Annual Financial Report
7 March 2024
Admiral Group reports solid profits and strong growth in
turnover
2023 Results Highlights
| |
2023 |
2022 |
% change vs. 2022 |
| |
|
|
|
| Group profit
before tax i |
£442.8m |
£361.2m |
+23% |
| Earnings per
share i |
111.2p |
95.4p |
+17% |
| |
|
|
|
| Dividend per
share |
103.0p |
112.0p |
-8% |
| Special
dividend per share from sale of Penguin Portals comparison
businesses |
- |
45.0p |
nm |
| Return on
equity i,ii |
36% |
29% |
+7pts |
| |
|
|
|
| Group
turnoverii |
£4.81bn |
£3.68bn |
+31% |
| Insurance
revenue |
£3.49bn |
£2.96bn |
+18% |
| |
|
|
|
| Group
customersii,iii |
9.73m |
9.20m |
+6% |
| UK insurance
customersii |
7.39m |
6.96m |
+6% |
| International
insurance customersii |
2.17m |
2.08m |
+4% |
| Admiral Money
gross loans balances |
£0.96bn |
£0.89bn |
+8% |
| |
|
|
|
| Solvency ratio
(post-dividend) ii |
200% |
180% |
+20pts |
Over 10,000 employees each receive free share
awards worth up to £3,600 under the employee share scheme based on
the full year 2023 results.
Comment from Milena Mondini de Focatiis, Group Chief
Executive Officer:
“Admiral achieved another good set of results, within the
context of challenging market conditions, with Group profit of £443
million and a 31% rise in turnover. The addition of over 500,000
customers and improved loss ratios demonstrate our commitment to
strengthening and diversifying our business.
“Our 30th anniversary is a good opportunity to remind ourselves
of our growth story, from a Welsh startup to a £4.8 billion
business serving nearly ten million customers in five countries,
driven by technical competence and continuous innovation across
service, pricing, products, and distribution. Our core values of
prioritising customers and people remain unchanged.
“In 2023, we accelerated our UK diversification. We announced
the intention to acquire the renewal rights for RSA’s pet and home
insurance businesses, improved results in all our main lines of
business, and achieved double-digit growth in our electric vehicle
book, supporting customers in transitioning to green mobility.
“Despite global uncertainties, our outlook is positive,
benefitting from improved market conditions and a strengthened
position, thanks to the discipline we maintained in the last
year.
“I would like to thank our people for their hard work, and our
customers for continuing to support us, as I look forward to a
positive 2024.”
Comment from Mike Rogers, Group Chair:
“In my first year as Chair, I've personally witnessed the
Group's exceptional ability to adapt, evolve, and consistently
deliver results. This resilience is a testament to our deliberate
financial discipline and strategic foresight.
“In the face of high inflation, Admiral remained resolute in
ensuring peace of mind for our colleagues, customers, and
shareholders. We have confidence in our diversified portfolio,
agile business model, and unwavering commitment to achieving
optimal outcomes for our customers. These factors position us
strongly for continued success.”
Final Dividend
The Board has proposed a final dividend of 52.0 pence per share
(2022 final: 52.0 pence per share) representing a normal dividend
(65% of post-tax profits) of 35.4 pence per share and a special
dividend of 16.6 pence per share. The final dividend will be paid
on 7 June 2024. The ex-dividend date is 9 May 2024 and the record
date is 10 May 2024.
Management presentation
Analysts and investors will be able to access the Admiral Group
management presentation which commences at 10.30 GMT on Thursday 7
March 2024 by registering at the following link to attend the
presentation in person, or access the presentation live via webcast
or conference call: 2023 Full Year 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).
Investors and Analysts: Admiral Group plc
Diane
Michelberger Diane.Michelberger@admiralgroup.co.uk
Media: Admiral Group plc
Claire Foster
Claire.Foster2@admiralgroup.co.uk
Media: FTI Consulting
Edward Berry
+44
(0) 7703 330 199
Tom Blackwell
+44
(0) 7747 113 919
Chair Statement
As I reflect on the challenges and triumphs of the past year, I
am pleased to present my inaugural Chair statement for Admiral
Group. This was certainly a challenging year, with high inflation
and macro-economic uncertainty. Against this backdrop, Admiral
remained steadfast in its commitment to providing peace of mind for
our colleagues, customers and shareholders. Having worked in
the insurance industry for a number of years, I can say that there
is an authenticity of culture and strong commercial thinking at
Admiral. The pace and passion for better consumer outcomes is
infectious.
Exceptional leadership in difficult times
Milena and her Executive team have exhibited exceptional
leadership throughout a challenging period within the industry and
economic cycle. Our customers, suppliers, colleagues and
shareholders have all endured a very demanding year – our ability
to not only weather these storms, but to adapt and grow is a
testament to the collective strength and strategic foresight of our
management team.
Resilience in performance
Admiral’s vision to help more people look after their future is
evident in the strong 2023 performance. The Group demonstrated its
traditional ability to adapt, evolve, and deliver results. This
resilience is no accident; it reflects our financial discipline and
longstanding commitment to looking after our people and customers;
thereby safeguarding our shareholders' interests and ensuring the
sustained success of Admiral Group.
Admiral retains outstanding competitive advantage in the UK
motor market: defending and extending this remains our number one
priority.
We are also mindful of our opportunity to leverage our brand,
capabilities and customer relationships into new products and
markets.
Presently, we cater to the needs of nearly ten million customers
across five countries. We have made good progress in Admiral Money
and Household, Pet, Travel and Van insurance in the UK, along with
our European franchises. We believe that diversifying our income
streams where we have competitive advantage will add significant
shareholder value.
Green transition
Our commitment to sustainability remains strong. Businesses, now
more than ever, play a critical role in the transition to a greener
economy. Admiral recognises this responsibility and underscores its
commitment in our latest Sustainability Report. Our journey toward
a greener future is not just a reflection of corporate
responsibility but a strategic imperative reflected in the Group’s
Net Zero ambition. From supporting our customers in the adoption of
electric vehicles to using renewable energy in our sites,
sustainability is becoming embedded throughout the business.
30 years of growth
None of the Group’s achievements would be possible without the
dedication and resilience of our thousands of colleagues worldwide.
Their energy, adaptability, and commitment have been the driving
force behind Admiral's success. From Cardiff to Rome, their
commitment to each other and our customers is the beating heart of
our organisation.
This year marked a significant milestone as Admiral celebrated
its 30th anniversary. The insurance industry and the nature of work
have evolved since Admiral’s inception in 1993, and the Group has
consistently adapted to remain a leader in the field.
I extend my thanks to Annette Court who joined the Board in 2012
and was appointed Chair in 2017. Annette guided the management team
through the transition from a founder-led business, strengthening
leadership development and succession, helping the business
navigate regulatory, economic, and global challenges.
We also fondly remember Jean Park, who retired from the Board
earlier this year and sadly passed away soon after. Jean's
contributions, particularly as the Chair of the Group Risk
Committee and Senior Independent Director, were invaluable. Her
legacy of steadfast support and wise counsel will be greatly
missed. I welcome the addition of Fiona Muldoon to the Board.
Fiona enhances our collective expertise and strengthens our
customer-centric approach.
Staying true to our values
While the industry has undergone changes, Admiral's core values
remain.
Looking ahead, we remain optimistic about the future. The
Group’s strategic roadmap is designed to drive long-term value for
our shareholders. We are confident that our diversified portfolio,
agile business model, and unwavering commitment to achieve the best
outcomes for our customers, will position us for continued
success.
I extend my gratitude to the Board, management team, and
colleagues for their dedication and support. Together, we will
continue to shape the future and continue our journey of sustained
growth and success.
Mike Rogers
Group Chair
6 March 2024
Group Chief Executive Officer’s Review
2023 was a strong year
In the context of challenging market conditions, we reported
another set of solid results with strong Group profit of £443
million and turnover up 31%. We welcomed more than 500,000
additional customers across the Group, an increase of 6% and
substantially improved our loss ratios, while continuing to
strengthen and diversify our business.
Over the past couple of years, the industry was hit by the worst
inflation in recent history and we faced a cost-of-living crisis in
the UK. This had a negative impact on our customers and our people,
who needed more support too.
Once again, we maintained pricing discipline and acted ahead of
the market to adapt to these trends. We continued to build on our
historical strengths and to look after our customers and our
people, whilst at the same time making positive progress on our
strategic objectives.
The combination of these three things has left us well placed to
achieve further growth, increase underwriting margins and better
provide for more customers’ needs.
Celebrating 30 years together
Our 30th anniversary served as a great reminder to
reflect on Admiral’s journey. From a small start-up in Wales, the
Admiral team built a £4.8 billion business catering to over nine
million customers across five countries. We became the market
leader in UK Motor insurance, with cumulative profits of around £7
billion over our 30 years and a dividend payout ratio of around 90%
for our shareholders over the last few years. We continued our
historical trend of strong capital efficiency and a return on
equity of 36% in 2023. This is a growth story fueled by a strong
combination of core technical competence and continuous innovation
in every part of the value chain: service, pricing, products and
distribution.
Whilst so much has changed, I am proud that so much has also
stayed the same. Our core values of putting our customers and
people first and enjoying what we do are as true today as they were
in 1993.
A year of two halves
Something else that sets us apart is our ability to focus on the
long term whilst being pragmatic in how we steer the business in
different parts of the insurance cycle. We do not forego difficult
decisions for short term targets. This has been a year of two
halves, and our approach serves as a perfect example of this
mindset.
In January it felt like we were standing at the foot of a
mountain. We knew we had a steep climb ahead of us. As we entered
2023, we were still helping customers with the freeze events of
2022. The year began with a spike in inflation, which persisted,
and the onset of new supply chain concerns.
As in 2022, we acted fast. We continued to increase premiums
ahead of the market to account for inflation, even if this meant a
further reduction of our UK Motor book, which was 7% down year on
year at the end of June (albeit this reduction was more than
compensated for by growth in other parts of the Group).
After a few challenging months we reached the summit of the
mountain and started to get comfortable with our pricing
levels, but it still felt like we needed a stronger
foothold amidst the macro-economic uncertainty.
As the summer arrived, we started to have a better outlook and a
clear sight of the downward path. Inflation and claims trends
started to stabilise. As the rest of the market followed by
increasing their premiums, our competitiveness and our retention
improved and in the second half of the year we reversed our loss of
policies in UK Motor.
Our strategic progress
One of Admiral’s historical characteristics is to navigate the
ups and downs of the insurance cycle well, together with continuing
to enhance our capabilities and preparing for the next climb. This
year we made strong progress in all of our three core strategic
pillars: Admiral 2.0, business diversification and motor
evolution.
Customer experience and outcomes have remained our primary
focus, including embracing the new Consumer Duty act in the UK.
Something I’ve been particularly proud of was the smooth
implementation of some large technology delivery projects,
including Guidewire claims systems for our UK customers and a new
platform for lending. We completed the transformation to scaled
agile across all our businesses, materially reducing the cost of
technology change.
We continued to diversify the business with the number of
policies beyond UK Motor up 12% and now accounting for almost half
of total Group customers. It has been pleasing to see, despite the
challenging market conditions, that all our businesses older than 3
years improved their results.
It wasn’t only organic growth that we achieved in 2023. We
accelerated our diversification strategy in the UK announcing our
intention to acquire the renewal rights for RSA’s pet and home
direct insurance businesses, under the More Than brand. It marked
our first acquisition of relevant size but more importantly, the
opportunity was a perfect fit with our strategy.
We achieved double-digit growth in our electric vehicle book,
supporting more of our customers to transition to green mobility,
and through Veygo we are offering differentiated propositions to
customers to meet their evolving mobility needs.
Our people
It was another memorable year of accolades for our
culture. Not only were we voted as the number one Best Company
to work for in the UK and recognised as a diversity leader in
Europe, we were also ranked 13th globally as one of the
World’s Best Workplaces™ by 2023 Great Place to Work®. We now have
over 13,000 amazing colleagues and we celebrated Admiral’s
30th birthday together with the first edition of the
Admiral Games sporting event.
Together, we also stepped up our contribution to ‘employability’
supporting around 2,000 people to find new jobs and volunteering
over 14,000 impact hours.
2024 and beyond
Despite persistent geopolitical and macro-economic uncertainty,
our outlook is more positive. We are benefiting from better market
conditions and a stronger position, thanks to the discipline we
maintained over the past year.
I am always mindful that the descent from a mountain can be more
dangerous than the climb up. There is no room for complacency or
distractions. We will focus on every single step, with clear
priorities, strong execution and continuing to leverage on our
historical competencies.
We are well positioned for further growth and diversification.
Assuming no unforeseen market disruptions, I am confident that we
should expect stronger underwriting performance across all our
geographies. And in the long term, I look forward to seeing Admiral
celebrate another 30 years of success.
Milena Mondini de Focatiis
Group Chief Executive Officer
6 March 2024
Group Chief Financial Officer’s Review
The past few years have surely been some of the most challenging
in the Group’s 30-year history - exiting the pandemic into two
heavily inflationary years leading to tough conditions for the
industry (and of course for our customers). And that’s not to
mention several major UK regulatory changes in the past couple of
years - well navigated by our teams.
Our clear goal for 2023 was to significantly improve underlying
insurance results and it’s very positive to see clear evidence of
that emerging through the year. I’ve been very satisfied with the
disciplined approach taken across the Group, even if that resulted
in a shrinking customer base for a period in the UK motor
business.
The 2023 numbers are the first full year results reported under
the major new insurance accounting standard, IFRS 17. I want to
repeat my huge thanks to the team involved in getting the Group
ready to produce these results, which was definitely no small
achievement A really great team effort!
As usual I’ll begin with a quick review of the group profit
versus last year*:
|
£m |
IFRS 17
2023 |
IFRS 17
2022 |
Change v 2022 |
IFRS 4
2022 |
| |
|
|
|
|
| UK Insurance |
597 |
510 |
+87 |
616 |
| Europe Insurance
(motor & other lines) |
2 |
(20) |
+22 |
(5) |
| US Insurance |
(20) |
(36) |
+16 |
(49) |
| Admiral Money |
10 |
2 |
+8 |
2 |
| Admiral
Pioneer |
(16) |
(14) |
(2) |
(16) |
| Share scheme
cost |
(54) |
(52) |
(2) |
(52) |
| Other costs |
(76) |
(29) |
(47) |
(27) |
| Pre-tax
profit |
443 |
361 |
+82 |
469 |
*See important footnote below on the basis of preparation of
the 2022 IFRS 17 numbers. The original IFRS 4 numbers are also
shown.
Considering the impact of the lower profitability of the 2021/22
years is still an important factor in the 2023 result, the near
£600 million profit for the main business was very positive. Only
three years have seen higher UK profit and two of those were very
impacted by reduced frequency during the pandemic. Critically the
impact of significant price increases over 2022 and 2023 has led to
much improved underwriting year results which will feed into the
results over the next few years. The business is well placed moving
into 2024 too.
The UK Household business continued to grow and delivered a
profit of around £8 million, benefitting from reinsurer profit
commission related to older years. Price increases led to higher
average premiums which should improve margins as we head into
2024.
Outside the UK our businesses substantially improved their
combined result compared to 2022, with the European businesses
returning to overall profit (despite continuing to invest in new
products beyond motor and diversified distribution within motor).
In the US, whilst the reported loss was still not small, underlying
results showed sharp improvement year-on-year thanks to the strong
actions of our team there.
And a few observations on the other lines:
- Admiral Money’s £10 million profit
was a clear highlight; the team took a cautious approach to volume
through the year and paused growth in the second half of the year
to focus on high quality risk selection.
We’re very comfortable with arrears trends and our cautious
credit loss provision and the business is well set to restart
growth in 2024.
- In Admiral Pioneer, the tremendous
growth and continued steps forward in product in Veygo stood out,
though one particularly large claim impacted the bottom line.
Pioneer continues to invest in testing its small commercial
insurance business line.
- The cost of the Group’s share schemes was basically in line
with the previous year, but other overheads and charges increased
fairly notably. There are a number of factors explaining the
increase, many of which shouldn’t be repeated in 2024 (e.g. M&A
project fees, adverse currency movement, costs to settle a historic
Italian tax matter). Fuller details later in the report. I
definitely expect a much lower number in 2024 (barring anything
unexpected).
More Than acquisition
As mentioned through the report, Admiral’s first significant
acquisition will complete during H1 2024. We will fund the upfront
payment of £82.5 million from free cash.
As the acquisition is entirely of intangible assets with no new
capital raised to fund it, the transaction will result in a
reduction to the Group’s solvency ratio of around 10 points. Given
the Group’s very strong capital position, this is comfortably
absorbed. More details on the accounting will feature in 2024’s
accounts.
Internal model
The Group has been developing an internal model to calculate its
solvency capital requirement (SCR) in a way that reflects Admiral’s
risk profile more accurately than the standard formula and allows
management to better incorporate capital considerations into
business decisions. The model will calculate the SCR for the
Group’s main UK lines of businesses and for most of market
risk.
Progress to application and approval by the Group’s two main
prudential regulators has been slower than we’d have liked, though
huge effort from our team has gone, and continues to go into the
project. We expect to enter the regulatory pre-application process
soon and will then hopefully have a clear path to application and
approval thereafter. It’s too early to give concrete information on
the exact timing of the application or likely financial outcome of
the process and more information will follow at the appropriate
time.
Dilution
Starting in 2024 we will make a change to the way we provide
shares to the Group’s employee share schemes. Historically we’ve
issued new shares to the trusts each year, mindful of a 10% rolling
ten-year cap. We will no longer dilute shareholders to fund the
share schemes, initially (probably for 2024 and 2025) making use of
shares already within the trusts and thereafter buying shares in
the market, funded through a reduction in special dividend.
This change will increase earnings per share by around 1% per year
from now on compared to our previous approach.
Wrap-up
Whilst the current year reported profit won’t break many
records, 2023 was clearly a year when the strong actions taken
since early 2022 started to bear fruit. We enter 2024 with much
improved margins across our insurance businesses and a strong
position in Admiral Money. I look forward to seeing the
improvements start to feed through into the reported results in
2024.
Geraint Jones
Chief Financial Officer
6 March 2024
A note on the 2022 IFRS 17
comparatives: As explained more fully later in the report, the
restated 2022 IFRS 17 insurance profits are lower than the
originally reported IFRS4 numbers. This is due to differences in
the movements in reserve strength or risk adjustment position over
2022 under each standard.
2023 Group overview
|
£m |
2023 |
2022
(restated)*1 |
% change vs. 2022*1*5 |
|
Group turnover (£bn) *2 |
4.81 |
3.68 |
+31% |
|
Net insurance and investment result |
363.1 |
207.5 |
+75% |
| Net interest
income from financial services |
68.1 |
46.1 |
+48% |
| Other income
and expenses |
31.7 |
119.6 |
-73% |
|
Operating profit*1 |
462.9 |
373.2 |
+24% |
| Group
profit before tax*1 |
442.8 |
361.2 |
+23% |
|
|
|
|
|
|
Analysis of profit |
|
|
|
| UK
Insurance |
596.5 |
509.7 |
+17% |
|
International Insurance |
(18.0) |
(56.2) |
Nm |
|
International Insurance – European Motor |
6.1 |
(16.5) |
Nm |
|
International Insurance – US Motor |
(19.6) |
(36.4) |
Nm |
|
International Insurance – Other |
(4.5) |
(3.3) |
Nm |
|
Admiral Money |
10.2 |
2.1 |
+386% |
| Other |
(145.9) |
(94.4) |
-55% |
| Group
profit before tax*1 |
442.8 |
361.2 |
+23% |
|
|
|
|
|
| Key
metrics |
|
|
|
| Reported Group
loss ratio*1*2 *3 |
63.9% |
70.6% |
-7pts |
| Reported Group
expense ratio*1*2 *3 |
24.8% |
26.2% |
-1pts |
| Reported Group
combined ratio*1 *2*3 |
88.7% |
96.8% |
-8pts |
| Insurance
service margin*2 *3 |
10.2% |
7.4% |
+3pts |
| Customer
numbers (million)*2*4 |
9.73m |
9.20m |
+6% |
| |
|
|
|
| Earnings per
share *1 |
111.2p |
95.4p |
+17% |
| Dividend per
share |
103.0p |
112.0p |
-8% |
| Special
dividend from sale of Penguin Portals |
- |
45.0p |
Nm |
| Return on
equity*1*2 |
36.0% |
29.4% |
+7pts |
|
Solvency ratio*2 |
200% |
180% |
+20pts |
*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, net of excess of loss reinsurance plus revenue
from underwritten ancillaries, an allocation of instalment and
administration fees/related commissions. See glossary for an
explanation of the ratios and Appendix 1a for a reconciliation of
reported loss and expense ratios, and insurance service margin, to
the financial statements.
*4 2022 Customer numbers restated – refer to the end of the
report for definition and explanation.
*5 For % change vs 2022, + shows favourable movements, - shows
unfavourable movements. Nm – not meaningful.
Group Highlights
Admiral reports another solid set of results in
2023 against a backdrop of continued elevated levels of claims
inflation and resulting significant rate increases. Highlights of
the Group’s results for 2023 are as follows:
-
Businesses across the Group grew strongly in 2023, with customer
numbers up 6% and turnover up significantly more at 31%
year-on-year:
- UK Motor customers
were broadly flat at the end of 2023 having fallen in the first
half. Market price increases accelerated relative to Admiral in the
second half, leading to improved competitiveness and a return to
growth
- UK Household grew
turnover by 33% as a result of an increase in customers of 12% and
continued increases in average premium. Including Travel Insurance,
(which reported its first small profit), and Pet Insurance, overall
UK insurance customers grew by 6%
- Outside the UK,
International Insurance customer numbers increased by 4%, made up
of a 7% increase in Europe and a reduction in the US. Increases in
average premiums to reflect the level of claims inflation led to a
growth in turnover of 12%
- Admiral Money has
employed a controlled approach to growth, with a total loans
balance at the year end of £0.96 billion, 8% growth since December
2022 and slightly lower than the HY 2023 position.
-
Group pre-tax profit was £443 million, 23% higher than 2022,
restated on an IFRS 17 basis:
-
UK Motor insurance profit was £593 million, 13% higher than 2022
(£525 million) as the significant increases in average premium over
the last year started to earn through, as well as higher investment
income due to the higher interest rate environment
-
UK Household reported a profit of £8 million (2022: loss of £11
million), with 2023 less impacted by severe weather events, and
benefitting from the positive impact of a commutation of quota
share arrangements on prior underwriting years
-
The International Insurance business reported a notably lower loss
of £18 million (2022: £56 million):
-
The EU Motor business returned to a profit of £6 million for the
year (2022: loss of £16 million), as a result of a lower current
year combined ratio arising from higher average premiums and small
releases on prior underwriting years
-
The result in the US also improved from a loss of £36 million in
2022 to a loss of £20 million in 2023, following actions taken to
improve the underwriting result through large price increases and a
focus on reducing costs.
-
Admiral Money reported a higher profit of £10 million (2022: £2
million), the increase in the average loans portfolio year-on-year
driving the positive result through increased net interest
income
-
Other Group costs increased to £146 million (2022: £94 million),
the adverse movement driven by higher central costs due to a number
of one-off items, as well as higher business development costs and
finance charges.
Earnings per share
Earnings per share for 2023 is 111.2 pence (2022: 95.4 pence,
restated on an IFRS 17 basis). The increase from 2022 is aligned to
the increase in pre-tax profit above, offset partly by a higher
effective tax rate, with the increase in the UK corporation tax
rate to 25% (from 19%) from 1 April 2023 being a significant driver
of the higher effective rate.
Return on equity
The Group’s return on equity was 36% in 2023, 7 points higher
than the restated 29% for 2022. Average equity for 2023 is lower
than 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
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 proposed a final dividend of 52.0 pence per share
(approximately £156 million) split as follows:
- 35.4 pence per share normal dividend
- A special dividend of 16.6 pence per share
The 2023 final dividend reflects a pay-out ratio of 97% of
second half earnings per share. 52.0 pence per share is in line
with the final 2022 dividend (52.0 pence per share).
The total 2023 dividend, including the interim dividend of 51.0
pence per share, declared with the Group’s interim 2023 results is
103.0 pence per share, 8% lower than the 112.0 pence per share paid
in 2022.
The total 2022 dividend also included the final additional
special dividend of 45.0 pence per share arising from the phased
return to shareholders of the proceeds from the sale of the Penguin
Portals comparison businesses which completed in 2021. The total
2022 dividend was 157.0 pence per share.
The 2023 final dividend payment date is 7 June 2024, ex-dividend
date 9 May 2024 and record date 10 May 2024.
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, the 2022 comparative income
statement and the balance sheet as at 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 31
December 2023 are compared to the 31 December 2022 comparatives
which have been restated under IFRS 17.
IFRS 17 reported profits for 2022 are lower than the previously
reported IFRS 4 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 the second half of the year. 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.
Note 1 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.
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 Admiral Pioneer and other central
costs
Economic backdrop
Global inflation continued to impact claims inflation across
Admiral’s markets in 2023, although with some positive signs of
improvement in the second half of the year, particularly in the
Group’s main UK market.
The main drivers of this claims inflation continue to be higher
repair costs, longer repair timescales and high 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 stabilised in 2023
with inflation easing in the latter part of the year.
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. UK Motor customers
were broadly flat year-on-year at the end of 2023, having slowed in
the first half as a result of price increases ahead of the market
since 2022, offset by growth during the second half of the year as
Admiral increased prices at a slower rate than the market. The
Group continues to set claims reserves cautiously.
Admiral Money grew its consumer loans book year-on-year, though
the portfolio reduced in size in the second half due to a prudent
approach reflecting the macroeconomic environment and potential
financial impact on consumers. The business continues to hold
appropriately cautious provisions for credit losses.
UK Insurance Review – Cristina Nestares, CEO UK
Insurance
2023 was a more encouraging year after a difficult 2022 for the
industry. Inflationary pressures began to stabilise and our early
and strong pricing response positions the business for a robust
improvement in results.
Product proposition and pricing enhancements and the Group’s
commitment to helping more people to look after their future, led
to the growth of the UK customer base by 6% while achieving a
Trustpilot rating of 4.4 (one of the best in the industry).
Further, to remain competitively priced, we continued to focus on
improving operational efficiencies and sustaining our leading
position in claims management.
The cost-of-living crisis has created a lot of pressure for our
people and in addition to the energy support payments and package
improvements in 2022, we officially recognised that we were paying
our people the real living wage by signing up to the Real Living
Wage Foundation in 2023.
Our award winning culture was again recognised by being placed
in the Top 10 Great Places to Work survey and number three for
Great Places to Work for women. A feature of our culture throughout
our history is to support our communities and in 2023 our teams
provided over 14,000 impact hours and helped over a thousand people
into work or helped them to gain new skills with funding and
support for our community partners.
We’re very pleased that our motor book has returned to growth in
the last six months of 2023, after 12 months of contraction
following our disciplined approach of strong price increases to
offset the impact of inflation. Our relatively early pricing
response led to a fall in our competitiveness and market share in
the second half of 2022 and first half of 2023. We recognise that
the market moves in cycles and there are times when it’s better to
protect margin at the expense of growth, with a view to capturing
volume when the market opportunity arises.
Inflation remained elevated compared to pre-pandemic years.
Supply chain pressures across the global repair network led to
slower damage repair times during 2022 and early 2023, resulting in
service pressures across the industry. In response, Admiral
leveraged our scale and strong working relationships with our
repair network partners to counter these effects, significantly
improving leading to good improvements in repair times and easing
service challenges faced by our teams. Overall, damage inflation
appears to have moderated towards the end of the year from the
levels seen during 2022, but higher wage inflation is likely to
feed into bodily injury claims over time, which we have provided
for in our reserves.
Beyond motor, our diversification businesses continued to show
growth and deliver against key objectives. Our strong multi-product
proposition and retention performance supported further growth in
our Household insurance business, despite unprecedented rate
increases during the year to offset inflation pressures. Enhanced
pricing capabilities and improvements to the Household proposition
has established a great platform to capitalise on future
opportunities. The refreshed Pet proposition that was relaunched in
late 2022 appears to resonate with our customers and the book has
grown strongly (albeit from a low base). The acquisition of the
More Than Pet and Household renewal rights from Royal Sun Alliance
(RSA) will give a further boost to these businesses, significantly
accelerating our growth ambitions for Pet.
Our Travel business has bounced back very well post-pandemic
with record sales volumes and a growing renewal book, and reports a
profit for the first time.
To sustain our competitiveness and operational resilience, we’ve
continued to invest to refresh our technology estate and transform
our channel and distribution capabilities. During the year, a key
pillar of the strategy was the migration of over 6.5 million
customer risks to a new policy and billing centre on Guidewire,
which I’m proud to say was successfully completed.
2023 will be defined as the key turning point in the recent
challenging insurance cycle and I believe we’re well positioned
with a strong team and good fundamentals to capture market
opportunities for profitable growth in 2024 and further earnings
momentum.
UK Insurance financial performance
|
£m |
2023 |
2022
(restated) |
|
Turnover*1*2 |
3,776.0 |
2,784.3 |
|
Total premiums written*1*3 |
3,502.6 |
2,555.0 |
|
Insurance revenue |
2,596.9 |
2,174.1 |
|
Underwriting result including net investment
income*1 |
438.6 |
301.6 |
|
Co-insurer profit commission and net other revenue |
157.9 |
208.1 |
|
UK Insurance profit before
tax*1 |
596.5 |
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 |
2023 |
2022
(restated) |
|
Motor |
593.3 |
524.9 |
| Household |
7.9 |
(10.7) |
|
Travel and Pet |
(4.7) |
(4.5) |
|
UK Insurance profit before tax |
596.5 |
509.7 |
Key performance indicators
|
|
2023 |
2022 |
|
Vehicles insured at period end |
4.94m |
4.94m |
| Households
insured at period end |
1.76m |
1.58m |
|
Travel and Pet policies at period end |
0.69m |
0.44m |
|
Total UK Insurance customers |
7.39m |
6.96m |
Highlights for the UK Insurance business
include:
- In UK
Motor Insurance:
- Customer numbers
grew in the second half of the year, to finish at 4.94 million, in
line with a year earlier. Admiral’s price increases to account for
claims inflation in the second half of 2022 and early 2023 were
more significant than the wider market, but this gap closed over
the latter part of 2023. Turnover increased by 35% to £3.4 billion
from £2.5 billion
- Profit growth of
13% to £593 million (v £525 million) as the rate increases
implemented over the past year are now earning through, and the
higher interest yield environment results in increased investment
income.
- In UK Household
Insurance:
- Customer numbers
grew by 12% to 1.76 million (31 December 2022: 1.58 million). As in
Motor, price increases have led to higher average premiums which
contributed to a strong 33% increase in turnover
- Profit was £7.9
million (2022: loss of £10.7 million) as a result of less severe
impact of weather in 2023 compared to 2022, along with the benefit
of the commutation of quota share arrangements on prior
underwriting years.
UK Motor Insurance financial review
|
£m |
2023 |
2022
(restated) |
|
Turnover*1 |
3,371.8 |
2,493.0 |
|
Total premiums written*1*2*4 |
3,118.2 |
2,271.3 |
|
Gross earned premium*1 |
2,115.4 |
1,795.7 |
|
Gross other insurance revenue |
134.8 |
114.0 |
|
Insurance revenue |
2,250.2 |
1,909.7 |
|
Insurance revenue net of XoL*2 |
2,188.6 |
1,865.1 |
|
Insurance expenses*1*2*3 |
(451.2) |
(389.6) |
|
Insurance claims incurred net of XoL*2*5 |
(1,729.0) |
(1,596.0) |
| Insurance claims
releases net of XoL*2*5 |
392.8 |
327.2 |
|
Quota share reinsurance result*2*3 |
(16.8) |
95.2 |
|
Movement in onerous loss component net of
reinsurance*2 |
4.1 |
5.2 |
|
Underwriting
result*2 |
388.5 |
307.1 |
|
Investment income |
111.8 |
53.8 |
|
Net insurance finance expenses |
(58.2) |
(36.4) |
|
Net investment income |
53.6 |
17.4 |
|
Co-insurer profit commission |
76.5 |
127.5 |
|
Other net income |
74.7 |
72.9 |
|
UK Motor Insurance profit before
tax*1 |
593.3 |
524.9 |
*1 Alternative Performance Measures – refer to the end of
this report for definition and explanation
*2 Alternative Performance Measures – refer to Appendix 1 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
*5 XoL refers to Excess of Loss (non-proportional) reinsurance;
see glossary at end of report for further information
Key performance indicators
|
|
2023 |
2022
(restated) |
|
Reported Motor loss ratio*1*2 |
61.1% |
68.0% |
|
Reported Motor expense ratio*1*3 |
20.6% |
20.9% |
|
Reported Motor combined ratio*1*2 |
81.7% |
88.9% |
|
Reported Motor Insurance service margin*1*4 |
17.7% |
16.5% |
|
Core motor loss ratio before releases*1*5 |
87.0% |
95.7% |
|
Core motor claims releases *1*5 |
(20.2%) |
(20.0%) |
|
Core motor loss ratio*1*5 |
66.8% |
75.7% |
|
Core motor expense ratio*1*6 |
21.4% |
21.6% |
|
Core motor combined ratio*1 |
88.2% |
97.3% |
|
Core motor written expense ratio*1*7 |
17.8% |
20.8% |
|
Vehicles insured at period end*1 |
4.94m |
4.94m |
|
Other revenue per vehicle*8 |
£62 |
£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 Appendix 1b.
*3 Reported Motor expense ratio defined as insurance expenses
divided by insurance revenue, net of excess of loss reinsurance.
Reconciliation in Appendix 1b.
*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 Appendix 1b.
*6 Core motor expense ratio defined as insurance expenses
divided by core product insurance premium revenue, net of excess of
loss reinsurance. Reconciliation in Appendix 1b.
*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 increased by 13% to £593.3 million (2022: £524.9
million) as a result of a lower current period loss ratio as the
significant rate increases from late 2022 and early 2023 start to
earn through, as well as higher net investment income due to the
higher interest rate environment. This was partly offset by lower
quota share recoveries due to both the more favourable current
period loss ratio and continued loss ratio improvements on prior
underwriting years, and lower co-insurer profit commission.
By year end 2023, customer numbers were flat when compared to
the end of 2022, with growth in the second half of 2023 due to
market price increases resulting in Admiral becoming increasingly
competitive, after lower customers earlier in the year due to the
strong price increases implemented by Admiral ahead of the market
in late 2022 and early 2023 reflecting the inflationary
environment.
Gross earned premium at £2,115.4 million is 18% higher than 2022
(2022: £1,795.7 million), reflecting the significant increase in
average earned premium as the price increases over the last year
start to earn through.
The UK Motor core expense ratio decreased to 21.4% (2022:
21.6%), with the written expense ratio decreasing by 3 points to
17.8% (2022: 20.8%), as a result of the higher premiums noted
above. Insurance expenses are higher in 2023, driven by wage
increases, higher amortisation of intangible assets from the new
systems that are now in use, and a short-term increased cost of
claims handling as new claims systems were implemented.
The movement in onerous loss component reflects the movement in
the provision for projected claims costs, inclusive of risk
adjustment, on unearned premium. The onerous loss component at the
start and end of 2023 was small (less than £2 million), with
movements over the course of both years leading to immaterial
impacts in the income statement.
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. Used car price inflation has
stabilised, showing signs of slowing down in the second half of the
year, and repair times have also started to reduce resulting in
stabilising costs for replacement vehicles.
Average claims cost inflation for 2023 is approximately 10%,
with higher inflation in the first half of 2023, easing modestly in
the second half. Claims frequency was also slightly higher in 2023
compared to 2022 as a result of increased miles driven, although
remains below pre-Covid levels.
The longer-term impacts of inflation on bodily injury claims
remain uncertain. Admiral has not observed material changes in
inflation for bodily injury claims settled in 2023 when compared to
2022. However, an allowance in the best estimate reserve to reflect
the potential impacts of higher than historic levels of future wage
inflation on certain elements of large bodily injury claims
reserves, is maintained.
There is still a relatively high level of uncertainty within
motor claims across the market arising from inflation and the
future developments relating to both whiplash reforms and the Ogden
discount rate. The review of the Ogden discount rate is due to
start in mid-2024, with the new rate, and any change to
methodology, unlikely to be known until late 2024 or early 2025.
Admiral’s assumption for the Ogden discount rate within best
estimate reserves continues to be the prevailing rate of minus 0.25
per cent.
Admiral holds a significant and prudent risk adjustment above
best estimate reserves, which has reduced (93rd
percentile confidence level) when compared to the end of 2022
(95th percentile confidence level). The movement is in
line with expectations given the slightly less volatile
inflationary environment and a perceived lower likelihood of an
adverse movement in the Ogden discount rate, together with the
continued diversification of the business. Whilst the underlying
methods to calibrate the reserve risk distribution from which the
percentile is selected are consistent year on year, a number of
developments in the reserve risk modelling in 2023 result in a
slightly less volatile distribution than at the end of 2022.
Further information is included in notes 2, 3 and 5 to the
financial statements.
The core motor loss ratio has reduced to 66.8% (2022: 75.7%) as
a result of a lower current period loss ratio. Movements in the
current period loss ratio and prior year reserve releases were as
follows:
|
Core Motor loss
ratio*1 |
Core motor loss ratio before releases |
Impact of claims reserve releases |
Core motor loss ratio |
|
2022 |
95.7% |
(20.0%) |
75.7% |
|
Change in current period loss ratio |
(8.7%) |
— |
(8.7%) |
|
Change in claims reserve release |
— |
(0.2%) |
(0.2%) |
|
2023 |
87.0% |
(20.2%) |
66.8% |
*1 Reported motor loss ratio shown on a discounted basis,
excluding unwind of finance expenses.
The current period loss ratio improved by 8.7 points which can
be primarily attributed to higher average premium in the period
following significant price increases.
The benefit from prior period releases was flat at 20.2% (2022:
20.0%), with the absolute level of prior period releases increasing
by £65.6 million or 20% to £392.8 million, from £327.2 million. The
benefit includes both favourable development of the best estimate
reserve for prior period claims, and the movement in the risk
adjustment as set out above. Reserve releases as a percentage of
premium are heavily impacted by the 18% increase in earned premium
in the year.
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 |
2023 |
2022
(restated) |
|
2020 & prior |
2.3 |
(2.9) |
|
2021 |
(57.6) |
7.1 |
|
2022 |
8.2 |
91.0 |
|
2023 |
30.3 |
— |
|
Total |
(16.8) |
95.2 |
The adverse quota share result in 2023 is therefore driven
by:
- Lower recoveries of £30.3 million on
the 2023 underwriting year (UWY 2023) compared to £91.0 million
recoveries on the 2022 underwriting year (UWY 2022) in 2022 due to
the significantly improved loss ratio on UWY 2023 compared to UWY
2022
- A significant reversal of recoveries that had been previously
recognised on the 2021 underwriting year, as a result of favourable
developments in loss ratio.
Co-insurer profit commission
Co-insurer profit commission is lower in 2023 (£76.5 million)
compared to 2022 (£127.5 million). In 2022, a greater proportion of
the reserve releases were related to older underwriting years (2019
and prior) which have lower combined ratios, with the releases
therefore attracting higher profit commission. In addition, in 2023
no profit commission has been recognised on underwriting years 2021
and 2022 due to the current combined ratio positions on those
years.
Net investment income
Net investment income benefitted significantly from the higher
yield environment during 2023, increasing to £53.6 million from
£17.4 million in 2022. Investment income before insurance finance
expense more than doubled to £111.8 million (2022: £53.8 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 in the investments and cash section 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 2023 (£58.2 million;
2022 £36.4 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 2023
relating to claims incurred during 2022 and, to a slightly lesser
extent, 2023.
Other revenue
UK Motor Insurance Other revenue
|
£m |
2023 |
|
|
Within underwriting result |
Other net income |
Total |
|
Premium and revenue from additional products &
fees*1 |
107.8 |
89.4 |
197.2 |
|
Instalment income and administration fees*2 |
134.8 |
29.3 |
164.1 |
|
Other revenue |
242.6 |
118.7 |
361.3 |
| Claims costs and
allocated expenses*3 |
(70.0) |
(44.0) |
(114.0) |
|
Net other revenue |
172.6 |
74.7 |
247.3 |
|
Other revenue per vehicle*4 |
|
|
£62 |
|
Other revenue per vehicle net of internal costs |
|
|
£52 |
|
£m |
2022 (restated) |
|
|
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 co-insurance) 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 are 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.
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 IFRS 17, 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. The
remaining income from instalment income and fees, as well as income
from other non-underwritten ancillary products is presented in
other net income.
Overall contribution increased to £247.3 million (2022: £236.8
million), primarily as a result of increased instalment income
following an increase in the proportion of customers paying by
instalment and the increase in average premiums.
Other revenue was equivalent to £62 per vehicle (gross of
costs), with net other revenue per vehicle at £52 per vehicle, both
favourable compared to 2022 as a result of the above-mentioned
increases as well as a broadly flat customer base.
UK Household Insurance financial
review
|
£m |
2023 |
2022
(restated) |
|
Turnover*1 |
338.6 |
255.4 |
|
Total premiums written*1*2 |
318.8 |
245.7 |
|
Insurance revenue |
292.8 |
236.9 |
|
Insurance revenue net of XoL*1 |
275.3 |
222.8 |
|
Insurance expenses*1 |
(80.9) |
(70.0) |
|
Insurance claims incurred net of XoL*1 |
(199.8) |
(198.1) |
|
Insurance claims releases net of XoL*1 |
6.4 |
16.5 |
|
Underwriting result, net of XoL
reinsurance*1 |
1.0 |
(28.8) |
|
Quota share reinsurance result*1*3 |
(1.4) |
9.2 |
|
Underwriting result *1 |
(0.4) |
(19.6) |
|
Net insurance investment income |
1.6 |
1.2 |
|
Other income |
6.7 |
7.7 |
|
UK Household Insurance result before
tax*1 |
7.9 |
(10.7) |
*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
|
|
2023 |
2022
(restated) |
|
Reported Household loss ratio*1* |
70.2% |
81.5% |
| Reported
Household expense ratio*1* |
29.4% |
31.4% |
|
Reported Household combined ratio*1 |
99.6% |
112.9% |
|
Household insurance service margin |
(0.1%) |
(8.8%) |
|
Household loss ratio before releases |
72.6% |
88.9% |
|
Impact of severe weather and subsidence on reported loss
ratio*1 |
11.3% |
29.0% |
|
Impact of severe weather and subsidence on result before
tax*1 (£m) |
9.8 |
33.3 |
|
Households insured at period end (m) |
1.76 |
1.58 |
*1 Alternative Performance Measures – refer to the end of
this report for definition and explanation
The UK Household business enjoyed strong top line growth in 2023
with a 33% increase in turnover to £338.6 million (2022: £255.4
million) as a result of significant price increases in response to
higher claims inflation.
The number of households insured increased by 12% to just under
1.8 million with Admiral’s multicover offering contributing
strongly to the growth.
The result for the year also improved materially, with the
business delivering a profit of £7.9 million compared to a loss of
£10.7 million in 2022. The improvement was due to two factors:
- The impact of severe weather and
subsidence was significantly lower in 2023 than 2022. Whilst the
final quarter of 2023 saw a run of named storms which were the main
contributor to the £9.8 million weather impact in the year, 2022
was impacted by a significant winter freeze event which impacted
the prior year result by £33.3 million.
- The 2023 result
benefitted from a one-off recognition of reinsurer profit
commission relating to prior period following a commutation. This
benefit is recognised in the quota share reinsurance result, with
the prior period quota share result being negatively impacted by
the original de-recognition of that profit commission following
significant weather events.
The reported loss ratio for the period was 70.2%, increasing to
72.6% when excluding prior period releases which primarily reflect
the reduction in risk adjustment in the current period. The impact
of releases on the 2023 reported loss ratio (benefit of 2.4 points)
is lower than the prior period (benefit of 7.4 points) partly as a
result of an increase in the estimate of the ultimate cost of the
December 2022 freeze event.
The reported loss ratio - excluding prior period releases and
the impact of severe weather - for 2023 was 61.3%, marginally
higher than the equivalent ratio for 2022 of 59.9%. The impact of
higher claims inflation was largely matched by the increases in
average premium, which earned through in the second half of the
year and are expected to continue earning through into 2024.
Admiral’s expense ratio improved to 29.4%, (2022: 31.4%) with
the impact of continued investment in technology, more than offset
by increasing average premiums and the benefits of increased
scale.
The quota share result for the period was a loss of £1.4 million
(2022: £9.2 million profit). Despite the benefit from the one-off
recognition of reinsurer profit commission, the quota share result
was materially lower than 2022 as there was no repeat of the
recoveries made from reinsurers following the December 2022 freeze
event.
Overall, excluding the impact of severe weather, profit for the
period was £17.7 million, £4.9 million lower than 2022 (2022: £22.6
million), primarily as a result of the slightly higher attritional
loss ratio.
International Insurance
International Insurance – Costantino Moretti – CEO,
International Insurance
In 2023, markets continued to be challenging with high claims
severity inflation, and the Motor insurance industry has reported
high combined ratios. Within this context, we continued to
prioritise margin over growth and managed to achieve solid customer
and turnover growth, with average premiums finally growing in all
geographies.
Despite inflation decelerating compared to 2022 it remains high,
placing pressure on claims, so it is imperative to continue to stay
prudent and prioritise profitability.
The overall profit in Europe is a combined outcome of the
positive contribution from Italy and France, while Spain has
reported a loss. France and Italy are now both profitable, and we
will continue to grow the book with discipline and invest in
diversification (distribution in Italy; product with Household in
France). The Spanish result is a function of the unprecedented high
combined ratio of the Motor insurance industry, as well as
continued investment to build our distribution diversification
capabilities. We have taken strong action and have built good
foundations, which we believe will result in improved performance
in 2024.
The US has shown a strong improvement of all KPIs and has
reported a lower loss compared to last year. We are confident that
the actions taken will continue to have a positive impact and
contribute to move Elephant closer to breakeven.
Due to those improvements, Elephant did not require a capital
injection from the Group and we expect this will also be the case
in 2024. We have made good progress on assessing strategic options
and we are now deep diving on a short list of them, aiming to get
to a final decision in the first part of 2024.
I am grateful for the hard work of our employees who have made
our companies a Great Place to Work. I am also proud of the focus
we have put on helping our customers and supporting the communities
in which we operate. Well done to the team, as we look forward to a
positive 2024!
France – Pascal Gonzalvez – CEO, L’olivier
In 2023, L'olivier performed well in the context of challenging
market conditions. Amidst escalating inflation and sluggish market
volumes that fell short of projections, L’olivier navigated these
uncertainties by prioritising margin protection. This approach
inevitably moderated our growth trajectory, resulting in a 6%
year-on-year increase in our motor policy base up to 420,000
customers. Concurrently, our turnover saw a 15% increase to £219
million, bolstered by a robust average premium.
By proactively adjusting our pricing strategies ahead of
competitors, we saw favourable loss ratio development. This,
combined with stringent expense control and continuous enhancements
in operational efficiency, culminated in our fifth year of written
profits, achieving a robust 95% written combined ratio.
Looking ahead to 2024, L'olivier is set to further leverage our
commitment to digitalisation and artificial intelligence deployment
(for example, pushing 100% of new claims notification online). This
pivotal focus aims to serve our customers faster and enables better
service while increasing our cost efficiency.
We are also poised to expedite our product diversification with
further development in household insurance, continuing our 2023
trend when turnover grew by more than 100% (albeit from a low
base). This aligns with our ongoing strategy to enhance
cross-selling and our multi-product offering.
Finally, I would like to thank all L’olivier staff for their
energy, enthusiasm and great contribution to these good 2023
results.
Italy – Antonio Bagetta – CEO, ConTe
2023 was a positive year for ConTe, with continued focus on
sustainable growth: +20% revenue increase led by higher average
premiums (+13%) and customer growth (+7%). Market conditions have
been improving, following a challenging 2022 which saw the market
combined ratio increase to 108% and 128% for the direct channel.
These inflationary pressures, together with regulatory changes, led
direct competitors to raise prices materially.
Our key aim is to be a very profitable insurer in Italy through
advanced technologies and analytics. We strengthened our
fundamentals with a new data platform which improves the time to
market for analytics model releases.
Sustainability has been a cornerstone of our operations making
significant strides in being more efficient (4pp of written expense
ratio reduction), responding to customers’ needs and expectations,
investing in data capabilities and ensuring long
term-viability.
ConTe also achieved the highest NPS in the industry and the best
Trustpilot score for online insurance, largely reflecting our
excellent operational service levels.
Our people remained a key priority in 2023. We implemented
several wellbeing initiatives and increased our GPTW Trust index by
9 points to 87 in 2023. We were also awarded by Milano Finanza for
our innovative approach to people management, and in particular for
our Corporate Welfare, Employee Benefit and Family Care
Welfare.
It has been a year of operational successes, with sustainable
growth of the Italian business driven by higher average premium and
number of customers, continuing to strengthen our data and
technological innovation and the launch of new channels. In
addition, we continued to focus on our customers and our people,
and I would like to thank the ConTe team for their continued
commitment and hard work in 2023!
Spain – Sarah Harris – CEO, Admiral Seguros
Claims inflation was the major theme for the Spanish car
insurance industry in 2023. Q4 market results showed a market
combined ratioiv exceeding 100% for the first time in
two decades. Market price correction started early in the year and
accelerated in the second half; we expect this trend to continue
into 2024.
Admiral Seguros was not immune to this market context. Inflation
in the first two quarters was ahead of our expectation, putting
pressure on loss ratios for both the 2022 and 2023 underwriting
years. We took strong action, raising prices more than the market
across all channels with a focus on protecting margin. Q4 average
premium was up 16% vs a year earlier, despite a portfolio shift
towards lower-risk profiles. The increasing trend in income per
policy contributed to an improved expense ratio and sets the
business up well going into 2024.
With a more medium-term perspective, we continued to invest in
new distribution channels as routes to future scale. June saw the
successful launch of our digital insurance product for ING bank,
“Seguro de Auto NARANJA”. This has attracted positive feedback
about both the product and purchase experience. In the broker
channel, we reinforced our commercial management team and made
pleasing progress in underwriting. We improved productivity, and
enhanced our digital servicing platforms, increasing our digital
sales ratio by 30% becoming even more responsive to customer
needs.
For another consecutive year, we were voted 2nd Great
Place to Work in Spain, winning the special prize “Better for
People” in recognition of a collaborative and open team culture. I
would like to thank all of my colleagues for their hard work and
contribution during 2023.
US – Alberto Schiavon – CEO, Elephant
In 2023, Elephant materially improved its result with a reduced
loss of £20 million from £36 million in 2022, in line with our
commitment to turn around our financial performance and despite
very challenging market conditions with sustained severity
inflation. Our combined ratio decreased by around 9
pointsv (compared to an industry projection of
3.5vi points lower) driven by improvements in both our
loss and expense ratios.
Our expense ratio was 5 pointsvii better than 2022,
benefitting from efficiency initiatives (including a reduction in
headcount) and a more favourable acquisition market. The latter was
driven by reduced competition in a difficult market, as many
players lowered their growth appetite to protect their bottom line
while increasing rates.
Our loss ratio improved by 4 pointsviii as a result
of strong rating action and intentional mix shift towards lower
loss ratio segments and away from newer channels and states. We
increased base rates by an additional 38% in 2023, compared to
circa 16% across the top five players in our statesix.
Important to note is that the most recent underwriting quarters
continue to show improving results compared to prior ones, at the
same point of development. It remains early days but this is
promising.
Our significant rate increases over the last few years have led
to an 18% reduction in vehicles insured throughout 2023, but at a
substantially higher average premium, leading to an overall growth
in turnover of 1%.
I am very grateful to the Elephant team for the dedication, hard
work, and commitment in delivering excellent customer service,
modernising our technology stack, while improving our business
fundamentals at a much faster rate than the market.
International Insurance financial review
|
£m |
2023 |
2022
(restated) |
|
Turnover*1 |
894.9 |
795.9 |
|
Total premiums written*1*2 |
840.0 |
744.2 |
|
Insurance revenue |
842.6 |
750.0 |
|
Insurance revenue net of XoL*1 |
811.8 |
732.0 |
|
Insurance expenses*1 |
(249.4) |
(254.6) |
|
Insurance claims net of XoL*1 |
(565.2) |
(547.1) |
|
Underwriting result, net of
XoL*1 |
(2.8) |
(69.7) |
|
Quota share reinsurance result*1*3 |
(22.1) |
13.9 |
|
Movement in net onerous loss component |
0.6 |
(1.0) |
|
Underwriting result*1 |
(24.3) |
(56.8) |
|
Net investment income |
4.3 |
1.1 |
|
Net other revenue |
2.0 |
(0.5) |
|
International Insurance loss before
tax*1*4 |
(18.0) |
(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.
*4 Costs related to the settlement of a historic Italian tax
matter during 2023 are excluded from the International Insurance
result and presented within Group other costs, given that these are
not reflective of the underlying trading performance of the
International Insurance business.
Key performance
indicators
|
|
2023 |
2022
(restated) |
|
Loss ratio*1 |
69.6% |
74.7% |
|
Expense ratio*1 |
30.7% |
34.8% |
|
Combined ratio*1 |
100.3% |
109.5% |
|
Insurance service margin*1 |
(3.0%) |
(7.8%) |
|
Customers insured at period end*1 (million) |
2.17 |
2.08 |
*1 Alternative Performance Measures – refer to the end of
this report for definition and explanation
International Motor Insurance – Geographical
analysis*1
|
2023 |
Spain |
Italy |
France |
US |
Total |
|
Vehicles insured at period end |
0.45m |
1.04m |
0.42m |
0.19m |
2.10m |
|
Turnover (£m) |
121.8 |
272.4 |
219.1 |
271.2 |
884.5 |
|
|
|
|
|
|
|
|
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 |
2023 |
2022
(restated) |
|
European Motor |
6.1 |
(16.5) |
|
US Motor |
(19.6) |
(36.4) |
|
Other |
(4.5) |
(3.3) |
|
International Insurance loss before tax |
(18.0) |
(56.2) |
Admiral’s International insurance businesses continued to grow,
with customers increasing by 4% to 2.17 million (2022: 2.08
million) and turnover growth of 12% to £894.9 million (2022: £795.9
million).
The insurance service margin also improved to -3.0% (2022:
-7.8%), driven by an improved combined ratio. This, together with
increased investment income, resulted in a lower reported loss
before tax of £18.0 million (2022: £56.2 million).
The combined ratio improved to 100.3% (2022: 109.5%), due to the
combined effect of higher premiums, increased scale in the European
businesses, and a strong focus on expense efficiency in Europe as
well as a reduced cost base in the US. This resulted in the loss
ratio improving to 69.6% (2022: 74.7%) while the expense ratio
reduced to 30.7% (2022: 34.8%). Investment in diversification
continued with a focus on distribution in Italy and Spain, and
Household insurance in France. This will further facilitate the
long-term growth and profitability of these businesses.
The European insurance operations in Spain, Italy and France
insured 1.91 million vehicles at 31 December 2023 – 6% higher than
a year earlier (2022: 1.80 million). Motor turnover was up 17% to
£613.3 million (2022: £522.9 million), driven by strong price
increases and the larger book sizes. The combined European Motor
profit was £6.1 million (2022: loss of £16.5 million), an
improvement driven by higher average premium and an improved
expense ratio despite continued inflationary pressures. The
combined ratio reduced to 95.4% (2022: 104.2%).
Inflation remained high throughout 2023 and had a material
impact on the International results, driving increased market
premiums particularly in Italy, Spain and the US. Admiral continues
to focus on medium term profitability.
Admiral Seguros (Spain) grew its customer base by 3% to 0.45
million customers over the past year (2022: 0.43 million) despite
strong price increases in a competitive market with high claims
inflation. The business continues to focus on improving margins,
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,
increased vehicles insured by 7% to 1.04 million (2022: 0.97
million) and Motor turnover by 20% to £272.4 million (2022: £227.9
million) reflecting disciplined growth and price increases. The
business continued to focus on risk selection and expense reduction
as well as growth in the broker channel.
L’olivier (France) increased its customer base by 6% to 0.42
million (2022: 0.40 million). The business has focused on margin
protection in a difficult market with risk selection and loss ratio
improvements, alongside strong cost control and the development of
household insurance to leverage cross-selling opportunities and
further support future growth.
In the US, Admiral underwrites motor insurance through its
Elephant Auto business. After a disappointing 2022 and in a context
of high inflationary pressures, Elephant focused on materially
improving its underwriting result in 2023 with strong rating action
and cost reduction. The conscious decision to focus on improving
underwriting results led to a 18% decrease in the number of
vehicles insured to 0.19 million (2022: 0.24 million), a moderately
higher turnover of £271.2 million (2022: £268.5 million) and a
reduced loss before tax of £19.6 million (2022: loss of £36.4
million). In light of this early progress, the business did not
need further capital from the Group in 2023. Elephant will continue
to prioritise improving the loss ratio ahead of growth in the
immediate future.
Admiral Money
Scott Cargill – CEO, Admiral Money
I’m pleased to be able to say it has been a positive 2023 for
Admiral Money. Coming into the year we knew there would be
continued uncertainty with higher interest rates and inflation
impacting on the cost of living. I’m proud of how we have navigated
these uncertain times and I am absolutely delighted with our first
double digit profit of £10 million. I would also draw particular
attention to our cost income ratio which is below 40% for the first
time and which represents growing evidence of a likely long-term
competitive advantage.
Through the year we have continued to focus on high quality risk
selection and a controlled and conservative approach to growth. Our
on-balance sheet loan book at end of December stands at £0.96
billion, 8% growth since FY 2022 and slightly down on the HY 2023
position. Our net income of £66 million has increased by 49% from
2022, largely reflecting the higher average balances through the
year as well as margin improvements to provide risk resiliency.
We retain a firm focus on prime lending and are seeing a high
level of resilience from our customers despite inflation and higher
interest rates. Where loss experience has varied from our
expectation, in true Admiral fashion we have adapted our approach
quickly and decisively and have remained well below our IFRS 9
expected credit loss (ECL) reserve position. Our NPS score of 68
and Trustpilot score of 4.5 provide continued evidence that our
commitment to being an efficient prime focused lender, providing
certainty and transparency to UK customers on their lending needs
is a successful formula.
2023 has also been a year of significant and successful
investment in our capabilities, particularly in technology and
data. We are especially looking forward to seeing the benefits of
our new origination platform in 2024. This new technology also
provides us with options to broaden our participation in the
consumer lending market in the future.
We have also completed the delivery of several enablers for
realising our goal to be the lender of choice for Admiral insurance
customers. This is a key pillar of our strategy and where we have
the most significant and sustained competitive advantage. Over 50%
of our new customer flows in 2023 came from either current or
recent Admiral Insurance customers.
Looking to 2024, we enter the year with good momentum. We expect
to benefit from our strong position in a growing market as we see a
continued shift to comparison and credit score marketplaces. I
expect to see further growth in our loan balances towards the £1.2
billion range during 2024, assuming current economic conditions.
Combined with a tightly controlled cost base, we should see
continued improvements in the economics in the coming years.
I’d like to finish by thanking our customers and all of my
colleagues and wish everyone the best for 2024.
Admiral Money financial review
|
£m |
2023 |
2022 |
|
Total interest income |
94.7 |
58.7 |
| Interest
expense*1 |
(28.3) |
(14.1) |
| Net
interest income |
66.4 |
44.6 |
| Other fee
income |
0.1 |
0.3 |
| Total
income |
66.5 |
44.9 |
| Credit loss
charge |
(33.4) |
(20.6) |
| Expenses |
(22.9) |
(22.2) |
|
Admiral Money profit before
tax*2 |
10.2 |
2.1 |
*1 Includes £1.5 million intra-group
interest expense (2022: £1.5 million).
*2 Alternative
Performance Measures – refer to the end of this report for
definition and explanation
Admiral Money distributes and underwrites unsecured personal
loans and car finance products for UK consumers through price
comparison, credit scoring applications and direct channels. The
proposition is focused on offering real rates to provide customers
with upfront transparency and certainty.
Admiral Money recorded a pre-tax profit of £10.2 million in 2023
(improved from £2.1 million profit in 2022), continuing the
positive trajectory seen since 2020.
Gross loan balances grew 8% to £0.96 billion (2022: £0.89
billion), with a £81.7 million (2022: £63.7 million) credit loss
provision, leading to a net loan balance of £875.1 million (2022:
£823.7 million). The increase in average portfolio size year on
year contributed to a 49% increase in net interest income to £66.4
million (2022: £44.6 million).
As with prior year, Admiral Money continued to carefully manage
affordability and credit criteria for new lending in 2023 to
reflect the higher interest rate and elevated inflation
environment. At the same time interest rates on new loans were
increased to reflect the rising cost of funding. These measures
will help ensure sustainable financial performance into the
future.
The credit loss charge increased to £33.4 million (2022: £20.6
million). Overall, an appropriately cautious approach has been
taken to calculating the credit loss provision, including post
model adjustments for model performance, cost of living, economic
scenarios forecast uncertainty, reflecting the level of uncertainty
in the current economic environment. For further information, refer
to note 7 in the financial statements.
Admiral Money is funded through a combination of internal and
external funding sources. The external funding is secured against
certain loans via 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
Other Group items financial review
|
£m |
2023 |
2022
(restated) |
|
Share scheme charges |
(54.4) |
(51.7) |
|
Other central costs*1 |
(41.7) |
(15.6) |
|
Admiral Pioneer result*1 |
(16.2) |
(13.5) |
|
Business development costs*1 |
(15.3) |
(8.8) |
|
Finance charges*2 |
(20.3) |
(12.1) |
|
Compare.com loss before tax |
(2.6) |
(2.8) |
|
Other interest and investment income*1 |
4.6 |
10.1 |
|
Total |
(145.9) |
(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
for 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 in
2022.
*2 Finance charges within other group items include
£1.7 million (2022: £0.7
million) that relate to intra-group arrangements, with the
corresponding income presented within the UK
Insurance result.
Share scheme charges relate to the Group’s two employee share
schemes. The increase in the charge compared to 2022 is driven
primarily by the higher share price in 2023 relative to 2022, which
increases the employer’s national insurance cost on shares due to
vest.
Other central costs consist of Group-related expenses and
include the cost of a number of significant Group projects, such as
the internal model development and other regulatory projects,
central management salaries and expenses, and additional expenses
including gains and losses on amounts held in foreign currencies.
The significant increase in other central costs is driven primarily
by costs incurred on interest and penalties on settlement of a
historic Italian tax matter (further details are provided in the
taxation section later in this report); an adverse impact of
foreign exchange movements (compared to a gain on these balances
recognised in 2022), and higher costs related to M&A
activity.
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 (flexible
pay-as-you-go and learner driver insurer in the UK) and small
business insurance in the UK. Pioneer reported a loss of £16.2
million in 2023 (2022: £13.5 million). This was mainly driven by
one particular large claim in Veygo, for which a cautious reserving
approach has been adopted, together with continued investment in
small business insurance.
Business development costs increased to £15.3 million (2022:
£8.8 million), primarily attributed to increased investment in new
businesses across the Group as part of the diversification
strategy. Admiral took the decision to close its small fleet
insurance business in France, which also resulted in modest closure
costs.
Finance charges of £20.3 million (2022: £12.1 million) primarily
related to interest on subordinated notes, as well as a small
one-off charge in relation to the renewal of the Group’s revolving
credit facility. In July 2023, the Group issued £250 million
subordinated loan notes, at a fixed rate of 8.5%, with a redemption
date of January 2034. At the same time as the new issue, the Group
made a tender offer for the existing £200 million subordinated
loans notes, with £145 million of the 2024 notes tendered. At 31
December 2023 the resulting nominal value of subordinated
liabilities on the balance sheet is £305 million, which will reduce
to £250 million in July 2024.
A loss of £2.6 million (2022: £2.8 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 £4.6 million
(2022: £10.1 million). In 2022, there was a gain of £4.7 million
from the sale of UK government bonds which was not repeated in the
current period, and the current period also includes a loss of £3.6
million in 2023 related to the re-purchase of bonds as a result of
the debt restructure. Excluding these factors, underlying interest
and investment income increased to £8.2 million from £5.4 million,
in line with the higher interest rate environment.
Group capital structure and financial
position
The Group manages its capital to ensure that all entities are
able to continue as going concerns and that regulated entities
comfortably meet regulatory capital requirements. Surplus capital
within subsidiaries is paid up to the Group holding company in the
form of dividends.
The Group’s regulatory capital is based on the Solvency II
Standard Formula, with a capital add-on to reflect recognised
limitations in the Standard Formula with respect to Admiral’s
business, predominantly in respect of profit commission
arrangements in co- and reinsurance agreements.
The Group continues to develop its partial internal model to
form the basis of future capital requirements. Having taken time to
review, update and extend the scope of the model as well as
completing further cycles of independent external validation, the
Group expects to enter a pre-application process with its
regulators soon. Once the pre-application process is complete, the
Group expects to be able to communicate timelines for a full
application.
In the interim period before model approval, the current
standard formula plus capital add-on basis will continue to be used
to calculate the regulatory capital requirement.
The estimated and unaudited Solvency ratio for the Group at the
date of this report is as follows:
Group capital position (estimated and
unaudited)
|
|
2023
£bn |
2022
£bn |
|
Eligible Own Funds (post-dividend)*1 |
1.42 |
1.20 |
|
Solvency II capital requirement*2 |
0.71 |
0.66 |
|
Surplus over capital requirement |
0.71 |
0.54 |
|
Solvency ratio
(post-dividend)*3 |
200% |
180% |
*1 2023 Own Funds include approximately
£250 million of Tier 2 capital following the Group’s recent issue
of ten-year subordinated loan notes. YE’22 Own
Funds include approximately £200 million of Tier 2
capital.
*2 Solvency capital requirement includes updated,
unapproved capital add-on.
*3 Solvency ratio calculated on a volatility
adjusted basis.
The Group’s solvency ratio has improved over 2023 to a strong
closing position at 200% (2022: 180%). Strong generation of
economic capital in the core UK motor business, in particular
during the second half of the year, contributed to an increase in
Own Funds of approximately £200 million. The increase in Tier 2
Capital of approximately £50 million (further detail below) also
contributed to the Own Funds increase as well as smaller favourable
impacts from movements in yields and spreads in the year, and the
impact of changes in the risk margin arising from the PRA’s
introduction of the new UK prudential regime for insurers,
‘Solvency UK’.
The SCR also increased over the year, though to a lesser extent.
The increase of approximately £50 million was primarily as a result
of the increase in premiums across all Group businesses and the
associated impact on underwriting and operational risk elements of
the capital requirement.
The SCR above includes an updated capital add-on which is
recalculated at the end of each period. As a result, it is
different to the fixed Group capital add-on which is included in
the regulatory Quantitative Reporting Templates (QRTs) reported to
the PRA.
During the second half of 2023, the PRA issued notice of an
updated fixed 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 the end of
2023.
The estimated solvency ratio including the fixed Group capital
add-on of £24 million, that is calculated at the balance sheet date
rather than the date of this report, and will be reported in the
Group’s 2023 Solvency and Financial Condition Report (SFCR) is as
follows:
|
Regulatory solvency ratio (estimated and
unaudited) |
2023 |
2022 |
|
Solvency ratio as reported above |
200% |
180% |
| Change in
valuation date*1 |
(11%) |
(11%) |
|
Other (including impact of updated, unapproved capital add-on) |
(6%) |
(20%) |
|
Solvency ratio to be reported (SFCR) |
183% |
149% |
*1 The solvency ratio reported above includes additional own
funds generated post year-end up to the date of this
report.
Issue of subordinated loan notes
During July 2023, Group issued 10.5 year, 8.5% £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 not classified as Tier 2 Capital within Own Funds at the end
of 2023.
Solvency ratio sensitivities
|
|
2023 |
2022 |
|
UK Motor – incurred loss ratio +5% |
-11% |
-11% |
| UK Motor – 1
in 200 catastrophe event |
-1% |
-1% |
| UK Household –
1 in 200 catastrophe event |
-5% |
-4% |
| Interest rate
– yield curve up 100 bps |
-1% |
-2% |
| Interest rate
– yield curve down 100 bps |
+1% |
+2% |
| Credit spreads
widen 100 bps*1 |
-5% |
-6% |
| Currency – 25%
movement in euro and US dollar |
-3% |
-3% |
| ASHE – long
term inflation assumption up 50 bps |
-3% |
-3% |
|
Loans – 100% weighting to ‘severe’
scenario*2 |
-1% |
-1% |
*1 2022 credit spread sensitivity restated to include the
benefit of offsetting movements in the volatility adjusted yield
curve used for discounting liabilities.
*2 Refer to note 7 to the financial statements for further
information on the ‘severe’ scenario.
Investments and cash
Investment strategy
Admiral Group’s investment strategy focuses on capital
preservation and low volatility of returns relative to liabilities
and follows an asset liability matching strategy to control
interest rate, inflation and currency risk. A prudent level of
liquidity is held and the investment portfolio has a high-quality
credit profile. In 2023, the focus remained on matching, and
cashflows were invested into high quality assets to take advantage
of rising risk-free rates, whilst being appropriately cautious on
the credit outlook. The Group holds a range of government bonds,
corporate bonds, alternative and private credit assets, alongside
liquid holdings in cash and money market funds.
A further aim of the strategy is to reduce the Environmental,
Social, and Governance (ESG) related risks in the portfolio whilst
continuing to achieve sustainable long-term returns. In 2023, the
portfolio weighted average ESG score had an MSCI AA
rating.
Investment return
|
£m |
2023 |
2022 |
|
Underlying investment income yield |
3.3% |
1.6% |
|
Investment return |
124.4 |
64.1 |
|
Unrealised (losses)/gains on derivatives |
(0.2) |
0.5 |
|
Movement in provision for expected credit losses |
2.5 |
1.8 |
|
Total investment return |
126.7 |
66.4 |
Net investment income for 2023 was £126.7 million (2022: £66.4
million). Provisions for expected credit losses developed
favourably, leading to a £2.5 million release of provisions (2022:
£1.8 million favourable impact).
The investment return on the Group’s investment portfolio
(excluding unrealised gains and losses and the movement in
provision for expected credit losses) was £124.4 million (2022:
£64.1 million). The annualised rate of return was higher at 3.3%
(2022: 1.6%), due to higher reinvestment yields and higher returns
on floating rate securities as interest rates rose throughout the
year.
An increase in the market value of the portfolio of £98.1
million (2021: £255.6 million reduction) primarily relates to
the reversal of losses recognised in 2022 as the bonds are held
closer to maturity. That movement is reflected in the Statement of
Other Comprehensive Income.
Cash and investments analysis
|
£m |
2023 |
2022 |
|
Fixed income and debt securities |
2,825.9 |
2,372.7 |
|
Money market funds and other fair value instruments |
918.8 |
934.7 |
|
Cash deposits |
116.7 |
101.4 |
|
Cash |
353.1 |
297.0 |
|
Total*1 |
4,214.5 |
3,705.8 |
*1 Total Cash and Investments include £278.2 million (2022:
£198.2 million) of Level 3 investments. Refer to note 6d for
further information.
Cashflow
|
£m |
2023 |
2022
(restated) |
|
Operating cashflow, before movements in investments |
697.5 |
379.1 |
|
Transfers to financial investments |
(285.5) |
189.0 |
|
Operating cashflow |
412.0 |
568.1 |
| Tax payments |
(133.0) |
(91.2) |
| Investing
cashflows (capital expenditure) |
(75.9) |
(101.0) |
| Financing
cashflows |
(216.7) |
(692.8) |
| Loans funding
through special purpose entity |
44.9 |
267.8 |
| Foreign currency
translation impact |
24.8 |
(26.6) |
|
Net cash movement |
56.1 |
(75.7) |
|
Unrealised gains/(losses) on investments |
98.1 |
(255.6) |
|
Movement in accrued interest, foreign exchange and unrealised
gains/(losses) on derivatives |
69.0 |
113.2 |
|
Net increase in cash and financial
investments |
508.7 |
(407.1) |
The main items contributing to the operating cash inflow are as
follows:
|
£m |
2023 |
2022
(restated) |
| Profit after
tax |
337.2 |
285.3 |
| |
|
|
| Change in net
insurance contract liabilities |
309.5 |
248.6 |
| Net change in trade
receivables and liabilities |
(42.3) |
(21.2) |
| Change in loans and
advances to customers |
(73.6) |
(280.6) |
| Non-cash income
statement items |
61.1 |
71.1 |
| Taxation
expense |
105.6 |
75.9 |
|
Operating cashflow, before movements in
investments |
697.5 |
379.1 |
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 31 December 2023 was £4,214.5 million (31 December
2022: £3,705.8 million), the increase reflecting market value gains
noted above, an increase in assets at the Group level following the
refinancing of the Group’s subordinate debt during 2023, and growth
in premiums written.
The net increase in cash and investments in the period is £508.7
million (2022: decrease of £407.1 million).
Taxation
The tax charge for the period is £105.6 million (2022: £75.9
million), which equates to 23.8% (2022: 21.0%) 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. In addition, in late 2023 the Group settled an amount
related to a historic Italian tax matter. This is not expected to
result in a material increase in the tax charge going forward. See
note 10 to the financial statements for further details.
Co-insurance and
reinsurance
Admiral makes significant use of proportional risk sharing
agreements, where insurers outside the Group underwrite a majority
of the risk generated, either through co-insurance or quota
share reinsurance contracts. These arrangements include profit
commission terms which allow Admiral to retain a significant
portion of the profit generated.
Although the primary focus and disclosure is in relation to the
UK Motor insurance book, similar longer-term arrangements are in
place in the Group’s international insurance operations and the UK
Household and Van businesses.
UK Motor Insurance
Munich Re and its subsidiary entity, Great Lakes, currently
underwrites 40% of the UK Motor business. From 2022, 20% of this
total is on a co-insurance basis (via Great Lakes) and will extend
to 2029. The remaining 20% is on a quota share reinsurance basis
and these arrangements now extend to 2026.
The Group also has other quota share reinsurance arrangements
confirmed to at least 2024, covering 38% of the business
written.
The nature of the co-insurance proportion underwritten by Munich
Re (via Great Lakes) in the UK is such that 20% of all Motor
premium and claims accrue directly to Great Lakes and are not
reflected in the Group’s financial statements. Similarly, Great
Lakes reimburses the Group for its proportional share of expenses
incurred in acquiring and administering this business.
The quota share reinsurance arrangements result in all Motor
premiums, claims and expenses that are ceded to reinsurers being
included in the Group’s financial statements. These agreements
operate on a funds withheld basis and include certain features such
as expense caps and an allocation of investment income earned on
the funds held by Admiral on behalf of the reinsurers. These
features result in higher profit commission should the underwriting
year reach profitability.
Admiral tends to commute its UK Car Insurance quota share
reinsurance contracts 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.
After an underwriting year is commuted, movements in financial
statement loss ratios result in reserve releases (or strengthening
if the loss ratios were to increase) rather than reduced or
increased profit commission.
In 2023, there were no significant commutations, with the
majority of quota share reinsurance covering underwriting year
2020, and all arrangements covering the 2019 and prior underwriting
years, having now been commuted.
UK Household Insurance
The Group’s Household business is supported by long-term
proportional reinsurance arrangements covering 70% of the risk,
that run to at least 2024. In addition, the Group has
non-proportional reinsurance to cover the risk of catastrophes
stemming from weather events.
International Car Insurance
In both 2022 and 2023 Admiral retained 35% (Italy), 30%
(France), 30% (Spain) and 40% (USA) of the underwriting risk in
each country respectively.
Excess of loss reinsurance
The Group also purchases excess of loss reinsurance to provide
protection against large claims and reviews this cover annually.
The UK motor excess of loss cover remained similar to prior years
with cover starting at £10 million.
Principal Risks and Uncertainties
The Group’s 2023 Annual Report will contain an analysis of the
Principal Risks and Uncertainties identified in the Group’s
Enterprise Risk Management Framework, along with the impacts of
those risks and actions taken to mitigate them.
Disclaimer on forward-looking
statements
Certain statements made in this announcement are forward-looking
statements. Such statements are based on current expectations and
assumptions and are subject to a number of known and unknown risks
and uncertainties that may cause actual events or results to differ
materially from any expected future events or results expressed or
implied in these 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.
Consolidated Income Statement
For the year ended 31 December 2023
|
|
|
Year ended |
|
|
Note |
31 December 2023
£m |
|
Restated1
31 December 2022
£m |
|
Insurance revenue |
5 |
3,486.1 |
|
2,956.9 |
|
Insurance service expenses |
5 |
(3,093.2) |
|
(2,737.2) |
|
Insurance service result before reinsurance |
|
392.9 |
|
219.7 |
|
Net expense from reinsurance contracts held |
5 |
(87.1) |
|
(38.4) |
|
Insurance service result |
|
305.8 |
|
181.3 |
| |
|
|
|
|
|
Investment return |
6 |
122.9 |
|
64.6 |
| |
|
|
|
|
| Finance
expenses from insurance contracts issued |
5 |
(94.5) |
|
(52.0) |
|
Finance income from reinsurance contracts held |
5 |
28.9 |
|
13.6 |
|
Net insurance finance expenses |
|
(65.6) |
|
(38.4) |
| |
|
|
|
|
| Net
insurance and investment result |
|
363.1 |
|
207.5 |
| |
|
|
|
|
| Interest
income from financial services |
|
94.9 |
|
58.7 |
|
Interest expense related to financial services |
|
(26.8) |
|
(12.6) |
|
Net interest income from financial services |
|
68.1 |
|
46.1 |
| |
|
|
|
|
| Other revenue
and profit commission |
8 |
205.7 |
|
256.4 |
| Other
operating expenses |
9 |
(250.8) |
|
(204.6) |
| Other
operating expenses recoverable from co-insurers |
9 |
107.8 |
|
86.7 |
|
Expected credit losses |
6 |
(31.0) |
|
(18.9) |
|
Other income and expenses |
|
31.7 |
|
119.6 |
|
|
|
|
|
|
|
Operating profit |
|
462.9 |
|
373.2 |
|
|
|
|
|
|
| Finance
costs |
6 |
(20.5) |
|
(13.5) |
|
Finance costs recoverable from co- and reinsurers |
6 |
0.4 |
|
1.5 |
|
Net finance costs |
|
(20.1) |
|
(12.0) |
|
|
|
|
|
|
|
Profit before tax |
|
442.8 |
|
361.2 |
|
Taxation expense |
10 |
(105.6) |
|
(75.9) |
|
Profit after tax |
|
337.2 |
|
285.3 |
| Profit after
tax attributable to: |
|
|
|
|
| Equity holders
of the parent |
|
338.0 |
|
286.5 |
|
Non-controlling interests (NCI) |
|
(0.8) |
|
(1.2) |
|
|
|
337.2 |
|
285.3 |
|
Earnings per share |
|
|
|
|
|
Basic |
12 |
111.2p |
|
95.4p |
|
Diluted |
12 |
110.8p |
|
95.0p |
|
|
|
|
|
|
|
Dividends declared and paid (total) |
12 |
307.1 |
|
658.3 |
|
Dividends declared and paid (per share) |
12 |
103.0p |
|
223.0p |
12022 comparative figures have been restated
following the adoption of IFRS 17 Insurance Contracts. For
further information see note 2 to the financial statements.
Consolidated Statement of Comprehensive
Income
For the year ended 31 December 2023
| |
|
Year ended |
|
|
Note |
31 December 2023
£m |
Restated1
31 December 2022
£m |
|
Profit for the period |
337.2 |
285.3 |
| Other
comprehensive income |
|
|
|
| Items
that are or may be reclassified to profit or loss |
|
|
|
| Movements in fair
value reserve |
|
98.1 |
(255.6) |
|
Deferred tax charge in relation to movement in fair value
reserve |
(5.7) |
13.0 |
| Movements in
insurance finance reserve |
|
(78.9) |
177.8 |
| Deferred tax in
relation to movement in insurance finance reserve |
|
9.7 |
(22.8) |
| Exchange
differences on translation of foreign operations |
|
3.7 |
(4.3) |
| Movement in
hedging reserve |
|
(18.1) |
25.1 |
|
Deferred tax charge in relation to movement in hedging reserve |
|
4.5 |
(7.0) |
|
Other comprehensive income for the period, net of income tax |
13.3 |
(73.8) |
|
Total comprehensive income for the period |
|
350.5 |
211.5 |
|
Total comprehensive income for the period attributable to: |
|
|
| Equity holders of
the parent |
|
351.3 |
212.6 |
|
Non-controlling interests |
|
(0.8) |
(1.1) |
|
|
|
350.5 |
211.5 |
12022 comparative figures have been restated
following the adoption of IFRS 17 Insurance Contracts. For
further information see note 2 to the financial statements.
Consolidated Statement of Financial
Position
As at 31 December 2023
| |
|
As at |
|
|
Note |
31 December 2023
£m |
Restated1
31 December 2022
£m |
Restated1
1 January 2022
£m |
|
ASSETS |
|
|
|
|
| Property and
equipment |
11 |
90.1 |
89.8 |
103.2 |
| Intangible
assets |
11 |
242.9 |
217.6 |
151.8 |
| Deferred
income tax |
10 |
46.1 |
28.4 |
20.7 |
| Corporation
tax asset |
|
20.4 |
9.1 |
10.2 |
| Reinsurance
contract assets |
5 |
1,191.9 |
1,015.4 |
987.2 |
| Loans and
advances to customers |
7 |
879.4 |
823.9 |
556.8 |
| Other
receivables |
6 |
409.9 |
316.4 |
391.5 |
| Financial
investments |
6 |
3,862.4 |
3,411.2 |
3,742.6 |
| Cash and cash
equivalents |
6 |
353.1 |
297.0 |
372.7 |
|
Total assets |
|
7,096.2 |
6,208.8 |
6,336.7 |
|
EQUITY |
|
|
|
|
| Share
capital |
12 |
0.3 |
0.3 |
0.3 |
| Share premium
account |
|
13.1 |
13.1 |
13.1 |
| Other
reserves |
12 |
(40.5) |
(50.2) |
23.7 |
|
Retained earnings |
|
1,018.9 |
922.6 |
1,243.5 |
|
Total equity attributable to equity holders of the
parent |
|
991.8 |
885.8 |
1,280.6 |
|
Non-controlling interests |
|
1.0 |
1.2 |
2.3 |
|
Total equity |
|
992.8 |
887.0 |
1,282.9 |
|
LIABILITIES |
|
|
|
|
| Insurance
contract liabilities |
5 |
4,581.7 |
4,025.4 |
3,926.4 |
| Subordinated
and other financial liabilities |
6 |
1,129.8 |
939.1 |
670.9 |
| Trade and
other payables |
6, 11 |
305.8 |
254.9 |
351.2 |
| Lease
liabilities |
6 |
81.2 |
88.5 |
105.3 |
| Corporation
tax liabilities |
|
4.9 |
13.9 |
— |
|
Total liabilities |
|
6,103.4 |
5,321.8 |
5,053.8 |
|
Total equity and total liabilities |
|
7,096.2 |
6,208.8 |
6,336.7 |
12022 comparative figures have been restated
following the adoption of IFRS 17 Insurance Contracts. For
further information see note 2 to the financial statements.
The accompanying notes form part of these financial statements.
These financial statements were approved by the Board of Directors
on 6 March 2024 and were signed on its behalf by:
Geraint Jones
Chief Financial Officer
Admiral Group plc
Company Number: 03849958
Consolidated Cashflow Statement
For the year ended 31 December 2023
| |
|
Year ended |
|
|
Note |
31 December 2023
£m |
Restated1
31 December 2022
£m |
|
Profit after tax |
|
337.2 |
285.3 |
| Adjustments
for non-cash items: |
|
|
|
- Depreciation of property, plant and
equipment and right-of-use assets
|
|
18.2 |
18.2 |
- Impairment/ disposal of property,
plant and equipment and right-of-use assets
|
|
(4.0) |
(1.2) |
- Amortisation and impairment of
intangible assets
|
11 |
40.5 |
23.7 |
- Movement in expected credit loss
provision
|
|
15.7 |
11.7 |
|
|
|
63.3 |
57.3 |
- Interest expense on funding for loans
and advances to customers
|
|
26.2 |
12.6 |
|
|
6 |
(119.3) |
(64.6) |
- Finance costs, including unwinding of
discounts on lease liabilities
|
|
20.5 |
13.4 |
|
|
10 |
105.6 |
75.9 |
| Change in
gross insurance contract liabilities |
5 |
451.3 |
372.8 |
| Change in
reinsurance assets |
5 |
(141.8) |
(124.2) |
| Change in
insurance and other receivables |
|
(94.7) |
75.1 |
| Change in
gross loans and advances to customers |
7 |
(73.6) |
(280.6) |
|
Change in trade and other payables, including tax and social
security |
11 |
52.4 |
(96.3) |
|
Cashflows from operating activities, before movements in
investments |
|
697.5 |
379.1 |
| Purchases of
financial instruments |
|
(3,538.4) |
(3,198.0) |
| Proceeds on
disposal/ maturity of financial instruments |
|
3,176.1 |
3,328.3 |
|
Interest and investment income received |
|
76.8 |
58.7 |
|
Cashflows from operating activities, net of movements in
investments |
|
412.0 |
568.1 |
|
Taxation payments |
|
(133.0) |
(91.2) |
|
Net cashflow from operating activities |
|
279.0 |
476.9 |
| |
|
|
|
|
Cashflows from investing activities: |
|
|
|
| Purchases of
property, equipment and software |
|
(75.9) |
(98.6) |
| Investments in
associates |
|
— |
(2.4) |
|
Net cash used in investing activities |
|
(75.9) |
(101.0) |
| |
|
|
|
|
Cashflows from financing activities: |
|
|
|
| Proceeds on
issue of loan backed securities |
|
44.9 |
267.8 |
| Proceeds from
other financial liabilities |
|
136.2 |
— |
| Finance costs
paid, including interest expense paid on funding for loans |
|
(35.1) |
(25.3) |
| Repayment of
lease liabilities |
|
(10.7) |
(9.2) |
|
Equity dividends paid |
12 |
(307.1) |
(658.3) |
|
Net cash used in financing activities |
|
(171.8) |
(425.0) |
|
Net increase/ (decrease) in cash and cash
equivalents |
|
31.3 |
(49.1) |
| Cash and cash
equivalents at 1 January |
|
297.0 |
372.7 |
|
Effects of changes in foreign exchange rates |
|
24.8 |
(26.6) |
|
Cash and cash equivalents at end of period |
6 |
353.1 |
297.0 |
12022 comparative figures have been restated
following the adoption of IFRS 17 Insurance Contracts. For
further information see note 2 to the financial statements.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2023
| |
|
|
Attributable to the owners of the Company |
|
|
|
|
Note |
Share
Capital
£m |
Share premium
£m |
Fair value reserve £m |
Hedging reserve
£m |
Foreign exchange reserve
£m |
Insurance finance reserve1
£m |
Retained profit
and loss1
£m |
Total1
£m |
Non-controlling interests
£m |
Total equity1
£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 171 |
|
— |
— |
— |
— |
0.2 |
(20.5) |
(105.3) |
(125.6) |
— |
(125.6) |
| At 1
January 2022 restated1 |
|
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 period1 |
|
— |
— |
— |
— |
— |
— |
286.5 |
286.5 |
(1.2) |
285.3 |
| Other
comprehensive income1 |
|
— |
— |
(242.6) |
18.1 |
(4.4) |
155.0 |
— |
(73.9) |
0.1 |
(73.8) |
|
Total comprehensive income for the
period1 |
— |
— |
(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 20221 |
0.3 |
13.1 |
(205.9) |
21.1 |
0.1 |
134.5 |
922.6 |
885.8 |
1.2 |
887.0 |
12022 comparative figures have been restated
following the adoption of IFRS 17 Insurance Contracts. For
further information see note 2 to the financial statements.
Consolidated Statement of Changes in Equity
(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 reserve1
£m |
Retained profit
and loss 1
£m |
Total1
£m |
Non-controlling interests
£m |
Total equity1
£m |
|
At 1 January 2023 |
|
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 |
|
— |
— |
— |
— |
— |
— |
338.0 |
338.0 |
(0.8) |
337.2 |
| Other
comprehensive income |
|
— |
— |
92.4 |
(13.6) |
3.7 |
(69.2) |
— |
13.3 |
— |
13.3 |
|
Total comprehensive income for the period |
— |
— |
92.4 |
(13.6) |
3.7 |
(69.2) |
338.0 |
351.3 |
(0.8) |
350.5 |
|
Transactions with equity holders |
|
|
|
|
|
|
|
|
|
|
|
| Dividends |
12 |
— |
— |
— |
— |
— |
— |
(307.1) |
(307.1) |
— |
(307.1) |
| Share scheme
credit |
|
— |
— |
— |
— |
— |
— |
63.3 |
63.3 |
— |
63.3 |
| Deferred tax
credit on share scheme credit |
|
— |
— |
— |
— |
— |
— |
2.1 |
2.1 |
— |
2.1 |
| 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) |
— |
(241.7) |
(245.3) |
0.6 |
(244.7) |
|
As at 31 December 2023 |
|
0.3 |
13.1 |
(113.5) |
7.5 |
0.2 |
65.3 |
1,018.9 |
991.8 |
1.0 |
992.8 |
12022 comparative figures have been restated
following the adoption of IFRS 17 Insurance Contracts. For
further information see note 2 to the financial statements.
Notes to the consolidated financial
statements
General information
Admiral Group plc is a public limited company incorporated in
England and Wales. Its registered office is at Tŷ Admiral, David
Street, Cardiff, CF10 2EH and its shares are listed on the London
Stock Exchange.
The consolidated financial statements have been prepared and
approved by the Directors in accordance with United Kingdom adopted
international accounting standards in conformity with the
requirements of the Companies Act 2006.
The financial information included in this preliminary
announcement has been prepared in accordance with the recognition
and measurement criteria of International Financial Reporting
Standards (“IFRS”) as adopted by the UK. The financial information
set out in this preliminary results announcement does not
constitute the statutory accounts for the year ended
31 December 2023. The financial information is derived from
the statutory accounts, which comply with IFRS, within the Group’s
Annual Report & Accounts 2023. These accounts were signed on 6
March 2024 and are expected to be published in March 2024 and
delivered to the Registrar of Companies following the Annual
General Meeting to be held on 25 April 2024. The independent
Auditor’s report on the Group accounts for the year ended
31 December 2022 was signed on 7 March 2023, is unqualified,
does not draw attention to any matters by way of emphasis and does
not include a statement under S498(2) or (3) of the Companies Act
2006. This audit opinion excludes disclosures surrounding capital
adequacy calculated under the Solvency II regime as these are
outside of the audit scope.
1. Basis of
preparation
The consolidated financial statements have been
prepared on a going concern basis. In considering this
requirements, 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
- The impacts of the continued
elevated inflationary environment on the cost of settling claims
across all of the Group’s insurance businesses
- The return of motor claims
frequency towards pre-pandemic levels
- 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 unemployment in
the context of credit risks and the growth of the Group’s consumer
lending business
- The More Than acquisition due to
complete in the first half of 2024
- Assessment of wider market risk and
changes in investment performance given the changing interest rates
toward the end of 2023.
- The Group’s solvency position,
which has been 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
including climate related 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 Group and Company financial statements are presented in
pounds sterling, rounded to the nearest £0.1 million.
Adoption of new and revised standards
The Group has adopted the following IFRSs and interpretations
during the year, which have been issued and endorsed:
- IFRS 17 Insurance Contracts (effective 1 January
2023)
- Amendments to IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors: Definition of Accounting
Estimates (effective 1 January 2023)
- Amendments to IAS 1 Presentation of Financial
Statements and Practice Statement 2: Disclosures of Accounting
policies (effective 1 January 2023)
- Amendments to IAS 12 Income Taxes: Deferred Tax
related to Assets and Liabilities arising from a Single Transaction
(effective 1 January 2023).
- Amendments to IAS 12 Income Taxes: International tax
reform - Pillar two model rules (effective 1 January 2023).
The application of the amendments listed above has not had a
material impact on the Group’s results, financial position and
cashflows. Further information on the impact of the transition to
IFRS 17 is provided below.
IFRS 17 adoption
IFRS 17, the new insurance contracts standard, replaces IFRS 4
Insurance Contracts, from 1 January 2023.
As a result, the opening balance sheet (1 January 2022) and
prior year comparatives (FY 2022) have been restated under IFRS 17,
applying 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 full in Group’s 2023
Annual Report.
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 Impact of Transition on FY 2022 restated
result
|
|
31 December 2022 |
|
£m |
IFRS 17 |
IFRS 4 |
Change |
| Analysis
of profit |
|
|
|
| UK Insurance |
509.7 |
615.9 |
(106.2) |
|
International Insurance |
(56.2) |
(53.8) |
(2.4) |
|
International Insurance – European Motor |
(16.5) |
(1.6) |
(14.9) |
|
International Insurance – US Motor |
(36.4) |
(48.9) |
12.5 |
|
International Insurance – Other |
(3.3) |
(3.3) |
— |
|
Admiral Money |
2.1 |
2.1 |
— |
|
Other |
(94.4) |
(95.2) |
0.8 |
|
Group profit before tax |
361.2 |
469.0 |
(107.8) |
The 2022 profit before tax on an IFRS 17 basis is lower than
that reported under IFRS 4. The following table sets out the key
differences for the UK and international insurance profits reported
under IFRS 17 compared to IFRS 4:
|
£m |
UK |
International |
|
IFRS 4 reported profit |
615.9 |
(53.8) |
| Timing of
reserve releases |
(93.3) |
(9.9) |
|
Discounting |
15.4 |
9.5 |
| Timing of
Quota share reinsurance recoveries |
(41.2) |
(2.9) |
|
Other |
12.9 |
0.9 |
|
IFRS 17 reported profit before tax |
509.7 |
(56.2) |
The difference between IFRS 4 and IFRS 17 reported profit
primarily arises as a result of differences in the reserve strength
or risk adjustment position over the course of 2022 under each
standard. Under IFRS 4, Admiral moved down to the 95th
percentile over the course of 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 discounting impact shown above is the impact of the
discounting of the gross, net of XoL claims cost and finance
expenses recognised in the period. In UK Insurance, whilst there is
a favourable impact of discounting of the claims incurred of circa
£52 million at YE 2022, this is offset by the unwind of discounting
of prior years, reducing the overall discounting benefit to £15
million when compared to IFRS 4 claims costs. It should be noted
that whilst the higher discount curves seen in 2022 result in lower
claims reserves, the Group’s accounting policy decision to take the
impact of changes in yield curve on outstanding claims reserves to
other comprehensive income 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
significant given that, due to quota share contracts having been
largely commuted on earlier underwriting years, there is no
significant offsetting finance income (representing the 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.
Acquisition of More Than home and pet personal lines
from RSA
During December 2023 the Group signed an agreement to acquire
the UK direct home and pet personal lines insurance operations of
RSA Insurance Group Limited (“RSA”). The acquisition is
expected to complete during the first half of 2024. The
consideration payable at completion is £82.5 million, with a
further potential payment of £32.5 million depending on the number
of policies successfully migrated to the Group. The acquisition
will not include liabilities relating to existing policies, which
will remain with RSA. There is no impact on the results reported in
these financial statements as a result of the transaction.
2. Critical accounting
judgements and estimates
In applying the Group’s accounting policies as described in the
notes to the financial statements, the Directors are required to
make judgements (other than those involving estimations) that have
a significant impact on the amounts recognised and to make
estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant,
including where appropriate, weather-related factors. Actual
results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
Critical accounting judgements and estimates that are not
impacted by the adoption of IFRS 17 will be set out in full in the
Group’s 2023 Annual Report. The following section sets out the key
judgements and estimates impacted as a result of the adoption of
IFRS 17.
2a.
Critical
accounting judgements in the application of IFRS
17
Premium allocation approach (‘PAA’)
The Group applies the PAA to all of its insurance and
reinsurance contracts.
The coverage period of insurance contracts is typically one year
or less, including insurance contract services arising from all
premiums within the contract boundary. The Group does not consider
the existing products with more than 12 months coverage to be
material. The Group’s insurance contracts are therefore
automatically eligible for the PAA.
However, the Group’s reinsurance contracts are not automatically
eligible for the PAA given that the coverage period is greater than
one year. The Group has modelled the expected cashflows and
reasonably possible future scenarios for its reinsurance contracts,
and as a result expects that the measurement of the asset for
remaining coverage for the group containing those contracts under
the PAA does not differ materially from the measurement that would
be produced applying the general model. Its reinsurance contracts
are therefore eligible for the PAA.
The modelling of the cashflows associated with the Group’s
reinsurance contracts, and reasonably possible future scenarios, is
a key area of judgement that impacts the PAA eligibility assessment
and the resulting measurement of and presentation of reinsurance
contracts in these financial statements.
Classification of the Group’s contracts with reinsurers
as reinsurance contracts
A contract is required to transfer significant insurance risk in
order to be classified as such. Management reviews all terms and
conditions of each such insurance and reinsurance contract in order
to be able to make this judgement. In particular, all reinsurance
contracts (both excess of loss and quota share contracts) held by
the Group have been assessed and it has been concluded that all
contracts transfer significant insurance risk and have therefore
been classified and accounted for as reinsurance contracts within
these financial statements.
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 of the arrangement
and separation of the contract is required, or alternatively
circumstances when contracts should be combined, such as when a set
of insurance contracts with the same or a related counterparty may
achieve, or be designed to achieve, an overall commercial
effect.
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, as set out by the IFRS 17 Transition
Resource Group, 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.
In addition, any cashflows related to promises to transfer
distinct goods or services, other than insurance contract services,
that are within the host insurance contract are separated and
recognised by applying IFRS 15. In determining whether there are
such distinct components, the following is considered:
- whether the policyholder can benefit from the good or service
on its own or together with other resources available to the
policyholder
- whether the cashflows and risks associated with the good or
services are highly interrelated with the cashflows and risks
associated with the insurance components in the contract
- whether the Group provides a
significant service in integrating the good or service with the
insurance components.
After separating any such 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 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
- 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 in cases where the policyholder can benefit from the
product on its own, and where the cashflows are not highly
interrelated with the insurance components in the contract or the
Group does not provide a significant service in integrating the
products.
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 excluded from the net
reinsurance expenses in the Group’s income statement (i.e. both
ceded reinsurance premiums and ceded recoveries are presented net
of the minimum guaranteed amount that the Group will always
receive).
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 Statement of
Financial Position.
2b. Key
sources of estimation uncertainty in the application of IFRS
17
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 cashflows 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 cashflows 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 cashflows.
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. The level and estimate of risk
adjustment required at reporting date is made in a way that reflect
the Group’s degree of risk aversion, taking into account both
internal factors (such as data quality and trends; diversification
across portfolios) and external factors (such as inflation and
potential changes in Ogden rate) that are relevant at that point in
time.
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 net of excess of loss risk adjustment
is allocated to quota share reinsurance contracts on a proportional
basis.
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 within the entity 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.
3. Insurance and financial
risk
3a. Insurance
risk sensitivity analysis
The following sensitivity analysis shows the impact on profit
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. The sensitivities are shown on a gross and net of
quota share reinsurance basis to illustrate the impacts on
shareholder profit and equity before and after risk mitigation from
quota share reinsurance. The sensitivities (both gross and net)
include the impacts of movements in co-insurance profit commission,
given that underwriting year loss ratios including risk adjustment,
are a direct input to the calculation of profit commission. Refer
to note 8 to these financial statements for the accounting policy
for co-insurance profit commission.
Odgen discount rate
The sensitivities reflect the impact on profit before tax and
equity in 2023 for changes to the Ogden discount rate from the
current rate of minus 0.25%, with all other assumptions (including
the absolute value of risk adjustment) remaining unchanged.
|
|
2023 |
|
£m |
Impact on profit before tax gross of
reinsurance |
Impact on profit before tax net of
reinsurance |
Impact on equity gross of reinsurance |
Impact on equity net
of reinsurance |
|
Ogden discount rate increase by 125 bps to +1.00% |
133.9 |
95.3 |
110.6 |
77.0 |
| Ogden discount
rate increase by 75 bps to +0.50% |
82.8 |
57.4 |
68.3 |
46.3 |
| Ogden discount
rate increase by 25 bps to 0.00% |
29.2 |
20.0 |
24.0 |
16.1 |
|
Ogden discount rate decrease by 75 bps to -1.00% |
(104.4) |
(70.2) |
(86.3) |
(56.6) |
The sensitivities do not reflect the full ultimate impacts of
changes in the Ogden rate as some of the impact will flow into
future financial periods.
In addition, should the Ogden discount rate change in future
periods, the impacts on profit before tax and equity are likely to
be larger than those set out above, as a result of including the
impacts on claims arising in relation to premium written and earned
beyond 31 December 2023.
Risk adjustment
The sensitivities reflect the impact on profit before tax in
2023 and equity as at the end of 2023 for changes in the selection
of the UK motor risk adjustment confidence level at 31 December
2023, with all other assumptions remaining unchanged.
|
|
2023 |
|
£m |
Impact on profit before tax gross of
reinsurance |
Impact on profit before tax net of
reinsurance |
Impact on equity gross of reinsurance |
Impact on equity net
of reinsurance |
|
Risk adjustment increase to 95th percentile |
(54.4) |
(25.6) |
(45.6) |
(20.3) |
| Risk
adjustment decrease to 90th percentile |
45.6 |
24.1 |
38.3 |
19.3 |
|
Risk adjustment decrease to 85th percentile |
108.8 |
57.6 |
91.2 |
46.0 |
Undiscounted loss ratios, including risk
adjustment
The sensitivities reflect the impact on profit before tax in
2023 and equity as at the end of 2023, of a change in the booked
loss ratios for individual underwriting years (UWY) as at 31
December 2023, with all other assumptions remaining unchanged.
|
|
2023 |
|
£m |
UWY 2020
impact on: |
UWY 2021
impact on: |
UWY 2022 impact on: |
UWY 2023 impact on: |
| |
PBT |
Equity |
PBT |
Equity |
PBT |
Equity |
PBT |
Equity |
| |
|
|
|
|
|
|
|
|
| Increase of 1%:
gross of reinsurance |
(19.8) |
(15.2) |
(13.9) |
(11.1) |
(14.5) |
(12.6) |
(9.6) |
(8.4) |
| Increase of 3%:
gross of reinsurance |
(59.3) |
(45.7) |
(41.7) |
(33.4) |
(43.4) |
(37.7) |
(28.7) |
(25.3) |
| Increase of 5%:
gross of reinsurance |
(98.9) |
(76.1) |
(69.5) |
(55.6) |
(72.3) |
(62.9) |
(47.8) |
(42.2) |
| |
|
|
|
|
|
|
|
|
| Decrease of 1%:
gross of reinsurance |
19.8 |
15.2 |
13.9 |
11.1 |
14.5 |
12.6 |
9.6 |
8.4 |
| Decrease of 3%:
gross of reinsurance |
59.3 |
45.7 |
41.7 |
33.4 |
43.4 |
37.7 |
28.7 |
25.3 |
| Decrease of 5%:
gross of reinsurance |
98.9 |
76.1 |
69.5 |
55.6 |
72.3 |
62.9 |
47.8 |
42.2 |
| |
|
|
|
|
|
|
|
|
| Increase of 1%:
net of reinsurance |
(19.8) |
(15.2) |
(6.4) |
(5.0) |
(4.4) |
(3.6) |
(3.5) |
(2.8) |
| Increase of 3%:
net of reinsurance |
(59.3) |
(45.7) |
(19.1) |
(15.1) |
(13.1) |
(10.8) |
(10.4) |
(8.5) |
| Increase of 5%:
net of reinsurance |
(98.9) |
(76.1) |
(29.0) |
(22.8) |
(21.8) |
(18.0) |
(17.3) |
(14.2) |
| |
|
|
|
|
|
|
|
|
| Decrease of 1%:
net of reinsurance |
19.8 |
15.2 |
7.0 |
5.5 |
4.4 |
3.6 |
3.4 |
2.8 |
| Decrease of 3%:
net of reinsurance |
59.3 |
45.7 |
27.3 |
21.7 |
13.1 |
10.8 |
10.4 |
8.5 |
|
Decrease of 5%: net of reinsurance |
98.9 |
76.1 |
49.0 |
39.0 |
24.1 |
20.0 |
19.6 |
16.3 |
*2 ‘Booked’ loss ratios
are undiscounted underwriting year loss ratios,
including risk adjustment.
3b.
Financial risk: Interest rate sensitivity
analysis
The impact on profit and loss (before tax) and equity arising
from the impact of 100 basis point and 200 basis point increases
and decreases in interest rates on insurance contract liabilities
and reinsurance contract assets, is as follows:
|
|
31 December 2023 |
|
£m |
Impact on profit before tax gross of
reinsurance |
Impact on profit before tax net of
reinsurance |
Impact on equity gross of reinsurance |
Impact on equity net of reinsurance |
|
Increase of 100 basis points |
22.2 |
15.4 |
60.1 |
49.7 |
| Decrease of
100 basis points |
(24.3) |
(17.0) |
(68.4) |
(57.4) |
| Increase of
200 basis points |
42.7 |
29.5 |
113.9 |
93.8 |
|
Decrease of 200 basis points |
(51.2) |
(36.2) |
(148.5) |
(125.9) |
The impact on profit before tax of a 100 basis and 200 basis
point move in relation to investments and cash is not significant,
at £15.2 million and £30.4 million respectively. The impact on
equity is more significant, at £81.7 million and £163.4 million
respectively, as a result of the gains and losses on the majority
of the financial investment portfolio being reflected in Other
Comprehensive Income.
Sensitivities for the 2022 comparative period are not
significantly different to those provided above.
4. Operating
segments
The Group has four reportable segments, as described below.
These segments represent the principal split of business that is
regularly reported to the Group’s Board of Directors, which is
considered to be the Group’s chief operating decision maker in line
with IFRS 8 Operating Segments.
UK Insurance
The segment consists of the underwriting of Motor, Household,
Pet and Travel insurance and other products that supplement these
insurance policies within the UK. It also includes the generation
of revenue from additional products and fees from underwriting
insurance in the UK. The Directors consider the results of these
activities to be reportable as one segment as the activities
carried out in generating the revenue are not independent of each
other and are performed as one business. This mirrors the approach
taken in management reporting.
International Insurance
The segment consists of the underwriting of car and home
insurance and the generation of revenue from additional products
and fees from underwriting car insurance outside of the UK. It
specifically covers the Group operations Admiral Seguros in Spain,
ConTe in Italy, L’olivier Assurance in France and Elephant Auto in
the US. None of these operations are reportable on an individual
basis, based on the threshold requirements in IFRS 8.
Admiral Money
The segment relates to the Admiral Money
business launched in 2017, which provides unsecured personal loans
and car finance products in the UK, primarily through the
comparison channel, credit scoring applications and direct
channels.
Other
The ‘Other’ segment is designed to be comprised of all other
operating segments that are not separately reported to the Group’s
Board of Directors and do not meet the threshold requirements for
individual reporting. It includes the results of Admiral Pioneer
and compare.com prior to its disposal on 27 March 2023.
Taxes are not allocated across the segments and,
as with the corporate activities, are included in the
reconciliation to the Consolidated Income Statement and
Consolidated Statement of Financial Position.
An analysis of the Group’s revenue and results
for the year ended 31 December 2023, by reportable segment, is
shown below. The accounting policies of the reportable segments are
materially consistent with those presented in the notes to the
financial statements for the Group.
|
|
Year ended 31 December 2023 |
|
|
UK Insurance £m |
International Insurance
£m |
Admiral Money
£m |
Other
£m |
Eliminations*3
£m |
Total
£m |
|
Turnover*1 |
3,776.0 |
894.9 |
92.1 |
48.5 |
— |
4,811.5 |
|
Insurance revenue |
2,596.8 |
842.6 |
— |
46.7 |
— |
3,486.1 |
|
Insurance revenue net of XoL |
2,517.3 |
811.8 |
— |
44.4 |
— |
3,373.5 |
| Insurance
expenses |
(559.6) |
(249.4) |
— |
(27.9) |
— |
(836.9) |
| Insurance
claims net of XoL |
(1,560.2) |
(565.2) |
— |
(33.1) |
— |
(2,158.5) |
| Quota share
reinsurance result |
(18.4) |
(22.1) |
— |
0.1 |
— |
(40.4) |
| Net movement
in onerous loss component |
4.3 |
0.6 |
— |
— |
— |
4.9 |
|
Underwriting result |
383.4 |
(24.3) |
— |
(16.5) |
— |
342.6 |
| Net investment
income *2 |
55.2 |
4.3 |
— |
0.3 |
(3.2) |
56.6 |
| Net interest
income from financial services |
— |
— |
66.4 |
0.2 |
1.5 |
68.1 |
| Net other
revenue and operating expenses |
157.9 |
2.0 |
(56.2) |
(12.4) |
— |
91.3 |
|
Segment profit/(loss) before
tax*4 |
596.5 |
(18.0) |
10.2 |
(28.4) |
(1.7) |
558.6 |
|
Other central revenue and expenses, including share scheme
charges*4 |
|
(101.8) |
|
Investment and interest income |
|
|
4.6 |
|
Finance costs |
|
|
(18.6) |
|
Consolidated profit before tax |
|
|
|
442.8 |
|
Taxation expense |
|
|
|
|
|
(105.6) |
|
Consolidated profit after tax |
|
|
|
|
337.2 |
Revenue and results for the corresponding reportable segments
for the year ended 31 December 2022 are shown below.
|
|
Year ended 31 December 2022 |
|
|
UK Insurance £m |
International 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 |
2,174.2 |
750.0 |
— |
32.7 |
— |
2,956.9 |
|
Insurance revenue net of XoL |
2,115.7 |
732.0 |
— |
31.3 |
— |
2,879.0 |
| Insurance
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
5a.
Accounting
policies
The full accounting policies will be provided in the Group’s
2023 Annual Report. The information below reflects the Group’s key
accounting policy choices under IFRS 17, and application
thereof.
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 cashflows for insurance contracts issued |
Where the coverage period of all contracts within a group is not
longer than one year, insurance acquisition cashflows 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 cashflows 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 |
For PAA groups, 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.
In addition, given the impact of discounting outstanding claims in
the Group’s US insurance operation is immaterial, no discounting
has been applied.
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. |
Discount rates
A bottom-up approach has been applied in the determination of
discount rates. 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 cashflows
(known as an illiquidity premium).
The following weighted average rates, based on the yield curves
derived using the above methodology, were used to discount the
liability for incurred claims at the end of the current and prior
periods:
| |
31 December 2023 |
|
31 December 2022 |
| |
1 year |
3 years |
5 years |
10 years |
|
1 year |
3 years |
5 years |
10 years |
| UK Insurance |
5.4% |
4.3% |
4.0% |
3.9% |
|
5.1% |
5.0% |
4.7% |
4.4% |
| International
(European motor) |
4.0% |
3.1% |
3.0% |
3.0% |
|
3.8% |
3.9% |
3.8% |
3.7% |
5b.
Insurance
revenue
Insurance revenue for the corresponding reportable segments for
the period ended 31 December 2023 are shown below.
|
31 December 2023 |
|
|
UK Motor
£m |
UK Non-motor
£m |
Int. Insurance
£m |
Other
£m |
Total Group
£m |
|
Insurance revenue related movement in liability for
remaining coverage |
2,250.2 |
346.6 |
842.6 |
46.7 |
3,486.1 |
|
|
Insurance revenue for the corresponding reportable segments for
the period ended 31 December 2022 are shown below.
|
31 December 2022 (restated) |
| |
UK Motor
£m |
UK Non-motor
£m |
Int. Insurance
£m |
Other
£m |
Total Group
£m |
|
Insurance revenue related movement in liability for
remaining coverage |
1,909.7 |
264.5 |
750.0 |
32.7 |
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 majority of contracts are short
term in duration, lasting for between 6 and 12 months.
5c.
Insurance
service expenses
Insurance service expenses for the corresponding reportable
segments for the period ended 31 December 2023 are shown below.
|
31 December 2023 |
|
|
UK Motor
£m |
UK Non-motor
£m |
Int. Insurance
£m |
Other
£m |
Total Group
£m |
|
Incurred claims |
|
|
|
|
|
| Claims
incurred in the period |
1,755.5 |
255.0 |
618.2 |
36.4 |
2,665.1 |
|
Changes to liabilities for incurred claims |
(406.9) |
(9.1) |
(21.3) |
(3.3) |
(440.6) |
|
Total incurred claims |
1,348.6 |
245.9 |
596.9 |
33.1 |
2,224.5 |
| Movement in
onerous contracts |
(18.6) |
(2.4) |
(2.4) |
— |
(23.4) |
|
Directly attributable expenses |
|
|
|
|
|
| Administration
expenses |
377.8 |
73.5 |
184.0 |
19.0 |
654.3 |
|
Acquisition expenses |
73.4 |
34.8 |
65.4 |
8.9 |
182.5 |
|
Insurance expenses |
451.2 |
108.3 |
249.4 |
27.9 |
836.8 |
| Share scheme
expenses |
43.2 |
2.4 |
8.9 |
0.8 |
55.3 |
|
Total insurance expenses and share scheme
expenses |
494.4 |
110.7 |
258.3 |
28.7 |
892.1 |
|
Total Insurance service expenses |
1,824.4 |
354.2 |
852.8 |
61.8 |
3,093.2 |
Insurance service expenses for the corresponding reportable
segments for the period ended 31 December 2022 are shown below.
|
31 December 2022 (restated) |
|
|
UK Motor
£m |
UK Non-motor
£m |
Int. Insurance
£m |
Other
£m |
Total Group
£m |
|
Incurred claims |
|
|
|
|
|
| Claims
incurred in the period |
1,620.4 |
214.8 |
516.0 |
21.1 |
2,372.3 |
|
Changes to liabilities for incurred claims |
(437.2) |
(16.9) |
37.2 |
(3.6) |
(420.5) |
|
Total incurred claims |
1,183.2 |
197.9 |
553.2 |
17.5 |
1,951.8 |
| Movement in
onerous contracts |
(19.1) |
0.4 |
(3.9) |
— |
(22.6) |
|
Directly attributable expenses |
|
|
|
|
|
| Administration
expenses |
327.7 |
54.6 |
182.5 |
16.0 |
580.8 |
|
Acquisition expenses |
61.9 |
31.5 |
72.1 |
8.7 |
174.2 |
|
Insurance expenses |
389.6 |
86.1 |
254.6 |
24.7 |
755.0 |
| Share scheme
expenses |
39.4 |
4.2 |
9.4 |
— |
53.0 |
|
Total insurance expenses and share scheme
expenses |
429.0 |
90.3 |
264.0 |
24.7 |
808.0 |
|
Total Insurance service expenses |
1,593.1 |
288.6 |
813.3 |
42.2 |
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 31 December
2023 are shown below.
|
31 December 2023 |
| |
UK Motor
£m |
UK Non-motor
£m |
Int. Insurance
£m |
Other
£m |
Total Group
£m |
|
Allocation of reinsurance premiums |
93.6 |
49.5 |
190.0 |
2.2 |
335.3 |
| Amounts
recoverable from reinsurers for incurred insurance service
expenses |
|
|
|
|
|
| Incurred
claims |
(173.8) |
(52.0) |
(270.3) |
— |
(496.1) |
| Changes to
liabilities for incurred claims |
135.1 |
(1.4) |
95.9 |
(0.1) |
229.5 |
|
Net expense from reinsurance contracts excluding movement
in onerous loss component |
54.9 |
(3.9) |
15.6 |
2.1 |
68.7 |
|
Other reinsurance recoveries including movement in loss recovery
component |
14.5 |
2.2 |
1.7 |
— |
18.4 |
|
Net expenses/(income) from reinsurance contracts
held |
69.4 |
(1.7) |
17.3 |
2.1 |
87.1 |
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) |
| |
UK Motor
£m |
UK Non-Motor
£m |
Int. Insurance
£m |
Other
£m |
Total Group
£m |
|
Allocation of reinsurance premiums |
69.8 |
44.4 |
161.3 |
1.4 |
276.9 |
| Amounts
recoverable from reinsurers for incurred insurance service
expenses |
|
|
|
|
|
| Incurred
claims |
(182.8) |
(43.5) |
(232.6) |
0.2 |
(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 |
(7.1) |
1.6 |
19.9 |
|
Other reinsurance recoveries including movement in loss recovery
component |
13.9 |
(0.3) |
4.9 |
— |
18.5 |
|
Net expenses/(income) from reinsurance contracts
held |
37.6 |
1.4 |
(2.2) |
1.6 |
38.4 |
5e. Finance (expenses)/income from insurance
contracts held and reinsurance contracts issued
| |
31 December 2023
£m |
31 December 2022
£m |
|
Amounts recognised through the income
statement |
|
|
| Insurance
finance expenses from insurance contracts issued |
(94.5) |
(52.0) |
|
Finance expenses from insurance contracts
issued |
(94.5) |
(52.0) |
| Insurance
finance income from reinsurance contracts held |
28.9 |
13.6 |
|
Finance income from reinsurance contracts
issued |
28.9 |
13.6 |
|
Net finance expense from insurance / reinsurance contracts
issued |
(65.6) |
(38.4) |
|
Amounts recognised in other comprehensive
income |
|
|
| (Losses)/gains
due to changes in discount rates – insurance contracts |
(128.1) |
274.0 |
|
Gains/ (losses) due to changes in discount rates – reinsurance
contracts |
49.2 |
(96.2) |
|
Total gains before tax recognised in other comprehensive
income |
(78.9) |
177.8 |
5f. Insurance Liabilities and Reinsurance
assets
(i) Analysis of recognised amounts
| |
2023 |
|
2022 |
| |
Assets
£m |
Liabilities
£m |
Net
£m |
|
Assets
£m |
Liabilities
£m |
Net
£m |
|
Insurance contracts issued |
|
|
|
|
|
|
|
| UK Motor |
— |
3,315.7 |
3,315.7 |
|
— |
2,953.3 |
2,953.3 |
| UK
Non-motor |
— |
353.7 |
353.7 |
|
— |
267.7 |
267.7 |
| International
Motor |
— |
862.5 |
862.5 |
|
— |
776.7 |
776.7 |
|
Other |
— |
49.8 |
49.8 |
|
— |
27.7 |
27.7 |
|
Total insurance contracts issued |
— |
4,581.7 |
4,581.7 |
|
— |
4,025.4 |
4,025.4 |
|
|
|
|
|
|
|
|
|
|
Reinsurance contracts held |
|
|
|
|
|
|
|
| UK Motor |
519.9 |
— |
519.9 |
|
457.5 |
— |
457.5 |
| UK
Non-Motor |
191.6 |
— |
191.6 |
|
126.5 |
— |
126.5 |
| International
Motor |
481.8 |
— |
481.8 |
|
432.2 |
— |
432.2 |
| Other |
— |
(1.4) |
(1.4) |
|
— |
(0.8) |
(0.8) |
|
Total reinsurance contracts held |
1,193.3 |
(1.4) |
1,191.9 |
|
1,016.2 |
(0.8) |
1,015.4 |
|
|
|
|
|
|
|
|
|
|
Net |
|
|
|
|
|
|
|
| UK Motor |
— |
2,795.8 |
2,795.8 |
|
— |
2,495.8 |
2,495.8 |
| UK other |
— |
162.1 |
162.1 |
|
— |
141.2 |
141.2 |
| International
Motor |
— |
380.7 |
380.7 |
|
— |
344.5 |
344.5 |
|
Other |
— |
51.2 |
51.2 |
|
— |
28.5 |
28.5 |
|
Total insurance contracts issued |
— |
3,389.8 |
3,389.8 |
|
— |
3,010.0 |
3,010.0 |
(ii) Roll-forward of net asset or liability for
insurance contracts issued
UK Motor
The following tables reconcile the opening and closing
balances of the LRC and LIC for UK Motor.
|
2023 |
Liability for remaining coverage |
|
Liability for incurred claims |
Total |
| £
million |
Excluding loss component |
Loss component |
Total |
|
Present value of future cashflows |
Risk adj. for non-financial risk |
Total |
Total |
| Opening
assets |
— |
— |
— |
|
— |
— |
— |
— |
|
Opening liabilities |
(534.1) |
(8.1) |
(542.2) |
|
(1,984.5) |
(426.6) |
(2,411.1) |
(2,953.3) |
|
Net opening balance |
(534.1) |
(8.1) |
(542.2) |
|
(1,984.5) |
(426.6) |
(2,411.1) |
(2,953.3) |
|
Insurance revenue |
2,250.2 |
— |
2,250.2 |
|
— |
— |
— |
2,250.2 |
|
Insurance service expenses |
|
|
|
|
|
|
|
|
| Incurred
claims and insurance service expenses |
— |
— |
— |
|
(2,105.1) |
(144.8) |
(2,249.9) |
(2,249.9) |
| Changes to
liabilities for incurred claims |
— |
— |
— |
|
140.1 |
266.8 |
406.9 |
406.9 |
|
Losses and reversals of losses on onerous contracts |
— |
18.6 |
18.6 |
|
— |
— |
— |
18.6 |
|
Insurance service result |
2,250.2 |
18.6 |
2,268.8 |
|
(1,965.0) |
122.0 |
(1,843.0) |
425.8 |
|
Insurance finance income/(expense) recognised in profit or
loss |
— |
(4.1) |
(4.1) |
|
(59.0) |
(12.3) |
(71.3) |
(75.4) |
| Insurance
finance income/(expense) recognised in OCI |
— |
(9.4) |
(9.4) |
|
(60.5) |
(27.0) |
(87.5) |
(96.9) |
|
Total changes in comprehensive income |
2,250.2 |
5.1 |
2,255.3 |
|
(2,084.5) |
82.7 |
(2,001.8) |
253.5 |
|
Other changes |
— |
— |
— |
|
— |
— |
— |
— |
|
Cashflows |
|
|
|
|
|
|
|
|
| Premiums
received |
(2,482.1) |
— |
(2,482.1) |
|
— |
— |
— |
(2,482.1) |
| Claims and
other insurance service expenses paid |
— |
— |
— |
|
1,866.2 |
— |
1,866.2 |
1,866.2 |
|
Other movements |
— |
— |
— |
|
— |
— |
— |
— |
|
Total cashflows |
(2,482.1) |
— |
(2,482.1) |
|
1,866.2 |
— |
1,866.2 |
(615.9) |
|
Net closing balance |
(766.0) |
(3.0) |
(769.0) |
|
(2,202.8) |
(343.9) |
(2,546.7) |
(3,315.7) |
|
Closing assets |
— |
— |
— |
|
— |
— |
— |
— |
|
Closing liabilities |
(766.0) |
(3.0) |
(769.0) |
|
(2,202.8) |
(343.9) |
(2,546.7) |
(3,315.7) |
|
2022 |
Liability for remaining coverage |
|
Liability for incurred claims |
Total |
| £
million |
Excluding loss component |
Loss component |
Total |
|
Present value of future cashflows |
Risk adj. for non-financial risk |
Total |
Total |
| Opening
assets |
— |
— |
— |
|
— |
— |
— |
— |
|
Opening liabilities |
(473.1) |
(28.8) |
(501.9) |
|
(1,993.7) |
(507.8) |
(2,501.5) |
(3,003.4) |
|
Net opening balance |
(473.1) |
(28.8) |
(501.9) |
|
(1,993.7) |
(507.8) |
(2,501.5) |
(3,003.4) |
|
Insurance revenue |
1,909.7 |
— |
1,909.7 |
|
— |
— |
— |
1,909.7 |
|
Insurance service expenses |
|
|
|
|
|
|
|
|
| Incurred
claims and insurance service expenses |
— |
— |
— |
|
(1,836.9) |
(212.5) |
(2,049.4) |
(2,049.4) |
| Changes to
liabilities for incurred claims |
— |
— |
— |
|
175.6 |
261.6 |
437.2 |
437.2 |
|
Losses and reversals of losses on onerous contracts |
— |
19.1 |
19.1 |
|
— |
— |
— |
19.1 |
|
Insurance service result |
1,909.7 |
19.1 |
1,928.8 |
|
(1,661.3) |
49.1 |
(1,612.2) |
316.6 |
|
Insurance finance income/(expense) recognised in profit or
loss |
— |
(1.8) |
(1.8) |
|
(36.5) |
(8.4) |
(44.9) |
(46.7) |
| Insurance
finance income/(expense) recognised in OCI |
— |
3.4 |
3.4 |
|
191.9 |
40.5 |
232.4 |
235.8 |
|
Total changes in comprehensive income |
1,909.7 |
20.7 |
1,930.4 |
|
(1,505.9) |
81.2 |
(1,424.7) |
505.7 |
|
Other changes |
— |
— |
— |
|
(1.7) |
— |
(1.7) |
(1.7) |
|
Cashflows |
|
|
|
|
|
|
|
|
| Premiums
received |
(2,000.8) |
— |
(2,000.8) |
|
— |
— |
— |
(2,000.8) |
| Claims and
other insurance service expenses paid |
— |
— |
— |
|
1,516.8 |
— |
1,516.8 |
1,516.8 |
|
Other movements |
30.1 |
— |
30.1 |
|
— |
— |
— |
30.1 |
|
Total cashflows |
(1,970.7) |
— |
(1,970.7) |
|
1,516.8 |
— |
1,516.8 |
(453.9) |
|
Net closing balance |
(534.1) |
(8.1) |
(542.2) |
|
(1,984.5) |
(426.6) |
(2,411.1) |
(2,953.3) |
|
Closing assets |
— |
— |
— |
|
— |
— |
— |
— |
|
Closing liabilities |
(534.1) |
(8.1) |
(542.2) |
|
(1,984.5) |
(426.6) |
(2,411.1) |
(2,953.3) |
(iii) Roll-forward of net asset or liability for
reinsurance contracts held
UK Motor
The following tables reconcile the opening and closing
balances of the ARC and AIC for UK Motor.
|
2023 |
Asset for remaining coverage |
|
Asset for incurred claims |
|
| £
million |
Excluding loss component |
Loss-recovery component |
Total |
|
Present value of future cashflows |
Risk adj. for non-financial risk |
Total |
Total |
| Opening
assets |
20.2 |
6.3 |
26.5 |
|
255.4 |
175.6 |
431.0 |
457.5 |
|
Opening liabilities |
— |
— |
— |
|
— |
— |
— |
— |
|
Net opening balance |
20.2 |
6.3 |
26.5 |
|
255.4 |
175.6 |
431.0 |
457.5 |
|
Allocation of reinsurance premiums |
(93.6) |
— |
(93.6) |
|
— |
— |
— |
(93.6) |
| Amounts
recoverable from reinsurers for incurred claims |
|
|
|
|
|
|
|
|
| Incurred
claims |
— |
— |
— |
|
96.7 |
77.1 |
173.8 |
173.8 |
| Changes to
liabilities for incurred claims |
— |
— |
— |
|
(43.1) |
(92.0) |
(135.1) |
(135.1) |
| Changes in the
loss recovery component |
— |
(14.5) |
(14.5) |
|
— |
— |
— |
(14.5) |
|
Net income/ (expense) from reinsurance contracts
held |
(93.6) |
(14.5) |
(108.1) |
|
53.6 |
(14.9) |
38.7 |
(69.4) |
|
Reinsurance finance income/(expense) Recognised in profit or
loss |
— |
3.2 |
3.2 |
|
9.4 |
7.5 |
16.9 |
20.1 |
| Reinsurance
finance income/(expense) Recognised in OCI |
— |
7.3 |
7.3 |
|
12.5 |
15.4 |
27.9 |
35.2 |
|
Total changes in comprehensive income |
(93.6) |
(4.0) |
(97.6) |
|
75.5 |
8.0 |
83.5 |
(14.1) |
|
Cashflows |
|
|
|
|
|
|
|
|
| Premiums
paid |
94.2 |
— |
94.2 |
|
— |
— |
— |
94.2 |
| Claims
recoveries |
— |
— |
— |
|
(2.2) |
— |
(2.2) |
(2.2) |
| Recoveries as a
result of commutations |
— |
— |
— |
|
(15.5) |
— |
(15.5) |
(15.5) |
|
Total cashflows |
94.2 |
— |
94.2 |
|
(17.7) |
— |
(17.7) |
76.5 |
|
Net closing balance |
20.8 |
2.3 |
23.1 |
|
313.2 |
183.6 |
496.8 |
519.9 |
|
Closing assets |
20.8 |
2.3 |
23.1 |
|
313.2 |
183.6 |
496.8 |
519.9 |
|
Closing liabilities |
— |
— |
— |
|
— |
— |
— |
— |
|
2022 |
Asset for remaining coverage |
|
Asset for incurred claims |
|
| £
million |
Excluding loss component |
Loss-recovery component |
Total |
|
Present value of future cashflows |
Risk adj. for non-financial risk |
Total |
Total |
| Opening
assets |
24.7 |
21.7 |
46.4 |
|
250.7 |
203.1 |
453.8 |
500.2 |
|
Opening liabilities |
— |
— |
— |
|
— |
— |
— |
— |
|
Net opening balance |
24.7 |
21.7 |
46.4 |
|
250.7 |
203.1 |
453.8 |
500.2 |
|
Allocation of reinsurance premiums |
(69.8) |
— |
(69.8) |
|
— |
— |
— |
(69.8) |
| Amounts
recoverable from reinsurers for incurred claims |
|
|
|
|
|
|
|
|
| Incurred
claims |
— |
— |
— |
|
91.9 |
90.9 |
182.8 |
182.8 |
| Changes to
liabilities for incurred claims |
— |
— |
— |
|
(36.7) |
(100.0) |
(136.7) |
(136.7) |
| Changes in the
loss recovery component |
— |
(13.9) |
(13.9) |
|
— |
— |
— |
(13.9) |
|
Net income/ (expense) from reinsurance contracts
held |
(69.8) |
(13.9) |
(83.7) |
|
55.2 |
(9.1) |
46.1 |
(37.6) |
|
Reinsurance finance income/(expense) recognised in profit or
loss |
— |
1.3 |
1.3 |
|
5.1 |
3.9 |
9.0 |
10.3 |
| Reinsurance
finance income/(expense) recognised in OCI |
— |
(2.8) |
(2.8) |
|
(44.8) |
(22.3) |
(67.1) |
(69.9) |
|
Total changes in comprehensive income |
(69.8) |
(15.4) |
(85.2) |
|
15.5 |
(27.5) |
(12.0) |
(97.2) |
|
Other changes |
— |
— |
— |
|
1.8 |
— |
1.8 |
1.8 |
|
Cashflows |
|
|
|
|
|
|
|
|
| Premiums
paid |
65.3 |
— |
65.3 |
|
— |
— |
— |
65.3 |
| Amounts
received |
— |
— |
— |
|
(12.6) |
— |
(12.6) |
(12.6) |
|
Total cashflows |
65.3 |
— |
65.3 |
|
(12.6) |
— |
(12.6) |
52.7 |
|
Net closing balance |
20.2 |
6.3 |
26.5 |
|
255.4 |
175.6 |
431.0 |
457.5 |
|
Closing assets |
20.2 |
6.3 |
26.5 |
|
255.4 |
175.6 |
431.0 |
457.5 |
|
Closing liabilities |
— |
— |
— |
|
— |
— |
— |
— |
(iv)
Claims
development
The tables below illustrate how estimates of cumulative
claims for UK Motor have developed over time on a gross and net of
reinsurance basis, for each underwriting year, and reconciles
the cumulative claims to the amount included in
the Statement of Financial Position.
Gross claims development
Financial year ended 31 December 2023 |
|
Underwriting year |
2013 & prior |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
2023 |
Total |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
UK Motor (core) |
|
|
|
|
|
|
|
|
|
|
|
|
|
At end of year one |
|
382 |
394 |
436 |
552 |
686 |
701 |
552 |
688 |
845 |
973 |
|
|
At end of year two |
|
675 |
701 |
829 |
1,144 |
1,175 |
1,067 |
985 |
1,326 |
1,584 |
|
|
|
At end of year three |
|
659 |
707 |
788 |
994 |
1,109 |
1,010 |
954 |
1,294 |
|
|
|
|
At end of year four |
|
689 |
680 |
727 |
947 |
1,064 |
996 |
921 |
|
|
|
|
|
At end of year five |
|
643 |
636 |
713 |
912 |
1,008 |
981 |
|
|
|
|
|
|
At end of year six |
|
635 |
619 |
690 |
890 |
1,000 |
|
|
|
|
|
|
|
At end of year seven |
|
619 |
606 |
656 |
865 |
|
|
|
|
|
|
|
|
At end of year eight |
|
604 |
594 |
652 |
|
|
|
|
|
|
|
|
|
At end of year nine |
|
593 |
585 |
|
|
|
|
|
|
|
|
|
|
Ten years later |
|
590 |
|
|
|
|
|
|
|
|
|
|
|
Gross best estimates of undiscounted claims |
3,225 |
590 |
585 |
652 |
865 |
1,000 |
981 |
921 |
1,294 |
1,584 |
973 |
12,670 |
|
Cumulative gross claims paid |
(3,075) |
(576) |
(560) |
(616) |
(747) |
(893) |
(770) |
(662) |
(826) |
(971) |
(395) |
(10,091) |
|
Gross undiscounted best estimate liabilities |
150 |
14 |
25 |
36 |
118 |
107 |
211 |
259 |
468 |
613 |
578 |
2,579 |
|
Risk adjustment (undiscounted) |
|
|
|
|
|
|
|
|
|
|
|
411 |
|
Effect of discounting |
|
|
|
|
|
|
|
|
|
|
|
(537) |
|
Gross claims liabilities |
|
|
|
|
|
|
|
|
|
|
|
2,453 |
|
Ancillary claims and expense liabilities |
|
|
|
|
|
|
|
|
|
|
|
94 |
|
UK Motor Gross liabilities for incurred
claims |
|
|
|
|
|
|
|
|
|
|
|
2,547 |
Claims development, net of XoL
reinsurance
|
Financial year ended 31 December 2023 |
|
Underwriting year |
2013 & prior |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
2023 |
Total |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
UK Motor (core) |
|
|
|
|
|
|
|
|
|
|
|
|
|
At end of year one |
|
373 |
378 |
427 |
510 |
646 |
675 |
520 |
661 |
825 |
951 |
|
|
At end of year two |
|
659 |
682 |
783 |
1,053 |
1,123 |
1,033 |
949 |
1,292 |
1,550 |
|
|
|
At end of year three |
|
644 |
667 |
743 |
917 |
1,053 |
986 |
927 |
1,257 |
|
|
|
|
At end of year four |
|
659 |
637 |
692 |
883 |
1,024 |
969 |
892 |
|
|
|
|
|
At end of year five |
|
623 |
607 |
677 |
860 |
974 |
950 |
|
|
|
|
|
|
At end of year six |
|
619 |
599 |
663 |
840 |
978 |
|
|
|
|
|
|
|
At end of year seven |
|
606 |
586 |
640 |
820 |
|
|
|
|
|
|
|
|
At end of year eight |
|
597 |
579 |
635 |
|
|
|
|
|
|
|
|
|
At end of year nine |
|
589 |
577 |
|
|
|
|
|
|
|
|
|
|
Ten years later |
|
589 |
|
|
|
|
|
|
|
|
|
|
|
Net of XoL best estimates of undiscounted
claims |
3,190 |
589 |
577 |
635 |
820 |
978 |
950 |
892 |
1,257 |
1,550 |
951 |
12,389 |
|
Cumulative claims paid |
(3,075) |
(576) |
(560) |
(616) |
(747) |
(893) |
(770) |
(662) |
(826) |
(971) |
(395) |
(10,091) |
|
Net of XoL undiscounted best estimate
liabilities |
115 |
13 |
17 |
19 |
73 |
85 |
180 |
230 |
431 |
579 |
556 |
2,298 |
|
Risk adjustment (undiscounted) |
|
|
|
|
|
|
|
|
|
|
|
331 |
|
Effect of discounting |
|
|
|
|
|
|
|
|
|
|
|
(420) |
|
Net of XoL claims liabilities |
|
|
|
|
|
|
|
|
|
|
|
2,209 |
|
Ancillary claims liabilities and expenses |
|
|
|
|
|
|
|
|
|
|
|
94 |
|
UK Motor Net of XoL liabilities for incurred
claims |
|
|
|
|
|
|
|
|
|
|
|
2,303 |
Claims development, net of
reinsurance
|
Financial year ended 31 December 2023 |
|
Underwriting year |
2013 & prior |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
2023 |
Total |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
UK Motor (core) |
|
|
|
|
|
|
|
|
|
|
|
|
|
At end of year one |
|
373 |
378 |
427 |
493 |
625 |
626 |
520 |
657 |
762 |
939 |
|
|
At end of year two |
|
659 |
682 |
783 |
1,016 |
1,086 |
1,033 |
949 |
1,259 |
1,442 |
|
|
|
At end of year three |
|
644 |
667 |
743 |
886 |
1,018 |
986 |
927 |
1,239 |
|
|
|
|
At end of year four |
|
659 |
637 |
692 |
853 |
990 |
969 |
892 |
|
|
|
|
|
At end of year five |
|
623 |
607 |
677 |
830 |
957 |
950 |
|
|
|
|
|
|
At end of year six |
|
619 |
599 |
663 |
811 |
944 |
|
|
|
|
|
|
|
At end of year seven |
|
606 |
586 |
640 |
793 |
|
|
|
|
|
|
|
|
At end of year eight |
|
597 |
579 |
635 |
|
|
|
|
|
|
|
|
|
At end of year nine |
|
589 |
577 |
|
|
|
|
|
|
|
|
|
|
Ten years later |
|
589 |
|
|
|
|
|
|
|
|
|
|
|
Net best estimates of undiscounted claims |
3,190 |
589 |
577 |
635 |
793 |
944 |
950 |
892 |
1,239 |
1,442 |
939 |
12,190 |
|
Cumulative net claims paid |
(3,076) |
(576) |
(560) |
(616) |
(719) |
(864) |
(770) |
(662) |
(826) |
(971) |
(395) |
(10,035) |
|
Net undiscounted best estimate liabilities |
114 |
13 |
17 |
19 |
74 |
80 |
180 |
230 |
413 |
471 |
544 |
2,155 |
|
Risk adjustment (undiscounted) |
|
|
|
|
|
|
|
|
|
|
|
172 |
|
Effect of discounting |
|
|
|
|
|
|
|
|
|
|
|
(365) |
|
Net claims liabilities |
|
|
|
|
|
|
|
|
|
|
|
1,962 |
|
Ancillary claims liabilities and expenses |
|
|
|
|
|
|
|
|
|
|
|
88 |
|
UK Motor Net liabilities for incurred claims |
|
|
|
|
|
|
|
|
|
|
|
2,050 |
(i) UK
Motor Loss ratios and Changes to liabilities for incurred
claims
The table below shows the development of UK
Motor Insurance loss ratios for the past three financial periods,
presented on an underwriting year basis, both using undiscounted
amounts (i.e. cashflows) and discounted amounts.
|
|
31 December |
|
UK Motor Insurance loss ratio development–- undiscounted, gross net
of excess of loss reinsurance |
2021 |
2022 |
2023 |
|
Underwriting year |
|
|
|
| 2018 |
73% |
68% |
65% |
| 2019 |
73% |
71% |
67% |
| 2020 |
68% |
65% |
58% |
| 2021 |
95% |
91% |
86% |
| 2022 |
— |
104% |
96% |
|
2023 |
— |
— |
94% |
*Booked undiscounted loss ratios presented from the
transition date of IFRS 17 (1 January 2022) onwards
|
|
31 December |
|
UK Motor Insurance loss ratio development – discounted*, gross net
of excess of loss reinsurance |
2021 |
2022 |
2023 |
|
Underwriting year |
|
|
|
| 2018 |
71% |
67% |
64% |
| 2019 |
71% |
69% |
65% |
| 2020 |
67% |
63% |
57% |
| 2021 |
92% |
86% |
81% |
| 2022 |
— |
97% |
88% |
|
2023 |
— |
— |
86% |
* Loss ratios using discounted locked-in curves, excluding
finance expenses are presented from the transition date of IFRS 17
(1 January 2022) onwards
The following table analyses the impact of movements in changes
to liabilities from incurred claims by underwriting year on a gross
and net of excess of loss reinsurance basis for UK Motor.
|
|
31 December 2023
£m |
31 December 2022 (restated)
£m |
|
Gross |
|
|
|
Underwriting year |
|
|
|
2018 & prior |
91.5 |
262.4 |
|
2019 |
61.4 |
34.2 |
|
2020 |
98.2 |
84.4 |
|
2021 |
76.4 |
56.1 |
|
2022 |
79.4 |
— |
|
2023 |
— |
— |
|
Total UK motor gross changes to liabilities for incurred
claims |
406.9 |
437.2 |
|
Net |
|
|
|
Underwriting year |
|
|
| 2018
& prior |
80.6 |
187.2 |
|
2019 |
65.0 |
29.0 |
|
2020 |
97.7 |
62.8 |
|
2021 |
80.1 |
48.2 |
|
2022 |
69.4 |
— |
|
2023 |
— |
— |
|
Total UK motor net of excess of loss changes to liabilities
for incurred claims |
392.8 |
327.2 |
6. Investment income
and finance costs
6a. Investment return
|
|
31 December
2023
£m |
31 December
2022
£m |
|
|
At EIR |
Other |
Total |
At EIR |
Other |
Total |
|
Investment return |
|
|
|
|
|
|
| On assets
classified as FVTPL |
— |
43.3 |
43.3 |
— |
8.4 |
8.4 |
| On assets
classified as FVOCI*1*3 |
77.0 |
(3.6) |
73.4 |
50.3 |
2.3 |
52.6 |
| On assets
classified as amortised costs*1 |
4.1 |
— |
4.1 |
2.0 |
— |
2.0 |
| |
|
|
|
|
|
|
| Net
unrealised losses |
|
|
|
|
|
|
| Unrealised
(loss) / gain on forward contracts |
— |
(0.2) |
(0.2) |
— |
0.5 |
0.5 |
| Share of
associate profit/ loss |
— |
(1.3) |
(1.3) |
— |
(0.1) |
(0.1) |
|
Interest receivable on cash and cash equivalents*1 |
— |
3.6 |
3.6 |
— |
1.2 |
1.2 |
|
Total investment and interest income
*2 |
81.1 |
41.8 |
122.9 |
52.3 |
12.3 |
64.6 |
*1 Interest received during the year was £76.8 million (2022:
£58.7 million).
*2 Total investment return excludes £3.2 million of intra-group
interest (2022: £2.2 million).
*3 Realised losses on sales of debt securities classified as FVOCI
are £0.9 million (2022: £2.2 million gain).
6b. Finance costs
|
|
31 December
2023
£m |
31 December
2022
£m |
|
Interest payable on subordinated loan notes and other credit
facilities*1*2 |
18.5 |
11.5 |
| Interest
payable on lease liabilities |
2.0 |
2.0 |
|
Interest recoverable from co and re-insurers |
(0.4) |
(1.5) |
|
Total finance costs |
20.1 |
12.0 |
*1 Interest paid during the year was £20.5 million (2022: £13.4
million).
*2 See note 7e for details of credit facilities.
Finance costs represent interest payable on the £305.1 million
(2022: £200.0 million) subordinated notes and other financial
liabilities.
Interest payable on lease liabilities represents the unwinding
of the discount on lease liabilities under IFRS 16 and does not
result in a cash payment.
6c. Expected credit losses
|
|
Note |
31 December
2023
£m |
31 December
2022
£m |
|
Expected credit (gains) on financial investments |
|
(2.5) |
(1.8) |
| Expected credit
losses on Loans and advances to customers*1 |
|
33.5 |
20.7 |
|
Total expense for expected credit losses |
|
31.0 |
18.9 |
*1 Includes £15.0 million (2022: £7.2 million) of write-offs,
with total movement in the expected credit loss provision being
£33.5 million (2022: £20.7 million).
6d.
Financial assets and liabilities
The Group’s financial assets and liabilities can be analysed as
follows:
|
|
31 December
2023
£m |
31 December
2022
(restated)
£m |
|
Financial investments measured at FVTPL |
|
|
| Money market
funds |
587.5 |
706.5 |
| Other
funds*1 |
301.3 |
188.8 |
| Derivative
financial instruments |
17.6 |
33.0 |
| Equity
Investments (designated FVTPL) |
12.4 |
6.4 |
|
|
918.8 |
934.7 |
|
Financial investments classified as FVOCI |
|
|
| Corporate debt
securities |
2,040.6 |
1,701.2 |
| Government debt
securities |
519.6 |
479.8 |
| Private debt
securities |
242.7 |
166.6 |
|
|
2,802.9 |
2,347.6 |
|
Equity investments (designated FVOCI) |
23.0 |
25.1 |
|
|
2,825.9 |
2,372.7 |
|
Financial assets measured at amortised cost |
|
|
| Deposits with
credit institutions |
116.7 |
101.4 |
| |
|
|
| Investment in
Associates |
1.0 |
2.4 |
|
|
|
|
|
Total financial investments |
3,862.4 |
3,411.2 |
| |
|
|
| Other
financial assets (measured at amortised cost) |
|
|
| Insurance
receivables |
272.7 |
187.6 |
|
Trade and other receivables |
75.0 |
87.6 |
|
Insurance and other receivables |
347.7 |
275.2 |
| Loans
and advances to customers (note 7) |
879.4 |
823.9 |
| Cash and
cash equivalents |
353.1 |
297.0 |
|
Total financial assets |
5,442.6 |
4,807.3 |
Financial liabilities |
|
|
| Subordinated
notes |
315.2 |
204.4 |
| Loan backed
securities |
759.6 |
714.7 |
| Other
borrowings |
55.0 |
20.0 |
| Derivative
financial instruments |
— |
— |
|
Subordinated and other financial liabilities |
1,129.8 |
939.1 |
| Trade and other
payables |
305.8 |
254.9 |
|
Lease liabilities |
81.2 |
88.5 |
|
Total financial liabilities |
1,516.8 |
1,282.5 |
*1 Other funds include fixed income securities recognised as
fair value through profit and loss.
The table below shows how the financial assets held at fair
value have been measured using the fair value hierarchy:
|
|
31 December 2023 |
31 December 2022 |
|
|
FVTPL
£m |
FVOCI
£m |
FVTPL
£m |
FVOCI
£m |
| Level one
(quoted prices in active markets) |
888.8 |
2,560.1 |
900.2 |
2,180.9 |
| Level two (use
of observable inputs) |
17.6 |
— |
28.1 |
— |
| Level three
(use of significant unobservable inputs) |
12.4 |
265.8 |
6.4*1 |
191.8 |
|
Total |
918.8 |
2,825.9 |
934.7 |
2,372.7 |
*1 Gains through the Income Statement are recognised within
Investment return. See note 6b for further information.
Level three investments consist of debt securities and equity
securities.
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. These
include funds that invest in corporate direct lending, residential
and commercial mortgages, and other private debt. 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; these valuations are performed by
the external fund managers. The key unobservable input across
private debt securities is the discount rate which is based on the
credit performance of the assets. A deterioration of the credit
performance or expected future performance will result in higher
discount rates and lower values.
Equity securities are primarily 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 cashflow 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:
|
31 December 2023 |
|
Level Three Investments |
Equity Securities
£m |
Debt Securities
£m |
Total
£m |
| Balance as at
1 January 2023 |
31.6 |
166.6 |
198.2 |
| Gains /
(losses) recognised in IS |
(0.1) |
10.0 |
9.9 |
| Gains /
(losses) recognised in OCI |
(1.0) |
0.8 |
(0.2) |
| Purchases |
6.1 |
89.6 |
95.7 |
| Disposals |
(1.1) |
(24.3) |
(25.4) |
|
Balance as at 31 December 2023 |
35.5 |
242.7 |
278.2 |
|
31 December 2022 |
|
Level Three Investments |
Equity Securities
£m |
Debt Securities
£m |
Total
£m |
| Balance as at
1 January 2022 |
21.5 |
125.5 |
147.0 |
| Gains /
(losses) recognised in IS |
1.8 |
3.9 |
5.7 |
| Gains /
(losses) recognised in OCI |
1.1 |
(9.6) |
(8.5) |
| Purchases |
9.4 |
74.4 |
83.8 |
| Disposals |
(2.5) |
(27.6) |
(30.1) |
| Translation
differences |
0.3 |
— |
0.3 |
|
Balance as at 31 December 2022 |
31.6 |
166.6 |
198.2 |
7. Loans and Advances
to Customers
|
|
|
31 December
2023
£m |
31 December
2022
£m |
|
Loans and advances to customers – gross carrying amount |
|
956.8 |
887.4 |
|
Loans and advances to customers – provision |
|
(81.7) |
(63.7) |
|
Total loans and advances to customers – Admiral
Money |
|
875.1 |
823.7 |
|
Total loans and advances to customers – Other |
|
4.3 |
0.2 |
|
Total loans and advances to customers |
|
879.4 |
823.9 |
Loans and advances to customers are comprised of the
following:
|
|
|
31 December 2023
£m |
31 December 2022
£m |
|
Unsecured personal loans |
|
937.7 |
855.8 |
| Finance
leases |
|
19.1 |
31.6 |
|
Other |
|
4.4 |
0.2 |
|
Total loans and advances to customers, gross |
|
961.2 |
887.6 |
Forward-looking information
Under IFRS 9 the provision must reflect an unbiased and
probability-weighted amount that is determined by evaluating a
range of possible outcomes. The means by which the Group has
determined this is to run scenario analysis.
Management judgment has been used to define the
weighting and severity of the different scenarios based on
available data.
The key economic driver of credit losses from the scenarios is
the likelihood of a customer entering hardship through
unemployment. Unemployment forecasts include a risk grade split of
PD based on the correlation between grade-level default rates
observed relative to the change in unemployment rates in the
previous downturn, adjusted for the unemployment forecast expected
in the current economic environment.
The scenario weighting assumptions used are
detailed below, along with the unemployment rate assumed in each
scenario at 31 December 2023.
|
|
31 December 2023
Scenario peak
Unemployment rate |
31 December
2023
Weighting |
31 December 2022
Scenario peak
Unemployment rate |
31 December
2022
Weighting |
|
Base |
4.7% |
50% |
4.8% |
40% |
|
Upturn |
3.5% |
10% |
3.5% |
10% |
|
Downturn |
6.0% |
30% |
6.0% |
40% |
|
Severe |
8.0% |
10% |
7.9% |
10% |
The economic scenarios and forecasts have been updated in
conjunction with a third party economics provider. The probability
weightings reflect the view that there is a probability of 90%
attached to recessionary outcomes.
Sensitivities to key areas of estimation
uncertainty
The key areas of estimation uncertainty identified, as per note
3 to the financial statements, are in the PD and the
forward-looking scenarios.
|
|
31 December
2023
Weighting |
31 December
2023
Sensitivity
£m |
31 December
2022
Weighting |
31 December
2022
Sensitivity
£m |
|
Base |
50% |
(1.1) |
40% |
(1.3) |
|
Upturn |
10% |
(5.2) |
10% |
(6.9) |
|
Downturn |
30% |
2.5 |
40% |
1.4 |
|
Severe |
10% |
8.2 |
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. At 31 December
2023 the implied weighted peak unemployment rate is 5.2%: the table
shows that in a downturn scenario with a 6.0% peak unemployment
rate the provision would increase by £2.5 million, whilst the
upturn would reduce the provision by £5.2 million, base case reduce
by £1.1 million and severe increase the provision by £8.2
million.
Stage 1 assets represent 81% of the total loan assets; 0.1%
increase in the stage 1 PD, i.e. from 2.2% to 2.3% would result in
a £0.6 million increase in ECL.
Post Model Adjustments
(‘PMA’s)
As at 31 December 2023, the expected credit loss
allowance included PMAs totalling £9.2 million (2022: £11.3
million).
|
Post Model Adjustments |
|
31 December
2023
£m |
31 December
2022
£m |
|
Model performance |
|
2.0 |
3.9 |
| Cost of
Living |
|
6.5 |
6.5 |
| Economic
scenarios |
|
0.7 |
0.9 |
|
|
|
9.2 |
11.3 |
PMAs are calculated using management judgement and analysis. The
key categories of PMAs are as follows:
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. In addition, interest rate rises in
2023 have created the potential for performance uncertainty. 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. A refresh of the PD model
during 2023 has reduced the PMA in comparison to the previous year
end.
Cost of Living
This PMA captures the risk of customers falling into a negative
affordability position, whereby customers are no longer able to
meet their credit commitments due to higher expenditure driven by
higher prices and increased mortgage payments, when their standard
variable or fixed term rate comes to an end. A PMA is held to
acknowledge this, using both external and internal data.
Economic scenarios
An uncertainty factor determined by management judgment has been
added to reflect the recent volatility in unemployment forecasts.
This factor has been reduced as variability between successive
forecasts has fallen.
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 at 31 December 2023 and
comparative period is as follows:
| |
31 December 2023 |
31 December 2022 |
|
|
Stage 1
12- month ECL
£m |
Stage 2
Lifetime ECL
£m |
Stage 3
Lifetime ECL
£m |
Total
£m |
Total
£m |
|
Credit
Grade*1 |
|
|
|
|
|
|
Higher |
566.0 |
83.3 |
— |
649.3 |
600.2 |
|
Medium |
155.8 |
30.8 |
— |
186.6 |
200.0 |
|
Lower |
53.6 |
11.8 |
— |
65.4 |
53.2 |
|
Credit impaired |
— |
— |
55.5 |
55.5 |
34.0 |
|
Gross carrying amount |
775.4 |
125.9 |
55.5 |
956.8 |
887.4 |
|
Expected credit loss allowance |
(12.8) |
(29.1) |
(39.2) |
(81.1) |
(63.1) |
|
Other loss
allowance*2 |
(0.5) |
(0.1) |
— |
(0.6) |
(0.6) |
|
Carrying amount – Admiral Money |
762.1 |
96.7 |
16.3 |
875.1 |
823.7 |
|
Carrying amount – Other |
4.3 |
— |
— |
4.3 |
0.2 |
|
Carrying amount |
766.4 |
96.7 |
16.3 |
879.4 |
823.9 |
*1 Credit grade is
the internal credit banding given to a customer at origination.
This is based on external credit rating information.
*2 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.
8. Other revenue and
co-insurer profit commission
|
|
31 December 2023 |
|
|
|
UK Insurance
£m |
International Insurance
£m |
Admiral Money
£m |
Other
£m |
Total
£m |
|
Major products/service line |
|
|
|
|
|
| Fee and
commission revenue |
107.2 |
— |
0.1 |
— |
107.3 |
| Revenue from
law firm |
18.3 |
— |
— |
— |
18.3 |
| Comparison
income*1 |
— |
— |
— |
1.6 |
1.6 |
|
Total other revenue |
125.5 |
— |
0.1 |
1.6 |
127.2 |
|
Profit commission from co-insurers |
76.5 |
2.0 |
— |
— |
78.5 |
|
Total other revenue and co-insurer profit
commission |
202.0 |
2.0 |
0.1 |
1.6 |
205.7 |
|
|
|
|
|
|
|
| Timing
of revenue recognition |
|
|
|
|
|
| Point in
time |
160.4 |
2.0 |
0.1 |
1.6 |
164.1 |
| Over time |
20.1 |
— |
— |
— |
20.1 |
|
Revenue outside the scope of IFRS 15 |
21.5 |
— |
— |
— |
21.5 |
|
|
202.0 |
2.0 |
0.1 |
1.6 |
205.7 |
|
|
31 December 2022 (restated) |
|
|
UK Insurance
£m |
International Insurance
£m |
Admiral Money
£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 |
*1 Comparison
revenue excludes £nil million (31 December 2022: £0.3 million) of
income from other Group companies.
Profit commission
The cumulative profit commission recognised is
calculated in aggregate across the contract, in line with contract
terms, based on a number of detailed inputs for each individual
underwriting year, the most material of which are as follows:
- Premiums, defined as gross premiums
ceded including any instalment income, less reinsurance premium
(for excess of loss reinsurance).
- Insurance expenses incurred.
- Claims costs incurred.
- The Group uses the expected value
method for the initial calculation of profit commission revenue,
based on known premiums and expenses, and the best estimate of
claims costs.
- The variable revenue estimated
using the expected value method above is constrained through the
inclusion of the risk adjustment within the claims cost element of
the calculation, with the profit commission recognised aligned to
the IFRS 17 booked loss ratios, discounted at locked-in rates, and
inclusive of finance expense. The inclusion of the risk adjustment
constrains the cumulative profit commission revenue recognised to a
level where there is a high probability of no significant
reversal.
The key methods, inputs and assumptions used to estimate the
variable consideration of profit commission are therefore in line
with those used for the calculation of claims liabilities, as set
out in note 3 to the financial statements, with further detail also
included in note 5. There are no further critical accounting
estimates or judgements in relation to the recognition of profit
commission.
|
|
31 December 2023
£m |
31 December 2022 (restated)
£m |
|
Underwriting year |
|
|
| 2019 &
prior |
48.8 |
105.9 |
| 2020 |
27.7 |
24.5 |
| 2021 |
— |
— |
| 2022 |
— |
(2.9) |
|
2023 |
— |
— |
|
Total UK motor profit commission |
76.5 |
127.5 |
9. Directly
attributable and other expenses
| |
31 December 2023 |
|
Directly attributable expenses
£m |
Other operating expenses
£m |
Total expenses
£m |
|
Administration and acquisition expenses |
836.8 |
100.8 |
937.6 |
| Expenses
relating to additional products and fees |
— |
41.4 |
41.4 |
| Share scheme
expenses |
55.3 |
28.5 |
83.8 |
| Loan expenses
(excluding movement on ECL provision) |
— |
23.0 |
23.0 |
| Movement in
expected credit loss provision |
— |
31.0 |
31.0 |
|
Other*1 |
— |
57.1 |
57.1 |
|
Total |
892.1 |
281.8 |
1,173.9 |
| |
31 December 2022 (restated) |
|
Directly attributable expenses
£m |
Other operating expenses
£m |
Total expenses
£m |
|
Administration and acquisition expenses |
755.1 |
83.8 |
838.9 |
| 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*1 |
— |
33.8 |
33.8 |
|
Total |
808.1 |
223.5 |
1,031.6 |
*1 Other includes centralised costs (2023: £34.5
million, 2022: £15.0 million) , business development costs (2023:
£15.3 million, 2022: £8.8 million) and other costs (2023: £7.3
million, 2022: £10.0 million).
10. Taxation
|
|
31 December 2023
£m |
31 December 2022 (restated)
£m |
|
Current tax |
|
|
| Corporation
tax on profits for the year |
91.6 |
107.6 |
|
Under/(over) provision relating to prior periods |
21.3 |
(0.8) |
|
Current tax charge |
112.9 |
106.8 |
|
Deferred tax |
|
|
| Current period
deferred taxation movement |
0.7 |
(31.6) |
|
(Over)/Under provision relating to prior periods |
(8.0) |
0.7 |
|
Total tax charge per Consolidated Income
Statement |
105.6 |
75.9 |
Factors affecting the total tax charge are:
|
|
31 December 2023
£m |
31 December 2022 (restated)
£m |
|
Profit before tax |
442.8 |
361.2 |
|
Corporation tax thereon at effective UK corporation tax rate of
23.5% (2022: 19.0%) |
104.1 |
68.6 |
| Expenses and
provisions not deductible for tax purposes |
3.0 |
2.2 |
| Non-taxable
income |
(13.4) |
(6.0) |
| Impact of
change in UK tax rate on deferred tax balances |
(0.4) |
(5.6) |
| Adjustments
relating to prior periods |
13.5 |
(0.2) |
| Impact of
different overseas tax rates |
(8.9) |
3.6 |
|
Unrecognised deferred tax |
7.7 |
13.3 |
|
Total tax charge for the period as above |
105.6 |
75.9 |
The UK corporation tax rate for 2023 is 23.5% (2022: 19.0%). An
increase to the main rate of corporation tax in the UK from 19% to
25% was announced in the 2021 Budget and has come into effect from
1 April 2023.
Adjustments relating to prior periods are higher than previous
periods, with £11.7 million of the above total impact of £13.5
million due to the Group deciding to settle a historic Italian tax
matter, relating mainly to cross border matters. Further
costs of £6.8 million relating to this inspection, such as interest
and penalties, are included in Other Group costs within the income
statement. These costs are expected to be non-recurring.
11. Other Assets and
Other Liabilities
11a. Intangible
assets
|
|
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 |
— |
7.9 |
51.1 |
7.7 |
66.7 |
| Amortisation
charge |
— |
— |
(34.8) |
(5.5) |
(40.3) |
| Disposals |
— |
— |
(0.1) |
— |
(0.1) |
|
Impairment |
— |
— |
(0.2) |
— |
(0.2) |
| Transfers |
— |
— |
— |
— |
— |
|
Foreign exchange movement & other |
— |
— |
(0.4) |
(0.4) |
(0.8) |
|
At 31 December 2023 |
62.3 |
7.9 |
152.0 |
20.7 |
242.9 |
11b.
Trade and other payables
|
|
31 December 2023
£m |
31 December 2022 (restated)
£m |
|
Trade payables |
42.3 |
22.7 |
| Other tax and
social security |
11.9 |
14.9 |
| Amounts owed to
co-insurers |
156.9 |
115.8 |
| Other
payables |
42.5 |
38.2 |
|
Accruals and deferred income |
52.2 |
63.3 |
|
Total trade and other payables |
305.8 |
254.9 |
| |
|
|
| Analysis
of accruals and deferred income |
|
|
| Accruals |
28.3 |
41.0 |
|
Deferred income |
23.9 |
22.3 |
|
Total accruals and deferred income as above |
52.2 |
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.
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 cashflows, 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.
12. Dividends,
Earnings and Share Capital
12a. Dividends
Dividends were proposed, approved and paid as follows:
|
|
31 December
2023
£m |
31 December
2022
£m |
|
Proposed March 2022 (118.0 pence per share, approved April 2022 and
paid June 2022) |
— |
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 |
— |
|
Declared August 2023 (51.0 pence per share, paid October 2023) |
152.2 |
— |
|
Total dividends |
307.1 |
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 dividends declared in August are interim distributions
in respect of 2022 and 2023.
A 2023 final dividend of 52.0 pence per share (approximately
£156 million) has been proposed. Refer to the financial narrative
for further detail.
12b. Earnings per share
|
|
31 December
2023
£m |
31 December
2022
£m |
|
Profit for the financial year after taxation attributable to equity
shareholders |
338.0 |
286.5 |
|
Weighted average number of shares – basic |
303,989,170 |
300,207,330 |
|
Unadjusted earnings per share – basic |
111.2p |
95.4p |
|
Weighted average number of shares – diluted |
305,052,941 |
301,543,390 |
|
Unadjusted earnings per share – diluted |
110.8p |
95.0p |
The difference between the basic and diluted number of shares at
the end of 2023 (being 1,063,771; 2022: 1,336,060) relates to
awards committed, but not yet issued under the Group’s share
schemes. Refer to note 9 for further detail.
12c. Share capital
|
|
31 December
2023
£m |
31 December
2022
£m |
|
Authorised |
|
|
|
500,000,000 ordinary shares of 0.1 pence |
0.5 |
0.5 |
|
Issued, called up and fully paid |
|
|
| 306,304,676
ordinary shares of 0.1 pence |
0.3 |
— |
| 302,837,726
ordinary shares of 0.1 pence |
— |
0.3 |
|
|
0.3 |
0.3 |
12d. Related party transactions
The Board considers that only the Executive and Non-Executive
Directors of Admiral Group plc are key management personnel.
Further detail on the remuneration and shareholdings of key
management personnel will be set out in the Directors’ Remuneration
Report in the Group’s 2023 Annual Report.
13. Reconciliation of
turnover to reported insurance premium and other revenue as per the
financial statements
The following table reconciles turnover, a
significant Key Performance Indicators (KPIs) and non-GAAP measure
presented within the Strategic Report, to insurance revenue, as
presented in note 4 to the financial statements.
|
|
Consolidated Financial Statement Note |
31 December 2023
£m |
31 December 2022 (restated)
£m |
|
Insurance premium revenue |
5b |
3,283.3 |
2,782.1 |
| Movement in
unearned premium |
|
528.3 |
142.7 |
| Premiums
written after co-insurance |
|
3,811.6 |
2,924.8 |
|
Co-insurer share of written premiums |
|
577.8 |
393.4 |
|
Total premiums written |
|
4,389.4 |
3,318.2 |
| Other
insurance revenue |
5b |
202.8 |
174.8 |
| Other
revenue |
8 |
127.2 |
128.9 |
|
Interest income |
|
92.1 |
58.7 |
|
Turnover as per note 4b of financial
statements |
|
4,811.5 |
3,680.6 |
|
Intra-group income elimination*1 |
|
— |
0.3 |
|
Total turnover |
|
4,811.5 |
3,680.9 |
*1 Total insurance revenue of £3,486.1
million (2022: £2,956.9 million), comprised of insurance premium
revenue of £3,283.3 million (2022: £2,782.1 million) and Other
insurance revenue of £202.8 million (2022: £174.8
million).
*2 Intra-group income elimination
relates to comparison income earned by compare.com from other Group
entities.
APPENDIX 1 TO THE GROUP FINANCIAL STATEMENTS
(unaudited)
1a:
Reconciliation of reported loss and expense ratios:
Group
|
|
|
31 December 2023 |
£m |
Consolidated Financial Statement Note |
Core product |
Ancillary income |
Total gross |
Total, net of XoL reinsurance |
|
Insurance premium revenue |
|
3152.3 |
131.0 |
3,283.3 |
3,170.6 |
|
Administration fees, instalment income and non-separable ancillary
commission |
|
— |
202.8 |
202.8 |
202.8 |
|
Insurance revenue (A) |
5b/5d |
3,152.3 |
333.8 |
3,486.1 |
3,373.4 |
|
Insurance expenses (B) |
5c |
(795.2) |
(41.6) |
(836.8) |
(836.8) |
| Claims incurred
(C) |
5c/5d |
(2,624.6) |
(40.5) |
(2,665.1) |
(2,605.8) |
| Claims releases
(D) |
5c/5d |
440.6 |
— |
440.6 |
447.3 |
| Quota share
reinsurance result1 |
|
|
|
|
(40.4) |
| Onerous loss
component movement2 |
|
|
|
|
4.9 |
|
Underwriting result (E) |
|
|
|
|
342.6 |
|
Net share scheme costs3 |
|
|
|
|
(36.8) |
|
Insurance service result |
|
|
|
|
305.8 |
|
Reported loss ratio ((C+D)/A) |
|
|
|
|
63.9% |
|
Reported expense ratio (B/A) |
|
|
|
|
24.8% |
|
Insurance service margin (E/A) |
|
|
|
|
10.2% |
31 December 2022 (restated) |
£m |
Consolidated Financial Statement Note |
Core product |
Ancillary income |
Total gross |
Total, net of XoL reinsurance |
|
Insurance premium revenue |
|
2,646.5 |
135.6 |
2,782.1 |
2,704.0 |
|
Administration fees, instalment income and non-separable ancillary
commission |
|
— |
174.8 |
174.8 |
174.8 |
|
Insurance revenue (A) |
5b/5d |
2,646.5 |
310.4 |
2,956.9 |
2,878.8 |
|
Insurance expenses (B) |
5c |
(710.4) |
(44.6) |
(755.0) |
(755.0) |
| 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
reinsurance result1 |
|
|
|
|
117.4 |
| Onerous loss
component movement2 |
|
|
|
|
4.1 |
|
Underwriting result (E) |
|
|
|
|
214.1 |
|
Net share scheme costs3 |
|
|
|
|
(32.8) |
|
Insurance service result |
|
|
|
|
181.3 |
|
Reported loss ratio ((C+D)/A) |
|
|
|
|
70.6% |
|
Reported expense ratio (B/A) |
|
|
|
|
26.2% |
|
Insurance service margin |
|
|
|
|
7.4% |
1 Quota share reinsurance result excludes quota share
reinsurers’ share of share scheme costs and movement in onerous
loss-recovery component
2 Onerous loss component movement is shown net of all
reinsurance
3 Net share scheme costs of £36.8 million (2022: £32.8
million), being gross costs of £55.3 million (2022: £53.0 million,
see note 5c) less reinsurers’ share of share scheme costs of £18.5
million (2022: £20.2 million) are excluded from the underwriting
result.
1b. Reconciliation
of reported loss and expense ratios: UK Motor
|
31 December 2023 |
|
£m |
Consolidated Financial Statement Note |
Core product |
Ancillary income1 |
Total gross |
Total, net of XoL reinsurance |
Core product, net of XoL |
|
Total premiums written |
|
3,004.3 |
113.9 |
3,118.2 |
3,016.8 |
2,903.0 |
|
Gross premiums written |
|
2,453.9 |
113.9 |
2,567.8 |
2,485.0 |
2,371.1 |
|
Insurance premium revenue |
|
2,007.6 |
107.8 |
2,115.4 |
2,053.8 |
1,946.0 |
|
Instalment income |
|
— |
99.0 |
99.0 |
99.0 |
— |
|
Administration fees non-separable ancillary commission |
|
|
35.8 |
35.8 |
35.8 |
— |
|
Insurance revenue (A) |
5b/5d |
2,007.6 |
242.6 |
2,250.2 |
2,188.6 |
1,946.0 |
|
Insurance expenses (B) |
5c |
(416.8) |
(34.4) |
(451.2) |
(451.2) |
(416.8) |
|
Claims incurred (C) |
5c/5d |
(1,719.9) |
(35.6) |
(1,755.5) |
(1,729.0) |
(1,693.4) |
|
Claims releases (D) |
5c/5d |
406.9 |
— |
406.9 |
392.8 |
392.8 |
|
Current period loss ratio (C/A) |
|
|
|
|
79.0% |
87.0% |
|
Claims releases (D/A) |
|
|
|
|
(17.9%) |
(20.2%) |
|
Reported loss ratio ((C+D)/A) |
|
|
|
|
61.1% |
66.8% |
|
Reported expense ratio (B/A) |
|
|
|
|
20.6% |
21.4% |
|
31 December 2022 (restated) |
|
£m |
Consolidated Financial Statement Note |
Core product |
Ancillary income1 |
Total gross |
Total, net of XoL reinsurance |
Core product, net of XoL |
|
Total premiums written |
|
2,157.7 |
113.6 |
2,271.3 |
2,213.5 |
2,099.9 |
|
Gross premiums written |
|
1,772.8 |
113.6 |
1,886.4 |
1,838.9 |
1,725.3 |
|
Insurance premium revenue |
|
1,682.4 |
113.3 |
1,795.7 |
1,751.1 |
1,637.8 |
|
Instalment income |
|
- |
75.3 |
75.3 |
75.3 |
- |
|
Administration fees and non-separable ancillary commission |
|
|
38.7 |
38.7 |
38.7 |
- |
|
Insurance revenue (A) |
5b/5d |
1,682.4 |
227.3 |
1,909.7 |
1,865.1 |
1,637.8 |
|
Insurance 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
£247.3 million
(2022: £236.8 million).
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
13 to the financial statements.
This measure has been presented by the Group in every Annual Report
since it became a listed Group in 2004. It reflects the total value
of the revenue generated by the Group and analysis of this measure
over time provides a clear indication of the size and growth of the
Group.
The measure was developed as a result of the Group’s business
model. The 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 13 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. |
|
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.
The reported loss ratios 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). It is understood that this is consistent with the
approach taken by peers, and it is considered to reflect 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 Appendix 1a and Appendix 1b 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.
The reported expense ratios 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). It is understood that this is
consistent with the approach taken by peers, and it is considered
to reflect 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 Appendix 1a and Appendix 1b 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 Appendix 1a and
Appendix 1b. |
|
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 finance expenses and
onerous loss component. |
|
Segment result |
The profit or loss before tax reported for individual business
segments, which exclude 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, vans,
households and pets 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.
The measure has been restated from 2022 onwards to exclude Veygo
policies, given the significant fluctuations that can arise at a
point in time as a result of the short-term nature of the
product. |
|
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. Claims incurred may be
presented on an accident year basis or an underwriting year basis,
the latter sees the claims attach to the year in which the
insurance policy incepted. |
|
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 calculating the 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 co-insurance agreements that
provides for profit sharing. Co-insurer profit commission is
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. |
|
Regulatory Solvency Capital Requirement
(‘SCR’) |
The Group’s Regulatory Solvency Capital Requirement (SCR) is an
amount of capital that it should hold in addition to its
liabilities in order to provide a cushion against unexpected
events. In line with the rulebook of the Group’s regulator, the
PRA, the Group’s SCR is calculated using the Solvency II Standard
Formula, and includes a fixed capital add-on to reflect limitations
in the Standard Formula with respect to Admiral’s risk profile
(predominately in respect of co-and reinsurance profit commission
arrangements and risks relating to Periodic Payment Orders (PPOs).
The Group’s current fixed capital add-on of £24 million was
approved by the PRA during 2023.
The Group is required to maintain eligible Own Funds ( Solvency II
capital) equal to at least 100% of the Group SCR. Both eligible Own
Funds and the Group SCR are reported to the PRA on a quarterly
basis and reported publicly on an annual basis in the Group’s
Solvency and Financial Condition Report.
Admiral separately calculates a ‘dynamic’ capital add-on and has
used this this to report a solvency capital requirement and
solvency ratio at the date of this report. A reconciliation between
the regulatory solvency ratio and that calculated on a dynamic
basis is included in note 3 to the Group financial statements. |
|
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. |
i 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.
ii Alternative Performance Measures – refer to the
end of the report for definition and explanation.
iii 2022 Customer numbers restated – refer to the
end of the report for definition and explanation.
iv ICEA market data, net of reinsurance.
v Earned whole account basis net of XoL.
vi Data is from S&P Global Market Intelligence 2023
Auto Insurance Market Report.
vii Insurance expenses, excluding share schemes divided
by insurance revenue net of XoL.
viii Insurance claims incurred and claims releases
divided by insurance revenue net of XoL.
ix State filing rate changes for Virginia and Texas.
Weighted average change from top 5 players based on market
share.
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