TIDMADM
16 August 2023
2023 Interim Results Highlights
Admiral Group reports growth in customers and turnover, with
strong profit despite continued challenging market conditions
Six months ended:
30 June 30 June % change
2023 2022 vs. 2022
Group profit before tax (1) GBP233.9m GBP224.6m +4%
Earnings per share (1) 57.6p 60.8p -5%
Interim dividend per share 51.0p 60.0p -15%
Special dividend per share
from sale of Penguin Portals
comparison businesses -- 45.0p --
Return on equity (1 2) 39% 36% +3pts
Group turnover(2) GBP2.24bn GBP1.85bn +21%
Insurance revenue GBP1.61bn GBP1.41bn +14%
Group customers(2,3) 9.41m 9.05m +4%
UK Insurance customers(2) 7.01m 6.94m +1%
International Insurance customers(2) 2.21m 1.98m +12%
Admiral Money gross loans
balances GBP1.03bn GBP0.79bn +31%
Solvency ratio (post-dividend)
(2) 182% 185% -3pts
1 2022 Group profit before tax, Earnings per share, and Return
on equity restated following the implementation of IFRS 17. Further
information follows later in the report.
2 Alternative Performance Measures -- refer to the end of the
report for definition and explanation.
3 2022 Customer numbers restated -- refer to the end of the
report for definition and explanation.
Around 10,000 employees each receive free share awards worth up
to GBP1,800 under the employee share scheme based on the interim
2023 results.
Comment from Milena Mondini de Focatiis, Group Chief Executive
Officer
"The Group has once again delivered a solid performance and
strong growth in the context of a challenging market, although we
believe that the cycle is turning. In the first half of the year,
profit was GBP234 million, turnover was up 21 per cent to GBP2.2
billion and our Group customer base grew 4 per cent.
"Inflation persists, but we have navigated the cycle well,
maintaining pricing discipline and a focus on medium-term
profitability. We recognise that these are challenging times for
many people and we are committed to being there for them when they
need us the most, delivering good service and competitively priced
products while also actively managing our costs.
"Our UK Motor business delivered a profit of GBP298 million in
the first half of 2023. As we increased prices well ahead of the
market last year, our active vehicle base reduced over the period,
but we are on a strong footing to leverage improving market
conditions.
"We continue to enhance our capabilities, particularly in data
and technology, and we are innovating to further develop our core
competences and enrich our customer proposition.
"We are making good progress on our diversification strategy,
with our non-UK Motor products delivering 19 per cent customer
growth, and our UK Household business and European Motor business
delivering profits of GBP8.7 million and GBP4.7 million,
respectively. It was also another positive and profitable period
for Admiral Money, with the business taking a cautious approach
whilst growing loans balances by 31 per cent.
"I am pleased to say that we remain strongly capitalised and,
thanks to the hard work of my colleagues across all of our markets,
we now serve even more customers, and are very well-positioned for
a more encouraging outlook."
Dividend
The Board has declared an interim dividend of 51.0 pence per
share (2022 interim: 60.0 pence per share, plus 45.0 pence per
share special dividend from the sale of Penguin Portals)
representing a normal dividend (65% of post-tax profits) of 38.0
pence per share and a special dividend of 13.0 pence per share. The
interim dividend will be paid on 6 October 2023. The ex-dividend
date is 7 September 2023 and the record date is 8 September
2023.
Management presentation
Analysts and investors will be able to access the Admiral Group
management presentation which commences at 10.30 BST on Wednesday
16 August 2023 by registering at the following link to attend the
presentation in person, or access the presentation live via webcast
or conference call:
https://www.globenewswire.com/Tracker?data=qRU4_cEYZIN6jCG5SV85XMI1pO4B9l4am-4JQ3Zf6mwB87t7VnT5KciKPmsfEVb9Khxt6o__s0uIG8hz6Yl_X48rzDxUIEpzsrWXCuKtUiDmiqFqF0v-cW_rE8YY3LPP3LjX1c9gw7jw5BFSRg_3jrKF0sorDV-6d1HR_AcGCKRZ110LY4DDifIjt3r-Zfif
2023 Interim Results | Admiral Group Plc. A copy of the
presentation slides will be available at the following link:
https://www.globenewswire.com/Tracker?data=qBkH30ZUIjeC7boYyhUjEc2uFncODSfYEF7W_8rZOQJZhnTJ4AqToy7-XWxkhY3Zn-SmvWXGt_0cXXdhn0HY2tp-RSdW-SzQd3MryrHyCWyCIcSi2rALCvAHahW7nwOXSG_Gkz0csVtn5BYs6fXG716jpl-LT3UzKcoMmgid22Da4sRILrek1UFl0QkEfd6BBIZ2f-LQwIwwBsz-kCYlFq_G6ATL-zs6MK-uujIwCK8=
Results, reports and presentations | Admiral Group Plc
(www.admiralgroup.co.uk).
H1 2023 Group overview
% change vs.
GBPm 30 June 2023 30 June 2022 2022
Group turnover (GBPbn) (*1*2) 2.24 1.85 +21%
Net insurance and investment
result 181.4 165.2 +10%
Net interest income from
financial services 31.7 20.6 +54%
Other income and expenses 27.1 44.7 -39%
Operating profit(*1*2) 240.2 230.5 +4%
Group profit before tax(*1*2) 233.9 224.6 +4%
Analysis of profit(*1) :
UK Insurance 303.9 290.5 +5%
International Insurance (7.6) (16.9) +55%
International Insurance --
European Motor 4.7 (1.6) nm
International Insurance --
US Motor (10.4) (13.6) nm
International Insurance --
Other (1.9) (1.7) nm
------------
Admiral Money 2.7 0.2 nm
Other (65.1) (49.2) -32%
Group profit before tax(*1) 233.9 224.6 +4%
Key metrics
Reported Group loss ratio(*1*2
*3) 63.5% 61.1% +2pts
Reported Group expense ratio(*1*2
*3) 26.3% 26.0% --
Reported Group combined ratio(*1
*3) 89.8% 87.1% +3pts
Insurance service margin(*2
*3) 10.7% 12.1% -1pts
Customer numbers (million)(*1) 9.41 9.05 +4%
Earnings per share (*1) 57.6p 60.8p -5%
Interim dividend per share 51.0p 60.0p -15%
Special dividend from sale
of Penguin Portals -- 45.0p --
Return on equity(*1*3) 39% 36% +3pts
Solvency ratio(*2) 182% 185% -3pts
*1 Operating profit, profit before tax (including analysis by
segment), Earnings per share, return on equity, and reported group
loss, expense ratio and combined ratios restated following the
implementation of IFRS 17. See later in the report for further
details
*2 Alternative Performance Measures -- refer to the end of the
report for definition and explanation
*3 Reported Group loss and expense ratios are calculated on a
basis inclusive of all insurance revenue -- this includes insurance
premium revenue plus revenue from underwritten ancillaries, an
allocation of instalment and administration fees/related
commissions, net of excess of loss reinsurance. See glossary for an
explanation of the ratios and note 13b for a reconciliation of
reported loss and expense ratios, and insurance service margin, to
the financial statements
nm -- not meaningful
Group Highlights
Admiral reports another solid set of results for the first half
of 2023 against a backdrop of continuing elevated levels of claims
inflation. Highlights are as follows:
--9.4 million Group customers at 30 June 2023, up 4% despite
challenging market conditions and a focus across the Group on
prioritising margin over growth
--Group turnover over 20% higher as rate increases across the
Group to address claims inflation led to significant increases in
average premium
--Group pre-tax profits of GBP234 million, 4% higher compared to
the first half of 2022, restated on an IFRS 17 basis
--The UK Insurance business generated strong year-on-year growth
in turnover (+21%) due to significant rate increases in UK Motor in
response to elevated claims inflation. Admiral continued to
increase rates in the first half and market rates started to
increase more strongly, with the gap between Admiral and the wider
market appearing to narrow. UK Motor customer numbers reduced by 3%
in the first half of the year
--UK Insurance profit was GBP304 million, 5% higher than 2022
(GBP291 million) positively impacted by higher investment income
and higher reserve releases, offset in part by higher claims
incurred as the less profitable 2022 underwriting year impacted the
result
--Positive performance from UK Household, with pre-tax profit of
GBP9 million and customers up 14% to 1.7 million. Turnover was up
strongly due to price increases in response to inflation
--An improved International Insurance result (loss of GBP8
million v loss of GBP17 million in H1 2022), impacted by reduced
losses in US Motor Insurance and a return to profit in European
Motor insurance
--Another encouraging period for Admiral Money, with a 31%
increase in loans balances compared to 30 June 2022, reported
profit of GBP2.7 million (H1 2022: GBP0.2 million) and strong
credit loss provisions maintained
Earnings per share
Earnings per share for the first half is 57.6 pence (H1 2022:
60.8 pence), lower despite the growth in pre-tax profit, as a
result of a higher effective tax rate in the first half of 2023
compared to the first half of 2022. The increase in the UK
corporation tax rate to 25% (from 19%) from 1 April 2023 is a
significant driver of the higher effective rate.
Return on equity
The Group's return on equity was 39% in the first half of 2023,
3 points higher than the 36% reported in H1 2022. Average equity
for H1 2023 is lower than H1 2022 as a result of the transition to
IFRS 17 and higher dividends were paid out compared to profits
recognised on an IFRS 17 basis. 2022 full year post-tax profits on
an IFRS 17 basis were GBP86 million lower than those reported under
the previous standard, IFRS 4. Further information on the
restatement of 2022 financials follows later in the report.
Dividends and solvency
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 or
buffers.
The Board has declared an interim dividend of 51.0 pence per
share (approximately GBP152 million) split as follows:
-- 38.0 pence per share normal dividend
-- A special dividend of 13.0 pence per share
The 2023 interim dividend reflects a pay-out ratio of 89% of
earnings per share. 51.0 pence per share is 15% lower than the
interim 2022 dividend (60.0 pence per share). Although the interim
2022 dividend reflected a broadly consistent 90% pay-out of
earnings on an IFRS 4 basis, restating 2022 earnings to an IFRS 17
basis results in a higher equivalent pay-out ratio for H1 2022 of
99%.
The total 2022 interim dividend also included the additional
special dividend of 45.0 pence per share, reflecting the final
payment of the phased return to shareholders of the proceeds from
the sale of the Penguin Portals comparison businesses which
completed in 2021. The total 2022 interim dividend was 105.0 pence
per share.
The 2023 interim dividend payment date is 6 October 2023,
ex-dividend date 7 September 2023 and record date 8 September
2023.
The Group reports a strong post-dividend solvency ratio of 182%.
The ratio has increased by 2 percentage points compared to the end
of 2022. The increase of approximately 7 percentage points
resulting from the replacement of the GBP200 million 2024 maturity
tier two bond with the newly issued GBP250 million 2033 tier two
bond, is partially offset by an underlying reduction of 5
percentage points, primarily due to an increase in the Group's
solvency capital requirement of approximately GBP30 million. Growth
in premium across the Group's insurance businesses and growth in
the Group's loans book contribute to the increase in solvency
capital requirement.
Re-statement of prior period comparatives following IFRS 17
adoption
IFRS 17, the new insurance contracts accounting standard has
been effective from 1 January 2023. As a result, the opening
balance sheet as at 1 January 2022 and 2022 comparative income
statements at both 30 June 2022 and 31 December 2022 have been
restated under IFRS 17, using a fully retrospective approach (i.e.
as though IFRS 17 had always been in place).
The new accounting policies and choices adopted in the
implementation of IFRS 17 are disclosed in the notes to these
financial statements. Both the policies and transition impact are
consistent with the key accounting policy decisions and transition
impact set out on page 234 of the 2022 Annual Report.
Throughout this report, the Group's results under IFRS 17 at 30
June 2023 are compared to the 30 June 2022 comparatives which have
been restated under IFRS 17.
At both H1 2022 and FY 2022, IFRS 17 reported profits are lower
than IFRS 4 reported profits. The difference primarily arises as a
result of differences in the movements in reserve strength or risk
adjustment position over 2022 under each standard. Under IFRS 4,
Admiral moved down to the 95(th) percentile over the course of
2022, with a greater proportion of this move taking place in H2
2022. Under IFRS 17, Admiral moved down to the 95(th) percentile at
the transition date of 1 January 2022, and remained at that
percentile during 2022. This results in lower reserve releases
under IFRS 17 in 2022, and therefore lower profit. The difference
in profit is much more pronounced in H2 as the reserve strength
movement in H2 2022 under IFRS4 was more significant.
Note 2 to the financial statements provides further information
regarding the key factors driving the differences between the IFRS
4 and IFRS 17 reported results in 2022.
IFRS 17 impacts in 2023
As noted, all 2023 numbers are reported under IFRS17 and
compared to the restated IFRS 17 results in 2022.
Some elements to note regarding the impacts of IFRS 17 on the
half year 2023 results:
-- The change in accounting standard does not lead to significant
differences in profit in H1 2023, assuming a similar risk adjustment
movement in the period
-- A small positive net discounting benefit (current year claims discount
minus unwind of previous years' claims) is offset by small decrease in
quota share recoveries
-- Reserves are still very prudent, around the 94th percentile for UK Motor,
having reduced slightly from 2022
The Group's results are presented in the following sections:
-- UK Insurance -- including UK Motor (Car and Van), Household, Travel and
Pet
-- International Insurance -- including L'olivier (France), Admiral Seguros
(Spain), ConTe (Italy), and Elephant (US)
-- Admiral Money
-- Other Group Items -- including compare.com (US comparison) and Admiral
Pioneer
Economic background
Continuing elevated inflation was a key feature of the first
half of the year, including in the Group's main UK market. Together
with supply chain pressures and labour shortages, this has resulted
in continued and high claims inflation in 2023 across most markets
in which Admiral operates.
The main drivers of this claims inflation continue to be higher
repair costs, longer repair timescales and higher expected levels
of wage inflation which impacts the projected costs of bodily
injury claims. Used car prices continue to be one of the largest
contributors to damage inflation, although they have stabilised at
the elevated levels of the last 18 months.
Admiral continues to focus on medium term profitability, and has
maintained a disciplined approach to business volumes, increasing
prices to reflect the elevated claims inflation. The Group customer
base has continued to grow, although this disciplined approach has
resulted in slower growth in some businesses, and reduced customers
in the UK Motor business (though there are clear signs the gap
between Admiral's price increases and those implemented by the
market is narrowing). The Group continues to set claims reserves
cautiously.
Admiral Money has continued to grow its consumer loans book,
with a prudent approach to growth and evolving underwriting
criteria to reflect the macroeconomic environment and potential
financial impact on consumers. The business continues to hold
appropriately cautious provisions for credit losses.
UK Insurance
30 June 30 June 31 Dec
GBPm 2023 2022 2022
Turnover(*1*2) 1,708.3 1,409.9 2,784.3
----------------------------------- ------- ------- -------
Total premiums written(*1*3) 1,581.9 1,298.1 2,555.0
Insurance revenue 1,178.9 1,042.9 2,174.1
Underwriting result including net
investment income(*1) 217.5 200.8 301.6
Co-insurer profit commission and
net other revenue 86.4 89.7 208.1
UK Insurance profit before tax(*1) 303.9 290.5 509.7
*1 Alternative Performance Measures -- refer to the end of this
report for definition and explanation
*2 Alternative Performance Measures -- refer to note 13 for
explanation and reconciliation to statutory income statement
measures
*3 Total premiums restated for prior periods to include premiums
for all underwritten ancillary products. There is a corresponding
reduction in Other net income, and no impact on turnover
Split of UK Insurance profit before tax 30 June 30 June 31 Dec
GBPm 2023 2022 2022
Motor 298.2 290.9 524.9
Household 8.7 4.3 (10.7)
Travel and Pet (3.0) (4.7) (4.5)
UK Insurance profit before tax 303.9 290.5 509.7
Key performance indicators
30 June 30 June 31 Dec
2023 2022 2022
-------------------------------------- ------- ------- ------
Vehicles insured at period end 4.76m 5.14m 4.94m
Households insured at period end 1.67m 1.46m 1.58m
Travel and Pet policies at period end 0.58m 0.34m 0.44m
Total UK Insurance customers 7.01m 6.94m 6.96m
Highlights for the UK Insurance business include:
-- In UK Motor Insurance:
-- A decrease in customer numbers of 7% to 4.76 million compared to a
year earlier (30 June 2022: 5.14 million). Admiral's price
increases to account for claims inflation since Q2 2022 have been
more significant than the wider market, though this gap notably
narrowed over the first half of 2023. Turnover increased by 20% to
GBP1.5bn from GBP1.3bn
-- Profit growth of 3% to GBP298 million (v GBP291 million) as a
result of higher investment income and higher reserve releases
compared to 2022
-- In UK Household Insurance:
-- Customer numbers grew by of 14% to 1.67 million (30 June 2022:
1.46 million). As in Motor, price increases have led to higher
average premiums which contributed to a significant 30% increase
in turnover
-- Profit grew to GBP8.7 million (from GBP4.3 million) as a result of
the benefit of the commutation of quota share arrangements on
prior underwriting years more than offsetting a higher current
period attritional loss ratio, with price increases still earning
through
UK Motor Insurance
30 June 30 June 31 Dec
GBPm 2023 2022 2022
------------------------------------------- ---------- ---------- ---------
Turnover(*1) 1,520.9 1,271.8 2,493.0
-------------------------------------------
Total premiums written(*1) (*2) (*4) 1,403.4 1,164.1 2,271.3
-------------------------------------------
Gross earned premium(*1) 961.2 865.5 1,795.7
Gross other insurance revenue 58.8 55.9 114.0
-------------------------------------------
Insurance revenue 1,020.0 921.4 1,909.7
-------------------------------------------
Insurance revenue net of XoL(*2) 994.0 899.8 1,865.1
Insurance expenses(*1*2*3) (220.5) (183.7) (389.6)
Insurance claims incurred net of XoL(*2) (834.2) (721.6) (1,596.0)
Insurance claims releases net of XoL(*2) 237.1 190.9 327.2
Quota share reinsurance result(*2*3) 13.1 16.2 95.2
Movement in onerous loss component
net of reinsurance(*2) -- (3.1) 5.2
-------------------------------------------
Underwriting result*(2) 189.5 198.5 307.1
Investment income 50.9 20.9 53.8
Net insurance finance expenses (25.3) (14.5) (36.4)
Net investment income 25.6 6.4 17.4
Co-insurer profit commission 44.8 53.8 127.5
Other net income 38.3 32.2 72.9
-------------------------------------------
UK Motor Insurance profit before tax(*1) 298.2 290.9 524.9
-------------------------------------------
*1 Alternative Performance Measures -- refer to the end of this
report for definition and explanation
*2 Alternative Performance Measures -- refer to note 13 for
explanation and reconciliation to statutory income statement
measures
*3 Insurance expenses and quota share reinsurance result
excludes gross and reinsurers share of share scheme charges
respectively. For share scheme charges refer to Other Group
Items
*4 Total premiums restated for prior periods to reflect premiums
for all underwritten ancillary products. There is a corresponding
reduction in Other net income, and no impact on Turnover
*XoL refers to Excess of Loss (non-proportional) reinsurance;
see glossary at end of report for further information
Key performance indicators
30 June 30 June 31 Dec
2023 2022 2022
-------------------------------------------- --------- ---------- ---------
Reported Motor loss ratio(*1*2) 60.1% 59.0% 68.0%
Reported Motor expense ratio(*1*3) 22.2% 20.4% 20.9%
Reported Motor combined ratio(*1*2) 82.3% 79.4% 88.9%
Reported Motor Insurance service
margin(*1*4) 19.1% 22.1% 16.5%
--------------------------------------------
Core motor loss ratio before
releases(*1*5) 92.7% 89.6% 95.7%
Core motor claims releases (*1*5) (26.9%) (24.1%) (20.0%)
--------------------------------------------
Core motor loss ratio(*1*5) 65.8% 65.5% 75.7%
Core motor expense ratio(*1*6) 23.4% 21.7% 21.6%
Core motor combined ratio(*1) 89.2% 87.2% 97.3%
--------------------------------------------
Core motor written expense ratio(*7) 19.5% 19.6% 20.8%
--------------------------------------------
Vehicles insured at period end(*1) 4.76m 5.14m 4.94m
Other revenue per vehicle(*8) GBP60 GBP59 GBP58
--------------------------------------------
*1 Alternative Performance Measures -- refer to the end of this
report for definition and explanation
*2 Reported Motor loss ratio defined as insurance claims
incurred and claims releases divided by insurance revenue, net of
excess of loss reinsurance. Reconciliation in note 13c
*3 Reported Motor expense ratio defined as insurance expenses
divided by insurance revenue, net of excess of loss reinsurance.
Reconciliation in note 13c
*4 Reported Motor insurance service margin defined as
underwriting result divided by insurance revenue, net of excess of
loss reinsurance
*5 Core motor loss ratio defined as insurance claims incurred
and claims releases divided by core product insurance premium
revenue, net of excess of loss reinsurance. Presented to enable
analysis of core motor result excluding other ancillary income.
Reconciliation in note 13c
*6 Core motor expense ratio defined as insurance expenses
divided by core product insurance premium revenue, net of excess of
loss reinsurance. Reconciliation in note 13c
*7 Core motor written expense ratio defined as insurance
expenses divided by core product written insurance premium, net of
excess of loss reinsurance
*8 Other revenue per vehicle includes other revenue included
within insurance revenue. See "Other Revenue" section for
explanation and reconciliation
UK Motor profit in the first six months of 2023 was GBP298.2
million, 3% higher than the same period in 2022 (H1 2022: GBP290.9
million) as a result of positive development of prior year claims
and higher investment income due to a higher interest rate
environment. This was partly offset by a higher current period loss
ratio, as a result of the premium earned in the period not fully
reflecting the significant price increases that started in 2022 and
are continuing into H2 2023. Higher net insurance finance expenses
as the discounting of claims incurred in higher interest rate
environments in 2022 start to unwind, and a higher earned expense
ratio, also contributed. On a written basis the expense ratio is
flat year on year.
Customer numbers reduced by 7% year-on-year, with a slightly
lower reduction in H1 2023 (-3%) compared to H2 2022 (-4%). This
was primarily as a result of strong price increases ahead of the
market for a large part of the period, although market prices have
started to increase more strongly towards the end of H1 2023.
Admiral increased prices around 20% across new business and
renewals in H1 2023 to reflect continued high claims inflation in
the period, which remained above expectation, and will continue to
maintain pricing discipline if the current level of claims
inflation persists.
Gross earned premium at GBP961.2 million is 11% higher than H1
2022, reflecting a significant increase in average earned premium
as the price increases over the course of the last year, and in
particular the last six months, are starting to earn through.
The core motor expense ratio increased to 23.4% (H1 22: 21.7%),
as a result of a delay in the pricing increases earning through.
The pricing increases are however reflected in the written expense
ratio, which remained stable at 19.5% (H1 2022: 19.6%). Insurance
expenses are higher in H1 2023, driven by a short-term increased
cost of claims handling.
The movement in onerous loss component reflects the movement in
the provision for projected claims costs, inclusive of risk
adjustment, on unearned premium. During the first half of 2022, the
provision increased although was subsequently fully released by the
end of 2022 as price increases made through the second half of the
year resulted in higher projected profitability on unearned
business. At H1 2023, the provision remained at GBPnil and
therefore there is no resulting impact on profit in the period.
Claims Incurred
Claims inflation remains high and continues to be influenced by
the average costs of repairing vehicles, in turn due to the
elevated cost of replacement parts and paint, as well as high
labour costs and shortages, which has also led to longer repair
times. Used car price inflation has stabilised. Admiral's current
estimate of average claims cost inflation for full year 2023
(compared to full year 2022) is approximately 10%, with higher
inflation in the first half of 2023, starting to ease in the second
half. Claims frequency increased slightly in H1 2023 v H1 2022,
likely due to an increase in miles driven, although remains below
pre-Covid levels.
The longer-term impacts of inflation on bodily injury claims
remains uncertain. Admiral has not observed material changes in
inflation for bodily injury claims settled in 2023 to date, when
compared to 2022. However, an allowance in the best estimate
reserve continues to be held to reflect the potential impacts of
higher than historic levels of future wage inflation on certain
elements of large bodily injury claims reserves.
Admiral continues to hold a significant and prudent risk
adjustment above best estimate reserves which has been reduced
slightly (94(th) percentile confidence level) when compared to the
end of 2022, the reduction being in line with expectations as the
Group continues to diversify.
The core motor loss ratio is broadly flat at 65.8% (H1 2022:
65.5%) with offsetting movements in the current period loss ratio
and prior year reserve releases, as follows:
Reported Motor loss
ratio(*1)
Core motor Impact of
loss ratio claims reserve Core motor
before releases releases loss ratio
H1 2022 89.6% (24.1%) 65.5%
Change in current
period loss ratio 3.1% -- 3.1%
Change in claims
reserve release -- (2.8%) (2.8%)
H1 2023 92.7% (26.9%) 65.8%
------------------------ ---------------- --------------- -----------
*1 Reported motor loss ratio shown on a discounted basis
-- The current period loss ratio increased by 3.1 points which can be
primarily attributed to:
-- Continued high levels of inflation, particularly in damage claims
costs as noted above
-- Partially offset by higher average premium in the period following
significant price increases, although the full extent of these
increases is not yet reflected in earned premium
-- The benefit from prior period releases increased by 2.8 points to 26.9%.
This includes both the positive development of the best estimate reserve
for prior period claims, and the movement in the risk adjustment. The
increase in releases in H1 2023 is primarily the result of the small
reduction in the risk adjustment from the 95th percentile to the 94th
percentile, as noted above.
Quota share reinsurance
Under IFRS 17, Admiral's quota share reinsurance result reflects
the net movement on ceded premiums, reinsurer margins and expected
recoveries (claims and expenses) for each underwriting year on
which quota share reinsurance is in place (primarily 2021
underwriting year onwards).
Admiral's UK motor quota share contracts operate on a funds
withheld basis, with Admiral retaining ceded premium (net of the
reinsurer margin) which then covers claims and expenses. If an
underwriting year is not profitable, investment income is allocated
to the withheld fund and used to delay the point at which cash
recoveries are collected from the reinsurer. Other features of the
arrangements include expense ratio caps and commutation options for
Admiral that become available 24-36 months after the start of the
underwriting year.
The quota share reinsurance result by underwriting year Is as
follows:
Quota share reinsurance result
-------------------------------- --- --------- --------- ------
30 June 30 June 31 Dec
GBPm 2023 2022 2022
--------------------------------
2020 & prior 0.3 (2.9) (2.9)
2021 (42.6) (4.1) 7.1
2022 45.6 23.2 91.0
2023 9.8 -- --
Total 13.1 16.2 95.2
-------------------------------- ---------- --------- --------
The positive quota share result in H1 2023 is therefore driven
by:
-- High recoveries on the most recent underwriting years (2022 and 2023)
that are still being earned (as a result of the higher current loss
ratio)
-- Offset by the partial reversal of recoveries that had been previously
recognised on the 2021 underwriting year, as a result of favorable
developments in loss ratio
In H1 2022, the positive result is driven by:
-- Higher recoveries on the most recent underwriting year (2022) due to a
higher loss ratio
-- Offset by lower recoveries on the 2021 underwriting year due to the
favourable development of the loss ratio
-- Little impact on underwriting years prior to 2020. By the end of 2021,
these underwriting years were all profitable on a booked basis and the
full cost of the contract (the reinsurers' margin) had already been
recognised, with no additional expected recoveries. There is therefore no
further impact on the income statement in H1 2023 on these years
Co-insurer profit commission
Co-insurer profit commission is slightly lower in H1 2023
(GBP44.8 million) compared to H1 2022 (GBP53.8 million). In H1
2022, a greater proportion of the reserve releases related to older
underwriting years which have lower combined ratios, with the
releases therefore attracting higher profit commission. In
addition, in H1 2023 no profit commission has been recognised on
underwriting years 2021 (which attracted significant reserve
releases in H1 2023) and onwards, due to the current combined ratio
positions on those years.
Net investment income
Net investment income benefitted significantly from the higher
yield environment during the first half of 2023, increasing to
GBP25.6 million from GBP6.4 million in the first half of 2022.
Investment income before insurance finance expense more than
doubled to GBP50.9 million (H1 2022: GBP20.9 million) primarily as
a result of the yield environment. Further information on the
Group's investment portfolio and the income generated in the period
is provided later in the report.
Net insurance finance expense reflects the unwind of the
discounting benefit recognised when claims are initially incurred.
The expense has increased significantly in H1 2023 (GBP25.3
million; H1 2022 GBP14.5 million) as a result of the significant
increase in risk-free interest rates since the start of 2022, with
a significant proportion of the insurance finance expense in H1
2023 relating to claims incurred during 2022.
Other Revenue
UK Motor Insurance Other Revenue:
GBPm 30 June 2023
------------------------- ---------------------------------------------------
Within underwriting
result Other net income Total
Premium and revenue from
additional products &
fees(*1) 53.5 46.3 99.8
Instalment income and
administration fees(*2) 58.8 12.4 71.2
Other revenue 112.3 58.7 171.0
Claims costs and
allocated expenses(*3) (31.1) (20.4) (51.5)
Net other revenue 81.2 38.3 119.5
Other revenue per GBP60
vehicle(*4)
------------------------- ------------------------- ---------------- ------
Other revenue per vehicle GBP50
net of internal costs
GBPm 30 June 2022
------------------------- ---------------------------------------------------
Within underwriting
result Other net income Total
Premium and revenue from
additional products &
fees(*1) 53.7 40.3 94.0
Instalment income and
administration fees(*2) 55.9 16.1 72.0
Other revenue 109.6 56.4 166.0
Claims costs and
allocated expenses(*3) (25.6) (24.2) (49.8)
Net other revenue 84.0 32.2 116.2
Other revenue per GBP59
vehicle(*4)
------------------------- ------------------------- ---------------- ------
Other revenue per vehicle GBP48
net of internal costs
GBPm 31 Dec 2022
------------------------- ---------------------------------------------------
Within underwriting
result Other net income Total
Premium and revenue from
additional products &
fees(*1) 113.3 90.5 203.8
Instalment income and
administration fees(*2) 114.0 21.9 135.9
Other revenue 227.3 112.4 339.7
Claims costs and
allocated expenses(*3) (63.4) (39.5) (102.9)
Net other revenue 163.9 72.9 236.8
Other revenue per GBP58
vehicle(*4)
------------------------- ------------------------ ---------------- -------
Other revenue per vehicle GBP48
net of internal costs
*1 Premium from underwritten ancillaries is recognised within
the insurance service result (underwriting result). Other income
from non-underwritten products and fees is included within other
net income, below the underwriting result but part of the insurance
segment result.
*2 Instalment income and administration fees are recognised
within insurance revenue (% aligned to Admiral's share of premium,
net of coinsurance) and other revenue (% aligned to co-insurance
share of premium).
*3 Claims costs relating to underwritten ancillary products,
along with an allocation of related expenses, are recognised within
the insurance result. Expenses allocated to the generation of
revenue from non-underwritten ancillaries is recognised within
other net income.
*4 Other revenue per vehicle (before internal costs) divided by
average active vehicles, rolling 12-month basis. Presented here
based on all ancillary income; also see note 13c for further
information.
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 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
Under IFRS17, income from underwritten ancillaries and an
allocation of instalment income and administration fees in line
with Admiral's gross share of the core motor product premium, are
included within Insurance Revenue in the underwriting result as
'Gross other insurance revenue'. The remaining income from
instalment income, fees as well as income from other
non-underwritten ancillary products is presented in other net
income.
Overall contribution increased to GBP119.5 million (H1 2022:
GBP116.2 million), as a result of modestly increased income from
additional products and fees as well as a reduction in allocated
costs.
Other revenue was equivalent to GBP60 per vehicle (gross of
costs), with net other revenue per vehicle at GBP50 per vehicle,
both slightly up compared to 2022.
UK Household Insurance
30 June 30 June 31 Dec
GBPm 2023 2022 2022
-------------------------------------------- ------- ------- ------
Turnover(*1) 156.6 120.7 255.4
Total premiums written(*1*3) 147.7 116.6 245.7
Gross Insurance revenue 136.2 111.5 236.9
Underwriting result, net of XoL reinsurance (1.4) 16.8 (28.8)
Quota share reinsurance result(*4) 6.2 (17.3) 9.2
Underwriting result (*1*2) 4.8 (0.5) (19.6)
Net insurance investment income 0.4 0.8 1.2
-------------------------------------------- ------- ------- ------
Other income 3.5 4.0 7.7
UK Household Insurance result before
tax 8.7 4.3 (10.7)
*1 Alternative Performance Measures -- refer to the end of this
report for definition and explanation
*2 Alternative Performance Measures -- refer to note 13 for
explanation and reconciliation to statutory income statement
measures
*3 Total premiums restated for prior periods to reflect premiums
for all underwritten ancillary products. There is a corresponding
reduction in Other net income, and no impact on turnover
*4 Quota share reinsurance result within the segment result
excludes reinsurers' share of share scheme costs
Key performance indicators
30 June 30 June
2023 2022 31 Dec 2022
---------------------------------------- ---------- ----------- -----------
Reported Household loss ratio(*1*) (2) 71.0% 54.0% 81.5%
Reported Household expense ratio(*1*3) 30.2% 30.2% 31.4%
Reported Household combined ratio(*1) 101.2% 84.2% 112.9%
Household insurance service margin 3.7% (0.4%) (8.8%)
Impact of severe weather and subsidence
on reported loss ratio(*1) 5.7% 10.0% 29.0%
Impact of severe weather and subsidence
on result before tax(*1) (GBPm) 2.2 9.9 33.3
Households insured at period end (m) 1.67 1.46 1.58
---------------------------------------- ---------- ----------- -----------
*1 Alternative Performance Measures -- refer to the end of this
report for definition and explanation
*2 Household loss ratio: Reconciliation in note 13d
*3 Household expense ratio excludes share scheme costs:
Reconciliation in note 13d
The UK Household insurance business continued to enjoy good
growth with turnover increasing by 30% to GBP156.6 million (H1
2022: GBP120.7 million) as Admiral increased prices ahead of the
market to reflect higher claims inflation and the weather events at
the end of 2022. The number of households insured increased by 14%
to 1.67 million (30 June 2022: 1.46 million) with growth in both
the price comparison and direct channels, despite challenging
market conditions and double-digit price increases made by Admiral
during the first half of 2023.
The reported loss ratio increased to 71% (H1 2022: 54%). The
impact of weather events on the loss ratio in the period was lower
at 6 percentage points (H1 2022: 10 points). The current period
attritional loss ratio was higher at 68% (H1 2022: 53%) as a result
of higher claims inflation, exacerbated by market supply chain
pressures following the December 2022 freeze event. Admiral
responded with price increases, the full extent of which will earn
through in the second half and into 2024.
Prior period releases, primarily reflecting the unwind of risk
adjustment, benefitted the reported loss ratio by 3 percentage
points (H1 2022: 9 points), with the lower benefit partly as a
result of an increase in the estimate of ultimate cost of the
December 2022 freeze event.
Admiral's expense ratio was broadly in line with the first half
of 2022 at 30%, with the impact of continued investment in
technology, offset by increasing average premiums and the benefits
of increased scale.
The quota share result for the period of GBP6.2 million profit
(H1 2022: loss of GBP17.3 million) benefitted from a one-off
recognition of reinsurer profit commission relating to prior
periods following a commutation. The quota share result for H1 2022
was negatively impacted by the original derecognition of that
profit commission resulting from the significant weather events as
well as a smaller impact in respect of slower recognition of
expense recovery from reinsurers.
Profit before tax for the period was GBP8.7 million (H1 2022:
GBP4.3 million). Excluding the impact of severe weather, profit for
the period was lower than the prior period at GBP10.9 million (H1
2022: GBP14.2 million), primarily as a result of the higher
attritional loss ratio with the impact partially offset by the
profit commission benefit noted above.
UK Insurance Co- and Reinsurance
Admiral makes significant use of proportional risk sharing
agreements (co-insurance and quota share reinsurance) which include
profit commission terms that allow Admiral to retain a significant
portion of the profit generated.
Munich Re and its subsidiary entity Great Lakes currently
underwrite 40% of Admiral's UK Car insurance business. The details
of these arrangements with Munich Re are as set out in the 2022
Annual Report, with agreements in place until at least the end of
2026.
Admiral has other UK Motor quota share agreements confirmed at
least to the end of 2024, covering 38% of business written.
For UK Household insurance, Admiral retains 30% and has quota
share contracts covering 70% of the book in place until at least
the end of 2024.
The Group tends to commute its UK Motor insurance quota share
agreements 24-36 months after inception of an underwriting year,
assuming there is sufficient confidence in the profitability of the
business covered by the reinsurance contract and having assessed
the solvency implications of the commutation for the Group and its
underwriting subsidiary. During the first half of 2023, there were
no significant UK motor commutations. The majority of quota share
reinsurance covering 2020 and prior underwriting years was commuted
prior to the start of this half year period.
International Insurance
30 June 30 June 31 Dec
GBPm 2023 2022 2022
----------------------------------------- ---------- ---------- ----------
Turnover(*1) 464.3 393.7 795.9
----------------------------------------- ---------- ----------
Total premiums written(*1*2) 437.6 368.9 744.2
----------------------------------------- ---------- ----------
Insurance revenue 407.2 357.0 750.0
Insurance revenue net of XoL(*1) 396.8 350.7 732.0
Insurance expenses(*1) (125.8) (124.1) (254.6)
Insurance claims net of XoL(*1) (269.7) (239.4) (547.1)
----------------------------------------- ---------- ----------
Underwriting result, net of XoL 1.3 (12.8) (69.7)
Quota share reinsurance result(*1*3) (13.1) (4.7) 13.9
Movement in net onerous loss component 0.8 (0.9) (1.0)
----------------------------------------- ---------- ----------
Underwriting result(*1) (11.0) (18.4) (56.8)
Net investment income 1.9 (0.1) 1.1
Net other revenue 1.5 1.6 (0.5)
----------------------------------------- ---------- ----------
International Insurance loss before
tax(*1) (7.6) (16.9) (56.2)
----------------------------------------- ---------- ----------
*1 Alternative Performance Measures -- refer to the end of this
report for definition and explanation
*2 Total premiums restated for prior periods to reflect premiums
for all underwritten ancillary products. There is a corresponding
reduction in Other net income, and no impact on turnover
*3 Quota share reinsurance result within the segment result
excludes reinsurers' share of share scheme costs
Key performance indicators
30 June 31 Dec
30 June 2023 2022 2022
-------------------------------------- --------------- ---------- ---------
Loss ratio(*1) 68.0% 68.3% 74.7%
Expense ratio(*1) 31.6% 35.4% 34.8%
--------------------------------------
Combined ratio(*1) 99.6% 103.7% 109.5%
--------------------------------------
Insurance service margin(*1) (2.8%) (5.3%) (7.8%)
--------------------------------------
Customers insured at period end (m) 2.21 1.98 2.08
--------------------------------------
*1 Alternative Performance Measures -- refer to the end of this
report for definition and explanation
International Motor Insurance -- Geographical analysis(*1)
30 June 2023 Spain Italy France US Total
----------------------------- ----- ----- ------ ----- -----
Vehicles insured at period
end 0.46m 1.07m 0.41m 0.22m 2.16m
-----------------------------
Turnover (GBPm) 62.6 145.1 113.4 138.4 459.5
-----------------------------
30 June 2022 Spain Italy France US Total
-----------------------------
Vehicles insured at period
end 0.40m 0.92m 0.38m 0.24m 1.94m
-----------------------------
Turnover (GBPm) 51.0 115.3 99.5 127.9 393.7
-----------------------------
31 December 2022 Spain Italy France US Total
----------------------------- ----- ----- ------ ----- -----
Vehicles insured at period
end 0.43m 0.97m 0.40m 0.24m 2.04m
-----------------------------
Turnover (GBPm) 104.6 227.9 190.4 268.5 791.4
-----------------------------
*1 Alternative Performance Measures -- refer to the end of this
report for definition and explanation
Split of International Insurance result
30 June 30 June 31 Dec
GBPm 2023 2022 2022
------------------------------------------ ---------- ---------- ---------
European Motor 4.7 (1.6) (16.5)
------------------------------------------
US Motor (10.4) (13.6) (36.4)
------------------------------------------
Other (1.9) (1.7) (3.3)
------------------------------------------
International Insurance loss before tax (7.6) (16.9) (56.2)
------------------------------------------
Admiral's International insurance businesses continued to grow
both turnover and customer numbers, with customers increasing by
12% to 2.21 million (30 June 2022: 1.98 million) and turnover
growth of 18% to GBP464.3 million (H1 2022: GBP393.7 million).
The insurance service margin also improved to -2.8% (H1 2022:
-5.3%), driven by the combined ratio. This, together with increased
investment income, resulted in a lower reported loss before tax of
GBP7.6 million (H1 2022: GBP16.9 million).
The combined ratio improved to 99.6% (H1 2022: 103.7%), due to
the combined effect of higher premiums as well as the benefits of
increased scale in the European businesses and a reduced cost base
in the US, which results in an expense ratio improvement to 31.6%
(H1 2022: 35.4%). Investment in distribution diversification
continued via broker channels and partnerships, to further
facilitate long term growth and profitability of these
businesses.
The European insurance operations in Spain, Italy and France
insured 1.94 million vehicles at 30 June 2023 -- 14% higher than a
year earlier (30 June 2022: 1.70 million). Motor turnover was up
21% to GBP321.1 million (H1 2022: GBP265.8 million), driven by
strong price increases and the larger book sizes. The combined
European Motor profit was GBP4.7 million (H1 2022: loss of GBP1.6
million). The combined ratio reduced to 93% (H1 2022: 94%), as a
result of higher average premium and an improved expense ratio,
partially offset by high claims inflation.
Inflation continued to persist in the first half of 2023 and has
had a material impact on the market results over the past year. As
a result, market premiums have increased and market cycles are
turning, particularly in Italy and Spain. Admiral continues to
focus on medium term profitability to maintain a strong position in
navigating the market cycle.
Admiral Seguros (Spain) grew by 13% to 0.46 million customers
over the past year (30 June 2022: 0.40 million), within the context
of a competitive market with high claims inflation. The business
continues to focus on enhancing digital and data capabilities, as
well as sustainable growth through distribution diversification
through the broker channel and other partnerships.
The Group's largest international operation, ConTe in Italy,
continued to grow strongly and increased vehicles insured by 15% to
1.07 million (30 June 2022: 0.92 million) despite continued price
increases. The business continued to focus on risk selection and
expense reduction as well as continued growth in the broker
channel.
L'olivier assurance (France) continued to grow within the
context of a challenging market reflecting lower price increases to
manage inflation than in other markets. The customer base increased
by 8% to 0.41 million at 30 June 2023 (30 June 2022: 0.38 million).
The business has focused on risk selection and loss ratio
improvements, together with a marketing focus on digital
acquisition to drive growth during the period.
In the US, Admiral underwrites motor insurance through its
Elephant Auto business. In the first half of 2023, Elephant focused
on materially improving the underwriting result and minimising the
capital injection required for the business. The business took
strong actions, including through large price increases and a
reduction in the cost base, through improved operational
efficiencies and efficient use of tech and digitalisation of
processes. Turnover increased by 8% to GBP138.4 million (H1 2022:
GBP127.9 million) reflecting these price increases, whilst the
conscious decision to focus on margin over growth led to a decrease
in the number of vehicles insured by 8% to 0.22 million (30 June
2022: 0.24 million).
As a result, Elephant is on track in its focus to reduce losses,
reporting a lower loss of GBP10.4 million in the period (H1 2022:
GBP13.6 million loss) and will continue to prioritise improving the
loss ratio ahead of growth in the immediate future.
Admiral Money
30 June 30 June 31 Dec
GBPm 2023 2022 2022
----------------------------------- ---------- ---------- ---------
Total interest income 43.6 25.5 58.7
Interest expense(*1) (12.7) (5.6) (14.1)
Net interest income 30.9 19.9 44.6
Other fee income 0.1 0.2 0.3
Total income 31.0 20.1 44.9
Credit loss charge (16.6) (9.0) (20.6)
Expenses (11.7) (10.9) (22.2)
Admiral Money profit before tax 2.7 0.2 2.1
----------------------------------- ---------- ---------- ---------
(*1) Includes GBP0.8 million intra-group interest expense (H1
2022: GBP0.8 million; FY 2022: GBP1.5 million)
Admiral Money distributes and underwrites unsecured personal
loans and car finance products for UK consumers through the
comparison channel, credit scoring applications and direct to
consumers via the Admiral website. The aim of the proposition is to
provide customers with affordable guaranteed rates, ensuring
transparency and certainty.
Gross loans balances continued to grow, rising 31% to GBP1.03
billion at the end of June 2023 (30 June 2022: GBP0.79 billion),
with a GBP74.6 million (30 June 2022: GBP53.5 million) expected
credit loss provision. This leads to a net loans balance of GBP0.96
billion (30 June 2022: GBP0.73 billion).
The business reported a pre-tax profit of GBP2.7 million
(improving from GBP0.2 million in H1 2022), the third consecutive
half year of profit for the business. The improvement was driven
largely by strong interest income growth of 55% to GBP30.9 million
(30 June 2022: GBP19.9 million) driven by growth in the loan
portfolio, cost discipline and higher net interest margins.
In 2023, Admiral Money has continued to manage its lending
criteria in response to higher inflation and interest rate rises.
Credit loss models reflect the latest economic assumptions and post
model adjustments to maintain an appropriate level of prudence
given the economic outlook. The provision to loans balance coverage
ratio remains at 7.2% (31 December 2022: 7.2%), leading to a
GBP21.1 million increase in absolute provision size to GBP74.6
million. The provision includes post model adjustments of GBP12.6
million (H1 2022: GBP12.2 million), reflecting the current
uncertainty in the UK economic environment.
Admiral Money is funded through a combination of internal and
external funding sources. The external funding is secured against
certain loans via a transfer of the rights to the cash-flows to two
special purpose entities ("SPEs"). The securitisation and
subsequent issue of notes via SPEs does not result in a significant
transfer of risk from the Group.
Other Group Items
30 June 30 June 31 Dec
GBPm 2023 2022 2022
------------------------------------------- ---------- ---------- ---------
Share scheme charges (22.7) (26.1) (51.7)
Other central costs(*1) (15.2) (11.0) (15.6)
Admiral Pioneer result(*1) (12.7) (8.8) (13.5)
Business development costs(*1) (7.9) (3.9) (8.8)
Finance charges (6.3) (5.7) (12.1)
Compare.com loss before tax (2.6) (1.7) (2.8)
Other interest and investment income(*1) 2.3 8.0 10.1
Total (65.1) (49.2) (94.4)
------------------------------------------- ---------- ---------- ---------
(*1) A number of small re-allocations of costs/ income have been
made between these lines and UK insurance/ International insurance
segment results at FY 2022. These include moving costs related to
the French fleet insurance business (closed in H1 2023) out of the
Admiral Pioneer operating result, leading to a lower loss in
Admiral Pioneer than reported at FY 2022
Share scheme charges relate to the Group's two employee share
schemes. The small reduction in charge in the period is driven
primarily by the lower dividend-linked bonuses paid to holders of
unvested share awards.
Other central costs consist of Group-related expenses and
include the cost of a number of significant Group projects,
including the preparation and implementation of the significant new
insurance accounting standard, IFRS 17, and the development of the
internal capital model. Additional expenses include donations for
the Admiral Community fund, and other regulatory projects.
Admiral launched Admiral Pioneer in 2020 to focus on new product
diversification opportunities, as part of the investment in product
diversification. Pioneer businesses include Veygo (short term and
learner driver car insurance in the UK) and small business
insurance in the UK. Pioneer reported a loss of GBP12.7 million in
H1 2023 (H1 2022: GBP8.8 million). This was mainly driven by an
increase in large claims experience in Veygo, for which a cautious
reserving approach has been adopted, together with continued
investment in the small business insurance product.
Business development costs increased to GBP7.9 million (H1 2022:
GBP3.9 million), primarily attributed to small tests on potential
new businesses within the insurance operations across the Group.
Admiral took the decision to close its small fleet insurance
business in France, which also resulted in modest closure
costs.
Finance charges of GBP6.3 million (H1 2022: GBP5.7 million)
primarily related to interest on the GBP200 million subordinated
notes issued in July 2014 (refer to note 6 to the financial
statements).
A loss of GBP2.6 million (H1 2022: GBP1.7 million) was
attributed to compare.com in the first half of the year, which was
a combination of a small loss in the business together with a small
loss recognised on disposal. The sale of this US comparison
business completed during the period, with no cash exchange as a
result, but Admiral receiving a minority share in the acquiring
business.
Other interest and investment income decreased to GBP2.3 million
in H1 2023 (H1 2022: GBP8.0 million), noting that in H1 2022 GBP4.7
million was attributed to gains from the sale of UK government
bonds which was not repeated in the current period.
Group capital structure and financial position
Group capital position (estimated)
H1 2023 H1 2022 YE 2022
GBPbn GBPbn GBPbn
---------------------------------------------- ----------- ------- -------
Eligible Own Funds (post-dividend)(*1) 1.25 1.24 1.20
Solvency II capital requirement(*2) 0.69 0.67 0.66
----------------------------------------------
Surplus over regulatory capital requirement 0.56 0.57 0.54
----------------------------------------------
Solvency ratio (post-dividend)(*3) 182% 185% 180%
----------------------------------------------
(*1) HY'23 Own Funds include approximately GBP250 million of
Tier 2 capital following the Group's recent issue of 10-year
subordinated loan notes. YE'22 and HY'22 Own Funds include
approximately GBP200 million of Tier 2 capital.
(*2) Solvency capital requirement includes updated, unapproved
'dynamic' capital add-on.
(*3) Solvency ratio calculated on a volatility adjusted
basis
At the date of this report, the Group reports a strong
post-dividend solvency ratio of 182%, 2 percentage points higher
than reported with the Group's 2022 year end results. The H1 2023
solvency ratio includes the benefit of the increased Tier 2 capital
resulting from the Group's recent issue of 10.5 year, GBP250
million subordinated loan notes. At the same time as the new issue,
the Group made a tender offer for the existing GBP200 million
subordinated loan notes, due to mature in 2024. GBP145 million of
the 2024 notes were tendered, with the remaining GBP55 million of
2024 notes excluded from Own Funds at H1 2023.
Excluding the benefit of increased Tier 2 capital, the H1 2023
solvency ratio is 175%, 5 percentage points lower than at YE 2022.
Whilst post-dividend Own Funds are broadly consistent with the end
of 2022, the increased solvency capital requirement results in the
lower solvency ratio. Higher premiums in the Group's insurance
businesses as well as growth in the Group's loan book result
contribute to the increase in solvency capital requirement.
The Group solvency on a regulatory basis as at 30 June 2023 is
estimated at 150% (30 June 2022: 164%), primarily as a result of a
higher solvency capital requirement. In the regulatory basis, the
capital add-on approved by the PRA is fixed and so does not reflect
changes in risk profile (primarily profit commission risk) across
the underwriting cycle. The ratio at 30 June 2023 is based on the
original GBP81 million fixed capital-add-on, and excludes the
benefit of the additional Tier 2 capital which was finalised in
early July 2023.
At the Group's request, the PRA has recently issued notice of an
updated Group capital add-on of GBP24 million, which is lower than
the previously approved add-on of GBP81 million, but higher than
the Group's own assessment of the capital add-on at H1 2023. The
Group expects to use this updated add-on in its QRT reporting from
Q3 2023. If it were in place at the end of Q2, the estimated
regulatory solvency ratio, including the benefit of the additional
capital generated post 30 June and the tier 2 issue, would increase
to 176%.
The Group continues to develop its partial internal model to
form the basis of future capital requirements. The timescale for
formal application remains under review. In the interim period
before model approval, the current capital add-on basis will
continue to be used to calculate the regulatory capital
requirement.
Solvency ratio sensitivities
H1 2023 H1 2022 YE 2022
--------------------------------------- ------------- ---------- ----------
UK Motor -- incurred loss ratio +5% -11% -10% -11%
UK Motor -- 1 in 200 catastrophe event -1% -1% -1%
UK Household -- 1 in 200 catastrophe
event -5% -4% -4%
Interest rate -- yield curve up 100 bps -3% -1% -2%
Interest rate -- yield curve down 100
bps +2% -2% +2%
Credit spreads widen 100 bps -9% -9% -9%
Currency -- 25% movement in euro and
US dollar -3% -3% -3%
ASHE -- long term inflation assumption
up 50 bps -2% -3% -3%
Loans -- 100% weighting to 'severe'
scenario(*1) -1% -1% -1%
------------- ---------- ----------
(*1) Refer to note 7 to the financial statements for further
information on the 'severe' scenario
Investments and cash
Admiral Group's investment strategy focuses on capital
preservation and low volatility of returns. The business follows an
asset liability matching strategy to control interest rates,
inflation and currency risk. A prudent level of liquidity is held
and the investment portfolio has a high-quality credit profile.
Investment return
30 June 30 June 31 Dec
GBPm 2023 2022 2022
Underlying investment income yield 3.0% 1.4% 1.6%
Investment return 58.4 27.8 64.1
Unrealised (losses)/gains on derivatives (0.2) 0.4 0.5
Movement in provision for expected credit
losses (0.5) 1.4 1.8
-------------------------------------------- ------------ ------------ ---------
Total investment return 57.7 29.6 66.4
-------------------------------------------- ------------ ------------ ---------
Investment income for the first half of 2023 was GBP57.7 million
(H1 2022: GBP29.6 million; FY 2022 GBP66.4 million). Provisions for
expected credit losses moved up slightly, leading to a GBP0.5
million loss (H1 2022: GBP1.4 million gain).
The investment return on the Group's investment portfolio
(excluding unrealised gains and losses and the movement in
provision for expected credit losses) was GBP58.4 million in H1
2023 (compared to GBP27.8 million in H1 2022). The unrealised rate
of return was higher at 3.0% (H1 2022 1.4%), mainly as a result of
higher reinvestment yields.
The increase in interest rates in H1 2023 resulted in a
reduction in the market value of the portfolio of GBP22.4 million
(H1 2022: 173.2 million reduction). That movement is reflected in
the statement of other comprehensive income.
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. Total cash and
investments at 30 June 2023 was GBP4,043.9 million (30 June 2022:
GBP3,900.3 million), the higher balance at the end of the current
period reflecting proceeds from Admiral's bond issuance, offset by
lower investment market values which is driven by interest rates
and dividend payments. The net increase in cash and investments in
the period is GBP143.6 million.
Cash and investments analysis
31
30 June 30 June Dec
GBPm 2023 2022 2022
------------------------------------ ---------- ----------- -------------------------
Fixed income and debt securities 2,762.3 2,461.6 2,372.7
Money market funds and other fair
value instruments 713.1 866.2 934.7
Cash deposits 105.8 65.9 101.4
Cash 462.7 506.6 297.0
-------------------------------------
Total 4,043.9 3,900.3 3,705.8
-------------------------------------
Taxation
The tax charge for the period is GBP60.0 million (H1 2022:
GBP42.9 million), which equates to 25.6% (H1 2022: 19.1%) of profit
before tax. The increase in the UK rate of corporation tax to 25%
(from 19%) from 1 April 2023 is a significant driver of the
increase.
Principal Risks and Uncertainties
Admiral has performed a robust assessment of its principal risks
and uncertainties (PR&Us), including those which would threaten
its business model, future performance, liquidity and solvency.
This assessment has concluded that Admiral's PR&Us are
consistent with those reported in the Group's 2022 Annual Report
(pages 114 -- 121). However, given the importance of the following
topics, additional commentary has been provided on their specific
impact on Admiral's PR&Us: the changing economic outlook,
Consumer Duty, cyber and operational resilience, and climate
change.
Changing Economic Outlook
Admiral continues to closely review the Group's position in
response to ongoing financial market volatility and wider economic
uncertainty. Within this focus is given to such factors as: supply
chain disruption caused by geopolitical instabilities such as the
ongoing Russia-Ukraine conflict and the economic slowdown in China;
increased claims and wage inflation; banking uncertainties
resulting from the collapse of regional US banks and the UBS rescue
of Credit Suisse; and persisting as well as volatile inflation, and
pressures on individual household finances, including from
increasing mortgage interest rates.
Admiral continues to manage these challenges with a disciplined,
long-term approach to pricing, growth and development; and by
maintaining a prudent reserving approach to claims. Admiral's
ability to manage market uncertainty is further supported by a
prudent approach to investment, with an emphasis on liquidity and
good quality short-maturity credit.
Admiral also recognises the importance of supporting its people
and customers through this challenging time, for example by,
providing support to some UK staff in meeting increased energy
costs, as well as working closely with its extended accident
network to manage increasing claims costs associated with
inflation, energy prices and supply chain disruption.
Consumer Duty
Admiral is well-known for its customer-centric approach and are
supportive of the aim of enhancing consumer protection and clarity
of communications across all financial services firms. The Group
has worked hard to ensure we implemented all changes needed to
enhance delivery, evidencing and monitoring of customer outcomes --
drawing on external subject matter experts and consultations with
the regulator to drive and deliver these enhancements. Although
Admiral has implemented Consumer Duty, it will, as before, continue
to review and evolve its proposition in order to continue to
deliver good outcomes and clear communications for our
customers.
Cyber and Operational Resilience
Admiral has continued to enhance its technology, cyber and
operational resilience capabilities, and continues to actively
monitor and manage the threats arising in this area. Key
developments in these areas include security improvement programmes
across the Group, on-going extensive staff training in key areas
such as phishing prevention, as well as continued investment in
staff and security in and around the Group's IT infrastructure.
Climate Change
Admiral remains committed to recognising and understanding the
threats and opportunities posed by climate change to the Group, as
well as to mitigating its impact on the environment.
Climate-related risks can, to varying degrees, impact on all of
Admiral's business lines, operations, and investments, and may also
impact reinsurance arrangements. The Group recognises that while
there are risks from delayed action, there are also opportunities
from considering the challenges, including the potential to
accelerate the Group's transformation, to build resilience, to
drive innovation in our insurance products, to gain competitive
advantage in new and existing markets, and to help attract and
retain talent.
As part of this work there is an ongoing Group focus on:
-- Ensuring full compliance with existing and emerging regulatory and
disclosure requirements
-- Further assessing the strategic risks and opportunities arising from
climate change
-- Reflecting climate-related risk into business-as-usual risk management,
such as pricing, reserving, and climate scenario testing
-- Continuing efforts to further reduce the Group's own carbon footprint, as
well as providing staff with additional information on how to reduce
their personal carbon footprints
Disclaimer on forward-looking statements
Persons receiving this announcement should not place undue
reliance on forward-looking statements. Unless otherwise required
by applicable law, regulation or accounting standard, the Group
does not undertake to update or revise any forward-looking
statements, whether as a result of new information, future
developments or otherwise.
Condensed consolidated income statement (unaudited)
Six months ended Year ended
---------------------------------- -------------------
30 June 30 June 31 December
2023 2022 (restated, 2022 (restated,
(unaudited) unaudited) unaudited)
Note GBPm GBPm GBPm
-------------------- -------------------
Insurance revenue 1,607.0 1,413.8 2,956.9
Insurance service expenses (1,437.7) (1,261.4) (2,737.2)
Insurance service result before
reinsurance 5 169.3 152.4 219.7
Net expense from reinsurance
contracts held 5 (16.8) (0.4) (38.4)
Insurance service result 152.5 152.0 181.3
Investment return 58.0 28.2 64.6
Finance expenses from insurance
contracts issued (47.4) (21.1) (52.0)
Finance income from reinsurance
contracts held 18.3 6.1 13.6
Net insurance finance expenses (29.1) (15.0) (38.4)
Net insurance and investment
result 181.4 165.2 207.5
Interest income from financial
services 43.6 25.4 58.7
Interest expense related to financial
services (11.9) (4.8) (12.6)
Net interest income from financial
services 31.7 20.6 46.1
Other revenue and profit commission 8 108.6 118.4 256.4
Other operating expenses 9 (120.2) (108.1) (204.6)
Other operating expenses recoverable
from co-insurers 55.8 42.0 86.7
Expected credit losses (17.1) (7.6) (18.9)
Other income and expenses 27.1 44.7 119.6
Operating profit 240.2 230.5 373.2
Finance costs (7.2) (6.7) (13.5)
Finance costs recoverable from
co- and reinsurers 0.9 0.8 1.5
Net finance costs (6.3) (5.9) (12.0)
Profit before tax 233.9 224.6 361.2
Taxation expense 10 (60.0) (42.9) (75.9)
Profit after tax 173.9 181.7 285.3
Profit after tax attributable
to:
Equity holders of the parent 174.5 182.4 286.5
Non-controlling interests (NCI) (0.6) (0.7) (1.2)
173.9 181.7 285.3
Earnings per share
Basic 12 57.6p 60.8p 95.4p
Diluted 12 57.5p 60.7p 95.0p
Dividends declared and paid (total) 12 154.9 348.1 658.3
Dividends declared and paid (per 12 52.0p 118.0p 223.0p
share)
-------------------
Condensed consolidated statement of comprehensive income
(unaudited)
Six months ended Year ended
30 June 2022 31 December2022
30 June 2023 (restated, (restated,
(unaudited) unaudited) unaudited)
Note GBPm GBPm GBPm
Profit for the period 173.9 181.7 285.3
Other comprehensive income
Items that are or may be reclassified
to profit or loss
Movements in fair value reserve (22.4) (173.2) (255.6)
Deferred tax charge in relation to
movement in fair value reserve 1.5 9.5 13.0
Movements in insurance finance reserve 16.4 104.8 177.8
Deferred tax in relation to movement
in insurance finance reserve (2.6) (13.6) (22.8)
Exchange differences on translation
of foreign operations (2.5) 0.7 (4.3)
Movement in hedging reserve 11.6 12.3 25.1
Deferred tax charge in relation to movement
in hedging reserve (2.9) -- (7.0)
Other comprehensive income for the
period, net of income tax (0.9) (59.5) (73.8)
Total comprehensive income for the period 173.0 122.2 211.5
Total comprehensive income for the
period attributable to:
Equity holders of the parent 173.6 122.8 212.6
Non-controlling interests (0.6) (0.6) (1.1)
173.0 122.2 211.5
Condensed consolidated statement of financial position
(unaudited)
As at
31 December 1 January
30 June 2022 2022 2022
30 June 2023 (restated, (restated, (restated,
(unaudited) unaudited) unaudited) unaudited)
Note GBPm GBPm GBPm GBPm
-------------- -----------
ASSETS
Property and equipment 81.4 93.1 89.8 103.2
Intangible assets 11 241.8 182.6 217.6 151.8
Deferred income tax 12.2 24.2 28.4 20.7
Corporation tax asset -- 4.3 9.1 10.2
Reinsurance contract assets 5 1,113.4 965.3 1,015.4 987.2
Loans and advances to customers 7 961.1 733.1 823.9 556.8
Other receivables 6 373.2 332.7 316.4 391.5
Financial investments 6 3,583.4 3,393.7 3,411.2 3,742.6
Cash and cash equivalents 6 462.7 506.6 297.0 372.7
Total assets 6,829.2 6,235.6 6,208.8 6,336.7
--------------------------------- ----- ------------ -------------- ----------- -----------
EQUITY
Share capital 12 0.3 0.3 0.3 0.3
Share premium account 13.1 13.1 13.1 13.1
Other reserves (54.7) (35.9) (50.2) 23.7
Retained earnings 968.7 1,102.9 922.6 1,243.5
Total equity attributable
to equity holders of the
parent 927.4 1,080.4 885.8 1,280.6
Non-controlling interests 1.2 1.7 1.2 2.3
Total equity 928.6 1,082.1 887.0 1,282.9
LIABILITIES
Insurance contracts liabilities 5 4,139.7 3,927.0 4,025.4 3,926.4
Subordinated and other financial
liabilities 6 1,187.3 887.4 939.1 670.9
Trade and other payables 6, 11 480.3 246.1 254.9 351.2
Lease liabilities 6 83.2 93.0 88.5 105.3
Corporation tax liabilities 10.1 -- 13.9 --
Total liabilities 5,900.6 5,153.5 5,321.8 5,053.8
--------------------------------- ----- ------------ -------------- ----------- -----------
Total equity and total
liabilities 6,829.2 6,235.6 6,208.8 6,336.7
Condensed consolidated cash flow statement (unaudited)
Six months ended Year ended
31 December
30 June 2022 2022
30 June 2023 (restated, (restated,
(unaudited) unaudited) unaudited)
Note GBPm GBPm GBPm
--------------- ----------------
Profit after tax 173.9 181.7 285.3
Adjustments for non-cash items:
-- Depreciation of property, plant and equipment and
right-of-use assets 9.2 8.8 18.2
-- Impairment/ disposal of property, plant and equipment
and right-of-use assets 1.1 (1.8) (1.2)
-- Amortisation and impairment of intangible assets 11 17.9 9.5 23.7
-- Movement in expected credit loss provision 11.5 7.6 11.7
-- Share scheme charges 27.4 26.1 57.3
-- Accrued interest income from loans and advances to
customers -- (0.5) --
-- Interest expense on funding for loans and advances to
customers 11.4 4.8 12.6
-- Investment return 6 (58.0) (28.2) (64.6)
-- Finance costs, including unwinding of discounts on
lease liabilities 7.3 5.9 13.4
-- Taxation expense 10 60.0 42.9 75.9
Change in gross insurance contract
liabilities 5 134.7 181.7 372.8
Change in reinsurance assets 5 (102.0) (54.4) (124.2)
Change in insurance and other receivables (56.8) 59.4 75.1
Change in gross loans and advances
to customers 7 (148.2) (179.6) (280.6)
Change in trade and other payables,
including tax and social security 11 225.4 (105.1) (96.3)
Cash flows from operating activities,
before movements in investments 314.8 158.8 379.1
Purchases of financial instruments (1,399.2) (1,606.7) (3,198.0)
Proceeds on disposal/ maturity of financial
instruments 1,217.3 1,808.0 3,328.3
Interest and investment income received 21.2 26.2 58.7
Cash flows from operating activities,
net of movements in investments 154.1 386.3 568.1
Taxation payments (43.3) (46.7) (91.2)
Net cash flow from operating activities 110.8 339.6 476.9
Cash flows from investing activities:
Purchases of property, equipment and
software (45.8) (44.1) (98.6)
Investments in Associates -- -- (2.4)
Net cash used in investing activities (45.8) (44.1) (101.0)
Cash flows from financing activities:
Proceeds on issue of loan backed securities 147.9 191.7 267.8
Proceeds from other financial liabilities 105.0 15.0 --
Finance costs paid, including interest
expense paid on funding for loans (26.6) (11.2) (25.3)
Repayment of lease liabilities (1.8) (4.2) (9.2)
Equity dividends paid 12 (154.9) (348.1) (658.3)
Net cash used in financing activities 69.6 (156.8) (425.0)
Net increase in cash and cash equivalents 134.6 138.7 (49.1)
Cash and cash equivalents at 1 January 297.0 372.7 372.7
Effects of changes in foreign exchange
rates 31.1 (4.8) (26.6)
Cash and cash equivalents at end of
period 6 462.7 506.6 297.0
Condensed consolidated statement of changes in equity
(unaudited)
Attributable to the owners of the Company
Share Fair Foreign Retained
Share premium value Hedging exchange Insurance profit Non-controlling Total
Capital account reserve reserve reserve Finance Reserve and loss Total interests equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------- -------- -------- --------- ---------------- --------- -------
At 1 January 2022 previously
reported 0.3 13.1 36.7 3.0 4.3 -- 1,348.8 1,406.2 2.3 1,408.5
Impact of initial application
of IFRS 17 -- -- -- -- 0.2 (20.5) (105.3) (125.6) -- (125.6)
At 1 January 2022 restated 0.3 13.1 36.7 3.0 4.5 (20.5) 1,243.5 1,280.6 2.3 1,282.9
Profit/(loss) for the
period -- -- -- -- -- -- 182.4 182.4 (0.7) 181.7
Other comprehensive
income -- -- (163.7) 12.3 0.6 91.2 -- (59.6) 0.1 (59.5)
Total comprehensive income for
the period -- -- (163.7) 12.3 0.6 91.2 182.4 122.8 (0.6) 122.2
-------------------------------------- -------- -------- -------- -------- --------- ---------------- --------- ------- --------------- -------
Transactions with equity
holders
Dividends 12 -- -- -- -- -- -- (348.1) (348.1) -- (348.1)
Share scheme credit -- -- -- -- -- -- 29.9 29.9 -- 29.9
Deferred tax credit
on share scheme credit -- -- -- -- -- -- (4.8) (4.8) -- (4.8)
Total transactions with equity
holders -- -- -- -- -- -- (323.0) (323.0) -- (323.0)
-------------------------------------- -------- -------- -------- -------- --------- ---------------- --------- ------- --------------- -------
As at 30 June 2022
(unaudited) 0.3 13.1 (127.0) 15.3 5.1 70.7 1,102.9 1,080.4 1.7 1,082.1
At 1 January 2022 previously
reported 0.3 13.1 36.7 3.0 4.3 -- 1,348.8 1,406.2 2.3 1,408.5
Impact of initial application
of IFRS 17 -- -- -- -- 0.2 (20.5) (105.3) (125.6) -- (125.6)
At 1 January 2022 restated 0.3 13.1 36.7 3.0 4.5 (20.5) 1,243.5 1,280.6 2.3 1,282.9
Profit/(loss) for the
period -- -- -- -- -- -- 286.5 286.5 (1.2) 285.3
Other comprehensive
income -- -- (242.6) 18.1 (4.4) 155.0 -- (73.9) 0.1 (73.8)
Total comprehensive income for
the period -- -- (242.6) 18.1 (4.4) 155.0 286.5 212.6 (1.1) 211.5
-------------------------------------- -------- -------- -------- -------- --------- ---------------- --------- ------- --------------- -------
Transactions with equity
holders
Dividends 12 -- -- -- -- -- -- (658.3) (658.3) -- (658.3)
Share scheme credit -- -- -- -- -- -- 57.3 57.3 -- 57.3
Deferred tax credit
on share scheme credit -- -- -- -- -- -- (6.4) (6.4) -- (6.4)
Total transaction with equity holders -- -- -- -- -- -- (607.4) (607.4) -- (607.4)
-------------------------------------- -------- -------- -------- -------- --------- ---------------- --------- ------- --------------- -------
As at 31 December 2022 (unaudited) 0.3 13.1 (205.9) 21.1 0.1 134.5 922.6 885.8 1.2 887.0
Condensed consolidated statement of changes in equity
(unaudited) (continued)
Attributable to the owners of the Company
Foreign Insurance Retained
Share Fair value Hedging exchange finance profit Non-controlling Total
Capital Share premium reserve reserve reserve reserve and loss Total interests equity
Note GBPm account GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------- ---------- -------- --------- --------- --------- -------
At 1 January 2023
(unaudited) 0.3 13.1 (205.9) 21.1 0.1 134.5 922.6 885.8 1.2 887.0
Profit/(loss) for the
period -- -- -- -- -- -- 174.5 174.5 (0.6) 173.9
Other comprehensive
income -- (20.9) 8.7 (2.5) 13.8 -- (0.9) -- (0.9)
Total comprehensive income
for the period -- -- (20.9) 8.7 (2.5) 13.8 174.5 173.6 (0.6) 173.0
--------------------------------- -------- ------------- ---------- -------- --------- --------- --------- ------- --------------- -------
Transactions with equity
holders
Dividends 12 -- -- -- -- -- -- (154.9) (154.9) -- (154.9)
Share scheme credit -- -- -- -- -- -- 27.4 27.4 -- 27.4
Deferred tax credit
on share scheme credit -- -- -- -- -- -- (0.9) (0.9) -- (0.9)
Transfer to loss on
disposal of assets held
for sale -- -- -- -- (3.6) -- -- (3.6) 0.6 (3.0)
Total transactions with equity
holders -- -- -- -- (3.6) -- (128.4) (132.0) 0.6 (131.4)
--------------------------------- -------- ------------- ---------- -------- --------- --------- --------- ------- --------------- -------
As at 30 June 2023
(unaudited) 0.3 13.1 (226.8) 29.8 (6.0) 148.3 968.7 927.4 1.2 928.6
Notes to the financial statements (unaudited)
1. General information
Admiral Group plc (the "Company") is a public limited company
incorporated and domiciled in England and Wales. Its registered
office is at T Admiral, David Street, Cardiff, CF10 2EH and its
shares are listed on the London Stock Exchange.
The condensed interim financial statements comprise the results
and balances of the Company and its subsidiaries (the Group) for
the six-month period ended 30 June 2023 and the comparative periods
for the six-months ended 30 June 2022 and the year ended 31
December 2022. This condensed set of financial statements has been
prepared in accordance with IAS 34 Interim Financial Reporting as
adopted by the UK, and should be read in conjunction with the
Group's last annual consolidated financial statements as at and for
the year ended 31 December 2022 ("last annual financial
statements"), prepared in accordance with United Kingdom adopted
international accounting standards in conformity with the
requirements of the Companies Act 2006. They do not include all of
the information required for a complete set of IFRS financial
statements. However, selected explanatory notes are included to
explain events and transactions that are significant to an
understanding of the changes in the Group's financial position and
performance since the last annual financial statements.
As required by the FCA's Disclosure and Transparency Rules, the
condensed set of financial statements has been prepared applying
the accounting policies and presentation that were applied in the
preparation of the Company's published consolidated financial
statements for the year ended 31 December 2022, except where new
accounting standards apply as noted below.
The financial statements of the Company's subsidiaries are
consolidated in the Group financial statements. In accordance with
IAS 24, transactions or balances between Group companies that have
been eliminated on consolidation are not reported as related party
transactions.
The comparative figures for the financial year ended 31 December
2022 are not the Company's statutory accounts for that financial
year, as a result of the restatement of the comparative figures
following the adoption of IFRS 17. Those accounts have been
reported on by the Company's auditors and delivered to the
registrar of companies. The report of the auditors was:
1. unqualified;
2. did not include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report; and
3. did not contain a statement under section 498(2) or (3) of the Companies
Act 2006.
The accounts have been prepared on a going concern basis. In
considering the appropriateness of this assumption, the Board have
reviewed the Group's projections for the next 12 months and beyond.
Further information is given in note 2 below.
2. Basis of preparation
The condensed set of interim financial statements have been
prepared applying the accounting policies and presentation that
were applied in the preparation of the Company's published
consolidated financial statements for the year ended 31 December
2022, other than in respect of the implementation of IFRS 17, the
new insurance contracts accounting standard. Further detail on
changes to accounting policies as a result of the implementation of
IFRS 17 are provided below.
A number of other IFRS and interpretations have been endorsed by
the UK in the period to 30 June 2023 and although they have been
adopted by the Group, none of them has had a material impact on the
Group's financial statements.
The Group's assessment of the impact of other standards that
have yet to be adopted remains consistent with that reported on
page 232 of the Group's 2022 Annual Report.
The consolidated financial statements have been prepared on a
Going Concern basis. In considering this requirement, the directors
have taken into account the following:
-- The Group's profit projections, including:
-- Changes in premium rates and projected policy volumes across the Group's
insurance businesses
-- Projected cost of settling claims across all of the Group's insurance
businesses, including the impact of continuing high levels of inflation
-- Projected trends in other revenue generated by the Group's insurance
business from fees and the sale of ancillary products
-- Projected contributions to profit from businesses other than the UK Car
insurance business
-- Expected trends in inflation and unemployment in the context of credit
risks and the growth of the Admiral Money business
-- The Group's solvency position, which continues to be closely monitored
through periods of market volatility. The Group continues to maintain a
strong solvency position above target levels
-- The adequacy of the Group's liquidity position after considering all 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 regulatory environment, focusing on regulatory guidance issued by the
FCA and the PRA in the UK and regular communications between management
and regulators
-- A review of the Company's principal risks and uncertainties and the
assessment of emerging risks
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.
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 financial statements are presented in
pounds sterling, rounded to the nearest GBP0.1 million.
Subsidiaries are entities controlled by the Group. The Group
controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
In assessing control, the Group takes into consideration potential
voting rights that are currently exercisable. The acquisition date
is the date on which control is transferred to the acquirer. The
financial statements of subsidiaries are included in the
consolidated financial statements from the date that control
commences until the date that control ceases. Losses applicable to
the non-controlling interests in a subsidiary are allocated to the
non-controlling interests even if doing so causes the
non-controlling interests to have a deficit balance.
Re-statement of prior period comparatives following IFRS 17
adoption
IFRS 17, the new insurance contracts standard, was effective
from 1 January 2023. As a result, the opening balance sheet (1
January 2022) and prior year comparatives (FY 2022 and HY 2022)
have been restated under IFRS 17, using a fully retrospective
approach (i.e. as though IFRS
17 had always been in place). The new accounting policies and choices adopted in the implementation of IFRS 17 are disclosed in the notes to these financial statements.
The following section provides further information regarding the
key factors driving the differences in the 2022 results under IFRS
4 and restated results under IFRS 17.
Summary of restated profits for 2022 due to IFRS 17:
30 June 2022 31 December 2022
(unaudited) (unaudited)
--------------------------- ----------------------- -------------------------
IFRS IFRS IFRS IFRS
GBPm 17 4 Change 17 4 Change
Analysis of profit
UK Insurance 290.5 321.8 (31.3) 509.7 615.9 (106.2)
International Insurance (16.9) (21.6) 4.7 (56.2) (53.8) (2.4)
International Insurance --
European Motor (1.6) 0.2 (1.8) (16.5) (1.6) (14.9)
International Insurance --
US Motor (13.6) (19.8) 6.2 (36.4) (48.9) 12.5
International Insurance --
Other (1.7) (2.0) 0.3 (3.3) (3.3) --
---------
Admiral Money 0.2 0.2 -- 2.1 2.1 --
Other (49.2) (49.1) (0.1) (94.4) (95.2) 0.8
Group profit before tax 224.6 251.3 (26.7) 361.2 469.0 (107.8)
The 2022 profit before tax on an IFRS 17 basis is lower than
that reported under IFRS 4, particularly in H2 2022. The following
table sets out the key differences for the UK and international
insurance profits reported under IFRS 17 compared to IFRS 4:
Unaudited
International
GBPm UK Insurance Insurance
H1 2022 FY 2022 H1 2022 FY 2022
IFRS 4 reported profit 321.8 615.9 (21.6) (53.8)
Timing of reserve releases (18.0) (93.3) (0.1) (9.9)
Discounting 2.7 15.4 1.8 9.5
Timing of Quota share reinsurance
recoveries (5.3) (41.2) 2.5 (2.9)
Other (10.7) 12.9 0.5 0.9
IFRS 17 reported profit before
tax 290.5 509.7 (16.9) (56.2)
The difference between IFRS 4 and IFRS 17 reported profits
primarily arises as a result of differences in the reserve strength
or risk adjustment position over 2022 under each standard. Under
IFRS 4, Admiral moved down to the 95(th) percentile over the course
of 2022, with a greater proportion of this move taking place in H2
2022. Under IFRS17, Admiral moved down to the 95(th) percentile at
the transition date of 1
January 2022, and remained at that percentile during 2022. This results in lower reserve releases under IFRS 17 in 2022, and therefore lower profit. The difference in profit is more pronounced in H2 as the reserve strength movement in H2 2022 under IFRS4 was more significant.
The discounting impact shown above is the impact of the
discounting of the gross, net of XoL claims incurred in the period.
Whilst there is some favourable impact of GBP15 million at H1 2022;
GBP52 million at YE 2022), this is offset by the unwind of
discounting of prior years. Whilst the higher discount curves seen
in 2022 result in this being a net benefit, the Group's accounting
policy decision to take the impact of changes in yield curve on
outstanding claims reserves to other reserves means that this is
not a material driver of IFRS 17 profit in 2022.
In addition, the majority of the discounting benefit on gross
claims net of excess of loss reinsurance is offset by the
significant adverse movement on quota share recoveries. This is far
more significant given that, due to quota share contracts having
been largely commuted on earlier underwriting years, there is no
significant offsetting "unwind" of discounting within the quota
share result.
Other movements include a number of largely offsetting
differences in the timing of recognition of acquisition expenses,
quota share reinsurance profit commission recoveries, and movements
in the onerous loss component.
Changes to accounting policies following the adoption of IFRS
17
(i) Insurance and reinsurance contracts accounting treatment
Level of aggregation
IFRS 17 requires an entity to determine the level of aggregation
for applying its requirements. The level of aggregation for the
Group is determined firstly by dividing the business written into
portfolios, which comprise contracts subject to similar risks and
which are managed together.
The Group's insurance business is therefore divided into
portfolios based on both the product (line of business such as
motor, household etc), and geography (UK, Italy, Spain, France and
the US).
IFRS 17 requires a further division of the portfolios into a
'group' of contracts (being the lowest unit of account) based on
expected profitability, and also requires that no group contains
contracts issued more than one year apart.
Following the application of the IFRS 17 level of aggregation
requirements, each of the Group's portfolios (which are determined
by geography and line of business) is further disaggregated by year
of issue into a group of contracts based on expected profitability
at inception into three categories:
1. a group of contracts that are onerous at initial recognition, if any;
2. a group of contracts that at initial recognition have no significant
possibility of becoming onerous subsequently, if any; and
3. a group of the remaining contracts in the portfolio.
The Group has elected to group together those contracts that
would fall into different groups only because law or regulation
specifically constrains its practical ability to set a different
price or level of benefits for policyholders with different
characteristics.
To assess the profitability of groups of contracts, the Group
determines the appropriate level at which reasonable and
supportable information is available. The Group assumes that no
contracts in the portfolio are onerous at initial recognition
unless facts and circumstances indicate otherwise.
The Group divides portfolios of reinsurance contracts held
applying the same principles set out above, except that the
references to onerous contracts refer to contracts on which there
is a net gain on initial recognition.
Reinsurance contracts held are assessed for aggregation
requirements on an individual contract basis. For many of the
Group's reinsurance contracts held, a group comprises a single
contract. The Group reports its reinsurance contracts by portfolio,
which aggregate the contracts by type of reinsurance (e.g. quota
share or XoL) and product.
These groups represent the level of aggregation at which
insurance contracts are initially recognised and measured. Such
groups are not subsequently reconsidered.
Contract boundary
The Group includes in the measurement of a group of insurance
contracts all the future cash flows within the boundary of each
contract in the group.
A liability or asset relating to expected premiums or claims
outside the boundary of the insurance contract is not recognised.
Such amounts relate to future insurance contracts.
For groups of reinsurance contracts held, cash flows are within
the contract boundary if they arise from substantive rights and
obligations of the Group that exist during the reporting period in
which the Group is compelled to pay amounts to the reinsurer or in
which the Group has a substantive right to receive services from
the reinsurer.
Presentation
The Group disaggregates the total amount recognised in the
Consolidated Income Statement and Consolidated Statement of Other
Comprehensive Income into an insurance service result, comprising
insurance revenue and insurance service expense, and insurance
finance income or expenses.
The Group separately presents income or expenses from
reinsurance contracts held from the expenses or income from
insurance contracts issued. This is presented as one single amount
in the Consolidated Income Statement, with additional disclosure
provided in the notes to the financial statements.
The Group does not disaggregate the change in risk adjustment
for non-financial risk between a financial and non-financial
portion. It includes the entire change as part of the insurance
service result.
1. Measurement
The table below sets out the Group's accounting policy choices.
The Group's accounting policies for measurement are set out in note
5 to these financial statements.
Accounting policy choices
Area IFRS 17 options Adopted approach
----------------------- ---------------------------------- ----------------------------------
Premium allocation Subject to specified criteria, Coverage period for the
approach ('PAA') the PAA can be adopted as Group's insurance contracts
eligibility a simplified approach to assumed is one year or less
the IFRS 17 general model and so qualifies automatically
for PAA
Reinsurance contracts (both
XoL and quota share) include
contracts with a coverage
period greater than one
year. However, there is
no material difference in
the measurement of the asset
for remaining coverage between
PAA and the general model,
therefore these qualify
for PAA
----------------------- ---------------------------------- ----------------------------------
Insurance acquisition Where the coverage period The Group's insurance contracts
cash flows for of all contracts within are all one year or less.
insurance contracts a group is not longer than The Group has therefore
issued one year, insurance acquisition taken the option to expense
cash flows can either be acquisition costs as incurred
expensed as incurred, or
allocated, using a systematic
and rational method, to
groups of insurance contracts
(including future groups
containing insurance contracts
that are expected to arise
from renewals) and then
amortised over the coverage
period of the related group.
For groups containing contracts
longer than one year, insurance
acquisition cash flows must
be allocated to related
groups of insurance contracts
and amortised over the coverage
period of the related group
----------------------- ---------------------------------- ----------------------------------
Liability for Remaining Where there is no significant There is no allowance made
Coverage ('LRC'), financing component in relation for accretion of interest
adjusted for financial to the LRC, or where the on the LRC given that the
risk and time value time between providing each premiums are received within
of money part of the services and one year of the coverage
the related premium due period
date is no more than a year,
an entity is not required
to make an adjustment for
accretion of interest on
the LRC
----------------------- ---------------------------------- ----------------------------------
Liability for Incurred Where claims or directly For some claims, for example
Claims ('LIC') attributable insurance expenses within the travel product
adjusted for time are expected to be paid line in the UK, and other
value of money within a year of the date immaterial product lines
that the claim is incurred, across the Group, the incurred
it is not required to adjust claims are expected to be
these amounts for the time paid out in less than one
value of money. year.
Similarly, the majority
of directly attributable
insurance expenses are expected
to be settled within one
year. For these claims and
expenses, no adjustment
is made for the time value
of money.
For all other business,
the LIC is adjusted for
the time value of money.
----------------------- ---------------------------------- ----------------------------------
Insurance finance There is an option to disaggregate The impact on LIC of changes
income and expense part of the movement in in discount rates will be
the LIC resulting from changes captured within OCI, in
in discount rates, and present line with the accounting
this in Other Comprehensive for assets backing the insurance
Income ('OCI') claims liabilities
----------------------- ---------------------------------- ----------------------------------
Interim reporting Where an entity is required The Group has opted to apply
to apply IAS 34 (as for the option to use year-to-date
the Group) there is an option accounting for interim reporting.
as to whether to choose
a "year to date" basis or
a "period to date" basis
for financial reporting
----------------------- ---------------------------------- ----------------------------------
3. Critical accounting judgements and estimates (unaudited)
The Group's 2022 Annual Report provides full details of
significant judgements and estimates used in the application of the
Group's
accounting policies. Changes in respect of critical judgements or estimates applied in the period as a result of the implementation of IFRS 17 are provided below.
Note 5 provides further information as to the changes in
accounting policies in respect of insurance liabilities and
reinsurance assets, and related insurance revenue and expenses, and
reinsurance expenses.
Note 7 provides further information as to changes in the
estimates with respect to the calculation of the expected credit
loss provision for the Admiral Money business.
Changes to critical accounting judgements and key sources of
estimation uncertainty (insurance and reinsurance contracts)
Critical accounting judgements
-- Premium allocation approach ('PAA')
As set out above, the Group has assessed all of its contracts
and determined that all contracts qualify for the PAA. The Group
therefore applies the PAA to all of its insurance and reinsurance
contracts.
-- Classification of the Group's contracts with reinsurers as reinsurance
contracts
A contract is required to transfer significant insurance risk in
order to be able 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.
-- Unit of account: combination of insurance contracts and separation of
distinct components
The lowest unit of account in IFRS 17 is the contract and there
is a presumption that a contract with the legal form of a single
contract would generally be considered a single contract in
substance. However, there might be certain facts and circumstances
where legal form does not reflect the substance and separation is
required. IFRS 17 contains requirements on when different insurance
contracts should be combined and treated as a single contract for
recognition and measurement.
Overriding the legal contract to reflect substance is not a
policy choice; it is a significant judgement requiring careful
consideration of all relevant facts and circumstances. The
following considerations are deemed relevant in assessing whether
the contracts should be separated, or alternatively, combined:
-- whether there is interdependency between the different risks covered;
-- whether components lapse together; and
-- whether components can be priced and sold separately.
After separating any distinct components, IFRS 17 is applied to
all remaining components of the (host) insurance contract.
The Group has determined that, in applying these requirements to
its insurance contracts:
-- The cashflows associated with administration fees (for changes to the
underlying insurance policy), and instalment income (being the additional
fees payable by a policyholder associated with paying for an insurance
contract over 12 months, rather than in one up-front payment), are
non-distinct given that the policyholder cannot benefit from these
services separately and the services are highly interrelated with the
core insurance policy. These cashflows are therefore treated as
insurance revenue under IFRS 17. However, for the component of the
insurance policy that is underwritten outside the Group by a third party
insurer, the Group is performing an agency service on behalf of the third
party insurer, and therefore this component is treated as a separate
component of revenue and accounted for under IFRS 15.
-- The cashflows associated with ancillary or "add on" products (which are
sold within the same set of contracts as the core product), are separated
from the core product given that the risks are not interdependent and the
components can be separately priced.
-- The individual insurance policies contained in a "multi-cover policy" are
treated as separate contracts, given that the components can be priced
and sold separately, there is little interdependency between the risks
covered, and the components can lapse separately.
In addition, the Group's quota share reinsurance contracts
contain profit commission arrangements. Under these arrangements,
there is a minimum guaranteed amount that the Group, as the
policyholder, will always receive -- either in the form of profit
commission, or as claims, or another contractual payment
irrespective of the insured event happening. The minimum guaranteed
amounts have been assessed to be highly interrelated with the
insurance component of the reinsurance contacts and are, therefore,
non-distinct investment components which are not accounted for
separately. Given that the receipt and payment of these
non-distinct investment components do not relate to the provision
of insurance services, the amounts are not presented as part of
reinsurance ceded premiums or recoveries.
-- Presentation of reinsurance "funds withheld" contracts
The Group has a number of quota share reinsurance contracts that
have funds withheld features, whereby the quota share proportion of
ceded premiums and related recoveries are retained by the Group,
and settled on a net basis at commutation. The only initial
cashflows during the coverage period are therefore the payment of
any reinsurer margin.
Under IFRS 17, the reinsurance assets related to these funds
withheld contracts are presented on a cashflow basis i.e. the full
proportional share of ceded premiums and recoveries is not
presented in either the income statement or the balance sheet.
Key sources of estimation uncertainty
-- Best estimate of future cashflows to fulfil insurance contracts
The process for the setting of the best estimate claims reserves
is largely unchanged from the process set out in the Group's 2022
Annual Report and therefore is not repeated here.
-- Discount rates
A bottom-up approach has been applied in the determination of
discount rates across all products and geographies.
Under this approach, the discount rate is determined as the
risk-free yield adjusted for differences in liquidity
characteristics between the financial assets used to derive the
risk-free yield and the relevant liability cash flows (known as an
illiquidity premium).
A separate risk-free yield is obtained for each currency, where
a material amount of business is written in that currency. The
risk-free yield curve is obtained using rates published by the
Prudential Regulation Authority (PRA) for the UK insurance business
and Elephant, whilst for AECS the EIOPA risk free term structures
are used. These curves are available from October 2015 and provides
rates for terms up to 150 years.
For periods prior to October 2015, observable market data is
available for terms up to 25 years for GBP (30 years for EUR and
USD). For terms that aren't directly observable from market data,
the Smith-Wilson approach is used to derive the rates which
extrapolates between the observable data and an assumed ultimate
forward rate. The Smith-Wilson approach is used to derive the
published Solvency II yield curves, which supports consistency over
time.
Similarly to the approach to risk-free rates, an illiquidity
premium will be set by currency. The illiquidity premium will be
set by reviewing internal illiquidity benchmarks and, when
required, performing quantitative analysis to support qualitative
judgement.
Generally, the illiquidity premium is expected to be stable over
time and re-assessment of the assumption will be triggered by
significant changes in internal illiquidity benchmarks and/or
changes in the illiquidity of the liabilities (e.g. claims mix).
Quantitative analysis will be performed when the illiquidity
premium changes, including performing sensitivity analysis on the
assumption.
-- Methods used to measure the risk adjustment for non-financial risk
The risk adjustment for non-financial risk is the compensation
that is required for bearing the uncertainty about the amount and
timing of cash flows that arises from non-financial risk as the
insurance contract is fulfilled. Because the risk adjustment
represents compensation for uncertainty, estimates are made on the
degree of diversification benefits and expected favourable and
unfavourable outcomes in a way that reflects the Group's degree of
risk aversion. The Group estimates an adjustment for non-financial
risk separately from all other estimates.
Applying a confidence level technique (value at risk ('VaR')),
the Group estimates the probability distribution of the present
value of the future cash flows from insurance contracts at each
reporting date and calculates the risk adjustment for non-financial
risk as the excess of the value at risk at the target confidence
level over the expected present value of the future cash flows.
The Group's risk adjustment is set in a range between the 85(th)
and 95(th) percentile, on a net of excess of loss reinsurance
basis.
To determine the risk adjustments for non-financial risk for
reinsurance contracts, the Group applies these techniques both
gross and net of excess of loss reinsurance and derives the amount
of risk being transferred to the reinsurer as the difference
between the two results.
The risk adjustment is calculated at the issuing entity level.
Diversification benefit is included across portfolios within the
entity, to reflect the diversification in contracts sold across
entities.
The risk adjustment is then allocated down to each portfolio of
contracts, using a spread VaR methodology to inform the allocation,
to ensure coherence of the gross and excess of loss reinsurance
results for risk adjustment across the portfolios within an entity.
Allocations of the risk adjustment to each underwriting year
(annual cohort) of contracts within a portfolio is performed
manually, based on a systematic approach using management
judgement. This typically involves allocating a higher proportion
of the risk adjustment to the more recent underwriting years that
are less developed and therefore more uncertain, compared to the
proportion of risk adjustment allocated to older, more developed
years.
Where a risk adjustment is required for the liability for
remaining coverage due to facts and circumstances indicating that
contracts are onerous, this is derived using the risk adjustment
for the earned portion of the reserves, adjusted for the unearned
claims reserves to reflect the difference in exposure/size of
reserves and difference in drivers of risk in the reserves.
The resulting amount of the calculated risk adjustment
corresponds to the confidence level at the 94(th) percentile (2022
-- 95(th) percentile). The methods used to determine the risk
adjustment for non-financial risk were not changed in 2022 or 2023.
The assumptions used to determine the risk adjustment were updated
during 2022 to reflect the Group's current view of uncertainty in
the reserves; there have been no material changes in those
assumptions since year end 2022.
4. Operating segments (unaudited)
The Group has four reportable segments; UK Insurance,
International Insurance, Admiral Money, and Other. The result of
the discontinued operations is also shown for completeness. These
reportable segments are consistent with those set out on page 238
of the Group's 2022 Annual Report.
Segment income, results and other information
An analysis of the Group's revenue and results for the period
ended 30 June 2023, by reportable segment, is shown below. The
accounting policies of the reportable segments are consistent with
those presented in the notes to the 2022 Group financial
statements, other than as a result of the adoption of IFRS 17 as
outlined in notes 2, 3 and 5 of these financial statements.
Six months ended 30 June 2023 (unaudited)
Admiral
UK Insurance Int. Insurance Money Other Eliminations(*3) Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------ -------------- ------- ------ ---------------- -------
Turnover(*1) 1,708.3 464.3 43.6 21.3 2,237.5
Insurance revenue net of
XoL 1,144.8 396.8 -- 19.7 -- 1,561.3
Insurance services expenses (271.7) (125.7) -- (14.2) -- (411.6)
Insurance claims net of
XoL (701.1) (269.7) -- (19.9) -- (990.7)
Quota share reinsurance
result 19.4 (13.2) -- (0.1) -- 6.1
Net movement in onerous
loss component 0.6 0.8 -- -- -- 1.4
Underwriting result 192.0 (11.0) -- (14.5) -- 166.5
Net investment income (*2) 25.5 1.9 0.3 0.1 (1.6) 26.2
Net interest income from
financial services -- -- 31.0 -- 0.7 31.7
Net other revenue and operating
expenses 86.4 1.5 (28.6) (3.4) -- 55.9
Segment profit/(loss) before
tax(*4) 303.9 (7.6) 2.7 (17.8) (0.9) 280.3
Other central revenue and expenses, including share scheme charges(*4) (42.4)
Investment and interest income 2.3
Finance costs (6.3)
Consolidated profit before tax 233.9
Taxation expense (60.0)
Consolidated profit after tax 173.9
Revenue and results for the corresponding reportable segments
for the period ended 30 June 2022 are shown below.
Six months ended 30 June 2022 (restated,
unaudited)
Admiral
UK Insurance Int. Insurance Money Other Eliminations(*3) Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------ -------------- ------- ------ ---------------- -------
Turnover(*1) 1,409.9 393.7 25.7 18.0 (0.2) 1,847.1
Insurance revenue net of
XoL 1,016.5 350.7 -- 13.3 -- 1,380.5
Insurance services expenses (222.8) (124.1) -- (11.0) -- (357.9)
Insurance claims net of
XoL (596.1) (239.4) -- (7.7) -- (843.2)
Quota share reinsurance
result (1.0) (4.7) -- (2.0) -- (7.7)
Net movement in onerous
loss component (3.2) (0.9) -- -- -- (4.1)
Underwriting result 193.4 (18.4) -- (7.4) -- 167.6
Net investment income (*2) 7.4 (0.1) -- -- (0.8) 6.5
Net interest income from
financial services -- -- 19.9 -- 0.8 20.7
Net other revenue and operating
expenses 89.7 1.6 (19.7) (3.9) -- 67.7
Segment profit/(loss) before
tax(*4) 290.5 (16.9) 0.2 (11.3) -- 262.5
Other central revenue and expenses, including share scheme charges(*4) (40.2)
Investment and interest income 8.0
Finance costs (5.7)
Consolidated profit before tax 224.6
Taxation expense (42.9)
Consolidated profit after tax 181.7
Revenue and results for the corresponding reportable segments
for the year ended 31 December 2022 are shown below.
Year ended 31 December 2022 (restated,
unaudited)
Admiral
UK Insurance Int. Insurance Money Other Eliminations*(3) Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------ -------------- ------- ------ ---------------- ---------
Turnover(*1) 2,784.3 795.9 59.0 41.7 (0.3) 3,680.6
Insurance revenue net of
XoL 2,115.7 732.0 -- 31.3 -- 2,879.0
Insurance services expenses (475.7) (254.6) -- (24.8) -- (755.1)
Insurance claims net of
XoL (1,466.6) (547.1) -- (17.5) -- (2,031.2)
Quota share reinsurance
result 104.5 13.9 -- (1.0) -- 117.4
Net movement in onerous
loss component 5.1 (1.0) -- -- -- 4.1
Underwriting result 283.0 (56.8) -- (12.0) -- 214.2
Net investment income (*2) 18.6 1.1 -- 0.1 (2.2) 17.6
Net interest income from
financial services -- -- 44.6 -- 1.5 46.1
Net other revenue and operating
expenses 208.1 (0.5) (42.5) (5.6) -- 159.5
Segment profit/(loss) before
tax(*4) 509.7 (56.2) 2.1 (17.5) (0.7) 437.4
-------------------------------- ------------ -------------- ------- ------ ---------------- ---------
Other central revenue and expenses, including share
scheme charges(*4) (74.9)
Investment and interest income 10.1
Finance costs (11.4)
Consolidated profit before tax 361.2
Taxation expense (75.9)
Consolidated profit after tax 285.3
*1 Turnover is an Alternative Performance Measure presented
before intra-group eliminations. Refer to the glossary and note 13
for further information.
*2 Net Investment income is reported net of impairment of
financial assets, in line with management reporting.
*3 Eliminations are in respect of the intra-group trading
between the Group's comparison and UK and International insurance
entities and intra-group interest charges related to the UK
Insurance and Admiral Money segment.
*4 Segment results are presented net of gross share scheme
charges, and any quota share reinsurance recoveries; these net
share scheme charges are presented within "Other central revenue
and expenses, including share scheme charges" in line with internal
management reporting.
5. Insurance Service result (unaudited)
5a. Insurance and reinsurance contracts accounting treatment
5a (i) Insurance revenue
IFRS 17 does not require separate insurance revenue analysis for
insurance contracts measured under PAA. However, the Group has
disaggregated the insurance revenue recognised into its component
parts, described here.
Insurance premium revenue
Insurance premium revenue reflects the expected premium receipts
allocated to the period based on the passage of time, adjusted for
seasonality if required. It excludes any additional income that
arises from the writing of the insurance contract that is presented
as part of insurance revenue as set out below.
-- Instalment income
In contrast to IFRS 4, instalment income related to the risk
attaching part of the premium that is retained within the Group is
recognised as part of the insurance revenue cash flows due to it
being considered non-distinct from the underlying insurance policy,
as set out in note 3 to the financial statements.
-- Administration Fees
Administration fees are costs charged to the customer for
arranging a change to their policy. The performance obligation is
the change in a customer's policy and given that the obligation
related to activities that are required to fulfil the insurance
contract and the policyholder cannot benefit from the service by
itself, it is considered as part of fulfilment cash flows, i.e.,
the full transaction price is therefore recognised as part of
insurance revenue on a point in time basis.
As stated in note 3, the Group has excluded any administration
fees derived from the proportion of insurance coverage under the
co-insurance arrangements where the Group bears no risks.
5a (ii) Insurance service expenses
The following elements are included in insurance service
expenses:
-- incurred claims and benefits excluding investment components;
-- other incurred directly attributable insurance service expenses,
including administration and acquisition expenses, and share scheme
expenses that are attributable to insurance services;
-- changes that relate to past service (i.e. changes in the fulfilment
cashflows relating to the Liability for Remaining Coverage); and
-- changes that relate to future service (i.e. losses/reversals on onerous
groups of contracts from changes in the loss components).
Only items that reflect insurance service expenses (i.e.
incurred claims and other insurance service expenses arising from
insurance contracts the Group issues) are reported as insurance
expenses. Cash flows that are not directly attributable to a
portfolio of insurance contracts, such as some product development
and training costs, are recognised in other operating expenses as
incurred.
The gross costs incurred in relation to the co-insurance share
of insurance business are presented within other operating
expenses, as is the reimbursement of these costs, given that they
are not related to the costs directly attributable to fulfilling
the Group's insurance contracts.
5a (iii) Reinsurance net expense/income
The Group has presented the income or expenses from a group of
reinsurance contracts held separately from insurance finance income
or expenses as a single amount and has provided in the disclosure
note a separate analysis of the amounts recovered from the
reinsurer and an allocation of the premiums paid that together give
a net amount equal to that single amount.
As part of its quota share arrangements, the Group typically
recovers either a set ceding commission, or the quota share
reinsurer's proportional share of the expenses that are incurred in
fulfilling the insurance contracts.
There amounts are typically settled net with the premium charged
and are not contingent on claims. As a result, under IFRS 17 the
expenses and ceding commissions recovered are considered to reflect
a reduction in the transaction price equivalent to charging a lower
premium (with no corresponding ceding commission or expense
recovery).
In addition, as set out in note 3 to these financial statements,
where the reinsurance arrangements result in a "minimum recovery"
from the reinsurer due to profit commission or sliding scale
commission arrangements that is not contingent on claims, and is
not settled "net" with premium, the minimum recovery is treated as
a non-distinct investment component.
As a result, the Group treats reinsurance cash flows that are
contingent on claims on the underlying contracts as part of the
claims that are expected to be reimbursed under the reinsurance
contract held, and excludes investment components and commissions
from an allocation of reinsurance premiums presented in the notes
to the financial statements.
5a (iv) Insurance finance income and expense
Insurance finance income or expenses comprise the change in the
carrying amount of the group of insurance contracts arising
from:
1. the effect of the time value of money and changes in the time value of
money; and
2. the effect of financial risk and changes in financial risk.
The Group disaggregates insurance finance income or expenses on
insurance contracts issued between the Consolidated Income
Statement and the Consolidated Statement of Other Comprehensive
Income. The impact of changes in market interest rates on the value
of the insurance assets and liabilities are reflected in Other
Comprehensive Income in order to minimise accounting mismatches
between the accounting for financial assets and insurance assets
and liabilities. The Group's financial assets backing the insurance
portfolios are predominantly measured Fair Value through Other
Comprehensive Income ('FVOCI').
5a (v) Insurance contracts: Liability for remaining coverage
Initial measurement
For a group of contracts that is not onerous at initial
recognition, the Group measures the liability for remaining
coverage as:
-- The premiums, if any, received at initial recognition; and
-- Any other asset or liability previously recognised for cash flows related
to the group of contracts that the Group pays or receives before the
group of insurance contracts is recognised.
The Group recognises any insurance premium tax collected in
relation to the premiums received as part of the premium receipts,
but given it is acting as an agent, these taxes are not included as
either insurance revenue or an insurance expense. Any outstanding
insurance premium tax liability is presented within the liability
for remaining coverage until paid.
There is no allowance for time value of money as the premiums
are received within one year of the coverage period.
Where facts and circumstances indicate that contracts are
onerous at initial recognition, the onerous contracts are
separately grouped from other contracts and a loss is recognised in
the Consolidated Income Statement for the net outflow, resulting in
the carrying amount of the liability for the group being equal to
the fulfilment cash flows. A loss component is established by the
Group for the liability for remaining coverage for such onerous
group depicting the losses recognised.
Subsequent measurement
The Group measures the carrying amount of the liability for
remaining coverage at the end of each reporting period as
-- the liability for remaining coverage at the beginning of the period; plus
-- Premiums received in the period; minus
-- The amount recognised as insurance revenue for the services provided in
the period; minus
-- Payments to the tax authorities in respect of premium receipts
The onerous loss component is re-measured over the coverage
period so that at the end of the coverage period, it is reduced to
GBPNil.
5a (vi) Insurance contracts: Liability for incurred claims
The Group estimates the liability for incurred claims as the
fulfilment cash flows related to incurred claims, including any
creditors related to directly attributable insurance expenses. The
liability for incurred claims also includes an explicit adjustment
for non-financial risk (the risk adjustment).
5a (vii) Reinsurance contracts held
Initial measurement
The Group measures its reinsurance assets for a group of
reinsurance contracts that it holds on the same basis as insurance
contracts that it issues. However, they are adapted to reflect the
features of reinsurance contracts held that differ from insurance
contracts issued.
Where the Group recognises a loss on initial recognition of an
onerous group of underlying insurance contracts or when further
onerous underlying insurance contracts are added to a group, the
Group establishes a loss-recovery component of the asset for
remaining coverage for a group of reinsurance contracts held
depicting the recovery of losses. The Group calculates the
loss-recovery component by multiplying the loss recognised on the
underlying insurance contracts and the percentage of claims on the
underlying insurance contracts the Group expects to recover from
the group of reinsurance contracts held. The Group uses a
systematic and rational method to determine the portion of losses
recognised on the group of insurance contracts covered by the
reinsurance contracts held, in the case that there is partial
coverage of underlying insurance contracts by reinsurance
contracts. The loss-recovery component adjusts the carrying amount
of the asset for remaining coverage.
The risk adjustment for non-financial risk is the amount of risk
being transferred by the Group to the reinsurer and is calculated
with reference to the gross risk adjustment, adjusted for any
excess of loss risk adjustment, as required.
Subsequent measurement
The subsequent measurement of reinsurance contracts held follows
the same principles as those for insurance contracts issued and has
been adapted to reflect the specific features and terms and
conditions of the reinsurance contracts held.
Where the Group has established a loss-recovery component, the
Group subsequently reduces the loss recovery component to zero in
line with reductions in the onerous group of underlying insurance
contracts in order to reflect that the loss-recovery component
shall not exceed the portion of the carrying amount of the loss
component of the onerous group of underlying insurance contracts
that the entity expects to recover from the group of reinsurance
contracts held.
The extinguishment or commutation of a reinsurance arrangement
results in a derecognition of any insurance assets or liabilities
related to the commuted contract from the balance sheet, so that
the Group retains the full future risk of claims development. As a
result of commutation, any difference arising between the present
carrying value of reinsurance assets or liabilities and the cash
settlement is recognised in the Consolidated Income Statement.
5b. Insurance revenue
Insurance revenue for the corresponding reportable segments for
the period ended 30 June 2023 are shown below.
30 June 2023 (unaudited)
UK UK
Motor Home Int. Motor Other Total Group
GBPm GBPm GBPm GBPm GBPm
Insurance premium revenue 961.2 130.7 377.1 46.5 1,515.5
Other revenue classed as insurance
revenue
Instalment income 40.4 4.0 3.3 -- 47.7
Administration fees and non-separable
ancillary commission 18.4 1.5 23.3 0.6 43.8
Total other revenue classed as
insurance revenue 58.8 5.5 26.6 0.6 91.5
Insurance revenue related movement
in liability for remaining coverage 1,020.0 136.2 403.7 47.1 1,607.0
Insurance revenue for the corresponding reportable segments for
the period ended 30 June 2022 are shown below.
30 June 2022 (restated, unaudited)
UK UK
Motor Home Int. Motor Other Total Group
GBPm GBPm GBPm GBPm GBPm
Insurance premium revenue 865.5 107.7 329.1 25.3 1,327.6
Other revenue classed as insurance
revenue
Instalment income 36.4 2.5 3.9 -- 42.8
Administration fees and non-separable
ancillary commission 19.5 1.3 22.4 0.2 43.4
Total other revenue classed
as insurance revenue 55.9 3.8 26.3 0.2 86.2
Insurance revenue related
movement in liability for
remaining coverage 921.4 111.5 355.4 25.5 1,413.8
Insurance revenue for the corresponding reportable segments for
the period ended 31 December 2022 are shown below.
31 December 2022 (restated, unaudited)
UK UK
Motor Home Int. Motor Other Total Group
GBPm GBPm GBPm GBPm GBPm
Insurance premium revenue 1,795.7 228.5 694.6 63.3 2,782.1
Other revenue classed as insurance
revenue
Instalment income 75.3 5.4 7.6 -- 88.3
Administration fees and non-separable
ancillary commission 38.7 2.9 44.4 0.5 86.5
Total other revenue classed
as insurance revenue 114.0 8.3 52.0 0.5 174.8
Insurance revenue related
movement in liability for
remaining coverage 1,909.7 236.8 746.6 63.8 2,956.9
The Group's share of its insurance business was underwritten by
Admiral Insurance (Gibraltar) Limited, Admiral Insurance Company
Limited, Admiral Europe Compañia Seguros ('AECS') and Elephant
Insurance Company. The vast majority of contracts are short term in
duration, lasting for between 6 and 12 months.
5c. Insurance service expenses
Insurance services expenses for the corresponding reportable
segments for the period ended 30 June 2023 are shown below.
30 June 2023 (unaudited)
UK Motor UK Home Int. Motor Other Total Group
GBPm GBPm GBPm GBPm GBPm
Incurred claims
Claims incurred in the
period 851.1 94.9 286.3 31.0 1,263.3
Changes to liabilities for
incurred claims (249.1) (3.9) (5.8) 3.0 (255.8)
Total incurred claims 602.0 91.0 280.5 34.0 1,007.5
Movement in onerous
contracts (3.4) -- (1.5) -- (4.9)
Directly attributable
expenses
Administration expenses 189.6 28.4 87.2 17.2 322.4
Acquisition expenses 30.9 10.3 35.3 12.8 89.3
Share scheme expenses 17.9 1.6 3.6 0.3 23.4
Total insurance expenses 238.4 40.3 126.1 30.3 435.1
Total Insurance service
expenses 837.0 131.3 405.1 64.3 1,437.7
Insurance services expenses for the corresponding reportable
segments for the period ended 30 June 2022 are shown below.
30 June 2022 (restated, unaudited)
UK Motor UK Home Int. Motor Other Total Group
GBPm GBPm GBPm GBPm GBPm
Incurred claims
Claims incurred in the
period 738.5 67.0 222.4 16.2 1,044.1
Changes to liabilities for
incurred claims (211.7) (9.2) 24.3 0.1 (196.5)
Total incurred claims 526.8 57.8 246.7 16.3 847.6
Movement in onerous
contracts 21.2 0.7 7.0 -- 28.9
Directly attributable
expenses
Administration expenses 149.1 23.1 82.9 10.8 265.9
Acquisition expenses 34.6 9.2 38.7 9.5 92.0
Share scheme expenses 19.8 2.3 4.9 -- 27.0
Total insurance expenses 203.5 34.6 126.5 20.3 384.9
Total Insurance service
expenses 751.5 93.1 380.2 36.6 1,261.4
Insurance services expenses for the corresponding reportable
segments for the period ended 31 December 2022 are shown below.
31 December 2022 (restated, unaudited)
UK Motor UK Home Int. Motor Other Total Group
GBPm GBPm GBPm GBPm GBPm
Incurred claims
Claims incurred in the
period 1,620.4 198.1 514.7 39.1 2,372.3
Changes to liabilities for
incurred claims (437.2) (16.5) 36.2 (3.0) (420.5)
Total incurred claims 1,183.2 181.6 550.9 36.1 1,951.8
Movement in onerous
contracts (19.1) 0.4 (3.9) -- (22.6)
Directly attributable
expenses
Administration expenses 327.7 51.5 178.6 23.0 580.8
Acquisition expenses 61.9 18.6 70.8 22.9 174.2
Share scheme expenses 39.4 4.2 9.4 -- 53.0
Total insurance expenses 429.0 74.3 258.8 45.9 808.0
Total Insurance service
expenses 1,593.1 256.3 805.8 82.0 2,737.2
5d. Net expenses from reinsurance contracts held
Net expenses from reinsurance contracts held for the
corresponding reportable segments for the period ended 30 June 2023
are shown below.
30 June 2023 (unaudited)
Total
UK Motor UK Home Int. Motor Other Group
GBPm GBPm GBPm GBPm GBPm
Allocation of reinsurance premiums 41.6 25.0 92.5 1.8 160.9
Amounts recoverable from reinsurers for
incurred insurance service expenses
Incurred claims (120.1) (20.3) (129.3) (0.3) (270.0)
Changes to liabilities for incurred claims 81.4 (4.1) 44.1 0.8 122.2
Net expense from reinsurance contracts excluding 2.3
movement in onerous loss component 2.9 0.6 7.3 13.1
Other reinsurance recoveries including movement
in onerous loss component 3.0 -- 0.7 -- 3.7
Net expenses from reinsurance contracts
held 5.9 0.6 8.0 2.3 16.8
Net expenses from reinsurance contracts held for the
corresponding reportable segments for the period ended 30 June 2022
are shown below.
30 June 2022 (restated, unaudited)
Total
UK Motor UK Home Int. Motor Other Group
GBPm GBPm GBPm GBPm GBPm
Allocation of reinsurance premiums 36.5 17.8 74.3 1.0 129.6
Amounts recoverable from reinsurers for
incurred insurance service expenses
Incurred claims (83.7) (1.9) (124.7) 1.7 (208.6)
Changes to liabilities for incurred claims 51.0 4.2 48.9 -- 104.1
Net expense from reinsurance contracts excluding 2.7
movement in onerous loss component 3.8 20.1 (1.5) 25.1
Other reinsurance recoveries including movement
in onerous loss component (18.0) (0.5) (6.2) -- (24.7)
Net (income)/expenses from reinsurance contracts
held (14.2) 19.6 (7.7) 2.7 0.4
Net expenses from reinsurance contracts held for the
corresponding reportable segments for the period ended 31 December
2022 are shown below.
31 December 2022 (restated,
unaudited)
Total
UK Motor UK Home Int. Motor Other Group
GBPm GBPm GBPm GBPm GBPm
Allocation of reinsurance premiums 69.8 44.4 160.8 1.9 276.9
Amounts recoverable from reinsurers for
incurred insurance service expenses
Incurred claims (182.8) (43.5) (232.3) (0.1) (458.7)
Changes to liabilities for incurred claims 136.7 0.8 64.2 -- 201.7
Net expense from reinsurance contracts excluding
movement in onerous loss component 23.7 1.7 (7.3) 1.8 19.9
Other reinsurance recoveries including movement
in onerous loss component 13.9 (0.3) 4.9 -- 18.5
Net expenses/(income) from reinsurance contracts
held 37.6 1.4 (2.4) 1.8 38.4
5e. Finance expenses/(income) from insurance/reinsurance
contracts issued
Unaudited Restated, unaudited
31 December
Amounts recognised through the income 30 June 2023 30 June 2022 2022
statement GBPm GBPm GBPm
Insurance finance expenses from insurance
contracts issued 47.4 21.1 52.0
Finance expenses from insurance contracts
issued 47.4 21.1 52.0
Insurance finance income from reinsurance
contracts held (18.3) (6.1) (13.6)
Finance income from reinsurance contracts
issued (18.3) (6.1) (13.6)
------------------------------------------------- ------------ ------------ -----------
Net finance expense from insurance / reinsurance
contracts issued 29.1 15.0 38.4
Amounts recognised in other comprehensive
income
Due to changes in discount rates -- insurance
contracts 20.4 181.1 274.0
Due to changes in discount rates -- reinsurance
contracts (4.0) (76.3) (96.2)
Total gains recognised in other comprehensive
income 16.4 104.8 177.8
5f. Sensitivity analysis
Sensitivity of recognised amounts to changes in assumptions
The following sensitivity analysis shows the impact on profit
after tax for reasonably possible movements in key assumptions with
all other assumptions held constant. The correlation of assumptions
will have a significant effect in determining the ultimate impacts,
but to demonstrate the impact due to changes in each assumption,
assumptions have been changed on an individual basis. It should be
noted that movements in these assumptions are non linear.
The sensitivities are shown for UK motor only, being the line of
business where such sensitivities could have a material impact at a
Group level.
GBPm 30 June 2023 (unaudited)
------------------------------------ ------------------------------
Ogden discount rate increase by 100
bps to +0.75% +64.5
Ogden discount rate increase by 50
bps to +0.25% +30.9
Ogden discount rate increase by 25
bps to 0.00% +15.2
------------------------------
Ogden discount rate decrease by 25
bps to -0.50% -16.6
Ogden discount rate decrease by 50
bps to -0.75% -39.1
Ogden discount rate decrease by 100
bps to -1.25% -96.7
------------------------------
Risk adjustment increase to 95(th)
percentile -25.8
Risk adjustment decrease to 90(th)
percentile +35.2
Risk adjustment decrease to 85(th)
percentile +61.0
------------------------------
UK Motor Claims --
impact of a change
in undiscounted loss
ratio by underwriting
year 2019 2020 2021 2022
Increase of 1% (11.4) (12.6) (5.7) (2.9)
Increase of 3% (34.3) (37.9) (14.2) (8.6)
Increase of 5% (57.2) (63.2) (22.8) (14.3)
Decrease of 1% 11.4 12.6 6.1 2.9
Decrease of 3% 34.1 37.9 18.3 8.6
Decrease of 5% 55.0 62.1 37.1 14.3
The table below shows the development of UK Car Insurance loss
ratios for the past six financial periods, presented on an
underwriting year basis, both using undiscounted amounts (i.e.
cashflows) and discounted amounts.
31 December 30 June
-------------------------------
UK Motor Insurance
loss ratio development---
undiscounted 2017* 2018* 2019* 2020* 2021 2022 2023
Underwriting year
2017 87% 83% 72% 68% 64% 63% 61%
2018 -- 92% 82% 77% 73% 68% 67%
2019 -- -- 97% 77% 73% 71% 68%
2020 -- -- -- 74% 68% 65% 62%
2021 -- -- -- -- 95% 91% 87%
2022 -- -- -- -- -- 104% 100%
2023 -- -- -- -- -- -- 92%
*Booked loss ratios presented for financial years prior to the
opening balance sheet date of 1 January 2022 are estimated based on
applying a similar pattern of risk adjustment to prior year
undiscounted best estimates. These are provided for guidance
only
31 December 30 June 2023
------------------------ ------------- ------------
UK Motor Insurance
loss ratio development
-- discounted* 2021 2022 2023
Underwriting year
2017 63% 61% 60%
2018 71% 67% 66%
2019 71% 69% 67%
2020 67% 63% 61%
2021 92% 86% 82%
2022 -- 97% 93%
2023 -- -- 85%
* Loss ratios using discounted locked-in curves are presented
from the transition date of IFRS 17 (1 January 2022) onwards
5g. Insurance liabilities and reinsurance assets
(i) Analysis of recognised amounts
Unaudited Restated, unaudited
30 June 31 December
2023 30 June 2022 2022
GBPm GBPm GBPm
Gross
Liability for incurred claims 3,126.9 3,036.0 3,173.7
Liability for remaining coverage 1,012.8 891.0 851.7
---------------------------------------
Total insurance contract liabilities 4,139.7 3,927.0 4,025.4
---------------------------------------
Recoverable from reinsurers
Asset for incurred claims 1,100.4 933.2 994.2
Asset for remaining coverage 13.0 32.1 21.2
---------------------------------------
Total reinsurance contract assets 1,113.4 965.3 1,015.4
---------------------------------------
1. Analysis of the liability/asset for incurred claims
Summary of liabilities for incurred claims
30 June 2023 (unaudited)
Estimates of the present
value of future cash Risk
flows adjustment Total
GBPm GBPm GBPm
UK Motor claims reserves 1,882.2 353.9 2,236.1
UK Household claims reserves 150.0 17.9 167.9
International claims reserves 489.2 74.9 564.1
Other claims reserves 41.5 8.2 49.7
Total claims reserves 2,562.9 454.9 3,017.8
Liabilities for other directly
attributable expenses 109.1
Liability for incurred claims 3,126.9
Summary of assets for incurred claims
30 June 2023 (unaudited)
Estimates of the present
value of future cash
flows Risk adjustment Total
GBPm GBPm GBPm
UK Motor claims reserves 296.1 170.2 466.3
UK Household claims
reserves 138.9 11.1 150.0
International claims
reserves 446.8 38.2 485.0
Other claims reserves (1.1) 0.2 (0.9)
Asset for incurred claims 880.7 219.7 1,100.4
The Company has estimated the risk adjustment using a confidence
level (probability of sufficiency) approach at the 94(th)
percentile (FY 2022 and HY 2022: 95(th) percentile). That is, the
Company has assessed its indifference to uncertainty for all
product lines (as an indication of the compensation that it
requires for bearing non-financial risk) as being equivalent to the
94(th) percentile confidence level less the mean of an estimated
probability distribution of the future cash flows.
30 June 2022 (restated, unaudited)
Estimates of the present
value of future cash Risk
flows adjustment Total
Liability for incurred claims GBPm GBPm GBPm
UK Motor claims reserves 1,835.6 480.4 2,316.0
UK Household claims reserves 74.4 13.2 87.6
International claims reserves 455.0 47.9 502.9
Other claims reserves 20.3 6.6 26.9
Total claims reserves 2,385.3 548.1 2,933.4
Liabilities for other directly
attributable expenses 102.6
Liability for incurred claims 3,036.0
30 June 2022 (restated, unaudited)
Estimates of the present
value of future cash
flows Risk adjustment Total
Asset for incurred claims GBPm GBPm GBPm
UK Motor claims reserves 236.4 200.7 437.1
UK Household claims reserves 85.6 (2.0) 83.6
International claims
reserves 393.0 19.5 412.5
Other claims reserves -- -- --
Asset for incurred claims 715.0 218.2 933.2
31 December 2022 (restated, unaudited)
Estimates of the present
value of future cash Risk
flows adjustment Total
Liability for incurred claims GBPm GBPm GBPm
UK Motor claims reserves 1,896.7 423.9 2,320.6
UK Household claims reserves 130.9 24.0 154.9
International claims reserves 490.2 76.0 566.2
Other claims reserves 24.7 7.8 32.5
Total claims reserves 2,542.5 531.7 3,074.2
Liabilities for other directly
attributable expenses 99.5
Liability for incurred claims 3,173.7
31 December 2022 (restated, unaudited)
Estimates of the present
value of future cash
flows Risk adjustment Total
Asset for incurred claims GBPm GBPm GBPm
UK Motor claims reserves 254.5 175.9 430.4
UK Household claims reserves 98.6 16.1 114.7
International claims
reserves 411.8 37.3 449.1
Other claims reserves -- -- --
Asset for incurred claims 764.9 229.3 994.2
The following rates were used to discount the liability for
incurred claims:
30 June 2022 (restated, 31 December 2022 (restated,
30 June 2023 (unaudited) unaudited) unaudited)
1 3 5 1 3 5 1 3 5
year years years 10 years year years years 10 years year years years 10 years
UK motor
insurance 6.7% 6.3% 5.7% 4.9% 3.1% 3.3% 3.2% 3.2% 5.1% 5.0% 4.7% 4.4%
The maturity profile for the liability for incurred claims for
UK motor is as follows:
Liability for incurred claims <1 1-2
(undiscounted) year years 2-3 years 3-4 years 4-5 years >5 years
GBPm GBPm GBPm GBPm GBPm GBPm
As at 30 June 2023 (unaudited) 632.3 362.3 276.1 223.7 171.5 710.8
As at 30 June 2022 (restated,
unaudited) 506.2 321.8 274.9 209.4 155.1 647.5
As at 31 December 2022 (restated,
unaudited) 609.5 353.8 289.4 223.1 161.5 679.4
(iii) Analysis of the liability for incurred claims (gross)
Estimate of undiscounted gross cumulative claims (UK Motor
Insurance)
Restated, unaudited
2012
& prior 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Total
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
At 31 December
2022 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At end of year
one 307 382 394 436 552 686 701 552 688 845
At end of year
two 569 675 701 829 1,144 1,175 1,067 985 1,326
At end of year
three 565 659 707 788 994 1,109 1,010 954
At end of year
four 575 689 680 727 947 1,064 996
At end of year
five 600 643 636 713 912 1,008
At end of year
six 578 635 619 690 890
At end of year
seven 562 619 606 656
At end of year
either 555 604 594
At end of year
nine 536 593
Nine years later 535
---------------------------------
Total undiscounted
incurred claims
YE 2022 535 593 594 656 890 1,008 996 954 1,326 845
Cumulative gross
claims paid (515) (576) (564) (608) (768) (825) (725) (605) (721) (304)
---------------------------------
Gross undiscounted
best estimate liabilities 131 20 17 30 48 122 183 271 349 605 541 2,317
Risk adjustment
(undiscounted) 3 2 2 5 11 34 51 71 97 126 110 512
Effect of discounting (60) (3) (3) (8) (13) (31) (46) (64) (77) (124) (85) (514)
---------------------------------
Gross discounted
best estimate liabilities
for incurred claims* 74 19 16 27 46 125 188 278 369 607 566 2,315
Ancillary claims 6
---------------------------------
Total liabilities
for incurred claims 2,321
---------------------------------
Discounting
within finance
reserve* 3 - (1) (2) (5) (12) (20) (39) (51) (58) (21) (206)
----------------------
(iv) Analysis of claims incurred (net)
Analysis of the liability incurred claims (net of excess of
loss)
Estimate of undiscounted gross cumulative claims (UK Motor
Insurance)
Restated, unaudited
2012
& prior 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Total
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
At 31 December 2022 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At end of year one 302 373 378 427 510 646 675 520 661 825
At end of year two 560 659 682 783 1,053 1,123 1,033 949 1,292
At end of year three 556 644 667 743 917 1,053 986 927
At end of year four 563 659 637 692 883 1,024 969
At end of year five 584 623 607 677 860 974
At end of year six 560 619 599 663 840
At end of year seven 552 606 586 640
At end of year either 546 597 579
At end of year nine 529 589
Nine years later 529
-------------------------------
Total undiscounted
incurred claims
YE 2022 529 589 579 640 840 974 969 927 1,292 825
Cumulative gross
claims paid (511) (574) (557) (608) (755) (825) (725) (605) (721) (305)
-------------------------------
Gross undiscounted
best estimate liabilities 95 18 15 22 32 85 149 244 322 571 520 2,073
Risk adjustment
(undiscounted) 2 1 1 1 4 19 35 63 87 113 100 426
Effect of discounting (46) (2) (2) (6) (7) (17) (27) (51) (64) (105) (72) (399)
-------------------------------
Gross discounted
best estimate liabilities
for incurred claims 51 17 14 17 29 87 157 256 345 579 548 2,100
Ancillary claims 6
-------------------------------
Total liabilities
for incurred claims 2,106
-------------------------------
Discounting within
finance reserve* 2 - (1) (2) (2) (7) (13) (32) (43) (51) (20) (169)
-------------------------------
(v) Analysis of claims incurred (net)
Analysis of the asset for incurred claims (quota share))
Estimate of undiscounted quota share cumulative claims (UK Motor
Insurance)
Restated, unaudited
2017 2018 2019 2020 2021 2022 Total
---- ---- ---- ---- ---- -----
At 31 December 2022 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At end of year one 17 21 49 -- 4 63
At end of year two 36 37 -- -- 33
At end of year three 31 35 -- --
At end of year four 30 34 --
At end of year five 29 33
At end of year six 29
Total undiscounted
incurred claims YE
2022 29 33 -- -- 33 63
Cumulative gross claims
recovered (25) (28) -- -- -- --
-----------------------------------
Gross undiscounted
best estimate liabilities 4 5 -- -- 33 63 105
Risk adjustment (undiscounted) 1 1 -- -- 73 78 153
Profit commission 9 6 -- -- - - 15
Effect of discounting (1) (1) -- -- (22) (34) (58)
-----------------------------------
Gross discounted quota
share asset for incurred
claims 13 11 -- -- 84 107 215
-----------------------------------
Discounting within
finance reserve -- 4 -- -- 8 11 23
-----------------------------------
6. Investment income and finance costs (unaudited)
6a. Investment return
Unaudited Restated, unaudited
30 June 30 June 31 December
2023 2022 2022
GBPm GBPm GBPm
Investment return
On assets classified as FVTPL 20.7 (2.6) 8.4
On debt securities classified as FVOCI(*2) 34.1 29.2 52.6
On assets classified as amortised
cost 2.1 0.9 2.0
Net unrealised losses
Unrealised gains/(losses) on forward
contracts (0.2) 0.4 0.5
Share of associate profit/loss (0.2) -- (0.1)
Interest receivable on cash and cash
equivalents 1.5 0.3 1.2
Total investment and interest income(*1) 58.0 28.2 64.6
*1 Total investment return excludes GBP1.6million of intra-group
interest (30 June 2022: GBP0.8million, 31 December 2022: GBP2.2
million)
*2 Realised gains/losses on sales of debt securities classified
as FVOCI are immaterial
6b. Financial assets and liabilities
The Group's financial instruments can be analysed as
follows:
Unaudited Restated, unaudited
30 June 31 December
30 June 2023 2022 2022
GBPm GBPm GBPm
Financial investments measured
at FVTPL
Money market funds 464.7 663.9 706.5
Other funds 195.1 183.0 188.8
Derivative financial instruments 43.6 15.3 33.0
Equity investments (designated
FVTPL) 9.7 4.0 6.4
Investment in Associate 2.2 -- 2.4
715.3 866.2 937.1
Financial investments classified
as FVOCI
Corporate debt securities 1,866.9 1,857.4 1,701.2
Government debt securities 646.2 460.3 479.8
Private debt securities 224.5 119.6 166.6
2,737.6 2,437.3 2,347.6
Equity investments (designated
FVOCI) 24.7 24.3 25.1
2,762.3 2,461.6 2,372.7
Financial assets measured at amortised
cost
Deposits with credit institutions 105.8 65.9 101.4
Total financial investments 3,583.4 3,393.7 3,411.2
Other financial assets
Insurance receivables(*1) 225.0 197.0 187.6
Trade and other receivables (measured
at amortised cost) (*1) 92.4 94.1 87.6
Insurance and other receivables 317.4 291.1 275.2
Loans and advances to customers
(note 7) 961.1 733.1 823.9
Cash and cash equivalents 462.7 506.6 297.0
Total financial assets 5,324.6 4,924.5 4,807.3
--------------------------------------- ------------ -------- -----------
Financial liabilities
Subordinated notes(*2) 204.4 204.4 204.4
Loan backed securities 857.7 638.2 714.7
Other borrowings 125.0 35.0 20.0
Derivative financial instruments 0.2 9.8 --
Subordinated and other financial
liabilities 1,187.3 887.4 939.1
Trade and other payables 480.3 246.1 254.9
Lease liabilities 83.2 93.0 88.5
Total financial liabilities 1,750.8 1,226.5 1,282.5
(*1) The amortised cost carrying amount of receivables is a
reasonable approximation of fair value.
(*2) The fair value of subordinated notes (level one valuation)
at 30 June 2023 is GBP196.9 million (30 June 2022: GBP201.1
million, 31 December 2022: GBP196.4 million).
The table below shows how the financial assets held at fair
value have been measured using the fair value hierarchy:
30 June 2023 31 December
(unaudited) 30 June 2022 2022
FVTPL FVOCI FVTPL FVOCI FVTPL FVOCI
GBPm GBPm GBPm GBPm GBPm GBPm
Level one (quoted prices in
active markets) 659.7 2,513.1 862.2 2,317.7 900.2 2,180.9
Level two (use of observable
inputs) 43.6 -- -- -- 28.1 --
Level three (use of significant
unobservable inputs) 9.8 249.2 4.0 143.9 6.4 191.8
Total(*1) 713.1 2,762.3 866.2 2,461.6 934.7 2,372.7
-------------------------------- ----- ----------- ----- ------- ----- -------
*1 There were no transfers between fair value hierarchy levels
in the reporting period
The majority of investments held at fair value through profit
and loss at the end of the period are invested in funds; mainly
money market funds. The measurement of investments at the end of
the period, for the majority investments held at fair value, is
based on active quoted market values (level one).
Level three investments consist of private debt securities and
equity investments. Private debt securities are comprised primarily
of investments in debt funds which are valued at the proportion of
the Group's holding of the Net Asset Value (NAV) reported by the
investment vehicle. In addition, there is a small allocation of
privately placed bonds which do not trade on active markets, these
are valued using discounted cash-flow models designed to
appropriately reflect the credit and illiquidity of these
instruments. The key unobservable input across private debt
securities is the discount rate which is based on the credit
performance of the assets.
Equity securities are comprised of investments in private equity
and Infrastructure equity funds, which are valued at the proportion
of the Group's holding of the NAV reported by the investment
vehicle. These are based on several unobservable inputs including
market multiples and cash flow forecasts.
There were no significant inter-relationships between
unobservable inputs that materially affect fair values.
The table below presents the movement in the period relating to
financial instruments valued using a level three valuation:
Unaudited
--------------------------------
30 June 2023 30 June 2022 31 December 2022
Level Three Investments GBPm GBPm GBPm
--------------------------------
Balance as at 1 January 198.2 147.0 147.0
Gains recognised in the Income
Statement 1.2 2.2 5.7
(Losses)/gains recognised in
Other Comprehensive Income (0.1) (1.9) (8.5)
Purchases 67.4 14.1 83.8
Disposals (7.6) (14.8) (30.1)
Translation differences (0.1) 1.3 0.3
Balance as at 30 June/ 31
December 259.0 147.9 198.2
7. Loans and Advances to Customers (unaudited)
Unaudited
--------------------------------------------------
30 June 2023 30 June 2022 31 December 2022
GBPm GBPm GBPm
--------------------------------------------------
Loans and advances to customers -- gross carrying
amount 1,033.9 786.6 887.6
Loans and advances to customers -- provision (74.6) (53.5) (63.7)
Total loans and advances to customers -- Admiral
Money 959.3 733.1 823.9
Total loans and advances to customers -- Other 1.8 -- --
Total loans and advances to customers 961.1 733.1 823.9
Loans and advances to customers are comprised of the
following:
Unaudited
30 June 2023 30 June 2022 31 December 2022
GBPm GBPm GBPm
Unsecured personal loans 1,008.3 750.3 856.0
Finance leases 25.6 36.3 31.6
Other 1.9 -- --
-------------------------------- ------------ ------------ ----------------
Total loans and advances to
customers, gross 1,035.8 786.6 887.6
The table below shows the gross carrying value of loans in
stages 1 -- 3.
Unaudited
31
December
30 June 2023 30 June 2022 2022
Carrying
Gross carrying amount Expected credit loss allowance Other loss allowance*1 Carrying amount Carrying amount amount
GBPm GBPm GBPm GBPm GBPm GBPm
Stage 1 845.8 (15.7) (0.6) 829.5 640.7 714.4
Stage 2 143.9 (25.7) -- 118.2 86.7 101.7
Stage 3 44.2 (32.6) -- 11.6 5.7 7.8
Total --
Admiral
Money 1,033.9 (74.0) (0.6) 959.3 733. 1 823.9
Total --
Other 1.8 -- --
Total
loans and
advances
to
customers 961.1 733.1 823.9
*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 and those as a result of changes in the
performance of the EIR asset.
Forward-looking information (unaudited)
Forecasts of macroeconomic variables and associated probability
weightings of several scenarios are procured from an independent
external provider. These scenarios represent a range of outcomes,
with both potential upside and downside included to provide a
blended view that represents managements best estimate of the
expected outcome.
The sole economic driver of the losses from the scenarios is the
likelihood of a customer entering hardship through unemployment.
The scenario weighting assumptions and unemployment rates used are
detailed below:
Scenario Scenario Scenario
Probability Probability Probability Peak Unemployment
Weighting Weighting Weighting Peak Unemployment Peak Unemployment rate %
30 June 30 June 31 December rate % rate % 31 December
2023 2022 2022 30 June 2023 30 June 2022 2022
Base 40% 40% 40% 4.7 4.1 4.8
Upturn 10% 10% 10% 3.7 3.5 3.5
Downturn 40% 40% 40% 6.0 6.1 6.0
Severe 10% 10% 10% 8.0 8.2 7.9
---------
Sensitivities to key areas of estimation uncertainty
(unaudited)
30
June Sensitivity 30 June Sensitivity 31 December Sensitivity
2023 (GBPm) 2022 (GBPm) 2022 (GBPm)
---------
Base 40% (1.8) 40% (3.6) 40% (1.3)
Upturn 10% (6.6) 10% (6.7) 10% (6.9)
Downturn 40% 1.5 40% 2.6 40% 1.4
Severe 10% 7.1 10% 9.1 10% 5.7
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.
Post Model Adjustments (PMAs)
Post Model 30 June 2023 30 June 2022 31 December 2022
Adjustments (GBPm) (GBPm) (GBPm)
Model Performance 4.1 2.0 3.9
Inflation 4.5 9.4 4.0
Economic Scenarios -- 0.8 0.9
Mortgage contagion 4.0 -- 2.5
12.6 12.2 11.3
Model performance
The model has been calibrated on historical data that may not
fully reflect the risk of losses in the recent and ongoing highly
volatile macro-economic period. For this reason a Model Performance
PMA has been made. It effectively recalibrates the modelled
probability of default of the loans to reflect recent monitored
performance.
Inflation
This PMA has been updated to reflect the wider cost of living
crisis. The impairment models operated are currently not highly
sensitive to inflation expectations, but inflation could alter the
ability of some customers to make their loan payments. A PMA has
been held to acknowledge this.
Economic scenarios
An uncertainty factor determined by management judgement was
previously added to reflect the volatility in unemployment
forecasts observed during and after the COVID pandemic. This factor
has been reduced over time as variability between successive
forecasts has fallen, and has now been unwound entirely.
Mortgage contagion
Captures the risk that as mortgage rates rise, customers may
experience payment shocks when their standard variable or fixed
term mortgages come to an end, and may have to prioritise mortgage
payments over other debts.
Credit grade information
Credit grade is the internal credit banding given to a customer
at origination and is based on external credit rating information.
The credit grading as at 30 June 2023 is as follows:
30 June 30 June 31 December
2023 2022 2022
Stage 1 Stage 2 Stage 3
12- month ECL Lifetime ECL Lifetime ECL Total Total Total
GBPm GBPm GBPm GBPm GBPm GBPm
Credit Grade
Higher 604.2 107.6 -- 711.8 537.8 600.4
Medium 192.7 27.9 -- 220.6 179.0 200.0
Lower 48.9 8.4 -- 57.3 42.8 53.2
Credit
Impaired -- -- 44.2 44.2 27.0 34.0
Gross
carrying
amount --
Admiral
Money 845.8 143.9 44.2 1,033.9 786.6 887.6
Gross
carrying
amount --
Other 1.9 -- --
Gross
carrying
amount 1,035.8 786.6 887.6
8. Other revenue and co-insurer profit commission (unaudited)
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 GBP108.6 million (H1 2022:
GBP118.4 million, FY 2022: GBP256.4 million) represents total other
revenue and co-insurer profit commission and is disaggregated into
the segments included in note 4.
30 June 2023 (unaudited)
International Admiral
UK Insurance Insurance Money Other Total
GBPm GBPm GBPm GBPm GBPm
----------------------------------- ------------ ------------- ------- ----- -----
Major products/service line
Fee and commission revenue 51.3 -- 0.1 -- 51.4
Revenue from law firm 10.8 -- -- -- 10.8
Comparison income -- -- -- 1.6 1.6
Total other revenue 62.1 -- 0.1 1.6 63.8
Profit commission from co-insurers 44.8 -- -- -- 44.8
Total other revenue and co-insurer
profit commission 106.9 -- 0.1 1.6 108.6
Timing of revenue recognition
Point in time 86.4 -- 0.1 1.6 88.1
Over time 11.7 -- -- -- 11.7
Revenue outside the scope
of IFRS 15 8.8 -- -- -- 8.8
106.9 -- 0.1 1.6 108.6
30 June 2022 (restated, unaudited)
International
UK Insurance Insurance Admiral Loans Other Total
GBPm GBPm GBPm GBPm GBPm
----------------------------------- ------------ ------------- ------------- ----- -----
Major products/service line
Fee and commission revenue 52.3 -- 0.1 0.2 52.6
Law firm revenue 8.0 -- -- -- 8.0
Comparison income -- -- -- 4.0 4.0
Total other revenue 60.3 -- 0.1 4.2 64.6
Profit commission from co-insurers 53.8 -- - - 53.8
Total other revenue and co-insurer
profit commission 114.1 -- 0.1 4.2 118.4
Timing of revenue recognition
Point in time 92.9 -- 0.1 4.2 97.2
Over time 9.1 -- -- -- 9.1
Revenue outside the scope
of IFRS 15 12.1 -- -- -- 12.1
114.1 -- 0.1 4.2 118.4
31 December 2022 (restated, unaudited)
International
UK Insurance Insurance Admiral Loans Other Total
GBPm GBPm GBPm GBPm GBPm
----------------------- ------------ ------------- ------------- ----- -----
Major products/service
line
Fee and commission
revenue 104.3 -- 0.3 0.2 104.8
Law firm revenue 15.8 -- -- -- 15.8
Comparison income -- -- -- 8.3 8.3
Total other revenue 120.1 -- 0.3 8.5 128.9
Profit commission
from co-insurers 127.5 -- -- -- 127.5
Total other revenue
and co-insurer profit
commission 247.6 -- 0.3 8.5 256.4
Timing of revenue
recognition
Point in time 209.0 -- 0.3 8.5 217.8
Over time 17.8 -- -- -- 17.8
Revenue outside the
scope of IFRS 15 20.8 -- -- -- 20.8
247.6 -- 0.3 8.5 256.4
Profit commission analysis
Unaudited Restated, unaudited
--------------- -----------------------
30 June 31 December
30 June 2023 2022 2022
GBPm GBPm GBPm
Underwriting year
2017 & prior 14.1 23.0 53.3
2018 6.1 13.9 32.7
2019 13.2 7.3 19.9
2020 13.2 9.6 24.5
2021 -- -- --
2022 -- -- (2.9)
2023 (1.8) -- --
Total UK motor profit commission 44.8 53.8 127.5
--------------------------------- --------------- --------- ------------
During the period, there has been a change in accounting
estimate in relation to the calculation of profit commission from
co-insurers within the scope of IFRS 15. The underwriting year loss
ratio inputs to the calculation were previously based on IFRS 4
financial statement loss ratios in line with the Group's insurance
accounting. The transition from IFRS 4 to IFRS 17 has resulted in a
change to the underwriting year loss ratio inputs to the
calculation, such that the new basis of estimation results in
movements in profit commission from co-insurers that are aligned to
the development of IFRS 17 loss ratios, including risk adjustment.
The impact of the change in estimation basis in the period and in
the future is not expected to have a material impact on the Group's
financial statements.
9. Directly attributable and other expenses (unaudited)
30 June 2023 (unaudited)
Directly attributable expenses Other operating expenses Total expenses
GBPm GBPm GBPm
Administration and
acquisition
expenses 411.6 52.2 463.8
Expenses relating to
additional products
and fees -- 20.8 20.8
Share scheme
expenses 23.3 13.0 36.3
Loan expenses
(excluding movement
on ECL provision) -- 12.2 12.2
Movement in expected
credit loss
provision -- 17.1 17.1
Other -- 22.0 22.0
Total expenses 434.9 137.3 572.2
30 June 2022 (restated, unaudited)
Directly attributable expenses Other operating expenses Total expenses
GBPm GBPm GBPm
Administration and
acquisition
expenses 357.9 39.2 397.1
Expenses relating to
additional products
and fees -- 24.5 24.5
Share scheme
expenses 27.0 13.4 40.4
Loan expenses
(excluding movement
on ECL provision) -- 10.9 10.9
Movement in expected
credit loss
provision -- 7.6 7.6
Other -- 20.1 20.1
Total expenses 384.9 115.7 500.6
31 December 2022 (restated, unaudited)
Directly attributable expenses Other operating expenses Total expenses
GBPm GBPm GBPm
Administration and
acquisition
expenses 755.1 100.2 855.3
Expenses relating to
additional products
and fees -- 38.5 38.5
Share scheme
expenses 53.0 26.3 79.3
Loan expenses
(excluding movement
on ECL provision) -- 22.2 22.2
Movement in expected
credit loss
provision -- 18.9 18.9
Other -- 17.4 17.4
Total expenses 808.1 223.5 1,031.6
-------------------- ------------------------------ ------------------------ --------------
10. Taxation (unaudited)
Unaudited Restated, unaudited
30 June 31 December
30 June 2023 2022 2022
GBPm GBPm GBPm
Current tax
Corporation tax on profits for the year 39.1 54.0 107.6
Under/(Over) provision relating to prior
periods 9.4 2.3 (0.8)
Current tax charge 48.5 56.3 106.8
Deferred tax
Current period deferred taxation movement 11.5 (13.4) (31.6)
Under provision relating to prior periods -- -- 0.7
Total tax charge per Consolidated Income
Statement 60.0 42.9 75.9
Factors affecting the total tax charge are:
Unaudited Restated, unaudited
30 June 30 June 31 December
2023 2022 2022
GBPm GBPm GBPm
Profit before tax 233.9 224.6 361.2
Corporation tax thereon at effective UK corporation
tax rate of 23.5% (2022: 19.0%) 55.0 42.6 68.6
Expenses and provisions not deductible for
tax purposes 1.1 0.3 2.2
Non-taxable income (5.7) (3.1) (8.7)
Impact of change in UK tax rate on deferred
tax balances (0.6) (3.4) (5.6)
Adjustments relating to prior periods 9.4 2.3 (0.2)
Impact of different overseas tax rates (2.3) 0.3 6.3
Unrecognised deferred tax 2.4 3.9 13.3
Loss on disposal of compare.com 0.7 -- --
Total tax charge for the period as above 60.0 42.9 75.9
---------------------------------------------------- --------- ------- -----------
11. Other Assets and Other Liabilities
11a. Intangible assets (unaudited)
Customer Software
contracts -- Internally Software
Goodwill and relationships generated -- Other Total
GBPm GBPm GBPm GBPm GBPm
At 1 January 2022 62.3 -- 64.4 25.0 151.7
Additions -- -- 83.4 5.2 88.6
Amortisation charge -- -- (18.3) (5.4) (23.7)
Foreign exchange movement -- -- 6.9 (5.9) 1.0
At 31 December 2022 62.3 -- 136.4 18.9 217.6
Additions -- 8.5 29.3 5.3 43.1
Amortisation charge -- -- (14.8) (3.1) (17.9)
Disposals -- -- -- -- --
Impairment -- -- -- -- --
Foreign exchange movement &
other -- (0.1) 0.2 (1.1) (1.0)
At 30 June 2023 62.3 8.4 151.1 20.0 241.8
11b. Trade and other payables
Unaudited Restated, unaudited
30 June 2023 30 June 2022 31 December 2022
GBPm GBPm GBPm
Trade payables 36.9 37.0 22.7
Other tax and social security 13.0 8.4 14.9
Amounts owed to co-insurers 121.1 82.2 115.8
Other payables 252.2 53.2 38.2
Accruals and deferred income 57.1 65.3 63.3
Total trade and other payables 480.3 246.1 254.9
Analysis of accruals and
deferred income
Accruals 37.4 43.8 41.0
Deferred income 19.7 21.5 22.3
Total accruals and deferred
income as above 57.1 65.3 63.3
11c. 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.
One of the Group's previously owned subsidiaries was subject to
a Spanish Tax Audit which concluded with the Tax Authority denying
the application of the VAT exemption relating to insurance
intermediary
services. The company has appealed 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. Whilst the company is no longer part of the Admiral Group, the contingent liability which the company is exposed to has been indemnified by the Admiral Group up to a cap of GBP22 million.
The Group is also in discussions with tax authorities in Italy
and Spain
on various corporate tax matters. To date these discussions have focused primarily on the transfer pricing and cross-border arrangements in place between the Group's intermediaries and insurers.
No material provisions have 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 or form a reliable estimate of its
financial effect. In these circumstances, specific disclosure of a
contingent liability and an estimate of its financial effect will
be made where material, unless it is not practicable to do so.
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, and as such, no
material provisions are currently held in relation to such
matters.
A number of the Group's contractual arrangements with reinsurers
include features that, in certain scenarios, allow for reinsurers
to recover losses incurred to date. The overall impact of such
scenarios would not lead to an overall net economic outflow from
the Group.
11d. Post Balance Sheet Events
On 6 July 2023, the Group's holding company, Admiral Group plc
issued GBP250,000,000 subordinated notes at a fixed rate of 8.50%
with a redemption date of 6 January 2034.
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 of bankruptcy, they are to be repaid only
after the claims of all other creditors have been met.
Prior to the issue of these subordinated notes, Admiral Group
plc issued an invitation to holders of its existing GBP200,000,000
5.50 per cent subordinated notes, due 2024 to tender any and all of
such notes for purchase by the Group for cash as set out in a
tender offer memorandum dated 27 June 2023. The offer expired on 4
July 2023 and the company announced on 5 July 2023 that it had
decided to accept for purchase GBP144,904,000 in aggregate, nominal
value of notes pursuant to the offer.
Neither transaction is reflected in the Group's balance sheet at
30 June 2023. Once reflected, the nominal value of subordinated
liabilities in the Group's balance sheet will be GBP305,096,000
until the expiry of the remainder of the existing notes in July
2024, when the nominal value of subordinated liabilities held in
the Group's balance sheet will reduce to GBP250,000,000.
12. Share Capital
12a. Dividends
Dividends were proposed, approved and paid as follows.
Unaudited
-------------------------------------------------------- ------------ --------------- -------------
30 June 31 December
2023 30 June 2022 2022
GBPm GBPm GBPm
-------------------------------------------------------- ------------ --------------- -------------
Proposed, March 2022 (118.0 pence per share, approved
April 2022 and paid June 2022) - 348.1 348.1
Declared August 2022 (105.0 pence per share, paid
October 2022) - - 310.2
Proposed, March 2023 (52.0 pence per share, approved
April 2023 and paid June 2023) 154.9 - -
Total 154.9 348.1 658.3
-------------------------------------------------------- ------------ --------------- -------------
The dividends proposed in March (approved in April) represent
the final dividends paid in respect of the 2021 and 2022 financial
years. The dividend declared in August reflects the 2022 interim
dividend.
A 2023 interim dividend of 51.0p pence per share (approximately
GBP152 million) has been declared.
12b. Earnings per share
Unaudited Restated, unaudited
30 June 31 December
30 June 2023 2022 2022
GBPm GBPm GBPm
Profit for the financial year after taxation attributable
to equity shareholders -- continuing operations 174.5 182.4 286.5
Weighted average number of shares -- basic 303,075,355 299,753,132 300,207,330
Unadjusted earnings per share -- basic -- continuing
operations 57.6p 60.8p 95.4p
Weighted average number of shares -- diluted 303,761,032 300,354,415 301,543,390
Unadjusted earnings per share -- diluted -- continuing 57.5p 60.7p 95.0p
operations
The difference between the basic and diluted number of shares at
the end the period (being 685,677; 30 June 2022: 601,283; 31
December 2022: 1,336,060) relates to awards committed, but not yet
issued under the Group's share schemes.
12c. Share capital
Unaudited
30 June 2023 30 June 2022 31 December 2022
GBPm GBPm GBPm
Authorised
500,000,000 ordinary shares of
0.1 pence 0.5 0.5 0.5
Issued, called up and fully paid
299,893,517 ordinary shares of
0.1p -- 0.3 --
302,837,726 ordinary shares of
0.1p -- -- 0.3
303,235,974 ordinary shares of
0.1p 0.3 -- --
Total share capital 0.3 0.3 0.3
During the first half of 2023, 398,248 (H1 2022: 338,797; FY
2022: 3,283,006) new ordinary shares of 0.1p were issued to the
trusts administering the Group's share schemes.
398,248 (H1 2022: 338,797; FY 2022: 675,927) of these were
issued to the Admiral Group Share Incentive Plan Trust for the
purposes of this share scheme.
No shares (H1 2022: nil; FY 2022: 2,607,079) were issued to the
Admiral Group Employee Benefit Trust for the purposes of the
Discretionary Free Share Scheme.
12d. Related party transactions
Details relating to the remuneration and shareholdings of key
management personnel are set out in the Directors' Remuneration
Report within the Group's 2022 Annual Report. Key management
personnel can obtain discounted motor insurance at the same rates
as all other Group staff.
The Board considers that Executive and Non-Executive Directors
of Admiral Group plc are key management personnel. Aggregate
compensation for the Executive and Non-Executive Directors is
disclosed in the Directors' Remuneration Report in the 2022 Annual
Report.
13. Reconciliations
The following tables reconcile significant Key Performance
Indicators (KPIs) and Alternative Performance Measures (APMs)
included in the financial review above to items included in the
financial statements.
13a. Reconciliation of turnover to reported insurance and other revenue in the financial statements
Unaudited Restated, unaudited
31 December
30 June 2023 June 2022 2022
Note GBPm GBPm GBPm
Insurance premium revenue 5b 1,515.5 1,327.6 2,782.1
Movement in unearned premium 262.2 137.0 142.7
Premiums written after coinsurance 1,777.7 1,464.6 2,924.8
Co-insurer share of written premiums 260.9 206.2 393.4
Total premiums written 2,038.6 1,670.8 3,318.2
Other insurance revenue 5b 91.5 86.2 174.8
Other revenue 8 63.8 64.6 128.9
Admiral Money interest income 43.6 25.5 58.7
Turnover as per note 4b of financial
statements 2,237.5 1,847.1 3,680.6
Intra-group income elimination(1) -- 0.2 0.3
Total turnover 2,237.5 1,847.3 3,680.9
*(1) Intra-group income elimination relates to comparison income
earned by compare.com from other Group entities.
13b. Reconciliation of reported loss and expense ratios:
Group
30 June 2023 (unaudited)
-------------------------------------------------------------------------------------------------------
Core Ancillary Total Total, net
GBPm Note product income gross of XoL reinsurance
--------------------------------- ------- ---------- ------------ --------- ----------------------
Insurance premium revenue 5b/5d 1,449.0 66.5 1,515.5 1,469.8
Administration fees and
non-separable ancillary
commission 5b -- 91.5 91.5 91.5
---------------------------------
Insurance revenue (A) 5b/5d 1,449.0 158.0 1,607.0 1,561.3
---------------------------------
Administration and acquisition
expenses (B) 5c (392.9) (18.8) (411.7) (411.7)
Claims incurred (C) 5c/5d (1,242.5) (20.8) (1,263.3) (1,244.7)
Claims releases (D) 5c/5d 255.8 -- 255.8 254.0
Quota share result* 6.1
Onerous loss component
movement 1.4
Underwriting result (E) 166.4
--------------------------------- ------- ---------- ------------ --------- ----------------------
Current period loss ratio
(C/A) 79.7%
---------------------------------
Claims releases (D/A) (16.2%)
---------------------------------
Reported loss ratio ((C+D)/A) 63.5%
---------------------------------
Reported expense ratio
(B/A) 26.3%
---------------------------------
Insurance service margin
(E/A) 10.7%
---------------------------------
* Quota share reinsurance result excludes reinsurers' share of
share scheme costs
30 June 2022 (unaudited, restated)
--------------------------------- ------- --------------------------------------------------------
Core Ancillary Total Total, net of
GBPm Note product income gross XoL reinsurance
--------------------------------- ------- ---------- ------------ --------- -------------------
Insurance premium revenue 5b/5d 1,263.4 64.2 1,327.6 1,294.3
Administration fees and
non-separable ancillary
commission 5b -- 86.2 86.2 86.2
---------------------------------
Insurance revenue (A) 5b/5d 1,263.4 150.4 1,413.8 1,380.5
---------------------------------
Administration and acquisition
expenses (B) 5c (340.8) (17.1) (357.9) (357.9)
Claims incurred (C) 5c/5d (1,028.0) (16.1) (1,044.1) (1,021.0)
Claims releases (D) 5c/5d 196.4 0.1 196.5 177.8
Quota share result* (7.7)
Onerous loss component
movement (4.1)
Underwriting result (E) 167.6
--------------------------------- ------- ---------- ------------ --------- -------------------
Current period loss ratio
(C/A) 74.0%
---------------------------------
Claims releases (D/A) (12.9%)
---------------------------------
Reported loss ratio ((C+D)/A) 61.1%
---------------------------------
Reported expense ratio
(B/A) 26.0%
---------------------------------
Insurance service margin
(E/A) 12.1%
---------------------------------
* Quota share reinsurance result excludes reinsurers' share of
share scheme costs
31 December 2022 (unaudited, restated)
----------------------------------------------------------------------------------------------------
Core Ancillary Total Total, net of
GBPm Note product income gross XoL reinsurance
--------------------------------- ------- ---------- ------------ --------- -------------------
Insurance premium revenue 5b/5d 2,646.5 135.6 2,782.1 2,704.2
Administration fees and
non-separable ancillary
commission 5b -- 174.8 174.8 174.8
---------------------------------
Insurance revenue (A) 5b/5d 2,646.5 310.4 2,956.9 2,879.0
---------------------------------
Administration and acquisition
expenses (B) 5c (710.5) (44.6) (755.1) (755.1)
Claims incurred (C) 5c/5d (2,339.3) (33.0) (2,372.3) (2,341.0)
Claims releases (D) 5c/5d 420.5 -- 420.5 309.8
Quota share result* 117.4
Onerous loss component
movement 4.1
Underwriting result (E) 214.2
--------------------------------- ------- ---------- ------------ --------- -------------------
Current period loss ratio
(C/A) 81.3%
---------------------------------
Claims releases (D/A) (10.7%)
---------------------------------
Reported loss ratio ((C+D)/A) 70.6%
---------------------------------
Reported expense ratio
(B/A) 26.2%
---------------------------------
Insurance service margin 7.4%
---------------------------------
* Quota share reinsurance result excludes reinsurers' share of
share scheme costs
13c. Reconciliation of reported loss and expense ratios: UK
Motor
30 June 2023 (unaudited)
-------------------------------------------------------------------------------------------------------- ---------------
Core Product
Core Ancillary Total Total, net Net of XoL
GBPm Note product income(1) gross of XoL reinsurance reinsurance
--------------------------------- ------- ---------- ------------- --------- ---------------------- ---------------
Insurance premium revenue 5b/5d 907.7 53.5 961.2 935.2 881.7
Administration fees and
non-separable ancillary
commission 5b -- 58.8 58.8 58.8 --
---------------------------------
Insurance revenue (A) 5b/5d 907.7 112.3 1,020.0 994.0 881.7
---------------------------------
Administration and acquisition
expenses (B) 5c (206.6) (13.9) (220.5) (220.5) (206.6)
Claims incurred (C) 5c/5d (833.9) (17.2) (851.1) (834.2) (817.0)
Claims releases (D) 5c/5d 249.1 -- 249.1 237.1 237.1
Current period loss ratio
(C/A) 83.9% 92.7%
--------------------------------- ------- ---------- ------------- --------- ---------------------- ---------------
Claims releases (D/A) (23.9%) (26.9%)
---------------------------------
Reported loss ratio ((C+D)/A) 60.1% 65.8%
---------------------------------
Reported expense ratio
(B/A) 22.2% 23.4%
---------------------------------
30 June 2022 (unaudited, restated)
-------------------------------------------------------------------------------------------------------------------------
Core Product
Core Ancillary Total Total, net Net of XoL
GBPm Note product income(1) gross of XoL reinsurance reinsurance
--------------------------------- ------- ---------- ------------- --------- ---------------------- ---------------
Insurance premium revenue 5b/5d 811.8 53.7 865.5 843.9 790.2
Administration fees and
non-separable ancillary
commission 5b -- 55.9 55.9 55.9 --
---------------------------------
Insurance revenue (A) 5b/5d 811.8 109.6 921.4 899.8 790.2
---------------------------------
Administration and acquisition
expenses (B) 5c (171.5) (12.2) (183.7) (183.7) (171.5)
Claims incurred (C) 5c/5d (725.1) (13.4) (738.5) (721.6) (708.2)
Claims releases (D) 5c/5d 211.7 -- 211.7 190.9 190.9
Current period loss ratio
(C/A) 80.2% 89.6%
--------------------------------- ------- ---------- ------------- --------- ---------------------- ---------------
Claims releases (D/A) (21.2%) (24.1%)
---------------------------------
Reported loss ratio ((C+D)/A) 59.0% 65.5%
---------------------------------
Reported expense ratio
(B/A) 20.4% 21.7%
---------------------------------
31 December 2022 (unaudited, restated)
--------------------------------------------------------------------------------------------------------------------------
Core Ancillary Total Total, net Core product,
GBPm Note product income(1) gross of XoL reinsurance net of XoL
--------------------------------- ------- ---------- ------------- --------- ---------------------- ----------------
Insurance premium revenue 5b/5d 1,682.4 113.3 1,795.7 1,751.1 1,637.8
Administration fees and
non-separable ancillary
commission 5b -- 114.0 114.0 114.0 --
---------------------------------
Insurance revenue (A) 5b/5d 1,682.4 227.3 1,909.7 1,865.1 1,637.8
---------------------------------
Administration and acquisition
expenses (B) 5c (354.4) (35.2) (389.6) (389.6) (354.4)
Claims incurred (C) 5c/5d (1,592.2) (28.2) (1,620.4) (1,596.0) (1,567.8)
Claims releases (D) 5c/5d 437.2 - 437.2 327.2 327.2
Current period loss ratio
(C/A) 85.5% 95.7%
--------------------------------- ------- ---------- ------------- --------- ---------------------- ----------------
Claims releases (D/A) (17.5%) (20.0%)
---------------------------------
Reported loss ratio ((C+D)/A) 68.0% 75.7%
---------------------------------
Reported expense ratio (B/A) 20.9% 21.6%
---------------------------------
(1) Ancillary income combined with other net income is presented
as part of UK motor insurance other revenue in reporting "Other
revenue per vehicle". Total other revenue was GBP119.5 million (H1
2022: GBP116.2 million; FY 2022: GBP236.8 million)
13d. Reconciliation of reported loss and expense ratios: UK
Household
30 June 2023 (unaudited)
---------------------------------------------------------------------------------------------------------------------------
Core Ancillary Total Total, net Core Product
GBPm Note product income gross of XoL reinsurance Net of XoL
--------------------------------- ------- ----------- ------------ --------- ---------------------- -----------------
Insurance premium revenue 5b/5d 118.4 12.3 130.7 122.8 110.5
Administration fees and
non-separable ancillary
commission 5b -- 5.5 5.5 5.5 --
---------------------------------
Insurance revenue (A) 5b/5d 118.4 17.8 136.2 128.3 110.5
---------------------------------
Administration and acquisition
expenses (B) 5c (34.6) (4.1) (38.7) (38.7) (34.6)
Claims incurred (C) 5c/5d (84.4) (3.2) (87.6) (87.6) (84.4)
Current period weather
events (E) (7.3) -- (7.3) (7.3) (7.3)
Claims releases (D) 5c/5d 3.9 -- 3.9 3.9 3.9
Current period attritional
loss ratio (C/A) 68.3% 76.4%
--------------------------------- ------- ----------- ------------ --------- ---------------------- ---------------
Current period weather
events (E/A) 5.7% 6.6%
---------------------------------
Current period loss ratio
((C+E)/A) 74.0% 83.0%
---------------------------------
Claims releases (D/A) (3.0%) (3.5%)
---------------------------------
Reported loss ratio ((C+D+E)/A) 71.0% 79.5%
---------------------------------
Reported expense ratio
(B/A) 30.2% 31.3%
---------------------------------
30 June 2022 (restated, unaudited)
-------------------------------------------------------------------------------------------------------------------------
Core Ancillary Total Total, net Core Product
GBPm Note product income gross of XoL reinsurance Net of XoL
--------------------------------- ------- ----------- ------------ --------- ---------------------- ---------------
Insurance premium revenue 5b/5d 97.7 10.0 107.7 103.2 93.2
Administration fees and
non-separable ancillary
commission 5b -- 3.8 3.8 3.8 --
---------------------------------
Insurance revenue (A) 5b/5d 97.7 13.8 111.5 107.0 93.2
---------------------------------
Administration and acquisition
expenses (B) 5c (28.3) (4.0) (32.3) (32.3) (28.3)
Claims incurred (C) 5c/5d (53.8) (2.5) (56.3) (56.3) (53.8)
Current period weather
events (E) (10.7) (10.7) (10.7) (10.7)
Claims releases (D) 5c/5d 9.2 -- 9.2 9.2 9.2
Current period attritional
loss ratio (C/A) 52.7% 57.7%
--------------------------------- ------- ----------- ------------ --------- ---------------------- ---------------
Current period weather
events (E/A) 10.0% 11.5%
---------------------------------
Current period loss ratio
((C+E)/A) 62.6% 69.2%
---------------------------------
Claims releases (D/A) (8.6%) (9.9%)
---------------------------------
Reported loss ratio ((C+D+E)/A) 54.0% 59.3%
---------------------------------
Reported expense ratio
(B/A) 30.2% 30.4%
---------------------------------
31 December 2022 (restated)
----------------------------------------------------------------------------------------------------------------------------------------
Total, net
Core Ancillary Total of XoL Core product,
GBPm Note product income gross reinsurance net of XoL reinsurance
--------------------------------- ------- ---------- ------------ --------- --------------------------- --------------------------
Insurance premium revenue 5b/5d 207.0 21.5 228.5 214.5 193.0
Administration fees and
non-separable ancillary
commission 5b -- 8.3 8.3 8.3 --
---------------------------------
Insurance revenue (A) 5b/5d 207.0 29.8 236.8 222.8 193.0
---------------------------------
Administration and acquisition
expenses (B) 5c (62.2) (7.9) (70.1) (70.1) (62.2)
Claims incurred (C) 5c/5d (129.2) (4.2) (133.4) (133.4) (129.2)
Current period weather
events (E) (64.7) -- (64.7) (64.7) (64.7)
Claims releases (D) 5c/5d 16.5 -- 16.5 16.5 16.5
Current period attritional
loss ratio (C/A) 59.9% 67.0%
--------------------------------- ------- ---------- ------------ --------- --------------------------- --------------------------
Current period weather
events (E/A) 29.0% 33.5%
---------------------------------
Current period loss ratio
((C+E)/A) 88.9% 100.5%
---------------------------------
Claims releases (D/A) (7.4%) (8.6%)
---------------------------------
Reported loss ratio ((C+D+E)/A) 81.5% 91.9%
---------------------------------
Reported expense ratio
(B/A) 31.4% 32.2%
---------------------------------
14. Statutory Information
The financial information above does not constitute the
Company's statutory accounts. Statutory accounts for 2022 have been
delivered to the Registrar of Companies, and those for 2023 will be
delivered in due course. The auditors have reported on the
statutory accounts for 2022, and their reports were (i)
unqualified, (ii) did not include a reference to any matters to
which the auditors drew attention by way of emphasis without
qualifying their report and (iii) did not contain a statement under
section 498 (2) or (3) of the Companies Act 2006.
Glossary
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 insurance revenue, Other revenue and interest income
from Admiral Money. It is reconciled to financial statement
line items in note 13a to the financial statements. It
has been redefined in the current period to exclude revenue
from discontinued operations.
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 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.
----------------- ----------------------------------------------------------------
Total Premiums Total premiums written are the total forecast premiums,
Written 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
13a 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.
Group profit Group profit before tax represents profit before tax
before tax
Earnings per Earnings per share represents the profit after tax attributable
share to equity shareholders, divided by the weighted average
number of basic shares.
Underwriting For each insurance business an underwriting result is
result (profit presented. This shows the insurance segment result before
or loss) tax excluding investment income, finance expenses, co-insurer
profit commission and other net income. It excludes both
gross share scheme costs and any assumed quota share
reinsurance recoveries on those share scheme costs.
Loss Ratio Loss ratios are reported as follows:
Reported loss ratios are expressed as a percentage, of
claims incurred, on a gross basis net of XoL reinsurance,
divided by insurance revenue net of XoL reinsurance premiums
ceded.
To calculate the reported loss ratios, we use the total
claims, and earned premium and related income (instalment
income, administration fees and ancillary income where
it is highly correlated to the core product). We believe
that this will be consistent with the approach taken
by peers, and reflects the true profitability of products
sold.
Core product loss ratios use the total claims and earned
premiums for the core product only. This measure is more
consistent with that used previously, and are reflective
of the performance of the core product in a line of business.
The calculations and compositions of the loss ratios
are presented within note 13b to 13d to these financial
statements.
Expense Ratio Expense ratios are reported as follows:
Reported expense ratios are expressed as a percentage,
of expenses incurred, on a gross basis excluding share
scheme costs, divided by insurance revenue net of XoL
reinsurance premiums ceded.
To calculate the reported expense ratios, we use the
total expenses (excluding share scheme costs), and earned
premium and related income (instalment income, administration
fees and ancillary income where it is highly correlated
to the core product). We believe that this will be consistent
with the approach taken by peers, and reflects the true
profitability of products sold.
Core product expense ratios use the total expenses (excluding
share scheme costs) and earned premiums for the core
product only. This measure is more consistent with that
used previously, and are reflective of the performance
of the core product in a line of business.
Written expense ratios are calculated using total expenses
(excluding share scheme costs) and written premiums,
net of cancellation provision, for the core product only.
The calculations of the reported expense ratios are presented
within notes 13b to 13d to the financial statements.
Combined Ratio 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 13b to 13d.
Insurance service This is the reported insurance segment underwriting result,
margin divided by insurance revenue net of excess of loss premiums
ceded.
Quota share The total result (ceded premiums minus ceded recoveries)
result from contractual quota share arrangements, excluding
the quota share reinsurer's share of share scheme expenses
Insurance segment The result of the insurance segment result, before tax,
result excluding net share scheme costs and other central expenses.
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. It excludes the impact of discontinued operations.
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, and the total number of travel insurance
and Admiral Money customers.
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 Effective tax rate is defined as the approximate tax
Rate 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.
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 The probability-weighted average of all future claims
estimate and cost scenarios calculated using historical data,
actuarial methods and judgement.
ASHE 'Annual Survey of Hours and Earnings' -- a statistical
index that is typically used for calculation inflation
of annual payment amounts under Periodic Payment Order
(PPO) claims settlements.
Claims reserves A monetary amount set aside for the future payment of
incurred claims that have not yet been settled, thus
representing a balance sheet liability.
Co-insurance 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.
Commutation 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 motor insurance quota
share contracts after 24-36 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 The tendency for the insurance market to swing between
cycle highs and lows of profitability over time, with the potential
to influence premium rates (also known as the "underwriting
cycle").
Claims net of The cost of claims incurred in the period, less any claims
XoL reinsurance costs recovered via salvage and subrogation arrangements
or under XoL reinsurance contracts. It includes both
claims payments and movements in claims reserves.
Excess of Loss Contractual arrangements whereby the Group transfers
('XoL') reinsurance part or all of the insurance risk accepted to another
insurer on an excess of loss ('XoL') basis (full reinsurance
for claims over an agreed value).
Insurance premium The element of premium, less XoL reinsurance premium,
revenue net earned in the period.
of XoL
Insurance revenue Gross earned premium (excluding any co-insurer share)
plus Other insurance revenue
Net promotor NPS is currently measured based on a subset of customer
score responding to a single question: On a scale of 0-10 (10
being the best score), how likely would you recommend
our company to a friend, family or colleague through
phone, online or email. Answers are then placed in 3
groups; Detractors: scores ranging from 0 to 6; Passives/neutrals:
scores ranging from 7 to 8; Promoters: scores ranging
from 9 to 10 and the final NPS score is : % of promoters
- % of detractors
Ogden discount The discount rate used in calculation of personal injury
rate claims settlements in the UK.
Other insurance Revenue that is considered non-separable from the core
revenue insurance product sold and therefore under IFRS 17 is
reported as insurance revenue. For the Group, this is
typically the instalment income, administration fees
and any other non-separable income related to the Group's
retained share of the underwritten products.
Periodic Payment A compensation award as part of a claims settlement that
Order (PPO) 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. Co-insurer profit commission
are presented separately on the income statement whilst
reinsurer profit commissions are presented within the
reinsurance result, as a part of any recovery for incurred
claims.
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 ('XoL') basis (full reinsurance for claims over
an agreed value).
Scaled Agile Scaled Agile is a framework that uses a set of organisational
and workflow patterns for implementing agile practices
at an enterprise scale. Scaled agile at Admiral represents
the ability to drive agile at the team level whilst applying
the same sustainable principles of the group.
Securitisation 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 transfer assets
to a special purpose entity (SPE) which then issues securities
backed by the assets.
Solvency Ratio A ratio of an entity's Solvency II capital (referred
to as Own Funds) to Solvency Capital Requirement. Unless
otherwise stated, Group solvency ratios include a reduction
to Own Funds for a foreseeable dividend (i.e. dividends
relating to the relevant financial period that will be
paid after the balance sheet date)
Special Purpose An entity that is created to accomplish a narrow and
Entity (SPE) well-defined objective. There are specific restrictions
or limited around ongoing activities. The Group uses
an SPE set up under a securitisation programme.
Ultimate loss A projected actuarial best estimate loss ratio for a
ratio particular accident year or underwriting year.
Underwriting The year in which an insurance policy was incepted.
year
Underwriting Also referred to as the written basis. Claims incurred
year basis 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 An insurance policy can be written in one calendar year
basis but earned over a subsequent calendar year.
Responsibility statement of the directors in respect of the
half-yearly financial report
We confirm that to the best of our knowledge:
--
-- the condensed set of financial statements has been prepared in
accordance with the UK-adopted IAS 34 'Interim Financial
Reporting' and gives a true and fair view of the assets,
liabilities, financial position and profit or loss of the Group.
-- the interim management report includes a fair review of the
information required by:
1. DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication
of important events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial
statements; and a description of the principal risks and uncertainties
for the remaining six months of the year; and
2. DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position
or performance of the entity during that period; and any changes in the
related party transactions described in the last annual report that could
do so.
By order of the Board,
Geraint Jones
Chief Financial Officer
15 August 2023
INDEPENDENT REVIEW REPORT TO ADMIRAL GROUP PLC
Conclusion
We have been engaged by the company to review the condensed
consolidated set of financial statements in the half-yearly
financial report for the six months ended 30 June 2023 which
comprises the condensed consolidated income statement, the
condensed consolidated statement of comprehensive income, the
condensed consolidated statement of financial position, the
condensed consolidated statement of changes in equity, the
condensed consolidated cash flow statement, and related notes 1 to
13.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2023 is not prepared, in all material respects, in accordance
with United Kingdom adopted International Accounting Standard 34
and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council for use in the
United Kingdom (ISRE (UK) 2410). A review of interim financial
information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with United Kingdom adopted
international accounting standards. The condensed set of financial
statements included in this half-yearly financial report has been
prepared in accordance with United Kingdom adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
Conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This Conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410; however future events or conditions
may cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the group'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 company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly financial report, we are
responsible for expressing to the company a conclusion on the
condensed set of financial statements in the half-yearly financial
report. Our Conclusion, including our Conclusion Relating to Going
Concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
ISRE (UK) 2410. Our work has been undertaken so that we might state
to the company those matters we are required to state to it in an
independent review 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, for our review work, for this
report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
15 August 2023
(END) Dow Jones Newswires
August 16, 2023 02:00 ET (06:00 GMT)
Copyright (c) 2023 Dow Jones & Company, Inc.
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