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Half-year report
10 August 2022
2022 Interim Results Highlights
Admiral Group reports solid first half profits and growth despite inflationary environment
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| 30 June 2022 | 30 June 2021 | 30 June 2019 | % change vs. 2021 | % change vs. 2019 |
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Group profit before tax 1 | £251.3m | £482.2m | £210.5m | -48% | +19% |
Earnings per share 1 | 67.0p | 132.9p | 60.9p | -50% | +10% |
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Interim dividend per share | 60.0p | 115.0p | 63.0p | -48% | -5% |
Special dividend per share from sale of Penguin Portals comparison businesses | 45.0p | 46.0p | — | — | — |
Return on equity 1 2 | 37% | 68% | 47% | -31pts | -10pts |
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Group turnover1 2 | £1.85bn | £1.75bn | £1.68bn | +6% | +10% |
Group net revenue 1 | £0.72bn | £0.79bn | £0.65bn | -9% | +10% |
Group customers2 | 9.11m | 8.02m | 6.74m | +14% | +35% |
UK Insurance customers2 | 6.94m | 6.22m | 5.32m | +12% | +30% |
International Insurance customers2 | 1.94m | 1.71m | 1.36m | +13% | +43% |
Gross loans balances | £786.6m | £469.4m | £437.0m | +68% | +80% |
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Solvency ratio (post-dividend) 2 | 185% | 209% | 190% | -24pts | -5pts |
1 Group profit before tax, Earnings per share, Group turnover, Net revenue and Return on equity presented on a continuing operations basis
2 Alternative Performance Measures - refer to the end of the report for definition and explanation
Around 10,000 employees each receive free shares worth up to £1,800 under the employee share scheme based on the interim 2022 results.
Comment from Milena Mondini de Focatiis, Group Chief Executive Officer
“Admiral has delivered a solid set of results and good customer growth in the first half of the year. We are happy with this progress against the backdrop of a more turbulent cycle than usual, and high levels of inflation. Although, as expected, profit has decreased against last year, the unique conditions of the pandemic years make 2019 a better comparison - with profit and customer numbers increasing by 19% and 35% respectively since then.
“We have remained disciplined, adapting our rates in response to the higher inflation environment earlier than the market and maintaining a cautious approach to reserving, as we always do. We continue to focus on good execution through the cycle. Our strong balance sheet and focus on profitability over growth puts us on a strong footing for when conditions improve.
“It is pleasing to see the majority of our growth coming from more and more customers across all of our products and geographies choosing to stay with us. We are committed to delivering great service and to support all of our customers, including those who are experiencing financial difficulty.
“We have made good progress on our diversification strategy. More than half of our customer growth came from our new products and geographies, with UK Household up 18% and Admiral Money loans balances up by almost 70% whilst the business made its first small profit. We now serve 1.9 million customers across our international businesses.
“I would like to thank all of my colleagues across the Group who make the business such a great place to work, and whose dedication and adaptability has enabled us to meet our 9 million customers’ needs during this period.”
Dividend
The Board has declared an interim dividend of 60.0 pence per share, made up of a normal dividend of 44.2 pence and a special dividend of 15.8 pence per share. The payment represents 90% of earnings per share for the first half.
The Board has also declared a further special dividend of 45.0 pence per share reflecting the final payment of the phased return to shareholders of the proceeds from the sale of the Penguin Portals comparison businesses. This payment, along with the previous two payments of 46.0 pence per share, brings the total amount returned to shareholders to just over £400 million.
The total interim dividend, including the further special dividend is 105.0 pence per share, made of a normal dividend of 44.2 pence per share and a special dividend of 60.8 pence per share.
Payment will be on 30 September 2022. The ex-dividend date is 1 September 2022 and the record date is 2 September 2022.
Management presentation
Analysts and investors will be able to access the Admiral Group management presentation which commences at 10.30 BST on Wednesday 10 August 2022 by registering at the following link for webcast at https://edge.media-server.com/mmc/p/8s7r4iut or via conference call at https://register.vevent.com/register/BI60d5a8704b4f49eaa19bd36b6abfd763. A copy of the presentation slides will be available at www.admiralgroup.co.uk
H1 2022 Group overview
£m | 30 June 2022 | 30 June 2021 | 30 June 2019 | % change vs. 2021 | % change vs. 2019 |
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Group turnover (£bn) *1*3 | 1.85 | 1.75 | 1.68 | +6% | +10% |
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Underwriting profit including investment income*1 | 106.6 | 244.5 | 96.0 | -56% | +11% |
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Profit commission | 75.5 | 187.3 | 36.1 | -60% | +109% |
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Net other revenue and expenses*1 | 75.1 | 56.3 | 84.6 | +33% | -11% |
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Operating profit*3 | 257.2 | 488.1 | 216.7 | -47% | +19% |
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Group profit before tax*3 | 251.3 | 482.2 | 210.5 | -48% | +19% |
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Analysis of profit: |
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UK Insurance | 321.8 | 543.5 | 255.0 | -41% | +26% |
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International Insurance | (21.6) | (0.9) | (2.7) | nm | nm |
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International Insurance – European Motor | 0.2 | 4.9 | 3.8 | nm | nm |
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International Insurance – US Motor | (19.8) | (4.2) | (6.2) | nm | nm |
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International Insurance – Other | (2.0) | (1.6) | (0.3) | nm | nm |
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Admiral Money | 0.2 | (1.9) | (4.3) | nm | nm |
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Other | (49.1) | (58.5) | (37.5) | +16% | -31% |
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Group profit before tax | 251.3 | 482.2 | 210.5 | -48% | +19% |
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Key metrics |
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Group loss ratio*1*2 | 67.6% | 49.1% | 69.1% | +19pts | -2pts |
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Group expense ratio*1*2 | 29.1% | 26.1% | 23.2% | +3pts | +6pts |
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Group combined ratio*1 | 96.7% | 75.2% | 92.3% | +22pts | +4pts |
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Customer numbers (million)*1 | 9.11 | 8.02 | 6.74 | +14% | +35% |
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Earnings per share *3 | 67.0p | 132.9p | 60.9p | -50% | +10% |
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Interim dividend per share | 60.0p | 115.0p | 63.0p | -48% | -5% |
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Special dividend from sale of Penguin Portals | 45.0p | 46.0p | — | — | — |
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Return on equity*1*3 | 37% | 68% | 47% | -31pts | -10pts |
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Solvency ratio*1 | 185% | 209% | 190% | -24pts | -5pts |
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*1 Alternative Performance Measures – refer to the end of the report for definition and explanation
*2 See notes 13b and 13c for a reconciliation of reported loss and expense ratios to the financial statements
*3 Group turnover, Operating profit, Group profit before tax, Earnings per share, Return on equity presented on a continuing operations basis
nm – not meaningful
Group Highlights
The Group delivered another solid set of results in the first half of 2022 against a backdrop of challenging market conditions and an elevated inflationary environment. Following on from two outlier years of higher profits resulting from Covid and related factors, Group profits have returned to a level more comparable to pre-Covid periods whilst delivering positive change in a number of key metrics. Highlights are as follows:
·9.1 million Group customers at the end of the first half of 2022, a 35% increase from 6.7 million at the end of the first half of 2019 and with over 1 million customers added since half year 2021
·Group pre-tax profits of £251 million, 48% lower than the exceptional first half of 2021, but 19% higher than H1 2019
·UK Insurance business year-on-year growth in both turnover (+3%) and customer numbers (+12%), despite significant rate increases in UK Motor in response to elevated claims inflation
·UK Insurance profit of £322 million, 41% lower than 2021 (£544 million) with higher current period claims and lower reserve releases and profit commission, but 26% ahead of H1 2019
·Strong performance from UK Household, with pre-tax profit of £7 million (£17 million excluding the impact of exceptional weather in the period)
·A worse overall International Insurance result (loss of £22 million v loss of £1 million in H1 2021) than recent years, primarily driven by a more significant loss in US Motor Insurance (due to much higher claims inflation) offsetting a small profit in European motor insurance
·Strong performance from Admiral Money, with a 68% increase in loans balances compared to 30 June 2021, continued favourable default experience and a first small profit for the first half of 2022
Earnings per share
Earnings per share for the first half is 67.0 pence (H1 2021: 132.9 pence). The reduction compared to 2021 is for the reasons noted above. Earnings per share is 10% ahead of H1 2019 (60.9 pence), with this increase being lower than the growth in pre-tax profits (19%) due to a higher effective tax rate in 2022 compared to 2019, primarily related to the higher loss in the US in the current period.
Return on equity
The Group’s return on equity was 37% in the first half of 2022, 31 points lower than H1 2021 and 10 points lower than the comparable period in 2019 despite the growth in profit vs 2019. This is the result of a significant growth in the average equity between H1 2019 and H1 2022. Whilst the Group pays out the majority of its post-tax profits in dividends, the higher level of profitability through 2020 and 2021 means that the quantum of profit that is retained has been at a higher than typical level, increasing net equity over these periods.
Dividends and solvency
The Group’s dividend policy is to pay 65% of post-tax profits as a normal dividend and to pay a further special dividend comprising earnings not required to be held in the Group for solvency or buffers.
The Board has declared an interim dividend of 60.0 pence per share (approximately £177 million) split as follows:
44.2 pence per share normal dividend
A special dividend of 15.8 pence per share
The 2022 interim dividend (excluding the further special dividend referred to below) reflects a pay-out ratio of 90% of earnings per share. 60.0 pence per share is 48% lower than the interim 2021 dividend (115.0 pence per share) with the movement being in line with the reduction in profit noted above.
The Board has declared a further special dividend of 45.0 pence per share reflecting the final payment of the phased return to shareholders of the proceeds from the sale of the Penguin Portals comparison businesses which completed in 2021. This payment, along with the previous two payments of 46.0 pence per share, brings the total amount returned to shareholders to just over £400 million.
The total interim dividend, including the further special dividend is 105.0 pence per share, split 44.2 pence per share normal element and 60.8 pence per share, special element.
The payment date is 30 September 2022, ex-dividend date 1 September 2022 and record date 2 September 2022.
The Group reports a strong solvency ratio of 185% post-dividend. The ratio has reduced by 24 percentage points from H1 2021 (a reduction of 10 percentage points from the end of 2021). The reduction from H1 2021 is primarily due to a reduction in own funds of approximately £170 million – arising through both the impact of widening credit spreads on the Group’s investment portfolio, and lower generation of economic capital.
Global context and inflation
Various macroeconomic and other factors (including significantly higher inflation, supply chain pressures and labour shortages) have influenced Admiral’s businesses and markets during 2022.
Elevated levels of inflation in insurance claims has been an important issue in the period, and the levels of claims frequencies have also returned near to, or to, pre-pandemic levels. The main drivers of claims inflation are higher used car prices, higher repair costs, longer repair timescales and higher expected levels of wage inflation impacting the projected costs of bodily injury claims.
Admiral continues to manage these challenges with a disciplined, long term approach to pricing and business volume and continues to take a very conservative approach to reserving for insurance claims. Admiral Money continued to cautiously grow its loans portfolio in the first half of 2022, though has further tightened underwriting criteria in response to economic conditions and outlook. Provisions for credit losses remain appropriately prudent, though no significant increase in the level of arrears and defaults has been seen to date.
The Group’s results are presented in the following sections:
UK Insurance – including UK Motor (Car and Van), Household and Travel
International Insurance – including L’olivier (France), Admiral Seguros (Spain), ConTe (Italy), and Elephant (US)
Admiral Money
Other Group Items – including compare.com (US comparison) and Admiral Pioneer
UK Insurance
£m | 30 June 2022 | 30 June 2021 | 30 June 2020 | 30 June 2019 |
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Turnover*1 | 1,409.9 | 1,372.0 | 1,248.4 | 1,338.8 |
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Total premiums written*1 | 1,265.1 | 1,230.9 | 1,101.6 | 1,186.0 |
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Net insurance premium revenue | 306.2 | 295.6 | 251.7 | 264.7 |
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Underwriting profit including investment income*1 | 153.6 | 259.6 | 158.1 | 106.7 |
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Profit commission and other revenue | 168.2 | 283.9 | 155.9 | 148.3 |
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UK Insurance profit before tax | 321.8 | 543.5 | 314.0 | 255.0 |
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*1 Alternative Performance Measures – refer to the end of this report for definition and explanation
Split of UK Insurance profit before tax | 30 June 2022 | 30 June 2021 | 30 June 2020 | 30 June 2019 |
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Motor | 317.3 | 530.4 | 310.6 | 252.0 |
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Household | 6.9 | 13.9 | 5.5 | 4.2 |
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Travel | (2.4) | (0.8) | (2.1) | (1.2) |
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UK Insurance profit | 321.8 | 543.5 | 314.0 | 255.0 |
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Key performance indicators
| 30 June 2022 | 30 June 2021 | 30 June | 30 June 2019 |
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Vehicles insured at period end | 5.14m | 4.93m | 4.42m | 4.33m |
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Households insured at period end | 1.46m | 1.23m | 1.07m | 0.92m |
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Travel Insurance customers | 0.34m | 0.06m | 0.09m | 0.07m |
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Total UK Insurance customers | 6.94m | 6.22m | 5.58m | 5.32m |
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Highlights for the UK Insurance business for H1 2022 include:
In UK Motor Insurance:
Customer growth of 4% to 5.14 million customers (30 June 2021: 4.93 million)
Profit of £317.3 million, down from the elevated profit in H1 2021 of £530.4 million, but higher than the pre-pandemic profit in H1 2019 of £252.0 million
In UK Household Insurance:
Customer growth of 18% to 1.46 million (30 June 2021: 1.23 million)
Profit of £6.9 million, lower than the £13.9 million profit in H1 2021 as a result of weather events which had a £10 million negative impact on the current period result (no significant weather impact in H1 2021)
UK Motor Insurance
£m | 30 June | 30 June | 30 June | 30 June |
Turnover*1 | 1,271.8 | 1,266.0 | 1,158.3 | 1,255.2 |
Total premiums written*1 | 1,135.9 | 1,135.0 | 1,019.8 | 1,110.1 |
Net insurance premium revenue | 234.8 | 242.4 | 208.5 | 225.4 |
Investment income | 19.8 | 20.7 | 30.6 | 15.9 |
Net insurance claims | (60.9) | 16.6 | (48.9) | (106.2) |
Net insurance expenses | (57.5) | (39.9) | (38.6) | (36.1) |
Underwriting profit including investment income*1*2 | 136.2 | 239.8 | 151.6 | 99.0 |
Profit commission | 71.0 | 177.7 | 41.1 | 35.0 |
Underwriting profit and profit | 207.2 | 417.5 | 192.7 | 134.0 |
Net other revenue*3 | 110.1 | 112.9 | 117.9 | 118.0 |
UK Motor Insurance profit before tax | 317.3 | 530.4 | 310.6 | 252.0 |
*1 Alternative Performance Measures – refer to the end of this report for definition and explanation
*2 Underwriting profit excludes contribution from underwritten ancillaries (included in net other revenue)
*3 Net other revenue includes instalment income and contribution from underwritten ancillaries. Further detail is given in the Other revenue section below
Key performance indicators
| 30 June | 30 June | 30 June | 30 June |
Reported Motor loss ratio*1*2 | 63.1% | 39.4% | 49.4% | 67.8% |
Reported Motor expense ratio*1*3 | 20.7% | 19.0% | 21.3% | 18.7% |
Reported Motor combined ratio*1 | 83.8% | 58.4% | 70.7% | 86.5% |
Written basis Motor expense ratio*1 | 19.5% | 18.7% | 18.8% | 17.5% |
Reported loss ratio before releases*1 | 91.3% | 72.9% | 80.2% | 90.0% |
Claims reserve releases – original net share*1*4 | £66.2m | £81.1m | £64.2m | £50.0m |
Claims reserve releases – commuted reinsurance*1*5 | £93.4m | £118.3m | £60.0m | £52.8m |
Total claims reserve releases*1 | £159.6m | £199.4m | £124.2m | £102.8m |
Claims reserve releases – original net share as a % of net premium revenue *1 | 28.2% | 33.5% | 30.8% | 22.2% |
Vehicles insured at period end*1 | 5.14m | 4.93m | 4.42m | 4.33m |
Other revenue per vehicle*1 | £59 | £58 | £64 | £66 |
*1 Alternative Performance Measures – refer to the end of this report for definition and explanation
*2 Motor loss ratio adjusted to exclude impact of reserve releases on commuted reinsurance contracts. Reconciliation in note 13b
*3 Motor expense ratio is calculated by including claims handling expenses that are reported within claims costs in the income statement, and excluding the impacts of reinsurance caps. Reconciliation in note 13c
*4 Original net share shows reserve releases on the proportion of the account that Admiral wrote on a net basis at the start of the underwriting year in question
*5 Commuted reinsurance shows releases on the proportion of the account that was originally ceded under quota share reinsurance contracts but has since been commuted and hence reported through underwriting profit and not profit commission
UK Motor profit in the first six months of 2022 was £317.3 million, lower than the same period in 2021 (H1 2021: £530.4 million) as a result of the non-repeat of the Covid-impacted favourable performance in 2021 across current year, and prior year claims as well as profit commission. Both 2020 and 2021 (especially H2 2020 and H1 2021) are considered exceptional periods, delivering much lower loss ratios than is the norm as a result of Covid-related factors.
When compared to H1 2019, UK Motor profit has grown by 26% (11% adjusting for the adverse Ogden impact in the first half of 2019). With the reported loss ratio before releases broadly consistent with that in H1 2019, the larger business combined with continued favourable prior period development results in a higher level of profit generated from reserve releases and profit commission.
The business delivered 4% growth in customer numbers year-on-year (all coming in the first half of 2022), primarily as a result of strong customer retention, within a challenging market. After the FCA’s general insurance pricing reforms came into effect at the start of the year, Admiral saw a notable increase in retention and remains well positioned in the market.
As the expected level of claims inflation increased during the period, new business and renewal prices were increased significantly (by around 16% from March to the end of July), and by more than the market average. Admiral will continue to prioritise underwriting profitability over growth in the second half of the year if the current level of inflation persists as expected.
Net insurance premium revenue at £234.8 million is 3% lower than H1 2021, with lower average earned premium reflecting the effects of the FCA pricing reform, a competitive market environment and a shift in mix towards the renewal book. The price increases in the first half are expected to increase average premium over the course of the second half of the year as the premium earns through.
The lower average premium (common with the market), along with continued technology investment resulted in an increase in reported expense ratio (20.7% vs 19.0% in H1 2021). The same drivers led to a similar increase in the written expense ratio (19.5% vs 18.7% in H1 2021).
Investment income in the period was £19.8 million (H1 2021: £20.7 million) with higher underlying investment income being offset by a reduction in income arising from cash held by Admiral relating to the portion of the book that is ceded through quota share reinsurance (£2.3 million reduction; H1 2021: £nil).
Claims, Reserve Releases and Profit Commission
There are a number of trends impacting UK motor claims in the first half of 2022 which result in the increase in reported loss ratio (39.4% in H1 2021 to 63.1% in H1 2022):
Reported Motor loss ratio |
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| Reported loss ratio before releases | Impact of claims reserve releases - net original share | Reported loss ratio | ||
H1 2021 |
| 72.9% | (33.5%) | 39.4% | ||
Change in current period loss ratio |
| +18.4% | — | +18.4% | ||
Change in claims reserve release – original net share |
| — | +5.3% | +5.3% | ||
H1 2022 |
| 91.3% | (28.2%) | 63.1% | ||
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The current period loss ratio increased by 18.4 points which can be primarily attributed to:
Continuing return towards pre-pandemic road usage over the last 12 months (although still below historic levels) and therefore an increase in claims frequency compared to H1 2021, with a partial offset arising from a reduction in frequency for smaller bodily injury claims following the whiplash reforms
Higher than usual levels of inflation in damage claims costs (further detail follows below)
Slightly lower average premium in the period following a shift in portfolio mix towards renewals business
Prior period releases reduced by 5.3 points to 28.2% from the elevated level experienced in H1 2021 (33.5%):
Though lower than in H1 2021, Admiral continues to see favourable development in best estimate reserves, primarily for large bodily injury claims which are initially projected cautiously
This benefit is partially offset by an allowance in the best estimate for the potential effects of excess inflation on bodily injury claims
The margin held above best estimate reserves is broadly consistent with year end 2021 and remains significant and prudent
Claims Inflation and Reserving
Admiral’s actuarial reserving team calculates best estimate claims reserves for UK motor claims reserves, using standard actuarial techniques applied to paid and incurred claims data, overlayed with assumptions and judgements where it is considered that the data does not fully reflect potential future trends and developments. The best estimate claims reserves are validated through comparison with projections performed by an independent, external actuarial firm. Projections show an increase in average ultimate claims cost in the first half of 2022 compared to 2021 of around 11%.
The impact of inflation on third party and own damage claims is observed reasonably quickly, with the elevated levels due to market-wide factors such as high second hand car values (impacting total loss claims), parts supply chain issues and underlying challenges in supply of labour leading to higher repair costs.
The longer term impacts of the current inflation spike on bodily injury claims is highly uncertain. Admiral does not currently observe material changes in inflation for bodily injury claims settled in 2022 to date, when compared to 2021. However, an allowance in the best estimate reserve is held to reflect the potential impacts of higher than historic levels of future wage inflation on certain elements of large bodily injury claims reserves.
In addition to the inflationary environment, there continues to be a high level of uncertainty within motor claims across the market arising from (and not limited to), the continued adjustment of claims frequency post Covid (for both road usage trends and the relationship between road usage and claims frequency), the impact of the whiplash reforms on smaller bodily injury claims and the future path of the Ogden discount rate.
As a result of this uncertainty, Admiral continues to hold a significant and prudent margin above best estimate reserves which sits at a broadly consistent confidence level when compared to the end of 2021 and other recent periods.
The factors impacting current and prior period claims also impact reserve releases on business originally ceded to reinsurers and subsequently commuted, and profit commission on current co-and reinsurance contracts:
Combined releases on commuted reinsurance and profit commission total £164.4 million (H1 2021: £296.0 million). The reduction of £131.6 million is explained by:
The higher current period loss ratio - meaning that no profit commission is recognised on the 2021 and 2022 underwriting years, compared to the unusually high £89 million recognised on the equivalent years in H1 2021; and
The lower level of prior period release - resulting in combined releases from commuted reinsurance and profit commission on the 2020 and prior underwriting years being £43 million lower than the equivalent underwriting years in H1 2021
UK Motor Co- and Reinsurance
Admiral makes significant use of proportional risk sharing agreements (co-insurance and quota share reinsurance) which include profit commission terms that allow Admiral to retain a significant portion of the profit generated.
Munich Re and its subsidiary entity Great Lakes currently underwrite 40% of Admiral’s UK Car insurance business. The details of these arrangements with Munich Re are as set out in the 2021 Annual Report.
Admiral has other UK Motor quota share agreements confirmed to the end of at least 2024, covering 38% of business written.
The Group tends to commute its UK Motor insurance quota share agreements 24-36 months after inception of an underwriting year, assuming there is sufficient confidence in the profitability of the business covered by the reinsurance contract and having assessed the solvency implications of the commutation for the Group and its underwriting subsidiary. During the first half of 2022, just over half of the quota share reinsurance covering the 2020 underwriting year was commuted. The majority of quota share reinsurance covering 2019 and prior underwriting years was commuted prior to the start of this half year period.
Other Revenue and Instalment Income
UK Motor Insurance Other Revenue – analysis of contribution:
£m | 30 June 2022 | 30 June 2021 | 30 June 2020 | 30 June 2019 |
Contribution from additional products & fees, including those underwritten by Admiral*1 | 104.4 | 97.2 | 105.1 | 111.1 |
Instalment income | 39.8 | 50.8 | 47.6 | 42.0 |
Other revenue | 144.2 | 148.0 | 152.7 | 153.1 |
Internal costs*2 | (34.1) | (35.1) | (34.8) | (35.1) |
Net other revenue | 110.1 | 112.9 | 117.9 | 118.0 |
Other revenue per vehicle*3 | £59 | £58 | £64 | £66 |
Other revenue per vehicle net of internal costs | £48 | £48 | £54 | £56 |
*1 Additional products underwritten by Admiral Included in underwriting profit in income statement but re-allocated to other revenue for purpose of KPIs.
*2 Internal costs reflect an allocation of insurance expenses incurred in generating other revenue.
*3 Other revenue (before internal costs) divided by average active vehicles, rolling 12-month basis.
Overall contribution (other revenue net of costs plus instalment income) was slightly lower at £110.1 million (H1 2021: £112.9 million), mainly due to instalment income which was lower due to lower average premiums impacting the level of interest charged.
Other revenue was equivalent to £59 per vehicle (gross of costs), largely consistent with 2021. Net Other revenue (after deducting costs) per vehicle remained at £48 (H1 2021: £48), also consistent with 2021.
UK Household Insurance
£m | 30 June 2022 |
| 30 June 2020 | 30 June 2019 |
Turnover*1 | 120.7 | 104.6 | 87.0 | 80.0 |
Total premiums written*1 | 111.8 | 94.5 | 78.7 | 72.2 |
Net insurance premium revenue | 26.1 | 23.3 | 20.9 | 18.1 |
Underwriting profit/(loss) *1*2 | 0.9 | 1.7 | (0.7) | 0.6 |
Profit commission and other income | 6.0 | 12.2 | 6.2 | 3.6 |
UK Household Insurance profit before tax | 6.9 | 13.9 | 5.5 | 4.2 |
*1 Alternative Performance Measures – refer to the end of this report for definition and explanation
*2 Underwriting profit excludes contribution from underwritten ancillaries (included in net other revenue)
*3 Profit commission and other income includes instalment income and contribution from underwritten ancillaries
Key performance indicators
| 30 June 2022 | 30 June 2021 | 30 June 2020 | 30 June 2019 |
Reported Household loss ratio*1 | 64.4% | 63.6% | 69.0% | 66.8% |
Reported Household expense ratio*1 | 33.0% | 32.5% | 34.2% | 30.1% |
Reported Household combined ratio*1 | 97.4% | 96.1% | 103.2% | 96.9% |
Impact of extreme weather and subsidence*1 (£m) | 9.9 | — | 5.0 | — |
Households insured at period end (m) | 1.46 | 1.23 | 1.07 | 0.92 |
*1 Alternative Performance Measures – refer to the end of this report for definition and explanation
The UK Household insurance business experienced another period of strong top line growth, with turnover increasing by 15% to £120.7 million (H1 2021: £104.6 million). The number of households insured increased by 18% to 1.46 million (30 June 2021: 1.23 million). Growth was delivered both through the price comparison channel where Admiral increased competitiveness, as well as through MultiCover. Average market premiums were lower, impacted by the implementation of the FCA reforms, with Admiral average premiums also being lower.
Profit before tax for the period was £6.9 million (H1 2021: £13.9 million), including a £10 million negative impact (on claims and profit commission) from exceptional weather due to storms in the first half of the year. The loss ratio increased modestly to 64.4% (H1 2021: 63.6%) despite the storms. The underlying loss ratio (excluding exceptional weather) continued to improve due to ongoing improvements in claims management. In addition, the business continued to invest in technical and digital capabilities and made pricing structure enhancements.
Admiral’s expense ratio was broadly in line with the comparative period at 33.0% (H1 2021: 32.5%), largely as a result of lower average premiums offsetting the benefits of increased scale.
International Insurance
£m | 30 June 2022 | 30 June | 30 June | 30 June 2019 |
Turnover*1 | 393.7 | 347.2 | 329.5 | 319.5 |
Total premiums written*1 | 355.4 | 314.3 | 297.6 | 288.0 |
Net insurance premium revenue | 116.4 | 111.7 | 95.5 | 80.6 |
Investment income | 0.3 | 0.6 | (0.1) | 0.9 |
Net insurance claims | (105.1) | (82.1) | (63.3) | (66.0) |
Net insurance expenses | (50.7) | (44.7) | (37.7) | (26.7) |
Underwriting result*1 | (39.1) | (14.5) | (5.6) | (11.2) |
Net other revenue | 17.5 | 13.6 | 12.1 | 8.5 |
International Insurance loss/ (profit) before tax | (21.6) | (0.9) | 6.5 | (2.7) |
Key performance indicators
| 30 June | 30 June | 30 June | 30 June |
Loss ratio*1*2 | 82.8% | 70.2% | 63.2% | 75.5% |
Expense ratio*1*2 | 45.0% | 43.9% | 44.8% | 38.4% |
Combined ratio*3 | 127.8% | 114.1% | 108.0% | 113.9% |
Combined ratio, net of other revenue*4 | 113.1% | 102.2% | 95.4% | 103.3% |
Claims reserve releases (£m) | 7.6 | 6.5 | 11.7 | 9.0 |
Vehicles insured at period end (m) | 1.94m | 1.71m | 1.49m | 1.36m |
*1 Alternative Performance Measures – refer to the end of this report for definition and explanation
*2 Loss and expense ratios adjusted to remove the impact of reinsurer caps
*3 Combined ratio is calculated on Admiral’s net share of premiums and excludes Other Revenue. It excludes the impact of reinsurer caps. Including the impact of reinsurer caps the reported combined ratio would be H1 2022: 134%; H1 2021: 114%; H1 2020: 106%; H1 2019: 115%.
*4 Combined ratio, net of Other Revenue is calculated on Admiral’s net share of premiums and includes Other Revenue. Including the impact of reinsurer caps the reported combined ratio, net of Other Revenue would be H1 2022: 119%; H1 2021: 102%; H1 2020: 93%; H1 2019: 104%
International Motor Insurance – Geographical analysis *1
30 June 2022 | Spain | Italy | France | US | Total |
Vehicles insured at period end | 0.40m | 0.92m | 0.38m | 0.24m | 1.94m |
Turnover (£m) | 51.0 | 115.3 | 99.5 | 127.9 | 393.7 |
|
|
|
|
|
|
30 June 2021 | Spain | Italy | France | US | Total |
Vehicles insured at period end | 0.35m | 0.82m | 0.32m | 0.22m | 1.71m |
Turnover (£m) | 44.6 | 112.4 | 87.4 | 102.8 | 347.2 |
*1 Alternative Performance Measures – refer to the end of this report for definition and explanation
Split of International Insurance result
£m | 30 June | 30 June | 30 June | 30 June |
European Motor | 0.2 | 4.9 | 10.4 | 3.8 |
US Motor | (19.8) | (4.2) | (3.3) | (6.2) |
Other | (2.0) | (1.6) | (0.6) | (0.3) |
International Insurance loss/ (profit) before tax | (21.6) | (0.9) | 6.5 | (2.7) |
Admiral’s International insurance businesses continued to grow turnover and customer numbers despite a challenging context of lower vehicle sales across markets resulting in reduced insurance shopping, and continued premium pressures within competitive markets. Customer numbers increased by 13% to 1.94 million (30 June 2021: 1.71 million) and turnover grew by 13% to £393.7 million (H1 2021: £347.2 million). The combined ratio, net of other revenue, increased to 113% (H1 2021: 102%). This was largely driven by much higher claims inflation in the US business and market, a continued increase in claims frequency in the first half of 2022, and pressure on premium revenue particularly in Italy, where competition remained high.
The expense ratio increased slightly to 45% (H1 2021: 44%). This was partly due to lower premiums as a result of premium pressure in Italy and Spain, as well as the cost of accelerated growth with the focus to achieve scale for long term sustainability of the businesses.
The European insurance operations in Spain, Italy and France insured 1.70 million vehicles at 30 June 2022 – 14% higher than a year earlier (30 June 2021: 1.49 million). Turnover was up 9% to £265.8 million (H1 2021: £244.4 million). The combined European Motor profit was £0.2 million (H1 2021: profit of £4.9 million), a £4.7 million decrease driven by accelerated growth, increasing frequency, a weather event in France, and lower average market premiums, particularly in Italy. The combined ratio net of other revenue (excluding the impact of reinsurer caps) increased to 104% from 96%, impacted by lower average market premiums and worsened claims experience primarily due to higher damage claims inflation and increased frequency.
Admiral Seguros (Spain) grew by 16% to 0.4 million customers over the past year (30 June 2021:0.35 million). The growth was supported by strong acquisition through the broker channel and improved retention, despite the competitive market environment. Investments in the business continue to focus on building sustainable growth through the broker channel and partnerships, while developing IT capabilities to drive future efficiency and speed.
The Group’s largest international operation, ConTe in Italy, continued to grow and increased vehicles insured by 12% to 0.92 million (30 June 2021: 0.82 million). The market environment during the period was challenging with a high level of competitiveness and premium pressure, driving lower average premiums. Within this context, the business grew strongly and continued to focus on increasing efficiency and risk selection capabilities.
L’olivier assurance (France) continued to grow strongly. The customer base increased by 19% to 0.38 million at 30 June 2022 (30 June 2021: 0.32 million) with investments in direct channel acquisition including targeted digital advertising, exploring partnership opportunities, and an enhanced user experience driving strong growth and customer satisfaction. Growth came despite reduced shopping in the market, driven by lower sales of new and used cars and lower levels of switching. A hail weather event in H1 2022 impacted the French Motor result by an estimated £2 million.
In the US, Admiral underwrites motor insurance in eight states through its Elephant Auto business. The number of vehicles insured increased by 10% to 0.24 million at 30 June 2022 (30 June 2021: 0.22 million) and turnover was up by 24% to £127.9 million (H1 2021: £102.8 million; in local currency turnover was up 16%). Growth was driven largely through continued expansion of the agent channel and partnerships, as a mechanism to achieve scale efficiently.
Although growth was strong, the business maintains a cautious approach with a focus on risk selection capabilities and improving customer lifetime value. This has been displayed in a shift toward higher tier, multi-vehicle policies.
Elephant reported a significantly higher loss of £19.8 million in the period (H1 2021: £4.2 million loss), largely due to the very strong increase in severity inflation seen across the US market. Elephant responded with strong action through large price increases which significantly reduced the rate of growth. As a result of the elevated claims inflation, the combined ratio net of other revenue deteriorated to 123% (H1 2021: 110%). Elephant will continue to prioritise improving its loss ratio ahead of growth in the immediate future.
Admiral Money
£m | 30 June | 30 June | 30 June | 30 June |
Total interest income | 25.5 | 15.7 | 19.8 | 13.3 |
Interest expense*1 | (5.6) | (4.3) | (5.1) | (4.1) |
Net interest income | 19.9 | 11.4 | 14.7 | 9.2 |
Other fee income | 0.2 | 0.5 | 0.9 | 0.9 |
Total income | 20.1 | 11.9 | 15.6 | 10.1 |
Credit loss charge | (9.0) | (4.0) | (16.2) | (6.0) |
Expenses | (10.9) | (9.8) | (8.8) | (8.4) |
Admiral Money profit/ (loss) before tax | 0.2 | (1.9) | (9.4) | (4.3) |
*1 Includes £0.8 million intra-group interest expense (H1 2021: £1.4 million; H1 2020: £1.5 million; H1 2019: £1.2 million)
Admiral Money (previously known as Admiral Loans) distributes and underwrites unsecured personal loans and car finance products through the comparison channel and direct to consumers via the Admiral website.
Gross loans balances grew strongly, up 68% to £786.6 million at the end of June 2022 (30 June 2021: £469.4 million). After a credit loss provision of £53.5 million (30 June 2021: £43.7 million), the net loans balance was £733.1 million (30 June 2021: £425.7 million).
Throughout 2021 and 2022 Admiral Money has tightened its lending criteria in response to higher inflation. Credit loss models reflect the latest economic assumptions and post model adjustments to maintain an appropriate level of prudence given the economic outlook. The provision to loans balance coverage ratio reduced to 6.8% (30 June 2021: 9.3%) as strong new business growth has moved the portfolio mix towards lower coverage in stage 1.
The business recorded its first pre-tax profit of £0.2 million in the first half of 2022 (improving from a £1.9 million loss in H1 2021). The improvement was driven primarily by strong interest income growth on the back of the growth in the loan portfolio.
Admiral Money is funded through a combination of internal and external funding sources. The external funding is secured against certain loans via a transfer of the rights to the cash-flows to two special purpose entities (“SPEs”). During H1 2022 one of the SPEs was extended, providing funding with improved terms for the next three years. The securitisation and subsequent issue of notes via SPEs does not result in a significant transfer of risk from the Group.
Other Group Items
£m | 30 June | 30 June | 30 June | 30 June |
Share scheme charges | (26.1) | (30.6) | (21.3) | (24.2) |
Compare.com loss before tax | (1.7) | (1.4) | (0.8) | (4.6) |
Other interest and investment income | 8.0 | 1.5 | 3.0 | 2.7 |
Business development costs | (12.6) | (3.8) | (0.5) | (0.4) |
Other central costs | (11.0) | (18.5) | (11.2) | (5.5) |
Finance charges | (5.7) | (5.7) | (5.9) | (5.5) |
Total | (49.1) | (58.5) | (36.7) | (37.5) |
Share scheme charges relate to the Group’s two employee share schemes. The reduction in charge in the period is driven by a combination of the expected decrease of the proportion of shares that will eventually vest following lower Group results, as well as a lower share price, compared to the first half of 2021.
Business development costs increased to £12.6 million (H1 2021: £3.8 million), primarily attributed to Admiral Pioneer. As part of the investment in product diversification, Admiral launched Admiral Pioneer in 2020 to focus on new product diversification opportunities. Pioneer businesses include Veygo (short term and learner driver car insurance in the UK), small business insurance in the UK and small fleet insurance in France. Pioneer made a loss of £9.6 million in H1 2022 (H1 2021: £2.2 million).
Compare.com reported a loss of £1.7 million, as a result of modestly increased investment in marketing and acquisition in a challenging market in the US.
Other central costs consist of Group-related expenses and include the cost of a number of significant Group projects, including preparation for the significant new insurance accounting standard, IFRS 17, and the development of the internal capital model. The reduction in the period is primarily due to the higher costs of regulatory projects and matters during 2021.
Finance charges of £5.7 million (H1 2021: £5.7 million) primarily relate to interest on the £200 million subordinated notes issued in July 2014 (refer to note 6 to the financial statements).
Other interest and investment income increased to £8.0 million in H1 2022 (H1 2021: £1.5 million), with £4.7 million attributed to gains from the sale of UK government bonds in the period.
Group capital structure and financial position
Group capital position (estimated)
| 30 June | 31 December 2021 | 30 June |
Eligible Own Funds (post-dividend) | 1.24 | 1.36 | 1.41 |
Solvency II capital requirement | 0.67 | 0.70 | 0.68 |
Surplus over regulatory capital requirement | 0.57 | 0.66 | 0.73 |
Solvency ratio (post-dividend) | 185% | 195% | 209% |
The Group reports a strong solvency ratio of 185% post-dividend. The solvency ratio has reduced by 10 percentage points from the end of 2021. This is primarily due to a reduction in eligible own funds of approximately £120 million – roughly half of the reduction arises through the impact of widening credit spreads on the Group’s investment portfolio, with the other half the result of a lower generation of economic capital in the current period.
The Group solvency on a regulatory basis is estimated at 164%, primarily as a result of a higher solvency capital requirement. In the regulatory basis, the capital add-on approved by the PRA is fixed and so does not reflect the reduction in profit commission risk (as a result of lower profit commission recognised within Own Funds on the current underwriting years) in the period.
The Group continues to develop its partial internal model to form the basis of future capital requirements. As noted in the Group’s 2021 Annual Report, the expected timescale for formal application has been extended as a result of a decision by the Admiral Group Board to review certain aspects of the model. In the interim period before submission, the current capital add-on basis will continue to be used to calculate the regulatory capital requirement.
Solvency ratio sensitivities
| 30 June 2022 | 31 December 2021 | 30 June 2021 |
UK Motor – incurred loss ratio +5% | -10% | -9% | -24% |
UK Motor – 1 in 200 catastrophe event | -1% | -1% | -1% |
UK Household – 1 in 200 catastrophe event | -4% | -3% | -3% |
Interest rate – yield curve down 50 bps | -1% | -3% | -3% |
Interest rate – yield curve down 100 bps | -2% | -5% | -6% |
Credit spreads widen 100 bps | -9% | -9% | -9% |
Currency – 25% movement in euro and US dollar | -3% | -3% | -2% |
ASHE – long term inflation assumption up 50 bps | -3% | -5% | -3% |
Loans – 100% weighting to ‘severe’ scenario*1 | -1% | -1% | -1% |
*1 Refer to note 7 to the financial statements for further information on the ‘severe’ scenario
Investments and cash
Admiral’s investment strategy was unchanged in H1 2022. The main focus of the Group’s strategy is capital preservation, with additional priorities including low volatility of returns, high levels of liquidity and matching of asset and liability durations and currencies.
Investment return
£m | 30 June 2022 | 30 June | 30 June | 30 June |
Investment return | 27.8 | 23.1 | 21.3 | 23.3 |
Movement on investment returns allocated to reinsurers | (2.3) | - | 12.9 | (4.5) |
Unrealised gains/ (losses) on forward contracts | 0.4 | (0.6) | 0.2 | (0.4) |
Movement in provision for expected credit losses | 1.4 | (1.1) | (2.4) | (0.1) |
Total | 27.3 | 21.4 | 32.0 | 18.3 |
Net investment income for the first half of 2022 was £27.3 million (H1 2021: £21.4 million).
Investment income in 2022 was adversely impacted by investment income adjustments related to UK motor quota share reinsurance arrangements of £2.3 million (H1 2021: nil). Provisions for expected credit losses developed favourably, leading to a £1.4 million release of provisions (H1 2021: £1.1 million adverse impact).
The investment return on the Group’s investment portfolio excluding unrealised gains and losses, the release of the investment income accruals held in relation to reinsurance contracts and the movement in provision for expected credit losses, was £27.8 million in H1 2022 (compared to £23.1 million in H1 2021), with the annualised rate of return higher at 1.4% (H1 2021: 1.2%) as a result of higher reinvestment yields.
The increase in yields and widening of credit spreads in the first six months of 2022 resulted in a reduction in the market value of the portfolio of £173.2 million (H1 2021: £32.2 million), the movement being reflected in the statement of other comprehensive income.
The Group continues to generate significant amounts of cash and its capital-efficient business model enables the distribution of the majority of post-tax profits as dividends. Total cash and investments at 30 June 2022 was £3,900.3 million (31 December 2021: £4,115.3 million; 30 June 2021: £4,275.2 million), the lower balance at the end of the current period reflecting the market value reduction noted above as well as the payment of the second tranche of the Penguin Portals disposal proceeds to shareholders.
Cash and investments analysis
£m |
| 30 June | 31 December 2021 | 30 June |
Fixed income and debt securities |
| 2,461.6 | 2,594.3 | 2,317.4 |
Money market funds and other fair value instruments |
| 866.2 | 1,063.0 | 1,465.9 |
Cash deposits |
| 65.9 | 85.3 | 96.0 |
Cash |
| 506.6 | 372.7 | 395.9 |
Total |
| 3,900.3 | 4,115.3 | 4,275.2 |
Taxation
The tax charge for the period is £51.1 million (H1 2021: £88.2 million), which equates to 20.3% (H1 2021: 18.3%) of profit before tax. The increase in the tax rate is primarily driven a higher loss in the US insurance business for which no deferred tax asset is recognised.
Principal Risks and Uncertainties
Admiral has performed a robust assessment of its principal risks and uncertainties (PR&Us), including those which would threaten its business model, future performance, liquidity and solvency. The result of this assessment has concluded that Admiral’s PR&Us are consistent with those reported in the Group's 2021 Annual Report (pages 116 – 123). However, given the ongoing importance of the following topics, additional commentary has been provided on: Inflation; the Russia-Ukraine conflict; climate change; people risk; and cyber and operational resilience.
Inflation and Outlook
The Group Risk Committee reviews regular information on the Group’s solvency and liquidity positions in response to market volatility and wider economic uncertainty, considering factors such as increases in inflation, the wider impact of supply chain disruption, and the pressures on individual household finances.
The impact of increasing claims inflation continues to evolve. In most markets, claims frequency has increased but has remained below pre-pandemic levels. The exception is in the US, where frequency returned to normal levels very early. From this perspective, the insurance environment has to some extent recalibrated and is more comparable to 2019, after two outlier years of the pandemic.
However, global uncertainties and supply chain pressure have influenced inflation in the countries in which Admiral operates. Vehicle repair costs have increased through a combination of parts and labour shortages across markets and vehicle replacement costs in the second hand market have remained high. Similarly, labour shortages and cost of living concerns will contribute to wage inflation impacting large bodily injury claims. The Whiplash reforms have started to reduce the costs of small bodily injury claims and these savings will be passed back to customers.
Admiral continues to manage these challenges with a disciplined, long-term approach to pricing and growth, with a focus on building the business for the long term. The business also continues to maintain a prudent reserving approach to claims.
The impact of the pandemic on Admiral’s PR&Us, as well as the steps taken to appropriately manage these risks, continues to be overseen by the Group Risk Committee. The Committee continues to support the prioritisation of a high level of service to our customers and employee physical wellbeing and mental health.
Russia-Ukraine conflict
The potential impact of the Russia-Ukraine conflict, as well as an escalation of geopolitical tensions, on Admiral’s PR&Us, has been considered and is being monitored. The Group does not have any direct exposure to Russia or Ukraine, either through its operations or investment portfolios.
Climate change
Admiral remains committed to recognising and understanding the threats and opportunities posed by climate change to the Group, as well as to mitigating its impact on the environment. Climate-related risks can impact on all of Admiral’s business lines, operations, investments, and reinsurance arrangements. Admiral Group recognises that while there are risks from delayed action, there are also opportunities from considering the challenges, including the potential to accelerate the Group’s transformation, to build resilience, and to gain competitive advantage in new and existing markets.
As part of this work there is an ongoing Group focus on:
Ensuring full compliance with regulatory and disclosure requirements, such as complying with the FCA’s new listing rule, LR 9.8.6R.
Researching climate-change trends and better understanding the risks arising from climate change.
Incorporating climate-related risk drivers into business-as-usual risk management, such as enhancing Admiral’s stress and scenario testing to incorporate climate-change related financial risks.
Continuing efforts to further reduce the Group’s carbon footprint.
People Risk
People Risk, which comprises Recruitment Risk, Retention Risk, Employment Law Risk and Health and Safety Risk, has been rising during the pandemic as entities across the Group are noticing differences as a result of changing external factors including inflation, cost of living and changing work conditions. This is being monitored in each entity with updates being provided to committees as appropriate. Admiral has had a very strong culture, often a competitive advantage in attracting and retaining talent. Admiral continues to monitor and adapt to any disruption in local markets as conditions evolve post-pandemic.
Cyber and Operational Resilience:
Admiral has continued to enhance its technology, cyber and operational resilience capabilities, as well as to monitor the related risks. Key developments in these areas include:
In the UK, an Operational Resilience programme was completed at the end of March 2022 in line with regulatory requirements. Work will continue in this area.
Ongoing security improvement programmes are to continue across the Group.
Disclaimer on forward-looking statements
Persons receiving this announcement should not place undue reliance on forward-looking statements. Unless otherwise required by applicable law, regulation or accounting standard, the Group does not undertake to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.
Condensed consolidated income statement (unaudited)
|
|
|
|
| |
|
| Six months ended |
| Year ended | |
| Note | 30 June | 30 June |
| 31 December 2021 |
Insurance premium revenue |
| 1,291.3 | 1,222.5 |
| 2,492.3 |
Insurance premium ceded to reinsurers |
| (851.2) | (806.3) |
| (1,637.3) |
Net insurance premium revenue | 5 | 440.1 | 416.2 |
| 855.0 |
Other revenue | 8 | 154.4 | 152.5 |
| 314.8 |
Profit commission | 5 | 75.5 | 187.3 |
| 304.5 |
|
|
|
|
|
|
Interest income | 7 | 25.5 | 15.7 |
| 36.6 |
Interest expense | 7 | (4.8) | (2.9) |
| (6.1) |
Net interest income from loans |
| 20.7 | 12.8 |
| 30.5 |
|
|
|
|
|
|
Investment return – interest income at effective interest rate | 6 | 26.4 | 19.8 |
| 40.6 |
Investment return – other | 6 | (0.5) | 2.7 |
| 4.6 |
Net revenue |
| 716.6 | 791.3 |
| 1,550.0 |
Insurance claims and claims handling expenses |
| (915.4) | (597.3) |
| (1,506.8) |
Insurance claims and claims handling expenses recoverable reinsurers |
| 695.4 | 501.5 |
| 1,174.5 |
Net insurance claims |
| (220.0) | (95.8) |
| (332.3) |
Operating expenses and share scheme charges | 9 | (456.5) | (440.8) |
| (970.1) |
Operating expenses and share scheme charges recoverable from co- and reinsurers | 9 | 224.7 | 238.5 |
| 491.1 |
Expected credit losses | 6, 9 | (7.6) | (5.1) |
| (13.3) |
Net operating expenses and share scheme charges |
| (239.4) | (207.4) |
| (492.3) |
Total expenses |
| (459.4) | (303.2) |
| (824.6) |
Operating profit |
| 257.2 | 488.1 |
| 725.4 |
Finance costs | 6 | (6.7) | (6.7) |
| (13.7) |
Finance costs recoverable from co- and reinsurers | 6 | 0.8 | 0.8 |
| 1.8 |
Net finance costs |
| (5.9) | (5.9) |
| (11.9) |
Profit before tax from continuing operations |
| 251.3 | 482.2 |
| 713.5 |
Taxation expense | 10 | (51.1) | (88.2) |
| (130.2) |
Profit after tax from continuing operations |
| 200.2 | 394.0 |
| 583.3 |
Profit before tax from discontinued operations |
| — | 11.3 |
| 11.3 |
Gain on disposal |
| — | 404.4 |
| 404.4 |
Taxation expense |
| — | (2.3) |
| (2.3) |
Profit after tax from discontinued operations |
| — | 413.4 |
| 413.4 |
Profit after tax from continuing and discontinued operations |
| 200.2 | 807.4 |
| 996.7 |
Profit after tax attributable to: |
|
|
|
|
|
Equity holders of the parent |
| 200.9 | 807.6 |
| 997.9 |
Non-controlling interests (NCI) |
| (0.7) | (0.2) |
| (1.2) |
|
| 200.2 | 807.4 |
| 996.7 |
Earnings per share – From continuing operations |
|
|
|
|
|
Basic | 12 | 67.0p | 132.9p |
| 196.7p |
Diluted | 12 | 66.9p | 132.7p |
| 196.1p |
Earnings per share – From continuing and discontinued operations |
|
|
|
|
|
Basic | 12 | 67.0p | 272.0p |
| 335.5p |
Diluted | 12 | 66.9p | 271.6p |
| 334.5p |
|
|
|
|
|
|
Dividends declared and paid (total) | 12 | 348.1 | 250.8 |
| 720.9 |
Dividends declared and paid (per share) | 12 | 118.0p | 86.0p |
| 247.0p |
Condensed consolidated statement of comprehensive income (unaudited)
|
| Six months ended |
| Year ended | |
|
|
|
|
|
|
| | 30 June | 30 June |
| 31 December |
Profit for the period – from continuing and discontinued operations | 200.2 | 807.4 |
| 996.7 | |
Other comprehensive income |
|
|
|
|
|
Items that are or may be reclassified to profit or loss |
|
|
|
|
|
Movements in fair value reserve |
| (173.2) | (32.2) |
| (50.1) |
Deferred tax charge in relation to movement in fair value reserve | 9.5 | 0.5 |
| 1.4 | |
Exchange differences on translation of foreign operations |
| 4.0 | (7.0) |
| (10.4) |
Movement in hedging reserve |
| 12.3 | 1.9 |
| 6.6 |
Other comprehensive income for the period, net of income tax | (147.4) | (36.8) |
| (52.5) | |
Total comprehensive income for the period |
| 52.8 | 770.6 |
| 944.2 |
Total comprehensive income for the period attributable to: |
|
|
|
| |
Equity holders of the parent |
| 53.5 | 771.2 |
| 945.7 |
Non-controlling interests |
| (0.7) | (0.6) |
| (1.5) |
|
| 52.8 | 770.6 |
| 944.2 |
Condensed consolidated statement of financial position (unaudited)
|
| As at | ||
| Note | 30 June | 30 June | 31 December |
ASSETS |
|
|
|
|
Property and equipment |
| 93.1 | 131.6 | 103.2 |
Intangible assets | 11 | 214.5 | 177.4 | 179.9 |
Deferred income tax |
| 19.4 | 7.3 | 9.3 |
Corporation tax asset |
| 4.3 | — | 10.6 |
Reinsurance assets | 5 | 2,346.1 | 1,911.9 | 2,176.1 |
Loans and advances to customers | 7 | 733.1 | 425.7 | 556.8 |
Insurance and other receivables | 6 | 1,325.4 | 1,223.9 | 1,208.5 |
Financial investments | 6 | 3,393.7 | 3,879.3 | 3,742.6 |
Cash and cash equivalents | 6 | 506.6 | 395.9 | 372.7 |
Total assets |
| 8,636.2 | 8,153.0 | 8,359.7 |
EQUITY |
|
|
|
|
Share capital | 12 | 0.3 | 0.3 | 0.3 |
Share premium account |
| 13.1 | 13.1 | 13.1 |
Other reserves |
| (103.4) | 59.8 | 44.0 |
Retained earnings |
| 1,226.7 | 1,595.3 | 1,348.8 |
Total equity attributable to equity holders of the parent |
| 1,136.7 | 1,668.5 | 1,406.2 |
Non-controlling interests |
| 1.6 | 3.5 | 2.3 |
Total equity |
| 1,138.3 | 1,672.0 | 1,408.5 |
LIABILITIES |
|
|
|
|
Insurance contracts liabilities | 5 | 4,504.3 | 4,019.2 | 4,215.0 |
Subordinated and other financial liabilities | 6 | 887.4 | 548.8 | 670.9 |
Trade and other payables | 6, 11 | 2,013.2 | 1,783.8 | 1,960.0 |
Lease liabilities | 6 | 93.0 | 114.9 | 105.3 |
Corporation tax liabilities |
| — | 14.3 | — |
Total liabilities |
| 7,497.9 | 6,481.0 | 6,951.2 |
Total equity and total liabilities |
| 8,636.2 | 8,153.0 | 8,359.7 |
|
|
|
|
|
Condensed consolidated cash flow statement (unaudited)
|
| Six months ended |
| Year ended | |
| Note | 30 June | 30 June |
| 31 December 2021 |
Profit after tax |
| 200.2 | 807.4 |
| 996.7 |
Adjustments for non-cash items: |
|
|
|
|
|
|
| 8.8 | 12.0 |
| 23.6 |
|
| (1.8) | — |
| — |
|
| — | — |
| 23.8 |
| 11 | 9.5 | 8.4 |
| 44.7 |
|
| — | (404.4) |
| (404.4) |
| 6 | 7.6 | 2.8 |
| 13.3 |
| 9 | 26.1 | 31.1 |
| 65.2 |
|
| (0.5) | (0.2) |
| (0.8) |
|
| 4.8 | 2.9 |
| 6.1 |
| 6 | (25.9) | (22.5) |
| (45.2) |
| 6 | 5.9 | 6.0 |
| 12.0 |
| 10 | 51.1 | 90.5 |
| 132.5 |
Change in gross insurance contract liabilities | 5 | 289.3 | (62.1) |
| 133.7 |
Change in reinsurance assets | 5 | (170.0) | 171.3 |
| (92.9) |
Change in insurance and other receivables | 6 | (120.7) | (23.2) |
| (9.2) |
Change in gross loans and advances to customers | 7 | (179.6) | (67.6) |
| 205.2) |
Change in trade and other payables, including tax and social security | 11 | 53.2 | (232.3) |
| (56.1) |
Cash flows from operating activities, before movements in investments |
| 158.0 | 320.1 |
| 637.8 |
Purchases of financial instruments |
| (1,606.7) | (1,898.5) |
| (3,710.2) |
Proceeds on disposal/ maturity of financial instruments |
| 1,808.0 | 1,480.8 |
| 3,397.1 |
Interest and investment income received | 6 | 26.2 | 21.5 |
| 46.6 |
Cash flows from operating activities, net of movements in investments |
| 385.5 | (76.1) |
| 371.3 |
Taxation payments |
| (46.7) | (57.8) |
| (126.7) |
Net cash flow from operating activities |
| 338.8 | (133.9) |
| 244.6 |
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
Purchases of property, equipment and software |
| (44.1) | (27.3) |
| (69.2) |
Proceeds from sale of Comparison entities |
| — | 471.8 |
| 471.8 |
Net costs paid on sale of Comparison entities |
| — | (14.8) |
| (14.8) |
Net cash used in investing activities |
| (44.1) | 429.7 |
| 387.8 |
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
Proceeds on issue of loan backed securities |
| 191.7 | 38.7 |
| 185.9 |
Proceeds from other financial liabilities |
| 15.0 | 20.0 |
| — |
Finance costs paid, including interest expense paid on funding for loans | 6 | (11.2) | (9.6) |
| (20.2) |
Repayment of lease liabilities |
| (4.2) | (4.7) |
| (9.6) |
Equity dividends paid | 12 | (348.1) | (250.8) |
| (720.9) |
Net cash used in financing activities |
| (156.8) | (206.4) |
| (564.8) |
Net increase in cash and cash equivalents |
| 137.9 | 89.4 |
| 67.6 |
Cash and cash equivalents at 1 January |
| 372.7 | 351.7 |
| 351.7 |
Cash and cash equivalents included within disposal of Comparison entities |
| — | (41.3) |
| (41.3) |
Effects of changes in foreign exchange rates |
| (4.0) | (3.9) |
| (5.3) |
Cash and cash equivalents at end of period | 6 | 506.6 | 395.9 |
| 372.7 |
Condensed consolidated statement of changes in equity (unaudited)
|
| Attributable to the owners of the Company |
|
| ||||||
|
| Share | Share premium account £m | Fair value reserve £m | Hedging reserve £m | Foreign exchange reserve £m | Retained profit | Total | Non-controlling interests £m | Total equity |
At 1 January 2021 |
| 0.3 | 13.1 | 85.4 | (3.6) | 13.1 | 1,004.4 | 1,112.7 | 10.7 | 1,123.4 |
Profit/(loss) for the period – from continuing and discontinued operations |
| — | — | — | — | — | 807.6 | 807.6 | (0.2) | 807.4 |
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
Movements in fair value reserve |
| — | — | (32.2) | — | — | — | (32.2) | — | (32.2) |
Deferred tax charge in relation to movement in fair value reserve | — | — | 0.5 | — | — | — | 0.5 | — | 0.5 | |
Movement in hedging reserve |
| — | — | — | 1.9 | — | — | 1.9 | — | 1.9 |
Currency translation differences |
| — | — | — | — | (6.6) | — | (6.6) | (0.4) | (7.0) |
Total comprehensive income for the period | — | — | (31.7) | 1.9 | (6.6) | 807.6 | 771.2 | (0.6) | 770.6 | |
Transactions with equity holders |
|
|
|
|
|
|
|
|
|
|
Dividends | 12 | — | — | — | — | — | (250.8) | (250.8) | — | (250.8) |
Share scheme credit |
| — | — | — | — | — | 33.2 | 33.2 | — | 33.2 |
Deferred tax credit on share scheme credit | — | — | — | — | — | 2.9 | 2.9 | — | 2.9 | |
Transfer to gain on disposal of assets held for sale |
| — | — | — | — | 1.3 | (2.0) | (0.7) | 0.1 | (0.6) |
Change in ownership interests on sale of comparison |
| — | — | — | — | — | — | — | (6.7) | (6.7) |
Total transactions with equity holders | — | — | — | — | 1.3 | (216.7) | (215.4) | (6.6) | (222.0) | |
As at 30 June 2021 |
| 0.3 | 13.1 | 53.7 | (1.7) | 7.8 | 1,595.3 | 1,668.5 | 3.5 | 1,672.0 |
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2021 |
| 0.3 | 13.1 | 85.4 | (3.6) | 13.1 | 1,004.4 | 1,112.7 | 10.7 | 1,123.4 |
Profit/(loss) for the period – from continuing and discontinued operations |
| — | — | — | — | — | 997.9 | 997.9 | (1.2) | 996.7 |
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
Movements in fair value reserve |
| — | — | (50.1) | — | — | — | (50.1) | — | (50.1) |
Deferred tax charge in relation to movement in fair value reserve | — | — | 1.4 | — | — | — | 1.4 | — | 1.4 | |
Movement in hedging reserve |
| — | — | — | 6.6 |
|
| 6.6 | — | 6.6 |
Currency translation differences |
| — | — | — | — | (10.1) | — | (10.1) | (0.3) | (10.4) |
Total comprehensive income for the period | — | — | (48.7) | 6.6 | (10.1) | 997.9 | 945.7 | (1.5) | 944.2 | |
Transactions with equity holders |
|
|
|
|
|
|
|
|
|
|
Dividends | 12 | — | — | — | — | — | (720.9) | (720.9) | — | (720.9) |
Share scheme credit |
| — | — | — | — | — | 63.1 | 63.1 | — | 63.1 |
Deferred tax credit on share scheme credit | — | — | — | — | — | 6.0 | 6.0 | — | 6.0 | |
Transfer to gain on disposal of assets held for sale |
| — | — | — | — | 1.3 | (2.0) | (0.7) | 0.1 | (0.6) |
Change in ownership interests on sale of comparison |
| — | — | — | — | — | — | — | (6.7) | (6.7) |
Change in ownership interests without a change in control |
| — | — | — | — | — | 0.3 | 0.3 | (0.3) | — |
Total transaction with equity holders | — | — | — | — | 1.3 | (653.5) | (652.2) | (6.9) | (659.1) | |
As at 31 December 2021 |
| 0.3 | 13.1 | 36.7 | 3.0 | 4.3 | 1,348.8 | 1,406.2 | 2.3 | 1,408.5 |
Condensed consolidated statement of changes in equity (unaudited) (continued)
|
| Attributable to the owners of the Company |
|
|
| ||||||||
|
| Share | Share premium account £m | Fair value reserve £m | Hedging reserve £m | Foreign exchange reserve £m | Retained profit | Total | Non-controlling interests £m | Total equity | |||
At 1 January 2022 |
| 0.3 | 13.1 | 36.7 | 3.0 | 4.3 | 1,348.8 | 1,406.2 | 2.3 | 1,408.5 | |||
Profit/(loss) for the period |
| — | — | — | — | — | 200.9 | 200.9 | (0.7) | 200.2 | |||
Other comprehensive income |
|
|
|
|
|
|
|
|
|
| |||
Movements in fair value reserve |
| — | — | (173.2) | — | — | — | (173.2) | — | (173.2) | |||
Deferred tax charge in relation to movement in fair value reserve |
| — | — | 9.5 | — | — | — | 9.5 | — | 9.5 | |||
Movement in hedging reserve |
| — | — | — | 12.3 | — | — | 12.3 | — | 12.3 | |||
Currency translation differences |
| — | — | — | — | 4.0 | — | 4.0 | — | 4.0 | |||
Total comprehensive income for the period | — | — | (163.7) | 12.3 | 4.0 | 200.9 | 53.5 | (0.7) | 52.8 | ||||
Transactions with equity holders |
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|
|
|
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|
|
| |||
Dividends | 12 | — | — | — | — | — | (348.1) | (348.1) | — | (348.1) | |||
Share scheme credit |
| — | — | — | — | — | 29.9 | 29.9 | — | 29.9 | |||
Deferred tax credit on share scheme credit | — | — | — | — | — | (4.8) | (4.8) | — | (4.8) | ||||
Total transactions with equity holders | — | — | — | — | — | (323.0) | (323.0) | — | (323.0) | ||||
As at 30 June 2022 |
| 0.3 | 13.1 | (127.0) | 15.3 | 8.3 | 1,226.7 | 1,136.7 | 1.6 | 1,138.3 | |||
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Notes to the financial statements (unaudited)
1. General information
Admiral Group plc (the “Company”) is a public limited company incorporated and domiciled in England and Wales. Its registered office is at Tŷ Admiral, David Street, Cardiff, CF10 2EH and its shares are listed on the London Stock Exchange.
The condensed interim financial statements comprise the results and balances of the Company and its subsidiaries (the Group) for the six-month period ended 30 June 2022 and the comparative periods for the six-months ended 30 June 2021 and the year ended 31 December 2021. This condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the UK, and should be read in conjunction with the Group’s last annual consolidated financial statements as at and for the year ended 31 December 2021 (“last annual financial statements”) prepared in accordance with United Kingdom adopted international accounting standards in conformity with the requirements of the Companies Act 2006. They do not include all of the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group’s financial position and performance since the last annual financial statements.
As required by the FCA’s Disclosure and Transparency Rules, the condensed set of financial statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the Company's published consolidated financial statements for the year ended 31 December 2021, except where new accounting standards apply as noted below.
The financial statements of the Company’s subsidiaries are consolidated in the Group financial statements. In accordance with IAS 24, transactions or balances between Group companies that have been eliminated on consolidation are not reported as related party transactions.
The comparative figures for the financial year ended 31 December 2021 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors and delivered to the registrar of companies. The report of the auditors was:
unqualified;
did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report; and
did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
The accounts have been prepared on a going concern basis. In considering the appropriateness of this assumption, the Board have reviewed the Group’s projections for the next 12 months and beyond. Further information is given in note 2 below.
2. Basis of preparation
The condensed set of interim financial statements have been prepared applying the accounting policies and presentation that were applied in the preparation of the Company’s published consolidated financial statements for the year ended 31 December 2021.
A number of other IFRS and interpretations have been endorsed by the UK in the period to 30 June 2022 and although they have been adopted by the Group, none of them has had a material impact on the Group’s financial statements.
The Group’s assessment of the impact of standards that have yet to be adopted remains consistent with that reported on page 230 of the Group’s 2021 Annual Report. In particular, IFRS 17 has an effective date of 1 January 2023. The main changes for the Group comprise the mandatory discounting of claims reserves, the introduction and increased disclosure of the risk adjustment for non-financial risk, and a higher likelihood and transparency of any loss-making portfolios due to the increased granularity of the onerous contract assessment. In addition, there are significant changes to the presentation of the income statement; gross written premium will no longer be presented and insurance and reinsurance results will be presented separately. The Group continues to work through the impact of these factors, and towards implementation by the effective date of 1 January 2023. At this moment it is too early to disclose the quantitative impact as of 2023 given that the preparation of the transition balance sheet and the decisions on key accounting policy choices are ongoing.
The consolidated financial statements have been prepared on a Going Concern basis. In considering this requirement, the directors have taken into account the following:
The Group’s profit projections, including:
Changes in premium rates and projected policy volumes across the Group’s insurance businesses, including the impact of the UK FCA general insurance pricing reform which came into effect at the start of the period
The impacts of the current 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 inflation and unemployment in the context of credit risks and the growth of the Admiral Money business
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
Following consideration of all of the above, the Directors have reasonable expectation that the Group has adequate resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report, and that it is therefore appropriate to adopt the going concern basis in preparing the consolidated financial statements.
The accounting policies set out in the notes to the financial statements have, unless otherwise stated, been applied consistently to all periods presented in these Group financial statements.
The financial statements are prepared on the historical cost basis, except for the revaluation of financial assets classified as fair value through profit or loss or as fair value through other comprehensive income. The financial statements are presented in pounds sterling, rounded to the nearest £0.1 million.
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable. The acquisition date is the date on which control is transferred to the acquirer. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.
3. Critical accounting judgements and estimates
The Group’s 2021 Annual Report provides full details of significant judgements and estimates used in the application of the Group’s accounting policies. There have been no additional critical judgements or estimates applied in the period.
Note 5 provides further information as to the changes in the estimates with respect to the calculation of insurance reserves.
Note 7 provides further information as to changes in the estimates with respect to the calculation of the expected credit loss provision for the Admiral Money business.
4. Operating segments
The Group has four reportable segments; UK Insurance, International Insurance, Admiral Money, and Other. The result of the discontinued operations is also shown for completeness. These reportable segments are consistent with those set out on page 234 of the Group’s 2021 Annual Report.
Segment income, results and other information
An analysis of the Group’s revenue and results for the period ended 30 June 2022, by reportable segment, is shown below. The accounting policies of the reportable segments are consistent with those presented in the notes to the 2021 Group financial statements.
|
| Six months ended 30 June 2022 | ||||
| UK Insurance £m | International Insurance | Admiral Money | Other | Eliminations*4 £m | Total (continuing) £m |
Turnover*1 | 1,409.9 | 393.7 |
| 18.0 | (0.2) | |
Net insurance premium revenue | 306.2 | 121.4 | — | 12.5 | — | 440.1 |
Other revenue and profit commission | 204.7 | 20.8 |
| 4.4 | (0.2) | |
Net interest income | — | — | 19.9 | — | 0.8 | 20.7 |
Investment return*2 | 19.8 | 0.3 | — | — | (0.8) | 19.3 |
Net revenue | 530.7 | 142.5 | 20.1 | 16.9 | (0.2) | 710.0 |
Net insurance claims | (102.0) | (108.7) | — | (9.3) | — | (220.0) |
Expenses | (106.9) | (55.4) | (19.9) | (18.9) | 0.2 | (200.9) |
Segment profit/(loss) before tax | 321.8 | (21.6) | 0.2 | (11.3) | — | 289.1 |
Other central revenue and expenses, including share scheme charges |
| (40.1) | ||||
Investment and interest income |
|
| 8.0 | |||
Finance costs*3 |
|
| (5.7) | |||
Consolidated profit before tax |
|
|
| 251.3 | ||
Taxation expense |
|
|
|
|
| (51.1) |
Consolidated profit after tax |
|
|
|
| 200.2 | |
Revenue and results for the corresponding reportable segments for the period ended 30 June 2021 are shown below.
| Six months ended 30 June 2021 | |||||||
| UK Insurance £m | International Insurance | Admiral Money | Other | Discontinued operations | Eliminations*4 £m | Total (continuing) £m | Total |
Turnover*1 | 1,372.0 | 347.2 |
| 11.1 | 67.2 | (7.7) | | 1,806.0 |
