Half-year report
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 2023 |
30 June 2022 |
% change vs. 2022 |
|
|
|
|
Group profit
before tax 1 |
£233.9m |
£224.6m |
+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
turnover2 |
£2.24bn |
£1.85bn |
+21% |
Insurance
revenue |
£1.61bn |
£1.41bn |
+14% |
|
|
|
|
Group
customers2,3 |
9.41m |
9.05m |
+4% |
UK Insurance
customers2 |
7.01m |
6.94m |
+1% |
International
Insurance customers2 |
2.21m |
1.98m |
+12% |
Admiral Money
gross loans balances |
£1.03bn |
£0.79bn |
+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 £1,800 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 £234 million, turnover was up 21 per cent to £2.2
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 £298 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 £8.7 million and £4.7 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: 2023 Interim Results | Admiral
Group Plc. A copy of the presentation slides will be
available at the following link: Results, reports and
presentations | Admiral Group Plc
(www.admiralgroup.co.uk).
H1 2023 Group overview
£m |
30 June 2023 |
30 June 2022 |
% change vs. 2022 |
|
|
Group turnover (£bn) *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 £234 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 £304 million, 5% higher
than 2022 (£291 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 £9 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 £8 million v loss of £17 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 £2.7 million (H1 2022: £0.2 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 £86 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 £152 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 £200 million 2024
maturity tier two bond with the newly issued £250 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 £30 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 95th 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
95th 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
£m |
30 June
2023 |
30 June
2022 |
31 Dec
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
£m |
30 June
2023 |
30 June
2022 |
31 Dec
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
2023 |
30 June
2022 |
31 Dec
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
£1.5bn from £1.3bn
- Profit growth of 3% to £298 million (v £291 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 £8.7 million (from £4.3 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
£m |
30 June
2023 |
30 June 2022 |
31 Dec
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
2023 |
30 June
2022 |
31 Dec
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 |
£60 |
£59 |
£58 |
*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 £298.2
million, 3% higher than the same period in 2022 (H1 2022: £290.9
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 £961.2 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
£nil 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 (94th 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 loss ratio before releases |
Impact of claims reserve releases |
Core motor 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 |
|
|
|
|
|
£m |
|
|
30 June
2023 |
30 June
2022 |
31 Dec
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 (£44.8
million) compared to H1 2022 (£53.8 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
£25.6 million from £6.4 million in the first half of 2022.
Investment income before insurance finance expense more than
doubled to £50.9 million (H1 2022: £20.9 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 (£25.3 million;
H1 2022 £14.5 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:
£m |
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 vehicle*4 |
|
|
£60 |
Other revenue per vehicle net of internal costs |
|
|
£50 |
£m |
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 vehicle*4 |
|
|
£59 |
Other revenue per vehicle net of internal costs |
|
|
£48 |
£m |
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 vehicle*4 |
|
|
£58 |
Other revenue per vehicle net of internal costs |
|
|
£48 |
*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 £119.5 million (H1 2022:
£116.2 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 £60 per vehicle (gross of
costs), with net other revenue per vehicle at £50 per vehicle, both
slightly up compared to 2022.
UK Household Insurance
£m |
30 June
2023 |
30 June
2022 |
31 Dec
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 2023 |
30 June 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 (£m) |
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 £156.6 million (H1 2022:
£120.7 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 £6.2 million profit (H1
2022: loss of £17.3 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 £8.7 million (H1 2022: £4.3
million). Excluding the impact of severe weather, profit for the
period was lower than the prior period at £10.9 million (H1 2022:
£14.2 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
£m |
30 June
2023 |
30 June
2022 |
31 Dec
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 2023 |
30 June
2022 |
31 Dec
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 (£m) |
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 (£m) |
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 (£m) |
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
£m |
30 June
2023 |
30 June
2022 |
31 Dec
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 £464.3 million (H1 2022: £393.7 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 £7.6 million (H1 2022: £16.9 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 £321.1 million (H1 2022: £265.8 million), driven by strong
price increases and the larger book sizes. The combined European
Motor profit was £4.7 million (H1 2022: loss of £1.6 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 £138.4 million (H1 2022:
£127.9 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 £10.4 million in the period (H1 2022:
£13.6 million loss) and will continue to prioritise improving the
loss ratio ahead of growth in the immediate future.
Admiral Money
£m |
30 June
2023 |
30 June
2022 |
31 Dec
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 £0.8 million
intra-group interest expense (H1 2022: £0.8 million; FY 2022: £1.5
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 £1.03
billion at the end of June 2023 (30 June 2022: £0.79 billion), with
a £74.6 million (30 June 2022: £53.5 million) expected credit loss
provision. This leads to a net loans balance of £0.96 billion (30
June 2022: £0.73 billion).
The business reported a pre-tax profit of £2.7 million
(improving from £0.2 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 £30.9 million
(30 June 2022: £19.9 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 £21.1
million increase in absolute provision size to £74.6 million. The
provision includes post model adjustments of £12.6 million (H1
2022: £12.2 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
£m |
30 June
2023 |
30 June
2022 |
31 Dec
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 £12.7 million in H1
2023 (H1 2022: £8.8 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 £7.9 million (H1 2022:
£3.9 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 £6.3 million (H1 2022: £5.7 million)
primarily related to interest on the £200 million subordinated
notes issued in July 2014 (refer to note 6 to the financial
statements).
A loss of £2.6 million (H1 2022: £1.7 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 £2.3 million
in H1 2023 (H1 2022: £8.0 million), noting that in H1 2022 £4.7
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
£bn |
H1 2022
£bn |
YE 2022
£bn |
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 £250
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 £200 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, £250 million
subordinated loan notes. At the same time as the new issue, the
Group made a tender offer for the existing £200 million
subordinated loan notes, due to mature in 2024. £145 million of the
2024 notes were tendered, with the remaining £55 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 £81 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 £24 million, which is lower than
the previously approved add-on of £81 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
£m |
30 June
2023 |
30 June
2022 |
31 Dec
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
£57.7 million (H1 2022: £29.6 million; FY 2022 £66.4 million).
Provisions for expected credit losses moved up slightly, leading to
a £0.5 million loss (H1 2022: £1.4 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 £58.4 million in H1 2023
(compared to £27.8 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
£22.4 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
£4,043.9 million (30 June 2022: £3,900.3 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 £143.6
million.
Cash and investments analysis
£m |
|
30 June
2023 |
30 June
2022 |
31 Dec 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 £60.0 million
(H1 2022: £42.9 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 |
|
Note |
30 June
2023
(unaudited)
£m |
30 June
2022 (restated, unaudited)
£m |
|
31 December 2022 (restated, unaudited)
£m |
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 share) |
12 |
52.0p |
118.0p |
|
223.0p |
Condensed consolidated statement of comprehensive income
(unaudited)
|
|
Six months ended |
|
Year ended |
|
|
|
|
|
|
|
Note |
30 June 2023
(unaudited)
£m |
30 June 2022
(restated, unaudited)
£m |
|
31 December2022
(restated, unaudited)
£m |
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 |
|
|
Note |
30 June 2023
(unaudited)
£m |
30 June 2022
(restated, unaudited)
£m |
31 December 2022
(restated, unaudited)
£m |
1 January 2022
(restated, unaudited)
£m |
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 |
|
Note |
30 June 2023
(unaudited)
£m |
30 June 2022
(restated, unaudited)
£m |
|
31 December 2022
(restated, unaudited)
£m |
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 |
|
|
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 |
|
6 |
(58.0) |
(28.2) |
|
(64.6) |
- Finance costs, including unwinding of discounts on lease
liabilities
|
|
7.3 |
5.9 |
|
13.4 |
|
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 |
|
|
|
Note |
Share
Capital
£m |
Share premium account £m |
Fair value reserve £m |
Hedging reserve
£m |
Foreign exchange reserve £m |
Insurance Finance Reserve £m |
Retained profit
and loss
£m |
Total
£m |
Non-controlling interests
£m |
Total equity
£m |
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 |
|
|
|
Note |
Share
Capital
£m |
Share premium account £m |
Fair value reserve £m |
Hedging reserve
£m |
Foreign exchange reserve £m |
Insurance finance reserve £m |
Retained profit
and loss
£m |
Total
£m |
Non-controlling interests
£m |
Total equity
£m |
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 Tŷ 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:
- unqualified;
- did not include a reference to any matters to which the
auditors drew attention by way of emphasis without qualifying their
report; and
- 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 £0.1 million.
Subsidiaries are entities controlled by the Group. The Group
controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
In assessing control, the Group takes into consideration potential
voting rights that are currently exercisable. The acquisition date
is the date on which control is transferred to the acquirer. The
financial statements of subsidiaries are included in the
consolidated financial statements from the date that control
commences until the date that control ceases. Losses applicable to
the non-controlling interests in a subsidiary are allocated to the
non-controlling interests even if doing so causes the
non-controlling interests to have a deficit balance.
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 (unaudited) |
31 December 2022 (unaudited) |
£m |
IFRS 17 |
IFRS 4 |
Change |
IFRS 17 |
IFRS 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 |
£m |
UK Insurance |
International 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 95th 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
95th 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 £15 million at H1 2022;
£52 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:
- a group of contracts that are onerous at initial recognition,
if any;
- a group of contracts that at initial recognition have no
significant possibility of becoming onerous subsequently, if any;
and
- 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.
- 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 approach (‘PAA’) eligibility |
Subject to specified criteria, the PAA can be adopted as a
simplified approach to the IFRS 17 general model |
Coverage period for the Group’s insurance contracts assumed is one
year or less 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 cash flows for insurance contracts
issued |
Where the coverage period of all contracts within a group is not
longer than one year, insurance acquisition cash flows can either
be 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 |
The Group’s insurance contracts are all one year or less. The
Group has therefore taken the option to expense acquisition costs
as incurred |
Liability for Remaining Coverage (‘LRC’), adjusted for financial
risk and time value of money |
Where there is no significant financing component in relation to
the LRC, or where the time between providing each part of the
services and the related premium due date is no more than a year,
an entity is not required to make an adjustment for accretion of
interest on the LRC |
There is no allowance made for accretion of interest on the LRC
given that the premiums are received within one year of the
coverage period |
Liability for Incurred Claims (‘LIC’) adjusted for time value of
money |
Where claims or directly attributable insurance expenses are
expected to be paid within a year of the date that the claim is
incurred, it is not required to adjust these amounts for the time
value of money. |
For some claims, for example within the travel product line in the
UK, and other immaterial product lines across the Group, the
incurred claims are expected to be paid out in less than one
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 income and expense |
There is an option to disaggregate part of the movement in the LIC
resulting from changes in discount rates, and present this in Other
Comprehensive Income (‘OCI’) |
The impact on LIC of changes in discount rates will be captured
within OCI, in line with the accounting for assets backing the
insurance claims liabilities |
Interim reporting |
Where an entity is required to apply IAS 34 (as for the Group)
there is an option as to whether to choose a “year to date” basis
or a “period to date” basis for financial reporting |
The Group has opted to apply the option to use year-to-date
accounting for interim 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.
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
85th and 95th 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 94th
percentile (2022 – 95th 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) |
|
UK Insurance £m |
Int. Insurance
£m |
Admiral Money
£m |
Other
£m |
Eliminations*3 £m |
Total
£m |
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) |
|
UK Insurance £m |
Int. Insurance
£m |
Admiral Money
£m |
Other
£m |
Eliminations*3 £m |
Total
£m |
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) |
|
UK Insurance £m |
Int. Insurance
£m |
Admiral Money
£m |
Other
£m |
Eliminations*3 £m |
Total
£m |
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.
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 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:
- the effect of the time value of money and changes in the time
value of money; and
- 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
£Nil.
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
Motor
£m |
UK
Home
£m |
Int. Motor
£m |
Other
£m |
Total Group
£m |
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
Motor
£m |
UK
Home
£m |
Int. Motor
£m |
Other
£m |
Total Group
£m |
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
Motor
£m |
UK
Home
£m |
Int. Motor
£m |
Other
£m |
Total Group
£m |
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
£m |
UK Home
£m |
Int. Motor
£m |
Other
£m |
Total Group
£m |
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
£m |
UK Home
£m |
Int. Motor
£m |
Other
£m |
Total Group
£m |
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
£m |
UK Home
£m |
Int. Motor
£m |
Other
£m |
Total Group
£m |
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) |
|
UK Motor
£m |
UK Home
£m |
Int. Motor
£m |
Other
£m |
Total Group
£m |
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 movement
in onerous loss component |
2.9 |
0.6 |
7.3 |
2.3 |
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) |
|
UK Motor
£m |
UK Home
£m |
Int. Motor
£m |
Other
£m |
Total Group
£m |
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 movement
in onerous loss component |
3.8 |
20.1 |
(1.5) |
2.7 |
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) |
|
UK Motor
£m |
UK Home
£m |
Int. Motor
£m |
Other
£m |
Total Group
£m |
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 |
Amounts
recognised through the income statement |
30 June 2023
£m |
30 June 2022
£m |
31 December 2022
£m |
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.
£m |
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
95th percentile |
-25.8 |
Risk adjustment decrease to
90th percentile |
+35.2 |
Risk
adjustment decrease to 85th 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 2023 |
30 June 2022 |
31 December 2022 |
|
£m |
£m |
£m |
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 |
|
|
|
|
- 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 flows |
Risk adjustment |
Total |
|
£m |
£m |
£m |
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 |
|
£m |
£m |
£m |
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 94th
percentile (FY 2022 and HY 2022: 95th 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
94th 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 flows |
Risk adjustment |
Total |
Liability for incurred claims |
£m |
£m |
£m |
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 |
£m |
£m |
£m |
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 flows |
Risk adjustment |
Total |
Liability
for incurred claims |
£m |
£m |
£m |
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 |
£m |
£m |
£m |
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 2023 (unaudited) |
30 June 2022 (restated, unaudited) |
31 December 2022 (restated, unaudited) |
|
1 year |
3 years |
5 years |
10 years |
1 year |
3 years |
5 years |
10 years |
1 year |
3 years |
5 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 (undiscounted) |
<1 year |
1-2 years |
2-3 years |
3-4 years |
4-5 years |
>5 years |
|
£m |
£m |
£m |
£m |
£m |
£m |
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 |
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
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 |
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
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 |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
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 2023
£m |
30 June 2022
£m |
31 December 2022
£m |
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 £1.6million
of intra-group interest (30 June 2022: £0.8million, 31 December
2022: £2.2 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 2023
£m |
30 June 2022
£m |
31 December 2022
£m |
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 £196.9 million (30 June
2022: £201.1 million, 31 December 2022: £196.4 million).
The table below shows how the financial assets held at fair
value have been measured using the fair value hierarchy:
|
30 June 2023 (unaudited) |
30 June 2022 |
31 December 2022 |
|
FVTPL
£m |
FVOCI
£m |
FVTPL
£m |
FVOCI
£m |
FVTPL
£m |
FVOCI
£m |
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 |
|
|
Level Three Investments |
30 June 2023
£m |
30 June 2022
£m |
31 December 2022
£m |
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
£m |
30 June 2022
£m |
31 December 2022
£m |
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
£m |
30 June 2022
£m |
31 December 2022
£m |
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 |
|
|
|
|
|
|
30 June 2023 |
30 June 2022 |
31 December 2022 |
|
Gross carrying amount
£m |
Expected credit loss allowance
£m |
Other loss allowance*1
£m |
Carrying amount
£m |
Carrying amount
£m |
Carrying
amount
£m |
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 Probability Weighting
30 June 2023 |
Scenario Probability Weighting
30 June 2022 |
Scenario Probability Weighting
31 December 2022 |
Peak Unemployment rate %
30 June 2023 |
Peak Unemployment rate %
30 June 2022 |
Peak Unemployment rate %
31 December 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 2023 |
Sensitivity (£m) |
30 June 2022 |
Sensitivity (£m) |
31 December 2022 |
Sensitivity (£m) |
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 Adjustments |
30 June 2023 (£m) |
30 June 2022 (£m) |
31 December 2022 (£m) |
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
2023 |
30 June
2022 |
31 December
2022 |
|
Stage 1
12- month ECL
£m |
Stage 2
Lifetime ECL
£m |
Stage 3
Lifetime ECL
£m |
Total
£m |
Total
£m |
Total
£m |
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 £108.6 million (H1 2022: £118.4
million, FY 2022: £256.4 million) represents total other revenue
and co-insurer profit commission and is disaggregated into the
segments included in note 4.
|
30 June 2023 (unaudited) |
|
UK Insurance
£m |
International Insurance
£m |
Admiral Money
£m |
Other
£m |
Total
£m |
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) |
|
UK Insurance
£m |
International Insurance
£m |
Admiral Loans
£m |
Other
£m |
Total
£m |
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) |
|
UK Insurance
£m |
International Insurance
£m |
Admiral Loans
£m |
Other
£m |
Total
£m |
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 2023
£m |
30 June 2022
£m |
31 December 2022
£m |
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
£m |
Other operating expenses
£m |
Total expenses
£m |
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
£m |
Other operating expenses
£m |
Total expenses
£m |
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
£m |
Other operating expenses
£m |
Total expenses
£m |
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 2023
£m |
30 June 2022
£m |
31 December 2022
£m |
|
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 2023
£m |
30 June 2022
£m |
31 December 2022
£m |
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)
|
Goodwill
£m |
Customer contracts and relationships
£m |
Software – Internally generated
£m |
Software – Other
£m |
Total
£m |
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
£m |
30 June 2022
£m |
31 December 2022
£m |
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
£22 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 £250,000,000 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 £200,000,000
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 £144,904,000 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 £305,096,000 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 £250,000,000.
12. Share Capital
12a. Dividends
Dividends were proposed, approved and paid as
follows.
|
Unaudited |
|
|
|
30 June
2023
£m |
30 June 2022
£m |
31 December
2022
£m |
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
£152 million) has been declared.
12b. Earnings per
share
|
|
|
|
|
|
|
|
|
Unaudited |
Restated, unaudited |
|
30 June 2023
£m |
30 June 2022
£m |
31 December 2022
£m |
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
operations |
57.5p |
60.7p |
95.0p |
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
£m |
30 June 2022
£m |
31 December 2022
£m |
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 |
|
Note |
30 June 2023
£m |
June 2022
£m |
31 December 2022
£m |
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 elimination1 |
|
— |
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) |
£m |
Note |
Core product |
Ancillary income |
Total gross |
Total, net 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) |
£m |
Note |
Core product |
Ancillary income |
Total gross |
Total, net of 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) |
£m |
Note |
Core product |
Ancillary income |
Total gross |
Total, net of 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) |
|
£m |
Note |
Core product |
Ancillary income1 |
Total gross |
Total, net of XoL reinsurance |
Core Product Net of XoL 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) |
£m |
Note |
Core product |
Ancillary income1 |
Total gross |
Total, net of XoL reinsurance |
Core Product Net of XoL 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) |
£m |
Note |
Core product |
Ancillary income1 |
Total gross |
Total, net of XoL reinsurance |
Core product, 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% |
1Ancillary 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 £119.5 million (H1 2022: £116.2 million; FY 2022: £236.8
million)
13d. Reconciliation of reported loss and expense
ratios: UK Household
30 June 2023 (unaudited) |
£m |
Note |
Core
product |
Ancillary income |
Total gross |
Total, net of XoL reinsurance |
Core Product 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) |
£m |
Note |
Core
product |
Ancillary income |
Total gross |
Total, net of XoL reinsurance |
Core Product 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) |
£m |
Note |
Core product |
Ancillary income |
Total gross |
Total, net of XoL
reinsurance |
Core product, 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 Written |
Total premiums written are the total forecast premiums, net of
forecast cancellations written in the underwriting year within the
Group, including co-insurance. It is reconciled to financial
statement line items in note 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 before tax |
Group profit before tax represents profit before tax |
Earnings per share |
Earnings per share represents the profit after tax attributable to
equity shareholders, divided by the weighted average number of
basic shares. |
Underwriting result (profit or loss) |
For each insurance business an underwriting result is
presented. This shows the insurance segment result before 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 margin |
This is the reported insurance segment underwriting result,
divided by insurance revenue net of excess of loss premiums
ceded. |
Quota share result |
The total result (ceded premiums minus ceded recoveries) from
contractual quota share arrangements, excluding the quota share
reinsurer’s share of share scheme expenses |
Insurance segment result |
The result of the insurance segment result, before tax, 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 Rate |
Effective tax
rate is defined as the approximate tax rate derived from dividing
the Group’s profit before tax by the tax charge going through the
income statement. It is a measure historically presented by the
Group and enables users to see how the tax cost incurred by the
Group compares over time and to current corporation tax rates. |
Additional Terminology
There are many other terms used in this report that are specific
to the Group or the markets in which it operates. These are defined
as follows:
Accident year |
The year in which an accident occurs, also referred to as the
earned basis. |
Actuarial best estimate |
The probability-weighted average of all future claims and cost
scenarios calculated using historical data, actuarial methods and
judgement. |
ASHE |
‘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 cycle |
The tendency for the insurance market to swing between highs and
lows of profitability over time, with the potential to influence
premium rates (also known as the “underwriting cycle”). |
Claims net of XoL reinsurance |
The cost of claims incurred in the period, less any claims 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 (‘XoL’) reinsurance |
Contractual arrangements whereby the Group transfers 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 revenue net of XoL |
The element of premium, less XoL reinsurance premium, earned in the
period. |
Insurance revenue |
Gross earned premium (excluding any co-insurer share) plus Other
insurance revenue |
Net promotor score |
NPS is currently measured based on a subset of customer 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 rate |
The discount rate used in calculation of personal injury claims
settlements in the UK. |
Other insurance revenue |
Revenue that is considered non-separable from the core 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 Order (PPO) |
A compensation award as part of a claims settlement that involves
making a series of annual payments to a claimant over their
remaining life to cover the costs of the care they will
require. |
Premium |
A series of payments are made by the policyholder, typically
monthly or annually, for part of or all of the duration of the
contract. Written premium refers to the total amount the
policyholder has contracted for, whereas earned premium refers to
the recognition of this premium over the life of the contract. |
Profit commission |
A clause found in some reinsurance and coinsurance agreements that
provides for profit sharing. 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 Entity (SPE) |
An entity that is created to accomplish a narrow and 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 ratio |
A projected actuarial best estimate loss ratio for a particular
accident year or underwriting year. |
Underwriting year |
The year in which an insurance policy was incepted. |
Underwriting year basis |
Also referred to as the written basis. Claims incurred are
allocated to the calendar year in which the policy was
underwritten. Underwriting year basis results are calculated on the
whole account (including co-insurance and reinsurance shares) and
include all premiums, claims, expenses incurred and other revenue
(for example instalment income and commission income relating to
the sale of products that are ancillary to the main insurance
policy) relating to policies incepting in the relevant underwriting
year. |
Written/Earned basis |
An insurance policy can be written in one calendar year 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:
- 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
- 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
Admiral (LSE:ADM)
Gráfico Histórico do Ativo
De Abr 2024 até Mai 2024
Admiral (LSE:ADM)
Gráfico Histórico do Ativo
De Mai 2023 até Mai 2024