439.2
295.6
35.9
107.7
439.2
161.9
625.3
Total
£m
167.8
106.4
178.7
26.7
11.7
491.3
134.0
458.9
28.4
138.0
625.3
Total
£m
152.2
88.2
182.6
32.9
14.0
469.9
114.9
161.9
–
–
–
–
161.9
–
161.9
–
–
161.9
145.6
–
–
–
–
145.6
–
145.6
584.8
145.6
–
–
145.6
441.2
35.9
107.7
584.8
*1
Comparison revenue excludes £22.2 million (2019: £19.4 million) of income from other Group companies, including £22.0 million (2019: £18.7 million) from discontinued operations.
*2 See note 13 for further detail on discontinued operations.
Instalment income is recognised applying the effective interest rate over the term of the policy, and is outside the scope of IFRS 15.
Profit commission from reinsurers is recognised under IFRS 4, and is discussed further in note 5 to the financial statements.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 222
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
9. Expenses
9a. 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
As detailed in the Remuneration Committee Report, the key elements of employee remuneration are:
• Base salaries and pension contributions;
• Share based incentive plans;
• A discretionary bonus, (the ‘DFSS Bonus’), rather than an annual cash bonus, that is directly linked to the number of DFSS awards held
and actual dividends paid out to shareholders.
Within note 9b, the charges for base salaries and pension contributions (and the related social security costs) are recognised within
insurance contract expenses or administration and other marketing costs, based on the role of the employee.
Charges for the share based incentive plans (and related social security costs) and discretionary bonus are included within ‘share scheme
charges’. These charges are not shown as part of the result for each reportable segment, or within the expense ratio, due to them being
materially comprised of an accounting charge in line with IFRS 2 Share based payments which does not result in a cash payment to
employees but instead results in a dilution of shares.
The rules of the share schemes ensure that the actual dilution level does not exceed 10% in any rolling ten-year period, by funding of any
vested (and future) DFSS and SIP awards as appropriate with market-purchased shares. This corresponds to approximately a 1% dilution of
share capital each year.
Base salaries and pension contributions
Base salaries and the related employer social security costs are charged to the income statement in the period that they are incurred.
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.
Share based incentive plans and related social security costs
The Group operates a number of equity and cash settled compensation schemes for its employees, the main ones being:
• a Share Incentive Plan (‘SIP’), which is in place for all UK employees encouraging wide share ownership across our employees, and
• the Discretionary Free Share Scheme (‘DFSS’). DFSS shares are typically awarded to managers, and for the majority of employees 50%
of the DFSS shares awarded are subject to three performance conditions being Earnings per Share growth, Return on Equity and Total
Shareholder Return vs. the FTSE 350 (excluding investment companies) over a three-year period.
For both schemes, employees must remain in employment three years after the award date (i.e. at the vesting date), otherwise the shares
are forfeited.
The majority of these schemes are classed as equity settled under IFRS 2, due to the employees receiving shares (rather than cash) as
consideration for the services provided.
For equity settled schemes, the charge, which reflects the fair value of the employee services received in exchange for the grant of the
free shares, is recognised as an expense, with a corresponding increase in equity, as shown in Consolidated statement of changes in equity
(2020: £53.8 million; 2019: £58.8 million).
For the cash settled schemes, the expense recognised for the fair value of services received results in a corresponding increase in liabilities.
223
The key drivers and assumptions used to calculate the charge for the schemes over the three year vesting period are:
• the number of shares awarded, which is set at the start of each scheme. Details of the number of shares awarded for each scheme where
shares remain unvested is set out in note 9f(ii).
• the fair value of the shares:
– For the SIP, the fair value of the shares awarded is the share price at the award date. Awards under the SIP are entitled to receive
dividends, and hence no adjustment is made to this fair value;
– For the DFSS equity settled awards, awards are not eligible for dividends, although a discretionary bonus is currently paid equivalent
to the dividend that would have been paid on the shareholding, hence the fair value of the shares is revised downwards to take
account of these expected dividends;
– For the DFSS cash settled awards, the fair value is based on the share price at the vesting date. The closing share price at the end of
each reporting period is used as an approximation for the closing price at the end of the vesting period.
• staff attrition rates, which impact the ultimate number of shares that vest.
•
in the case of the DFSS, the vesting rates based on the performance conditions, which also impact the ultimate number of shares that vest.
The number of shares that have ultimately vested compared to those originally awarded is set out in note 9f(iii).
At each balance sheet date, the Group revises its assumptions on the number of shares which will ultimately vest based on the latest
forecast information for attrition rates and, for the DFSS, the extent to which the performance conditions are met.
The financial impact as a result of any change in the assumptions is recognised through the income statement. Any significant changes
in assumptions may therefore result in an increased/decreased charge in an accounting period as a result of this true-up of the expected
cumulative charge required.
Social security costs on share based incentive plans
Social security costs are incurred by the Group in respect of the share based incentive plans, with the expense recognised over the vesting
period for each share scheme. For the SIP, these costs are paid when the employees sell the shares after vesting (typically 3-5 years after
the grant date). For the DFSS, the costs are paid immediately upon vesting.
The total social security costs are calculated based on the following:
• The taxable value of the shares, being:
– For the SIP, the lower of the share price at award date and the share price at the balance sheet date;
– For the DFSS, the share price at the balance sheet date.
• the number of shares expected to vest for each scheme, driven by the number of shares awarded, attrition rates and, for the DFSS, the
vesting rate based on performance conditions;
• the appropriate social security rate.
These assumptions are updated at the end of each reporting period. The financial impact as a result of any change in the assumptions is
recognised through the income statement. Any significant changes in assumptions may therefore result in an increased/decreased charge
in an accounting period as a result of this true-up of the expected cumulative charge required.
Discretionary bonus on shares allocated but unvested
The cost of the DFSS bonus is recognised and paid in each period equivalent to the dividends on shares allocated to employees that are
still entitled to vest, but have not yet vested. The cost shown also includes the social security costs on the discretionary bonus. No accrual
is made for future discretionary bonus payments due to there being no contractual obligation for such a bonus at the balance sheet date.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 224
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
9. Expenses continued
9b. Operating expenses and share scheme charges
Continuing operations
Acquisition of insurance contracts
Administration and other marketing costs (insurance contracts)
Insurance contract expenses
Administration and other marketing costs (other)
Share scheme charges
Movement in expected credit loss provision
Total expenses and share scheme charges – continuing operations
Continuing operations
Acquisition of insurance contracts*1
Administration and other marketing costs (insurance contracts)
Insurance contract expenses
Administration and other marketing costs (other)
Share scheme charges
Movement in expected credit loss provision
Total expenses and share scheme charges – continuing operations
31 December 2020
Recoverable
from co- and
reinsurers
£m
(106.8)
(321.0)
(427.8)
–
(28.8)
–
(456.6)
Re-presented
31 December 2019
Recoverable
from co- and
reinsurers
£m
(104.9)
(307.2)
(412.1)
–
(29.1)
–
(441.2)
Gross
£m
166.2
437.4
603.6
131.3
79.7
33.6
848.2
Gross
£m
156.7
398.8
555.5
125.2
78.2
14.2
773.1
Net
£m
59.4
116.4
175.8
131.3
50.9
33.6
391.6
Net
£m
51.8
91.6
143.4
125.2
49.1
14.2
331.9
*1
Acquisition of insurance contracts expense excludes £0.2 million (2019: £0.7 million) of aggregator fees from other Group companies.
The £116.4 million (2019: £91.6 million) administration and marketing costs allocated to insurance contracts is principally made up of
salary costs.
Analysis of other administration and other marketing costs:
Continuing operations
Expenses relating to additional products and fees
Loans expenses (excluding movement on ECL provision)
Other expenses
Total (continuing operations)
Refer to note 14 for a reconciliation between insurance contract expenses and the reported expense ratio.
31 December
2020
£m
Re-presented
31 December
2019
£m
80.6
16.8
33.9
70.1
18.5
36.6
131.3
125.2
225
9c. Staff costs and other expenses
Continuing operations
Salaries
Social security charges
Pension costs
Share scheme charges (see note 9f)
Total staff expenses
Depreciation charge:
– Owned assets
– ROU assets
Amortisation charge:
– Software
– Deferred acquisition costs
Auditor’s remuneration (including VAT) (total Group):
– 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 audit related assurance services pursuant to legislation
or regulation
31 December 2020
Re-presented
31 December 2019
Total
£m
298.8
32.6
16.2
79.7
427.3
12.0
10.0
19.1
166.4
0.1
1.2
0.5
Net
£m
100.1
11.6
5.4
50.6
167.7
3.0
2.9
5.6
59.0
0.1
0.6
–
Total
£m
271.9
27.8
13.0
78.2
390.9
11.2
11.1
17.2
158.5
0.1
0.9
0.4
Net
£m
88.9
9.7
4.2
49.1
151.9
3.3
3.7
5.1
52.8
0.1
0.8
–
£8,880 (inclusive of VAT) (2019: £32,380) was payable to the auditor for other services in the year.
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. Audit fees are 70% (2019: 66%) of total fees and 30% (2019: 31%) of total fees are for non-audit services, which are classed as
audit related assurance services under the FRC rules on non-audit services.
The amortisation of software and deferred acquisition cost assets is charged to expenses in the income statement.
9d. Staff numbers (including Directors)
Direct customer contact staff
Support staff
Total
Average for the year
2020
Number
7,278
3,559
10,837
2019
Number
7,319
3,510
10,829
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 226
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
9. Expenses continued
9e. Directors’ remuneration
(i) Directors’ remuneration
Directors’ emoluments
Amounts receivable under SIP and DFSS share 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
9f. Staff share schemes
31 December
2020
£m
31 December
2019
£m
2.1
2.7
–
4.8
1.7
1.2
–
2.9
2020
Number
2019
Number
3
1
Total share scheme costs for the Group, including discontinued operations share scheme costs of £3.1 million (2019: £4.3 million)
are analysed below:
IFRS 2 charge for equity settled share schemes
IFRS 2 charge for cash settled share schemes
Total IFRS 2 charge
Social security costs on IFRS 2 charge
Discretionary bonus on shares allocated but unvested
Total share scheme charges
IFRS 2 charge for equity settled share schemes
IFRS 2 charge for cash settled share schemes
Total IFRS 2 charge
Social security costs
Discretionary bonus on shares allocated but unvested
Total share scheme charges
31 December 2020
SIP charge (i)
DFSS charge (ii)
Total charge
Gross
£m
18.0
–
18.0
1.6
–
19.6
Gross
£m
17.3
–
17.3
1.6
–
18.9
Net
£m
12.4
–
12.4
1.0
–
13.4
Gross
£m
35.8
4.2
40.0
8.7
14.5
63.2
Net
£m
23.3
2.5
25.8
5.9
8.9
40.6
Gross
£m
53.8
4.2
58.0
10.3
14.5
82.8
Net
£m
35.7
2.5
38.2
6.9
8.9
54.0
31 December 2019
SIP charge (i)
DFSS charge (ii)
Total charge
Net
£m
11.9
–
11.9
1.2
–
13.1
Gross
£m
41.5
1.9
43.4
7.1
13.1
63.6
Net
£m
26.5
1.0
27.5
4.8
8.0
40.3
Gross
£m
58.8
1.9
60.7
8.7
13.1
82.5
Net
£m
38.4
1.0
39.4
6.0
8.0
53.4
227
Net share scheme charges are presented after allocations to co-insurers (in the UK and Italy) and reinsurers (in the International Insurance
businesses). The proportion of net to gross share scheme charges would be expected to be consistent in each period, at approximately 65%.
Financial year ended 31 December
Analysis of gross cost
Year of share scheme – SIP
2017 and prior
£m
2015
2016
2017
2018*1
2019*1
2020*1
Gross IFRS 2 costs – SIP
Year of share scheme – DFSS
2015
2016
2017
2018*2
2019*2
2020*2
Gross IFRS 2 costs – DFSS
Total IFRS 2 costs
11.6
8.2
3.3
–
–
–
19.0
18.6
3.6
–
–
–
2018
£m
2.0
5.4
5.5
3.5
–
–
16.4
7.0
17.0
13.0
3.9
–
–
40.9
57.3
2019
£m
–
2.1
5.5
6.1
3.6
–
17.3
–
9.8
14.5
15.6
3.5
–
43.4
60.7
Total
cumulative
charge to date
£m
13.6
15.7
16.7
15.7
9.8
3.3
26.0
45.4
37.8
36.9
14.6
4.8
2020
£m
–
–
2.4
6.1
6.2
3.3
18.0
–
–
6.7
17.4
11.1
4.8
40.0
58.0
*1 Awards are made in March and September of each year, and vest over 36 months from award date. On the 2018 scheme, an average of 5 months’ charge remains outstanding, on
the 2019 scheme an average of 17 months’ charge remains outstanding, and on the 2020 schemes an average of 29 months’ charge remains outstanding.
*2 The main award is made in September of each year, with smaller awards made at other points through the year. The shares vest over 36 months from award date. On the 2018 main
DFSS, 9 months’ charge remains outstanding; on the 2019 main DFSS 21 months’ charge remains outstanding, and on the 2020 main DFSS, 33 months’ charge remains outstanding.
(i) The Approved Share Incentive Plan (the SIP)
Eligible UK based employees qualified for awards under the SIP based upon the performance of the Group in each half-year period. The
maximum award for each year is £3,600 per employee and the maximum number of shares that can vest relating to the 2020 schemes is
982,643 (2019 schemes: 1,113,496; 2018 schemes: 1,192,302).
The awards are made at the discretion of the Remuneration Committee, taking into account the Group’s performance.
(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.
The maximum number of shares that can vest relating to the 2020 schemes is 2,795,261 (2019 scheme: 2,637,196; 2018 schemes: 3,373,948).
The vesting percentage for most employees for the 2017 DFSS scheme which vested during 2020 was 94.4% (2016 DFSS scheme: 93.8%).
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 228
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
9. Expenses continued
(iii) Number of free share awards committed at 31 December 2020
SIP 2018*2
SIP 2019*2
SIP 2020*2
DFSS 2018*3
DFSS 2019*3
DFSS 2020*3
Total awards committed
Awards
outstanding*1
1,192,302
1,113,496
982,643
3,373,948
2,637,196
2,795,261
12,094,846
*1 Being the maximum number of awards committed before accounting for expected staff attrition and vesting conditions.
*2 Shares are awarded in March and September of each year, and vest three years later.
*3 The main award is made in September of each year, with smaller awards made at other points through the year.
(iv) Number of free share awards vesting during the year ended 31 December 2020
During the year ended 31 December 2020, awards under the SIP H1 17 and H2 17 schemes and the DFSS 2017 schemes vested. The total
number of awards vesting for each scheme is as follows.
SIP 2017 schemes
DFSS 2017 schemes
Original awards
Awards vested
1,067,291
3,205,449
841,940
2,627,669
The difference between the original and vested awards reflects employee attrition (SIP schemes) and both employee attrition and the
vesting outcomes based on performance conditions noted above (DFSS schemes).
The weighted average fair value of the shares granted in the year was £23.13 (2019: £18.96).
The weighted average market share price at the date of exercise for shares exercised during the year was £25.60 (2019: £21.06).
10. Taxation
10a. 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.
Deferred tax is calculated at the tax rates that have been enacted or substantively 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.
229
10b. Taxation
Continuing operations
Current tax
Corporation tax on profits for the year
Under-provision relating to prior periods
Current tax charge
Deferred tax
Current period deferred taxation movement
(Over) provision relating to prior periods
Total tax charge per consolidated income statement
Factors affecting the total tax charge are:
Continuing operations
Profit before tax
Corporation tax thereon at effective UK corporation tax rate of 19.0% (2019: 19.0%)
Expenses and provisions not deductible for tax purposes
Non-taxable income
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
Total tax charge for the period as above
31 December
2020
£m
31 December
2019
£m
101.6
0.6
102.2
4.0
–
106.2
87.1
(0.3)
86.8
2.8
(0.4)
89.2
31 December
2020
£m
31 December
2019
£m
608.2
115.5
0.7
(10.5)
0.4
0.6
(1.6)
1.1
106.2
505.1
96.0
1.8
(4.9)
0.3
(0.7)
(9.0)
5.7
89.2
The corporation tax receivable for continuing operations as at 31 December 2020 was £22.9 million (2019: £48.3 million payable). See note
13 for details of the corporation tax charge on discontinued operations, and the related corporation tax balance at 31 December 2020.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 230
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
10. Taxation continued
10c. Deferred income tax asset/(liability)
Analysis of deferred tax asset/(liability)
Balance brought forward at 1 January
2019
Tax treatment of share scheme charges
through income or expense
Tax treatment of share scheme charges
through reserves
Capital allowances
Carried forward losses
Movement in fair value reserve
Other difference
Balance carried forward at
31 December 2019
Tax treatment of share scheme charges
through income or expense
Tax treatment of share scheme charges
through reserves
Capital allowances
Carried forward losses
Movement in fair value reserve
Transferred to disposal group held for sale
Other difference
Balance carried forward at
31 December 2020
Tax treatment
of share
schemes
£m
Capital
allowances
£m
Carried
forward losses
£m
Fair value
reserve
£m
Other
differences
£m
Total
£m
7.2
(4.6)
3.3
–
–
–
–
5.9
(3.2)
6.6
–
–
–
(0.5)
–
8.8
(3.6)
–
–
1.5
–
–
–
(2.1)
–
–
0.7
–
–
(0.3)
–
(1.7)
–
–
–
–
–
–
–
–
–
–
–
2.9
–
(2.9)
–
–
(3.9)
0.5
–
–
–
–
(1.5)
–
(5.4)
–
–
–
–
(1.8)
–
–
(7.2)
–
–
–
–
–
0.7
1.2
–
–
–
–
–
(0.5)
(1.5)
(0.8)
0.2
(4.6)
3.3
1.5
–
(1.5)
0.7
(0.4)
(3.2)
6.6
0.7
2.9
(1.8)
(4.2)
(1.5)
(0.9)
Positive amounts presented above relate to a deferred tax asset position.
The average effective rate of tax for 2020 is 19.0% (2019: 19.0%). An increase to the main rate of corporation tax in the UK to 25% was
announced in the 2021 Budget, and is expected to come into effect in 2023. This will increase the Group’s future tax charge accordingly.
The deferred tax asset in relation to carried forward losses (for continuing operations) remains at £nil at the year end (2019: £nil) due
to uncertainty over the availability of future taxable profits against which to offset any deferred tax asset.
At 31 December 2020 the Group had unused tax losses amounting to £236.8 million (2019: £231.3 million), relating primarily to the
Group’s US businesses Elephant Auto and compare.com, for which no deferred tax asset has been recognised. The earliest expiry date
for any of these tax losses is 2029. The total aggregated unrecognised deferred tax liabilities on temporary differences associated with
subsidiaries is £nil (2019: £nil).
231
11. Other assets and other liabilities
11a. 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
Computer equipment
Office equipment
Furniture and fittings
Motor vehicles
Right-of-use assets
–
–
–
–
–
–
four to ten years
two to four years
four years
four years
four years
two – twenty years, aligned to lease agreement
In line with IFRS 16, and as set out further in note 6i to the financial statements, a right-of-use asset has been established in relation the
Group’s lease arrangements.
The right-of-use asset is measured at cost, which comprises the following:
• the amount of the initial measurement of lease liability (see notes 2 and 6h to the financial statements);
• any lease payments made at or before the commencement date less any lease incentives received;
• any initial direct costs; and
• restoration costs.
The right-of-use asset is subsequently depreciated over the shorter of the lease term and the asset’s useful life on a straight-line basis.
The Group does not have any significant leases which qualify for the short-term leases or leases of low-value assets exemption.
(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.
(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 2020 and 2019 is allocated solely to the UK Insurance segment.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information
232
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
11. Other assets and other liabilities continued
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 period of up to
three years. Cash flows beyond this period are considered, but not included in the calculation.
The key assumptions used in the value in use calculations are those regarding revenue growth, along with expected changes in pricing
and expenses incurred during the forecast period. Management estimates revenue 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.
(iv) Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised when a legal or constructive obligation arises as a result of an event that occurred before the balance sheet
date, when a cash outflow relating to this obligation is probable and when the amount can be estimated reliably.
Where a material obligation exists, but the likelihood of a cash outflow or the amount is uncertain, or where there is a possible
obligation arising from a past event that is contingent on a future event, a contingent liability is disclosed.
Contingent assets are possible assets that arise from past events, whose existence will be confirmed only by the occurrence or non-
occurrence of future events. Where it is probable that a cash inflow will arise from a contingent asset, this is disclosed.
233
ROU
Asset–
Leasehold
buildings
£m
–
136.7
–
–
–
(2.3)
134.4
–
–
11.9
–
(0.1)
11.8
Total
£m
123.1
136.7
16.6
(1.0)
–
(3.2)
272.2
95.0
–
23.8
(0.3)
(0.7)
117.8
–
28.1
122.6
154.4
9.8
–
0.9
(0.2)
0.3
(0.2)
10.6
8.9
–
0.5
(0.2)
(0.1)
9.1
0.9
1.5
10.6
134.4
272.2
(0.2)
0.2
–
(0.3)
(0.1)
10.2
9.1
(0.2)
0.5
(0.2)
(0.1)
9.1
(5.5)
0.1
(3.1)
(1.8)
0.1
124.2
(14.0)
18.3
(3.1)
(2.7)
0.9
271.6
11.8
117.8
(1.6)
10.8
(1.5)
–
19.5
(8.1)
23.6
(2.4)
0.3
131.2
Improvements
to short
leasehold
buildings
£m
Computer
equipment
£m
Office
equipment
£m
Furniture and
fittings
£m
11b. Property and equipment
Cost
At 1 January 2019
Initial application of IFRS 16
Additions
Disposals
Transfers
Foreign exchange and other movements
At 31 December 2019
Depreciation
At 1 January 2019
Initial application of IFRS 16
Charge for the year
Disposals
Foreign exchange and other movements*1
At 31 December 2019
Net book amount
At 1 January 2019
Net book amount
At 31 December 2019
Cost
At 1 January 2020
Transfer of assets associated with
disposal group held for sale
Additions
Impairment
Disposals
Foreign exchange and other movements
At 31 December 2020
Depreciation
At 1 January 2020
Transfer of depreciation associated
with disposal group held for sale
Charge for the year
Disposals
Foreign exchange and other movements
At 31 December 2020
Net book amount
At 31 December 2020
29.8
–
4.2
–
(0.4)
(0.2)
33.4
16.8
–
3.2
–
(0.2)
19.8
13.0
13.6
33.4
(1.2)
3.1
–
–
0.7
36.0
19.8
(0.6)
3.7
–
0.1
23.0
62.1
–
9.7
(0.2)
0.1
(0.3)
71.4
52.3
–
6.7
(0.1)
(0.2)
58.7
9.8
12.7
71.4
(6.2)
14.1
–
(0.6)
(0.1)
78.6
58.7
(5.2)
6.8
(0.7)
–
59.6
21.4
–
1.8
(0.6)
–
(0.2)
22.4
17.0
–
1.5
–
(0.1)
18.4
4.4
4.0
22.4
(0.9)
0.8
–
–
0.3
22.6
18.4
(0.5)
1.8
–
0.3
20.0
*1
Within foreign exchange and other movements for the ROU asset, £0.6 million relates to remeasurements of the ROU asset due to amendments to the payment terms of the
leasing arrangement.
13.0
19.0
2.6
1.1
104.7
140.4
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 234
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
11. Other assets and other liabilities continued
11c. Intangible assets
At 1 January 2019
Additions
Amortisation charge
Disposals
Impairment
Transfers
Foreign exchange movement
At 31 December 2019
Additions
Amortisation charge
Disposals
Transfer of assets associated
with disposal group held for sale
Foreign exchange movement
At 31 December 2020
Goodwill
£m
62.3
–
–
–
–
–
–
62.3
–
–
–
–
–
62.3
Deferred
acquisition
costs
£m
Software*1
£m
23.4
54.8
(52.8)
–
–
–
(0.6)
24.8
61.3
(59.0)
–
–
0.2
27.3
76.3
17.0
(17.4)
(0.3)
(1.2)
–
(1.2)
73.2
24.8
(19.2)
(1.2)
(1.2)
0.7
77.1
Total
£m
162.0
71.8
(70.2)
(0.3)
(1.2)
–
(1.8)
160.3
86.1
(78.2)
(1.2)
(1.2)
0.9
166.7
*1
Software additions relating to internal development are immaterial in both 2020 and 2019. Gross carrying amount and accumulated amortisation of software as at the end of
2020 are £184.8 million (2019: £168.1 million) and £107.7 million respectively (2019: £94.9 million).
Goodwill relates to the acquisition of Group subsidiary EUI Limited (formerly Admiral Insurance Services Limited) in November 1999. 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.
Only one year of forecasts is required to support the recoverable value of goodwill above. Given the short time period used to support the
recoverable amount, no terminal growth rate or discounting is applied.
Refer to the accounting policy for goodwill for further information.
An analysis of deferred acquisition costs is given in the table below:
At 1 January 2019
Additions
Amortisation
Foreign exchange movement
At 31 December 2019
Additions
Amortisation
Foreign exchange movement
At 31 December 2020
Gross
£m
71.6
163.1
(158.5)
(1.6)
74.6
168.4
(166.4)
1.0
77.6
Reinsurance
£m
(48.2)
(108.3)
105.7
1.0
(49.8)
(107.1)
107.4
(0.8)
(50.3)
Net
£m
23.4
54.8
(52.8)
(0.6)
24.8
61.3
(59.0)
0.2
27.3
235
31 December
2020
£m
Restated*1
31 December
2019
£m
34.9
240.9
1,262.8
72.9
135.6
244.1
1,991.2
37.5
220.8
1,221.3
79.6
160.2
256.5
1,975.9
11d. Trade and other payables
Trade payables
Amounts owed to co-insurers
Amounts owed to reinsurers
Other taxation and social security liabilities
Other payables
Accruals and deferred income (see below)
Total trade and other payables
*1 Other payables and Accruals and deferred income balances in 2019 have been restated to better reflect the nature of the underlying balances.
Of amounts owed to reinsurers (recognised under IFRS 4), £1,175.1 million (2019: £1,129.6 million) is held under funds withheld
arrangements.
Analysis of accruals and deferred income:
Premium received in advance of policy inception
Accrued expenses
Deferred income
Total accruals and deferred income as above
31 December
2020
£m
Restated*1
31 December
2019
£m
98.3
77.2
68.6
244.1
131.7
66.1
58.7
256.5
*1 Accrued expenses and Deferred income balances in 2019 have been restated to better reflect the nature of the underlying balances.
11e. Leases
Admiral Group plc hold various property under leasing arrangements that are now recognised as right-of-use assets and lease liabilities.
A maturity analysis of lease liabilities based on contractual undiscounted cashflows is set out below:
Maturity analysis – contractual undiscounted cash flows
Within one year
Between two to five years
Between five to ten years
Over ten years
Total
31 December
2020
£m
31 December
2019
£m
13.8
42.4
39.1
50.0
145.3
12.9
47.9
45.3
56.7
162.8
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 236
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
11. Other assets and other liabilities continued
Amounts recognised in the statement of financial position are as follows:
Lease liabilities
Current
Non-current
Total
31 December
2020
£m
31 December
2019
£m
11.0
111.8
122.8
9.7
127.4
137.1
See note 11b for right-of-use assets depreciation and the carrying amount of right-of-use asset at the end of the reporting period. Only
one class of underlying assets is identified as leasehold buildings. Total cash outflows in relation to leases is disclosed under note 6i.
The Group has no significant financial commitments other than those accounted for as right-of-use assets and lease liabilities under
IFRS 16.
11f. Contingent liabilities
The Group’s legal entities operate in numerous tax jurisdictions and on a regular basis are subject to review and enquiry by the relevant tax
authority.
Rastreator Comparador Correduria de Seguros (‘Rastreator Comparador’), the Group’s Spanish comparison business, has undergone a tax
audit in respect of the 2013 and 2014 financial years. As a result of the audit, the Spanish Tax Authority has denied the VAT exemption
relating to insurance intermediary services which Rastreator Comparador has applied. Rastreator Comparador is appealing this decision
via the Spanish Courts and is confident in defending its position which is, in its view, in line with the EU Directive and is also consistent with
the way similar supplies are treated throughout Europe.
The potential liability for the financial years currently subject to audit is approximately €5 million, and, as identified in note 6, a bank
guarantee has been provided to the Spanish Tax Authority for this amount. If the exemption is also disallowed in respect of later years, with
further notification of the 2016 year also now having been received from the Spanish Tax Authority, the liability could increase to €24 million.
If this matter has not been resolved prior to the disposal of Rastreator Comparador, the contingent liability will remain with the Group.
The Group is also in early stage discussions on various corporate tax matters with tax authorities in Italy and Spain. To date, these
discussions have focused on the transfer pricing arrangements in place between the Group’s intermediaries and insurers.
No provision has been made in these financial statements in relation to the matters noted above.
The Group is, from time to time, subject to threatened or actual litigation and/or legal and/or regulatory disputes, investigations or similar
actions both in the UK and overseas. All potentially material matters are assessed, with the assistance of external advisers if appropriate,
and in cases where it is concluded that it is more likely than not that a payment will be made, a provision is established to reflect the best
estimate of the liability. In some cases it will not be possible to form a view, for example if the facts are unclear or because further time
is needed to properly assess the merits of the case. No provisions are held in relation to such matters. In these circumstances, specific
disclosure of a contingent liability will be made where material. The Directors do not consider that the final outcome of any such current
case will have a material adverse effect on the Group’s financial position, operations or cash flows.
12. Share capital
The Group’s capital includes share capital and the share premium account, other reserves which are comprised of the fair value reserve,
hedging reserve and foreign exchange reserve, and retained earnings.
12a. 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.
237
(iii) Earnings per share
Basic earnings per share is calculated by dividing profit or loss attributable to equity holders of the Group parent company, Admiral Group
plc by the weighted average number of ordinary shares during the period.
Diluted earnings per share is calculated by dividing profit or loss attributable to equity holders of the Group parent company by the
weighted average number of ordinary shares outstanding, adjusted for the effects of all dilutive potential ordinary shares.
12b. Dividends
Dividends were proposed, approved and paid as follows:
Proposed March 2019 (66.0 pence per share, approved April 2019, paid June 2019)
Declared August 2019 (63.0 pence per share, paid October 2019)
Proposed March 2020 (77.0 pence per share, 56.3 pence per share approved April 2020
and paid June 2020)
Declared August 2020 (91.2 pence per share, including 20.7 pence per share deferred,
paid October 2020)
Total dividends
31 December
2020
£m
31 December
2019
£m
–
–
162.3
263.4
425.7
188.0
179.8
–
–
367.8
The dividends proposed in March (approved in April) represent the final dividends paid in respect of the 2018 and 2019 financial years.
The dividends declared in August are interim distributions in respect of 2019 and 2020, with the deferred 20.7 pence per share special
dividend relating to the 2019 financial year included in the 2020 interim dividend.
A final dividend of 86.0 pence per share (£250 million) has been proposed in respect of the 2020 financial year. Refer to the Chairman’s
Statement and Strategic Report for further detail.
12c. Earnings per share
Profit for the financial year after taxation attributable to equity shareholders –
continuing operations
Profit for the financial year after taxation attributable to equity shareholders –
discontinued operations
Profit for the financial year after taxation attributable to equity shareholders –
continuing and discontinued operations
31 December
2020
£m
Re-presented
31 December
2019
£m
502.9
25.9
528.8
418.9
13.5
432.4
Weighted average number of shares – basic
294,563,978
291,513,714
Unadjusted earnings per share – basic – continuing operations
Unadjusted earnings per share – basic – discontinued operations
Unadjusted earnings per share – basic – continuing and discontinued operations
170.7p
8.8p
179.5p
143.7p
4.6p
148.3p
Weighted average number of shares – diluted
295,034,233
292,094,797
Unadjusted earnings per share – diluted – continuing operations
Unadjusted earnings per share – basic – discontinued operations
Unadjusted earnings per share – diluted – continuing and discontinued operations
170.4p
8.8p
179.2p
143.4p
4.6p
148.0p
The difference between the basic and diluted number of shares at the end of 2020 (being 470,255 2019: 581,083) relates to awards
committed, but not yet issued under the Group’s share schemes. Refer to note 9 for further detail.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 238
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
12. Share capital continued
12d. Share capital
Authorised
500,000,000 ordinary shares of 0.1 pence
Issued, called up and fully paid
296,692,063 ordinary shares of 0.1 pence
293,686,329 ordinary shares of 0.1 pence
Total share capital
31 December
2020
£m
31 December
2019
£m
0.5
0.3
–
0.3
0.5
–
0.3
0.3
During 2020, 3,005,734 (2019: 3,183,592) new ordinary shares of 0.1 pence were issued to the trusts administering the Group’s share schemes.
755,734 (2019: 883,592) of these were issued to the Admiral Group Share Incentive Plan Trust for the purposes of this share scheme resulting in
cumulative shares issued to the Trust at 31 December 2020 of 12,384,715 (31 December 2019: 11,628,981). Of the shares issued, 4,331,860 remain
in the Trust at 31 December 2020 (2019: 4,389,821). These shares are entitled to receive dividends.
2,250,000 (2019: 2,300,000) shares were issued to the Admiral Group Employee Benefit Trust for the purposes of the Discretionary Free Share
Scheme resulting in cumulative shares issued to the Trust of 25,711,948 (31 December 2019: 23,461,948). Of the shares issued 5,447,441 remain
in the Trust at 31 December 2020 (2019: 5,823,675) to be used for future vesting, the remaining issued shares having vested.
The balance of awards made to employees under the Discretionary Free Share Scheme that have not either vested or lapsed is 8,277,428
(2019: 8,691,542).
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.
There is one class of share with no unusual restrictions.
12e. Objectives, policies and procedures for managing capital
The Group’s capital management policy defines the Board oversight, risk appetite and tier structure of the Group’s capital in addition to
management actions that may be taken in respect of capital, such as dividend payments.
The Group aims to operate a capital efficient business model by transferring a significant proportion of underwriting risk to co-insurance
and reinsurance partners. This in turn reduces the amount of capital the Group needs to retain to operate and grow, and allows the Group
to distribute the majority of its earnings as dividends.
The Board has determined that it will hold capital as follows:
• Sufficient Solvency II Own Funds to meet all of the Group’s Solvency II capital requirements (over a 1 year and ultimate time horizon).
• An additional contingency to cover unforeseen events and losses that could realistically arise. This risk appetite buffer is assessed via
stress testing performed on an annual basis and is calibrated in relation to the one-year regulatory SCR.
The Group’s current risk appetite buffer is 30% above the regulatory SCR. This forms the lower bound of the longer-term solvency target
operating range of 130% to 150%.
The Group’s dividend policy is to:
• Pay a normal dividend equal to 65% of post-tax profits for the period;
• Pay a special dividend calculated with reference to distributable reserves and surplus capital held above the risk appetite buffer.
This policy gives the Directors flexibility in managing the Group’s capital.
As noted above, the Group’s regulatory capital position is calculated under the Solvency II Framework. The Solvency Capital Requirement
is based on the Solvency II Standard Formula, with a capital add-on to reflect limitations in the Standard Formula with respect to Admiral’s
risk profile (predominately in respect of profit commission arrangements in co- and reinsurance agreements and risks relating to Periodic
Payment Order (PPO) claims).
239
Solvency Ratio (unaudited)
At the date of this report (3 March 2021), the Group’s regulatory solvency ratio, calculated using a capital add-on that has not been
subject to regulatory approval, is 187% (2019: 190%). This includes the recognition of the 2020 final dividend of 86 pence per share (2019:
77 pence per share).
The Group’s 2020 Solvency and Financial Condition Report (SFCR) will, when published, disclose a solvency ratio that is calculated at the
balance sheet date rather than annual report date, using the capital add-on that was most recently subject to regulatory approval. The
estimated and unaudited SFCR solvency ratio is 206%, with the reconciliation between this ratio and the 187% noted above being as follows:
Regulatory solvency ratio (Unaudited)
Solvency ratio reported in the Annual Report
Change in valuation date
Other (including impact of updated, unapproved capital add-on)
Solvency ratio to be reported in the SFCR
Subsidiaries
31 December
2020
£m
31 December
2019
£m
187%
(5%)
24%
206%
190%
(10%)
(10%)
170%
The Group manages the capital of its subsidiaries 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 risk appetite buffer. Excess capital above these
levels within subsidiaries is paid up to the Group holding company in the form of dividends on a regular basis.
12f. Group related undertakings
The Parent Company’s subsidiaries are as follows:
Subsidiary
Incorporated in England and Wales
Registered office: Floor 3 No. 3 Capital Quarter, Cardiff, CF10 4BZ
Class of
shares held
%
Ownership
Principal
Activity
Admiral Law Limited
Ordinary
95
Legal company
Registered office: Admiral House, Queensway, Newport, NP20 4AG
BDE Law Limited
Ordinary
95 (indirect)
Dormant*
Registered office: Floor 4 No. 3 Capital Quarter, Cardiff, CF10 4BZ
Able Insurance Services Limited
Registered office: Greyfriars House, Greyfriars Road, Cardiff, CF10 3AL
Penguin Portals Limited
Inspop.com Limited
Rastreator.com Limited
Registered office: Tŷ Admiral, David Street, Cardiff, CF10 2EH
EUI Limited
Admiral Insurance Company Limited
Admiral Life Limited
Admiral Syndicate Limited
Admiral Syndicate Management Limited
Bell Direct Limited
Confused.com Limited
Diamond Motor Insurance Services Limited
Elephant Insurance Services Limited
Admiral Financial Services Limited
Preminen Price Comparison Holdings Limited
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
75
100
100
100
100
100
100
100
100
100
100
50
Insurance intermediary
Internet-based comparison site
Internet-based comparison site
Internet-based comparison site
Insurance Intermediary
Insurance company
Dormant*
Dormant*
Dormant*
Dormant*
Dormant*
Dormant*
Dormant*
Financial services company
Internet-based comparison site
Preminen Dragon Price Comparison Limited
Ordinary
50 (indirect)
Internet-based comparison site
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information
240
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
12. Share capital continued
Subsidiary
Incorporated in Gibraltar
Class of
shares held
%
Ownership
Principal
Activity
Registered office: 1st Floor, 24 College Lane, Gibraltar, GX11 1AA
Admiral Insurance (Gibraltar) Limited
Ordinary
100
Insurance company
Incorporated in Spain
Registered office: Calle Sanchez Pacheco 85 28002 Madrid
Rastreator Comparador Correduría De Seguros S.L.U.
Ordinary
75 (indirect)
Internet-based comparison site
Admiral Europe Compañía de Seguros, S.A.
Registered office: Calle Albert Einstein, 10 41092 Sevilla
Admiral Intermediary Services S.A.
Ordinary
Ordinary
100
100
Insurance company
Insurance Intermediary
Incorporated in France
Registered office: 34 quai de la loire, 75019, Paris
LeLynx SAS
Ordinary
100
Internet-based Comparison Site
Incorporated in the United States of America
Registered office: Deep Run 1, Suite 400, 9950 Mayland Drive,
Henrico, VA 23233
Elephant Insurance Company
Grove General Agency Inc
Platinum General Agency Inc
Registered office: Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801
Ordinary
Ordinary
Ordinary
100
100
100
Insurance company
Insurance intermediary
Insurance intermediary
Elephant Insurance Services LLC
Elephant Holding Company LLC
Ordinary
100
Insurance intermediary
Ordinary
100 (indirect)
Insurance intermediary
Registered office: 6802 Paragon Place, Suite 410, Richmond VA 23230
compare.com Insurance Agency LLC
Ordinary 58.14 (indirect)
Internet-based Comparison site
Inspop USA LLC
Incorporated in Mexico
Registered Office: Varsovia, 36, 5th floor, Office 501, Colonia Juárez,
Cuauhtemoc, Ciudad de Mexico
Ordinary
58.14
Internet-based Comparison site
Preminen Mexico Sociedad Anonima de Capital Variable
51.25 (indirect)
Internet-based Comparison Site
Incorporated in India
Registered office: F-2902, Ireo Grand Arch, Sector 58, Gurugram,
HARYANA, Gurgaon, Haryana, India, 122011
Preminen Price Comparison India Private Limited
50 (indirect)
Internet-based Comparison Site
Subsidiaries by virtue of control
The related undertakings below are subsidiaries in accordance with IFRS 10, as Admiral can exercise dominant influence or control over them:
Registered office: 10th Floor, 5 Churchill Place, London, E14 5HU
Seren One Limited
n/a
0
Special purpose entity
241
Subsidiary
Associates
Incorporated in China
Registered office: Room 1806, 15th Floor, Block 16, No. 39 East
3rd Ring Middle Road, Chaoyang District, Beijing
Class of
shares held
%
Ownership
Principal
Activity
Long Yu Science and Technology (Beijing) Co., Ltd
20.25 (indirect)
Internet-based Comparison Site
Incorporated in Bahrain
Registered office: 4th Floor, Office 42, LMC Building 852, Road 3618,
Block 436, Al Seef District, PO Box 60138, Manama, Bahrain
Preminen MENA Price Comparison
15 (indirect)
Internet-based Comparison Site
*
Exempt from audit under S479A of Companies Act 2006.
For further information on how the Group conducts its business across the UK, Europe and the US, refer to the Strategic Report.
12g. Related party transactions
The Board considers that only the Executive and Non-Executive Directors of Admiral Group plc are key management personnel.
A summary of the remuneration of key management personnel is as follows, with further detail relating to the remuneration and
shareholdings of key management personnel set out in the Directors’ Remuneration Report.
Key management personnel received short term employee benefits in the year of £2,522,280 (2019: £1,957,868), post-employment
benefits of £22,999 (2019: £18,946) and share based payments of £2,249,425 (2019: £938,258). 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%.
12h. Post balance sheet events
No events have occurred since the reporting date that materially impact these financial statements.
13. Discontinued operations
13a. Accounting policy
Disposal groups are classified as held for sale in accordance with IFRS 5 if their carrying amount will be recovered principally through a sale
transaction rather than through continuing use and a sale is considered highly probable. A discontinued operation is a component of the
business that has been disposed of or is classified as held for sale and represents a separate major line of business, or is part of a single co-
ordinated plan to dispose of such a line of business.
The disposal group is measured at the lower of carrying value and fair value less costs to sell. Assets within a disposal group that is
classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell, except for assets which are
specified under IFRS 5 which shall continue to be measured in accordance with the applicable standard. These assets include, deferred tax
assets, assets arising from employee benefits, financial assets within the scope of IFRS 9 and contractual rights under insurance contracts
as defined in IFRS 4.
The assets and liabilities of a disposal group classified as held for sale are presented separately from the other assets and liabilities
in the Statement of Financial Position. Non-current assets within a disposal group are not depreciated or amortised from the point
of classification as held for sale. The results of discontinued operations are presented separately in the Statement of Comprehensive
Income. The result comprises the profit or loss after tax from discontinued operations and other comprehensive income attributable
to discontinued operations. In the period in which an operation is first classified as discontinued, the Income Statement, Statement of
Comprehensive Income and applicable notes are represented to present those operations as discontinued.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 242
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
13. Discontinued Operations continued
13b. Description
On the 29th December 2020, the Group announced that it had reached an agreement with ZPG Comparison Services Holdings UK
Limited (‘RVU’) that RVU will purchase the Penguin Portals Group (‘Penguin Portals’, comprising online comparison portals Confused.
com, Rastreator.com and LeLynx.fr and the Group’s technology operation Admiral Technologies) and its 50% share of Preminen Price
Comparison Holdings Limited (‘Preminen’). MAPFRE will also sell its 25% holding in Rastreator and 50% holding in Preminen as part of
the transaction.
As such, management consider these entities to meet the definition of a disposal group as set out under IFRS 5 above.
The total transaction value, including the amount attributable to MAPFRE, is £508 million plus a further amount that will accrue until the
date of completion of the Proposed Transaction (‘Transaction Value’). The Transaction Value shall be satisfied in cash at completion of the
Proposed Transaction subject to certain adjustments. The proceeds to Admiral, net of minority interests and transaction costs, will be
around £450 million. As noted above, the final transaction value will depend on the completion date.
At 31st December 2020, the Group retains control and continues to consolidate the Penguin Portals Group and Preminen Price Comparison
Holdings Limited. The sale is subject to regulatory approval but is expected to be completed within the first half of 2021 and will result
in a loss of control. The disposal group is measured at its carrying value as this is lower than the fair value of the agreed sale price less
transaction costs.
The disposal group is included within the ‘Comparison (discontinued)’ operating segment as stated in note 4.
13c. Financial performance and cash flow information
Financial information relating to the discontinued operations for the financial year ending 31 December 2020 and 2019 are
presented below:
Revenue (other revenue)
Interest Income
Net Revenue
Operating expenses and share scheme charges
Operating profit
Finance costs
Profit before tax from discontinued operations
Taxation expense
Profit after tax from discontinued operations
31 December 2020
31 December 2019
Gross
£m
Eliminations
£m
Net
£m
Gross
£m
Eliminations
£m
Net
£m
183.9
–
183.9
(154.4)
29.5
(0.1)
29.4
(3.6)
25.8
(22.0)
161.9
164.3
(18.7)
145.6
–
–
–
–
–
(22.0)
161.9
164.3
(18.7)
145.6
22.0
(132.4)
(146.7)
18.7
(128.0)
–
–
–
–
–
29.5
(0.1)
29.4
(3.6)
25.8
17.6
(0.1)
17.5
(5.0)
12.5
–
–
–
–
–
17.6
(0.1)
17.5
(5.0)
12.5
Operating expenses and share scheme charges include £3.1 million (2019: £4.3 million) of share scheme expenses that are not included in
the segmental result in note 4. The net cash flows incurred by the disposal group are as follows:
Net cash inflow from operating activities
Net cash (outflow) from investing activities
Net cash (outflow) from financing activities
Net cash inflow from discontinued operations
31 December
2020
£m
31 December
2019
£m
36.1
(1.0)
(15.9)
19.2
21.9
(1.5)
(16.8)
3.6
243
Note
11b
11c
10c
31 December
2020
£m
5.9
1.2
4.2
18.2
53.5
83.0
24.9
4.1
5.0
34.0
13d. Assets held for sale
Assets
Property and equipment
Intangible assets
Deferred tax asset
Trade and other receivables
Cash and cash equivalents
Assets associated with disposal group held for sale
Liabilities
Trade and other payables
Lease liabilities
Corporation tax liability
Liabilities directly associated with disposal group held for sale
14. 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.
14a. Reconciliation of turnover to reported gross premiums written and Other Revenue as per the financial statements
Gross premiums written after co-insurance per note 5b of financial statements
Premiums underwritten through co-insurance arrangements
Total premiums written
Other revenue – continuing operations
Other revenue – discontinued operations
Admiral Loans interest income
Other*1
Turnover as per note 4b of financial statements
Intra-group income elimination*2
Total turnover*3
31 December
2020
£m
31 December
2019
£m
2,344.0
613.2
2,957.2
329.4
161.9
36.8
3,485.3
42.4
3,527.7
22.2
3,549.9
2,273.7
610.7
2,884.4
324.3
145.6
30.8
3,385.1
59.0
3,444.1
19.4
3,463.5
*1 Other reconciling items represent co-insurer and reinsurer shares of Other Revenue in the Group’s Insurance businesses outside of UK Car Insurance.
*2
Intra-group income elimination relates to comparison income earned in the Group from other Group companies.
*3 See note 14g for the impact of the ‘Stay at home’ premium refund issued to UK motor insurance customers on Turnover in H1 2020.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 244
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
14. Reconciliations continued
14b. Reconciliation of claims incurred to reported loss ratios, excluding releases on commuted reinsurance
Group
£m
293.2
70.8%
0.3%
(16.7%)
54.4%
Group
£m
359.3
December 2020
Net insurance claims (note 5)
Deduct claims handling costs
Prior year release/strengthening –
net original share
Prior year release/strengthening –
commuted share
Impact of reinsurer caps
Impact of weather events
Attritional current period claims
UK Motor
£m
UK Home
£m
UK Other
£m
UK Total
£m
Int. Car
£m
Int. Other
£m
Int. Total
£m
97.1
(12.3)
29.3
(1.3)
104.3
2.8
137.3
–
–
326.4
–
–
(2.3)
28.5
23.8
150.2
139.3
3.7
143.0
–
–
–
–
–
(13.6)
(9.8)
107.1
18.6
137.3
–
(2.3)
–
1.9
–
–
–
–
–
–
(9.8)
(23.4)
18.6
125.7
–
1.9
–
137.3
1.9
(2.3)
23.8
378.7
150.0
3.7
153.7
532.4
Net insurance premium revenue
451.4
43.2
45.2
539.8
204.2
7.6
211.8
751.6
Loss ratio – current period attritional
72.3%
65.9%
Loss ratio – current period weather events
–
5.3%
Loss ratio – prior year release/
strengthening (net original share)
Loss ratio – reported
(23.1%)
(6.4%)
49.2%
64.8%
–
–
–
–
70.2%
73.4%
0.4%
–
(19.8%)
(9.1%)
50.8%
64.3%
–
–
–
–
–
–
–
–
December 2019
Net insurance claims (note 5)
Deduct claims handling costs
Prior year release/strengthening –
net original share
Prior year release/strengthening –
commuted share
Impact of reinsurer caps
Impact of weather events
Impact of subsidence
UK Motor
£m
UK Home
£m
UK Other
£m
UK Total
£m
Int. Car
£m
Int. Other
£m
Int. Total
£m
24.3
215.8
137.2
6.3
143.5
164.7
(11.8)
26.8
(1.1)
121.7
2.5
121.7
–
–
–
–
–
–
–
–
–
–
–
–
–
(12.9)
(7.6)
124.2
14.4
121.7
–
–
–
–
(0.1)
–
–
Attritional current period claims
396.3
28.2
24.3
448.8
143.9
Net insurance premium revenue
452.6
37.2
43.4
533.2
168.6
Loss ratio – current period attritional
87.6%
75.8%
Loss ratio – prior year release/
strengthening (net original share)
Loss ratio – reported
(26.9%)
(6.7%)
60.7%
69.1%
–
–
–
84.2%
85.3%
(23.3%)
(8.5%)
60.9%
76.8%
–
–
–
–
–
–
6.3
7.6
–
–
–
(7.6)
(20.5)
14.4
138.6
–
121.7
(0.1)
(0.1)
–
–
–
–
150.2
599.0
176.2
–
–
–
709.4
84.4%
(19.5%)
64.9%
245
Group
£m
175.8
23.4
0.2
1.1
0.6
14c. Reconciliation of expenses related to insurance contracts to reported expense ratios
Expense ratio – reported
19.8%
29.4%
–
19.9%
43.9%
December 2020
Net insurance expenses (note 9)
Claims handling costs
Intra-group expenses elimination*1
Impact of reinsurer caps
Net IFRS 16 finance costs
Adjusted net insurance expenses
Net insurance premium revenue
December 2019
Net insurance expenses (note 9)
Claims handling costs
Intra-group expenses elimination*1
Impact of reinsurer caps
Net IFRS 16 finance costs
Adjusted net insurance expenses
Net insurance premium revenue
UK Motor
£m
UK Home
£m
UK Other
£m
UK Total
£m
Int. Car
£m
Int. Other
£m
Int. Total
£m
78.5
4.0
82.5
76.7
12.3
–
–
0.5
89.5
451.4
11.4
1.3
–
–
–
12.7
43.2
5.2
–
–
–
–
5.2
45.2
93.3
13.6
–
–
0.5
107.4
539.8
74.2
11.8
–
–
0.5
86.5
452.6
9.7
1.1
–
–
–
10.8
37.2
6.0
–
–
–
–
6.0
43.4
89.9
12.9
–
–
0.5
103.3
533.2
9.8
0.2
1.1
0.1
89.7
204.2
7.6
0.7
2.9
0.1
63.5
168.6
–
–
–
–
4.0
7.6
–
–
–
–
–
1.3
7.6
–
9.8
0.2
1.1
0.1
7.6
0.7
2.9
0.1
93.7
211.8
201.1
751.6
44.2%
26.8%
Group
£m
143.4
20.5
0.7
2.9
0.6
64.8
176.2
168.1
709.4
–
23.7%
UK Motor
£m
UK Home
£m
UK Other
£m
UK Total
£m
Int. Car
£m
Int. Other
£m
Int. Total
£m
52.2
1.3
53.5
Expense ratio – reported
19.1%
28.9%
–
19.4%
37.6%
*1 The intra-group expenses elimination amount relates to aggregator fees charges by the Group’s comparison business, Compare.com to other Group companies: given the
re-presentation of other comparison businesses to discontinued operations, those expenses are now included in net insurance expenses in note 9, as acquisition costs.
14d. Reconciliation of statutory profit before tax to Group’s share of profit before tax, and profit after tax
31 December
2020
£m
31 December
2019
£m
Reported profit before tax per the consolidated income statement – continuing operations
Non-controlling share of profit before tax – continuing operations
Group’s share of profit before tax – continuing operations
Reported profit before tax per note 13 – discontinued operations
Non-controlling interest share of profit before tax – discontinued operations
Group’s share of profit before tax – discontinued operations
Reported Group profit before tax – continuing and discontinued operations
Non-controlling interest share of profit before tax – continuing and discontinued operations
Group’s share of profit before tax – continuing and discontinued operations
608.2
0.9
609.1
29.4
(0.1)
29.3
637.6
0.8
638.4
505.1
3.0
508.1
17.5
0.5
18.0
522.6
3.5
526.1
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information
246
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Financial Statements continued
For the year ended 31 December 2020
14. Reconciliations continued
Reported profit after tax per the consolidated income statement – continuing operations
Non-controlling share of profit after tax – continuing operations
Group’s share of profit after tax – continuing operations
Reported profit after tax per note 13 – discontinued operations
Non-controlling interest share of profit after tax – discontinued operations
Group’s share of profit after tax – discontinued operations
Reported profit after tax per consolidated income statement – continuing
and discontinued operations
Non-controlling interest share of profit after tax – continuing and discontinued operations
Group’s share of profit after tax – continuing and discontinued operations (SOCIE)
31 December
2020
£m
31 December
2019
£m
502.0
0.9
502.9
25.8
0.1
25.9
527.8
1.0
528.8
415.9
3.0
418.9
12.5
1.0
13.5
428.4
4.0
432.4
14e. Reconciliation of share scheme charges in Strategic report to Consolidated Income Statement and Consolidated Statement of
Changes in Equity
Net share scheme charges included in Group’s share of profit before tax
Non-controlling interest share of net share scheme charges
Net share scheme charges included in Group profit before tax
14f. Reconciliation of note 4 to Strategic Report
i) UK Insurance
2020
Turnover
UK Insurance profit before tax – Strategic Report
Non-controlling interest share of PBT
Statutory profit/(loss) before tax
2019
Turnover
UK Insurance profit before tax – Strategic Report
Non-controlling interest share of PBT
Statutory profit/(loss) before tax
Motor
£m
2,473.8
683.4
0.2
683.6
Motor
£m
2,455.3
591.5
0.5
592.0
Household
£m
193.8
15.4
–
15.4
Household
£m
171.3
7.5
–
7.5
31 December
2020
£m
31 December
2019
£m
53.8
0.2
54.0
Travel
£m
4.4
(0.7)
–
(0.7)
Travel
£m
8.4
(1.6)
–
(1.6)
52.7
0.7
53.4
Total
£m
2,672.0
698.1
0.2
698.3
Total
£m
2,635.0
597.4
0.5
597.9
247
Spain
£m
83.9
Spain
£m
78.2
Italy
£m
213.0
13.6
Italy
£m
204.2
8.7
France
£m
139.3
France
£m
108.1
US
£m
212.6
(4.8)
US
£m
233.1
(9.6)
Total
£m
648.8
8.8
Total
£m
623.6
(0.9)
Discontinued
Continuing
Total
Confused
£m
European
£m
Other
£m
Total
(discontinued)
£m
Compare
(other)
£m
133.5
29.4
–
29.4
48.5
3.6
0.9
4.5
183.9
32.3
6.1
(1.3)
Total
£m
190.0
31.0
0.2
(1.0)
(0.8)
1.9
(0.7)
(0.7)
(1.4)
32.5
(2.3)
30.2
ii) International Insurance
2020
Turnover
Profit/(loss) before tax – Strategic Report and Statutory
2019
Turnover
Profit/(loss) before tax – Strategic Report and Statutory
iii) Comparison
2020
Turnover
Group’s share of profit before tax – Strategic Report
Non-controlling interest share of profit/(loss) before
tax
Statutory profit/(loss) before tax excluding share
scheme charges *1
*1 When share scheme charges are included, the statutory profit for discontinued operations is £29.4 million. See note 13 for further information.
2019 – Re-presented*1
Turnover
Group’s share of profit before tax – Strategic Report
Non-controlling interest share of profit/(loss) before
tax
Statutory profit/(loss) before tax excluding share
scheme charges
Discontinued
Continuing
Total
Confused
£m
European
£m
112.7
20.4
–
20.4
50.1
3.5
1.0
4.5
Other
£m
Total
(discontinued)
£m
Compare
(other)
£m
1.5
(1.6)
164.3
22.3
7.3
(4.3)
Total*1
£m
171.6
18.0
(1.4)
(0.4)
(2.9)
(3.3)
(3.0)
21.9
(7.2)
14.7
*1 When share scheme charges are included, the statutory profit for discontinued operations is £17.5 million. See note 13 for further information.
14g. Reconciliation of Impact of ‘Stay at Home’ premium refund issued to UK motor insurance customers on Turnover, Total written
premiums, Gross written premiums and net insurance premium revenue
Total ‘stay at home’ premium refund issued to UK motor insurance customers
Insurance premium tax
Impact of premium refund on turnover and total written premium
Co-insurer share of premium refund
Impact of premium refund on gross written premium and gross earned premium
Reinsurer share of premium refund on reinsurers’ written and earned premium
Impact of premium refund on net insurance premium revenue (written and earned)
31 December
2020
£m
110.0
(12.7)
97.3
(27.3)
70.0
(48.9)
21.1
Whilst the impact on premium in the period is £21.1 million, the ultimate impact is expected to be the majority of the total premium
refunded due to the Group’s co- and reinsurance profit commission arrangements. The majority of this has been reflected in the current year.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 248
Admiral Group plc · Annual Report and Accounts 2020
Parent Company Financial Statements
Parent Company Income Statement
Administrative expenses
Operating loss
Investment and other interest income
Interest income at effective interest rate
Impairment expense
Interest payable
Profit before tax
Taxation credit
Profit after tax
Parent Company Statement of Comprehensive Income
Profit for the period
Other comprehensive income
Items that are or may be reclassified to profit or loss
Movements in fair value reserve
Deferred tax in relation to movement in fair value reserve
Other comprehensive income for the period, net of income tax
Total comprehensive income for the period
Year ended
31 December 2020
£m
Total
31 December 2019
£m
Total
Note
2
3
3
4
6
7
(21.6)
(21.6)
471.0
4.2
(10.5)
(12.2)
430.9
4.9
435.8
(17.6)
(17.6)
402.3
4.1
(93.6)
(11.3)
283.9
3.9
287.8
Year ended
31 December
2020
£m
435.8
31 December
2019
£m
287.8
4.3
(0.8)
3.5
439.3
4.2
(0.8)
3.4
291.2
249
Parent Company Statement of Financial Position
ASSETS
Investments in group undertakings
Intangible assets
Financial investments
Corporation tax asset
Trade and other receivables
Cash and cash equivalents
Total assets
EQUITY
Share capital
Share premium account
Fair value reserve
Retained earnings
Total equity
LIABILITIES
Subordinated and other financial liabilities
Deferred tax
Trade and other payables
Total liabilities
Total equity and total liabilities
As at
Note
31 December
2020
£m
31 December
2019
£m
4
5
6
7
8
6
10
10
6
7
9
327.3
0.4
281.0
4.7
193.3
9.5
816.2
0.3
13.1
23.4
73.0
109.8
224.3
5.2
476.9
706.4
816.2
301.4
0.6
324.2
4.0
184.7
30.3
845.2
0.3
13.1
19.9
8.9
42.2
224.2
4.4
574.4
803.0
845.2
The accompanying notes form part of these financial statements.
These financial statements were approved by the Board of Directors on 3 March 2021 and were signed on its behalf by:
Geraint Jones
Chief Financial Officer
Admiral Group plc
Company Number: 03849958
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information
250
Admiral Group plc · Annual Report and Accounts 2020
Parent Company Financial Statements continued
Parent Company Statement of Changes in Equity
At 1 January 2019
Profit for the period
Other comprehensive income
Movements in fair value reserve
Deferred tax charge in relation to movements in fair value
reserve
Total comprehensive income for the period
Transactions with equity holders
Dividends
Issues of share capital
Share scheme credit
Deferred tax on share scheme credit
Total transactions with equity holders
As at 31 December 2019
At 1 January 2020
Profit for the period
Other comprehensive income
Movements in fair value reserve
Deferred tax charge in relation to movements in fair value
reserve
Total comprehensive income for the period
Transactions with equity holders
Dividends
Issues of share capital
Share scheme credit
Deferred tax on share scheme credit
Total transactions with equity holders
As at 31 December 2020
Share
capital
£m
0.3
Share
premium
account
£m
13.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.3
0.3
13.1
13.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Fair
value
reserve
£m
16.5
–
4.2
(0.8)
3.4
–
–
–
–
–
19.9
19.9
–
4.3
(0.8)
3.5
–
–
–
–
–
0.3
13.1
23.4
Retained
earnings
£m
30.2
287.8
–
–
287.8
Total
equity
£m
60.1
287.8
4.2
(0.8)
291.2
(367.8)
(367.8)
–
58.5
0.2
–
58.5
0.2
(309.1)
(309.1)
8.9
8.9
435.8
–
–
435.8
42.2
42.2
435.8
4.3
(0.8)
439.3
(425.7)
(425.7)
–
53.8
0.2
(371.7)
73.0
–
53.6
0.4
(371.7)
109.8
Notes to the Parent Company Financial Statements
For the year ended 31 December 2020
251
1. Accounting policies
1.1 Basis of preparation
These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101).
The financial statements are prepared on the historical cost basis except for the revaluation of financial assets classified as fair value
through the profit or loss.
In preparing these financial statements, the Company applies the recognition, measurement and disclosure requirements of International
Financial Reporting Standards as adopted by the EU (‘Adopted IFRSs’), but makes amendments where necessary in order to comply with
Companies Act 2006 and has set out below where advantage of the FRS 101 disclosure exemptions has been taken.
1.2 Changes to accounting policies
There were no significant changes to accounting policies in the period.
1.3 Disclosure exemptions applied under FRS 101
The Company has taken advantage of the following disclosure exemptions under FRS 101:
• FRS 101.8 (d): the requirement of IFRS 7 Financial Instruments: Disclosure to make disclosures about financial instruments
• FRS 101.8 (f): the requirement in paragraph 38 of IAS 1 Presentation of Financial Statements to present comparative information in respect of:
– paragraph 118(3) of IAS 38 Intangible Assets
• FRS 101.8 (g): the requirements of paragraphs 10(d), 10(f), 16, 38A, 38B, 38C, 38D, 40A, 40B, 40C, 40D and 111 of IAS 1 Presentation of
Financial Statements to produce a cash flow statement, a third balance sheet and to make an explicit and unreserved statement of
compliance with IFRSs
• FRS 101.8 (h): the requirements of IAS 7 Statements of Cash Flows to produce a cash flow statement
• FRS 101.8 (i): the requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to include a
list of new IFRSs that have been issued but that have yet to be applied
• FRS 101.8 (k): the requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or
more members of a group, provided that any subsidiary which is party to a transaction is wholly owned by such a member
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these
financial statements.
1.4 Going concern
The financial statements have been prepared on a going concern basis. In considering the appropriateness of this assumption, the Board have
reviewed the Company’s projections for the next twelve months and beyond, including cash flow forecasts and regulatory capital surpluses.
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.
1.5 Key source of estimation uncertainty
In applying the Company’s accounting policies as described below, management consider there to be a key source of estimation
uncertainty within the impairment testing of the Company’s investments in group undertakings. Management recognises the estimation
involved in determining whether the carrying value of the investment may be supported by the recoverable amount calculation based on
the ‘value in use’ of the asset (the net present value of future cash-flows arising from the asset).
In calculating the net present value of future cash-flows, management has made assumptions over the timing and amount of underlying
profit projections of the relevant undertakings, long term growth rates in those projections and the discount rate applied to these
projections that is appropriate to reflect the market’s view of the risk of the relevant investment. Sensitivity of these assumptions is also
considered in calculating the net present value and suitably incorporated in management’s valuations. Sensitivity of the key estimates
can be found within note 4.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 252
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Parent Company Financial Statements continued
For the year ended 31 December 2020
1. Accounting policies continued
1.6 Shares in Group undertakings
Shares in Group undertakings are valued at cost less any provision for impairment in value.
The requirements of IAS 36 are applied to determine whether it is necessary to recognise any impairment loss with respect to the
company’s investments in subsidiaries. When necessary, the entire carrying amount of the investment is tested for impairment in
accordance with IAS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value
less costs of disposal) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment.
Any reversal of that impairment loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of the investment
subsequently increases. See note 4 to these financial statements for further detail.
1.7 Employee share schemes
The Company operates a number of share schemes for employees of the Group’s subsidiaries. For equity settled schemes, the fair value
of the employee services received in exchange for the grant of free shares under the schemes is recognised as an increase in equity in the
Company. A corresponding intercompany charge is made to the subsidiaries whose employees receive the free shares. For further detail,
see note 9 in the consolidated financial statements.
1.8 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.
1.9 Financial assets and liabilities
Under IFRS 9, classification and subsequent measurement of financial assets depend on:
• The Company’s business model for managing the asset; and
• The cashflow characteristics of the asset.
Based on these factors, the Company classifies its financial assets into one of the three categories below:
• Amortised cost: assets held for collection of contractual cash flows where the cash flows represent solely payments of principal and
interest, that are not designated as FVTPL.
• Fair value through other comprehensive income (FVOCI): Financial assets that are held for collection of contractual cash flows and selling
the assets, where the assets’ cash flows represent solely payments of principal and interest, and that are not designated at FVTPL.
• Fair value through profit or loss (FVTPL): Assets that do not meet the criteria for amortised cost or FVOCI, or which are designated as
FVTPL at initial recognition.
In line with the above:
• Gilts are measured at FVOCI. Unrealised changes in the fair value of these assets are recognised in Other Comprehensive Income (OCI).
•
Investments measured at FVTPL are primarily money market funds. Interest income is recognised in the Income statement.
Cash and cash equivalents include cash in hand and deposits held at call with banks. All cash and cash equivalents are measured at
amortised cost.
The Company’s financial liabilities comprise of subordinated notes which are held at amortised cost using the effective interest method.
1.10 Intangible assets
Purchased software licences are classified as an intangible asset and stated in the balance sheet at a cost less accumulates amortisation.
Software is amortised from the point at which the asset is operational and is amortised over the licence period.
1.11 Trade and other receivables
Trade and other receivables are measured at amortised cost, less any impairment.
1.12 Trade and other payables
Trade and other payables are measured at amortised cost.
253
2. Administrative expenses
Included within administrative expenses are re-charges of £3.3 million (2019: £3.1 million) relating to employees within the Group who
perform services on behalf of the Company. No staff are directly employed by the Company.
3. Investment and interest income
Dividend income from subsidiary undertakings
Interest income – other
Interest income at effective interest rate
Total investment and interest income
4. Investments in Group undertakings
Investments in subsidiary undertakings:
At 1 January 2019
Additions
Impairment
At 31 December 2019
Additions
Impairment
At 31 December 2020
31 December
2020
£m
31 December
2019
£m
470.0
1.0
4.2
475.2
401.0
1.3
4.1
406.4
£m
292.3
102.7
(93.6)
301.4
36.4
(10.5)
327.3*1
*1 Of this amount £9.2 million relates to Assets held for sale. See note 11 for further detail.
A full list of the Company’s subsidiaries is disclosed in note 12 of the consolidated financial statements.
The additions to investments in the period of £36.4 million relate to the following:
• Transfer of Admiral Intermediary Services, S.A.U. (‘AIS’) (£18.7 million investment) from an indirect shareholding through EUI Limited
(‘EUI’), to a direct shareholding held by Admiral Group plc (‘AGp’);
• Further investment in Admiral Financial Services Limited (‘AFSL’) (£15.5 million);
• Further investment in Preminen Price Comparison Holdings Limited (£2.2 million).
An annual impairment review is performed over the carrying value of the investments in subsidiary undertakings, which involves
comparing the carrying amount to the estimated recoverable amount. The recoverable amount is the greater of the fair value of the asset
less costs to sell, and the value in use of the subsidiary, calculated using cash flow projections based on financial budgets approved by the
Group Board.
Elephant Auto
In 2020 a non-cash impairment loss of £9.1 million (2019: £65.9 million) has been recognised by the parent company in respect of its
investment in the Group’s US insurance business Elephant Auto. The impairment charge is presented within the ‘Impairment losses’ line
of the Parent Company Income Statement and reduces the value of the investment to its recoverable amount, being fair value less costs
to sell (equivalent to the Group’s share of net asset value), of £30.6 million (2019: £39.9 million).
The impairment charge arises due to a change in the 5 year forecast resulting from a strategic decision to move to 6 month policies in line
with the current US market, which reduces the valuation due to deferring projected underwriting year profits outside the 5 year forecast
period, alongside the impact of Covid-19 on the current and future forecast performance of the business. This creates an adverse impact
on the 5 year forecasts that are used as the basis of the value in use calculation.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 254
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Parent Company Financial Statements continued
For the year ended 31 December 2020
4. Investments in Group undertakings continued
The carrying value is now based on fair value less costs of disposal, for which the Group’s share of net assets has been used as a reasonable
approximation, using tier 3 of the fair value hierarchy. Due to limitations on evidential market information and restrictions in readily
available information, the Group’s share of net assets has been used to estimate fair value less costs to sell.
As the valuation is based on the Group’s share of net assets, any movement in future profits will impact the investment held. The Board
continues to support Elephant Auto in the achievement of its goals.
Compare.com
In 2020 a non-cash impairment loss of £1.4 million (2019: £27.7 million) has been recognised by the parent company in respect of its
investment in the Group’s US comparison business compare.com. The impairment charge is to reflect the loss incurred during 2020 to
bring the value of the investment to its recoverable amount, being its fair value less costs to sell (equivalent to the Group’s share of net
asset value), of £3.7 million (2019: £5.1 million). The impairment charge is presented within the ‘Impairment losses’ line of the Parent
Company Income Statement.
The carrying value is based on fair value less costs of disposal, for which the Group’s share of net assets has been used as a reasonable
approximation following a review of the carrying value of those assets compared to fair value, using tier 3 of the fair value hierarchy.
Given the size of the remaining carrying value, no sensitivities are provided on the grounds of materiality.
The Board continues to support compare.com in the achievement of its goals. However, given the challenging and still nascent US
comparison market conditions there remains considerable uncertainty over the timing and level of the future profitability of the business.
5. Intangible assets
Cost
At 1 January 2020
Additions
Disposal
At 31 December 2020
Amortisation
At 1 January 2020
Charge for the year
Disposal
At 31 December 2020
Net Book Value
At 31 December 2019
At 31 December 2020
Domain name
£m
Software
£m
0.6
–
(0.6)
–
–
–
–
–
0.6
–
–
0.4
–
0.4
–
–
–
–
–
0.4
Total
£m
0.6
0.4
(0.6)
0.4
–
–
–
–
0.6
0.4
255
6. Financial assets and liabilities
The Company’s financial instruments can be analysed as follows:
Investments classified as FVOCI
Gilts (level 1 of the IFRS 13 hierarchy)
Investments classified as FVTPL
Money market and other similar funds (level 1 of the IFRS 13 hierarchy)
Total financial investments
Financial assets held at amortised cost
Trade and other receivables (note 8)
Cash and cash equivalents
Total financial assets
Financial liabilities
Subordinated notes
Other borrowings
Trade and other payables (note 9)
Total financial liabilities
31 December
2020
£m
31 December
2019
£m
177.3
177.3
103.7
103.7
281.0
193.3
9.5
483.8
204.3
20.0
476.9
701.2
174.0
174.0
150.2
150.2
324.2
184.7
30.3
539.2
204.2
20.0
574.4
798.6
The amortised cost carrying amount of deposits and receivables is a reasonable approximation of fair value. The table below compares the
carrying value of subordinated notes (as per the Statement of Financial Position) with the fair value of the subordinated notes using a level
one valuation:
Financial liabilities
Subordinated notes
31 December 2020
31 December 2019
Carrying
amount
£m
Fair
value
£m
Carrying
amount
£m
Fair
value
£m
204.3
222.9
204.2
225.1
The subordinated notes were issued on 25 July 2014 at a fixed rate of 5.5%, with a redemption date of 25 July 2024.
Total interest payable of £12.2 million (2019: £11.3 million) was recognised, of which £11.1 million (2019: £11.3 million) was in relation
to the subordinated loan notes.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 256
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Parent Company Financial Statements continued
For the year ended 31 December 2020
7. Taxation
7a. Taxation credit
Current tax
Corporation tax credit on profits for the year
Change in provision relating to prior periods
Current tax credit
Deferred tax
Current period deferred taxation movement
Change in provision relating to prior periods
Total tax credit per income statement
Factors affecting the total tax credit are:
31 December
2020
£m
31 December
2019
£m
(4.7)
(0.4)
(5.1)
0.2
–
(4.9)
(3.9)
–
(3.9)
–
–
(3.9)
31 December
2020
£m
31 December
2019
£m
Profit before tax
Corporation tax thereon at effective UK corporation tax rate of 19.0% (2019: 19.0%)
Expenses and provisions not deductible for tax purposes
Non-taxable income
Total tax credit for the period as above
At the year end, the corporation tax asset was £4.7 million (2019: £4.0 million.).
7b. Deferred income tax liability
Analysis of deferred tax liability
430.9
81.9
2.5
(89.3)
(4.9)
Balance brought forward at 1 January 2019
Tax treatment of share scheme charges through
income or expense
Tax treatment of share scheme charges through reserves
Movement in fair value reserve
Balance carried forward at 31 December 2019
Tax treatment of share scheme charges through
income or expense
Tax treatment of share scheme charges through reserves
Movement in fair value reserve
Balance carried forward at 31 December 2020
Tax
treatment
of share
schemes
£m
(0.2)
–
–
–
(0.2)
0.2
(0.2)
–
(0.2)
Capital
allowances
£m
Carried
forward
losses
£m
Fair value
reserve
£m
Other
differences
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3.8
–
–
0.8
4.6
–
–
0.8
5.4
–
–
–
–
–
–
–
–
–
283.9
53.9
18.4
(76.2)
(3.9)
Total
£m
3.6
–
–
0.8
4.4
0.2
(0.2)
0.8
5.2
The average effective rate of tax for 2020 is 19.0% (2019: 19.0%).
The deferred tax liability at 31 December 2020 has been calculated based on the rate at which each timing difference is most likely
to reverse.
257
8. Trade and other receivables
Trade and other receivables
Amounts owed by subsidiary undertakings
Total trade and other receivables
31 December
2020
£m
31 December
2019
£m
1.0
192.3
193.3
1.0
183.7
184.7
Held within amounts owed by subsidiary undertakings is £176.5 million (2019: £183.7 million) which relates to loans with formal
agreements in place between the parent and the subsidiary. The estimated credit losses of these loans has been considered and any
expected credit loss is considered to be immaterial due to the assessment of credit risk being low due to the positive net value of assets of
the subsidiaries and future trading projections.
Of the above amount, £101.0 million is due in greater than one year (2019: £149.3 million).
9. Trade and other payables
Trade and other payables
Amounts owed to subsidiary undertakings
Total trade and other payables
31 December
2020
£m
31 December
2019
£m
8.5
468.4
476.9
6.1
568.3
574.4
Held within amounts owed to subsidiary undertakings is £38.5 million (2019: £nil) which relates to loans with formal agreements in place
between the parent and the subsidiary.
10. Share capital and reserves
Capital within the Company is comprised of share capital and the share premium account, the fair value reserve (which reflects
movements in the fair value of assets classified as FVOCI) and retained earnings. Further information can be found within note 12 of the
consolidated financial statements.
10a. Share capital
Authorised
500,000,000 ordinary shares of 0.1 pence
Issued, called up and fully paid
296,692,063 (2019: 293,686,329) ordinary shares of 0.1 pence
31 December
2020
£m
31 December
2019
£m
0.5
0.3
0.3
0.5
0.3
0.3
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 258
Admiral Group plc · Annual Report and Accounts 2020
Notes to the Parent Company Financial Statements continued
For the year ended 31 December 2020
10. Share capital and reserves continued
10b. Dividends
Dividends were proposed, approved and paid as follows:
Proposed March 2019 (66.0 pence per share, approved April 2019, paid June 2019)
Declared August 2019 (63.0 pence per share, paid October 2019)
Proposed March 2020 (77.0 pence per share, 56.3 pence per share approved April 2020
and paid June 2020)
Declared August 2020 (91.2 pence per share, including 20.7 pence per share deferred,
paid October 2020)
Total dividends
31 December
2020
£m
31 December
2019
£m
–
–
162.3
263.4
425.7
188.0
179.8
–
–
367.8
The dividends proposed in March (approved in April) represent the final dividends paid in respect of the 2018 and 2019 financial years. The
dividends declared in August are interim distributions in respect of 2019 and 2020, with the deferred 20.7 pence per share special dividend
relating to the 2019 financial year included in the 2020 interim dividend.
A final dividend of 86.0 pence per share (£250.4 million) has been proposed in respect of the 2020 financial year. Refer to the Chairman’s
Statement and Strategic Report for further detail.
The profit and loss account of the Parent Company does not include any unrealised profits, therefore the amount available for distribution by
reference to these accounts is £73.0 million. The Group also has substantial retained profits in its subsidiary companies which are expected to
flow up to the Parent Company in due course, such that surplus cash generated can continue to be returned to our shareholders.
During the year to December 2020, the Directors became aware that interim dividends paid in 2009, 2010 and 2020 were made otherwise
than in accordance with the Companies Act 2006 because interim accounts had not been filed prior to payment. A resolution has been
proposed for the Annual General Meeting due to be held on 30 April 2021 to authorise the appropriation of distributable profits to the
payment of the relevant dividends, and remove any right for the Company to pursue shareholders or Directors for repayment. The overall
effect of the resolution would be to return all parties to the position they would have been in should the relevant dividends have been
made in full compliance with the Companies Act 2006.
11. Assets held for sale
On the 29 December 2020, Admiral Group plc announced that it had reached an agreement with ZPG Comparison Services Holdings UK
Limited (‘RVU’) that RVU will purchase the Penguin Portals Group (‘Penguin Portals’, comprising online comparison portals Confused.
com, Rastreator.com and LeLynx.fr and the Group’s technology operation Admiral Technologies) and its 50% share of Preminen Price
Comparison Holdings Limited (‘Preminen’). These entities are determined to be the disposal group. Further information can be found
within the consolidated accounts.
The assets held for sale as at 31 December 2020 are presented below:
Assets
Investments in subsidiary undertakings
Assets associated with disposal group held for sale
There are no associated liabilities with the disposal group.
Note
31 December 2020
£m
4
9.2
9.2
259
12. Related party transactions
The Company has taken advantage of the exemptions permitted by Financial Reporting Standard 101.8 (k) and not disclosed details of
transactions with other wholly owned group undertakings. Transactions with group undertakings that are not wholly owned by Admiral
Group plc are disclosed below.
Transaction
Value
2020
£m
Balance at
31 December
2020 due/(to)
related party
£m
Transaction
Value
2019
£m
Balance at
31 December
2019 due/(to)
related party
£m
compare.com Insurance Agency LLC (Subsidiary undertaking)
0.3
4.2
0.3
4.1
The balance owed from compare.com relates to a convertible loan issued for which interest is being accrued.
13. Guarantees
During 2018, a Special Purpose Entity (SPE) was set up in order to secure additional funding for the Admiral Loans business. The Company
acts as guarantor for certain operational performance conditions of its subsidiary, AFSL, as seller and servicer for the SPE, and indemnifies
AFSL in respect of any amount that would have been payable by AFSL for non-compliance with such performance conditions.
Admiral Group plc have provided a cap warranty to RVU on the Rastreator Comparador contingent liability outstanding, due to the
proposed sale of Rastreator Comparador to RVU set out in note 13 to the Group financial statements. The warranty will commence
at the point the loss of control is recognised. See note 11f in the consolidated financial statements for further information on the
contingent liability.
14. Post balance sheet events
No events have occurred since the reporting date that materially impact these financial statements.
15. Continued application of Financial Reporting Standard (FRS) 101 – Reduced Disclosure Framework
Following the first time application of FRS 101 Reduced Disclosure Framework in 2015, the Board considers that it is in the best interests
of the Group for Admiral Group plc to continue to apply the FRS 101 Reduced Disclosure Framework in future periods. A shareholder or
shareholders holding in aggregate 5% or more of the total allotted shares in Admiral Group plc may serve objections to the use of the
disclosure exemptions on Admiral Group plc, in writing, to its registered office (Tŷ Admiral, David Street, Cardiff CF10 2EH) no later than
30 June 2021.
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 260
Admiral Group plc · Annual Report and Accounts 2020
Consolidated Financial Summary (unaudited)
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
Net finance costs
Profit before tax
Balance sheet
Property and equipment
Intangible assets
Deferred income tax
Corporation tax asset
Reinsurance assets
Insurance and other receivables
Loans and advances to customers
Financial investments
Cash and cash equivalents
Total assets
Equity
Insurance contracts
Subordinated and other financial liabilities
Trade and other payables
Lease liabilities
Deferred income tax
Current tax liabilities
2020
£m
2019
£m
2018
£m
2017
£m
2016
£m
2,957.2
2,938.6
2,766.4
2,499.4
2,193.9
751.6
520.9
134.0
60.7
709.4
494.4
114.9
35.3
671.8
460.6
93.2
36.0
619.1
401.1
67.0
41.7
548.8
360.6
54.3
53.1
1,467.2
1,354.0
1,261.6
1,128.9
1,016.8
(293.2)
(524.0)
650.0
(12.4)
637.6
2020
£m
146.3
167.9
3.3
17.9
2,083.2
1,200.2
359.8
3,506.0
351.7
7,836.3
1,123.4
4,081.3
488.6
2,016.1
126.9
–
–
(359.3)
(459.5)
535.2
(12.6)
522.6
2019
£m
154.4
160.3
–
–
2,071.7
1,227.7
455.1
3,234.5
281.7
7,585.4
918.6
3,975.0
530.1
1,975.9
137.1
0.4
48.3
(350.1)
(424.0)
487.5
(11.3)
476.2
2018
£m
28.1
162.0
0.2
–
1,883.5
1,082.0
300.2
2,969.7
376.8
6,802.5
771.1
3,736.4
444.2
1,801.5
–
–
(347.1)
(366.9)
414.9
(11.4)
403.5
2017
£m
31.3
159.4
0.3
–
1,637.6
939.7
66.2
2,697.8
326.8
5,859.1
655.8
3,313.9
224.0
1,641.6
–
–
(394.6)
(332.4)
289.8
(11.4)
278.4
2016
£m
32.0
162.3
8.4
–
1,126.4
784.9
–
2,420.2
326.6
4,860.8
581.7
2,749.5
224.0
1,292.2
–
–
49.3
23.8
13.4
Total equity and total liabilities
7,836.3
7,585.4
6,802.5
5,859.1
4,860.8
Glossary
261
Alternative Performance Measures
Throughout this report, the Group uses a number of Alternative Performance Measures (APMs); measures that are not required or
commonly reported under International Financial Reporting Standards, the Generally Accepted Accounting Principles (GAAP) under which
the Group prepares its financial statements.
These APMs are used by the Group, alongside GAAP measures, for both internal performance analysis and to help shareholders and
other users of the Annual Report and financial statements to better understand the Group’s performance in the period in comparison to
previous periods and the Group’s competitors.
The table below defines and explains the primary APMs used in this report. Financial APMs are usually derived from financial statement
items and are calculated using consistent accounting policies to those applied in the financial statements, unless otherwise stated.
Non-financial KPIs incorporate information that cannot be derived from the financial statements but provide further insight into the
performance and financial position of the Group.
APMs may not necessarily be defined in a consistent manner to similar APMs used by the Group’s competitors. They should be considered
as a supplement rather than a substitute for GAAP measures.
Turnover
Turnover is defined as total premiums written (as below), other revenue and income from Admiral Loans. It is
reconciled to financial statement line items in note 14a to the financial statements.
This measure has been presented by the Group in every Annual Report since it became a listed Group in 2004. It
reflects the total value of the revenue generated by the Group and analysis of this measure over time provides a
clear indication of the size and growth of the Group.
The measure was developed as a result of the Group’s business model. The core UK Car insurance business has
historically shared a significant proportion of the risks with Munich Re, a third party reinsurance group, through
a co-insurance arrangement, with the arrangement subsequently being replicated in some of the Group’s
international insurance operations. Premiums and claims accruing to the external co-insurer are not reflected in
the Group’s income statement and therefore presentation of this metric enables users of the Annual Report to see
the scale of the Group’s insurance operations in a way not possible from taking the income statement in isolation.
In 2020 a ‘Stay at Home’ premium rebate of £25 per vehicle was issued to UK motor insurance customers. The total
refunded was £110 million. Of this total, £97 million has been reflected within the 2020 total premiums written, and
therefore, turnover metric, with the remaining amount reflecting insurance premium tax.
Total Premiums
Written
Total premiums written are the total forecast premiums, net of forecast cancellations written in the underwriting
year within the Group, including co-insurance. It is reconciled to financial statement line items in note 14a to the
financial statements.
This measure has been presented by the Group in every Annual Report since it became a listed Group in 2004. It
reflects the total premiums written by the Group’s insurance intermediaries and analysis of this measure over time
provides a clear indication of the growth in premiums, irrespective of how co-insurance agreements have changed
over time.
The reasons for presenting this measure are consistent with that for the Turnover APM noted above.
As noted in the Turnover metric above, in 2020 a reduction of £97 million has been reflected within 2020 total
premiums written, to reflect the ‘Stay at Home’ premium rebate.
Group’s share of
Profit before Tax
Group’s share of profit before tax represents profit before tax, excluding the impact of Non-controlling Interests.
It is reconciled to statutory profit before tax in note 14d to the financial statements.
This measure is useful in presenting the limit of the Group’s exposure to the expenditure incurred in starting up new
businesses and demonstrates the ‘test-and-learn’ strategy employed by the Group to expansion into new territories.
For each insurance business an underwriting result is presented showing the segment result prior to the inclusion
of profit commission, other income contribution and instalment income. It demonstrates the insurance result, i.e.
premium revenue and investment income on insurance assets less claims incurred and insurance expenses.
Underwriting
result including
investment income
(profit or loss)
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 262
Admiral Group plc · Annual Report and Accounts 2020
Glossary continued
Alternative Performance Measures continued
Loss Ratio
Reported loss ratios are expressed as a percentage of claims incurred divided by net earned premiums.
There are a number of instances within the Annual Report where adjustments are made to this calculation in order
to more clearly present the underlying performance of the Group and operating segments within the Group. The
calculations of these are presented within note 14b to the accounts and explanation is as follows.
UK reported motor loss ratio: Within the UK insurance segment the Group separately presents motor ratios, i.e.
excluding the underwriting of other products that supplement the car insurance policy. The motor ratio is adjusted
to i) exclude the impact of reserve releases on commuted reinsurance contracts and ii) exclude claims handling costs
that are reported within claims costs in the income statement.
International insurance loss ratio: As for the UK Motor loss ratio, the international insurance loss ratios presented
exclude the underwriting of other products that supplement the car insurance policy. The motor ratio is adjusted
to exclude the claims element of the impact of reinsurer caps as inclusion of the impact of the capping of reinsurer
claims costs would distort the underlying performance of the business.
Group loss ratios: Group loss ratios are reported on a consistent basis as the UK and international ratios noted above.
Adjustments are made to i) exclude the impact of reserve releases on commuted reinsurance contracts, ii) exclude
claims handling costs that are reported within claims costs in the income statement and iii) exclude the claims
element of the impact of international reinsurer caps.
Expense Ratio
Reported expense ratios are expressed as a percentage of net operating expenses divided by net earned premiums.
There are a number of instances within the Annual Report where adjustments are made to this calculation in order
to more clearly present the underlying performance of the Group and operating segments within the Group. The
calculations of these are presented within note 14c to the accounts and explanation is as follows.
UK reported motor expense ratio: Within the UK insurance segment the Group separately presents motor ratios, i.e.
excluding the underwriting of other products that supplement the car insurance policy. The motor ratio is adjusted
to i) include claims handling costs that are reported within claims costs in the income statement and ii) include intra-
group aggregator fees charged by the UK comparison business to the UK insurance business.
International insurance expense ratio: As for the UK Motor loss ratio, the international insurance expense ratios
presented exclude the underwriting of other products that supplement the car insurance policy. The motor ratio
is adjusted to i) exclude the expense element of the impact of reinsurer caps as inclusion of the impact of the
capping of reinsurer expenses would distort the underlying performance of the business and ii) include intra-group
aggregator fees charged by the overseas comparison businesses to the international insurance businesses.
Group expense ratios: Group expense ratios are reported on a consistent basis as the UK and international ratios
noted above. Adjustments are made to i) include claims handling costs that are reported within claims costs in the
income statement, ii) include intra-group aggregator fees charged by the Group’s comparison businesses to the
Group’s insurance businesses and iii) exclude the expense element of the impact of international reinsurer caps.
Combined Ratio
Reported combined ratios are the sum of the loss and expense ratios as defined above. Explanation of these figures is
noted above and reconciliation of the calculations are provided in notes 14b and 14c.
Return on Equity
Return on equity is calculated as profit after tax for the period attributable to equity holders of the Group divided
by the average total equity attributable to equity holders of the Group in the year. This average is determined by
dividing the opening and closing positions for the year by two.
The relevant figures for this calculation can be found within the consolidated statement of changes in equity.
Group Customers Group customer numbers reflect the total number of cars, households and vans on cover at the end of the year,
across the Group.
This measure has been presented by the Group in every Annual Report since it became a listed Group in 2004. It
reflects the size of the Group’s customer base and analysis of this measure over time provides a clear indication of
the growth. It is also a useful indicator of the growing significance to the Group of the different lines of business and
geographic regions.
Effective Tax Rate Effective tax rate is defined as the approximate tax rate derived from dividing the Group’s profit before tax by the
tax charge going through the income statement. It is a measure historically presented by the Group and enables
users to see how the tax cost incurred by the Group compares over time and to current corporation tax rates.
263
Additional Terminology
There are many other terms used in this report that are specific to the Group or the markets in which it operates. These are defined
as follows:
Accident year
The year in which an accident occurs, also referred to as the earned basis.
Actuarial best estimate
The probability-weighted average of all future claims and cost scenarios calculated using historical
data, actuarial methods and judgement.
ASHE
Claims reserves
Co-insurance
Commutation
‘Annual Survey of Hours and Earnings’ – a statistical index that is typically used for the calculation
inflation of annual payment amounts under Periodic Payment Order (PPO) claims settlements.
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.
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 Group typically commutes UK Car insurance quota share contracts after 24 months from the start
of an underwriting year where it makes economic sense to do so. Although an individual underwriting
year may be profitable, the margin held in the financial statement claims reserves may mean that an
accounting loss on commutation must be recognised at the point of commutation of the reinsurance
contracts. This loss on commutation unwinds in future periods as the financial statement loss ratios
develop to ultimate.
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’).
Net claims
The cost of claims incurred in the period, less any claims costs recovered under reinsurance contracts.
It includes both claims payments and movements in claims reserves.
Net insurance premium revenue Also referred to as net earned premium. The element of premium, less reinsurance premium, earned in
the period.
Ogden discount rate
The discount rate used in calculation of personal injury claims settlements. The rate is set by the Lord
Chancellor.
Periodic Payment Order (PPO)
A compensation award as part of a claims settlement that involves making a series of annual payments
to a claimant over their remaining life to cover the costs of the care they will require.
Premium
A series of payments are made by the policyholder, typically monthly or annually, for part of or all
of the duration of the contract. Written premium refers to the total amount the policyholder has
contracted for, whereas earned premium refers to the recognition of this premium over the life of the
contract.
Profit commission
A clause found in some reinsurance and coinsurance 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).
Company OverviewStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information 264
Admiral Group plc · Annual Report and Accounts 2020
Glossary continued
Additional Terminology continued
Securitisation
Special Purpose Entity (SPE)
A process by which a group of assets, usually loans, is aggregated into a pool, which is used to back
the issuance of new securities. A company transfers assets to a special purpose entity (SPE) which
then issues securities backed by the assets.
An entity that is created to accomplish a narrow and well-defined objective. There are specific
restrictions or limitations around ongoing activities. The Group uses an SPE set up under a
securitisation programme.
Ultimate loss ratio
A projected actuarial best estimate loss ratio for a particular accident year or underwriting year.
Underwriting year
The year in which the policy was incepted.
Underwriting year basis
Also referred to as the written basis. Claims incurred are allocated to the calendar year in which
the policy was underwritten. Underwriting year basis results are calculated on the whole account
(including co-insurance and reinsurance shares) and include all premiums, claims, expenses incurred
and other revenue (for example instalment income and commission income relating to the sale of
products that are ancillary to the main insurance policy) relating to policies incepting in the relevant
underwriting year.
Written/Earned basis
A policy can be written in one calendar year but earned over a subsequent calendar year.
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Company Overview
Strategic Report
Corporate Governance
Financial Statements
Additional Information
265
Registered Office
Tŷ Admiral
David Street
Cardiff
CF10 2EH
www.admiralgroup.co.uk