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07.03.2024 08:00:05 - dpa-AFX: GNW-News: Annual Financial Report
7 March 2024
Admiral Group reports solid profits and strong growth in turnover
2023 Results Highlights
Special dividend per share from sale of
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 (https://admiralgroup.co.uk/events/event-
details/2023-full-year-results). A copy of the presentation slides will be
available at the following link: Results, reports and presentations | Admiral
Group Plc (https://admiralgroup.co.uk/investor-relations/results-reports-and-
presentations) (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
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 betterconsumer 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
Our30(th) 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 13(th) globally as one of the
World's Best Workplaces(TM) by 2023 Great Place to Work®. We now have over 13,000
amazing colleagues and we celebrated Admiral's 30(th) 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 furthergrowth 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*:
*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
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
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Group turnover (£bn) (*2) 4.81 3.68 +31%
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Net insurance and investment
result 363.1 207.5 +75%
Net interest income from
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Analysis of profit
+------------------------------------------------------------------------------+
|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| +------------------------------------------------------------------------------+
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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
Customer numbers
Special dividend from sale of
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*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:
* UK Motor customers were broadly flat at the end of 2023 having fallen in
* 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
year started to earn through, as well as higher investment income due to
* 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,
IFRS4. 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:
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 95(th) 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 95(th)
percentile at the transition date of 1 January 2022, and remained at that
percentile during 2022. This results in lower reserve releases under IFRS 17 in
2022, and therefore lower profit.
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:
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 lookafter 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
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Turnover(*1*2) 3,776.0 2,784.3
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Total premiums written(*1*3) 3,502.6 2,555.0
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Insurance revenue 2,596.9 2,174.1
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Underwriting result including net investment income(*1) 438.6 301.6
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Co-insurer profit commission and net other revenue 157.9 208.1
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UK Insurance profit before tax(*1) 596.5 509.7
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*1 Alternative Performance Measures - refer to the end of this report for
definition and explanation.
*2 Alternative Performance Measures - refer to note13 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
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------------------------------------------------------
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UK Insurance profit before tax 596.5 509.7
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Key performance indicators
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2023 2022
--------------------------------------------------------
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Total UK Insurance customers 7.39m 6.96m
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Highlights for the UK Insurance business include:
UK Motor Insurance financial review
-------------------------------------------------------------------------------
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Turnover(*1) 3,371.8 2,493.0
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Total premiums written(*1*2*4) 3,118.2 2,271.3
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Insurance revenue 2,250.2 1,909.7
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UK Motor Insurance profit before tax(*1) 593.3 524.9
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*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
*3Insurance 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
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Reported Motor Insurance service margin(*1*4) 17.7% 16.5%
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Core motor written expense ratio(*1)(*7) 17.8% 20.8%
-----------------------------------------------------------------------
-----------------------------------------------------------------------
*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 theincome 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 (93(rd) percentile confidence level) when compared
to the end of 2022 (95(th) 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:
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
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
-------------------------------------2022
£m 2023 (restated)
-------------------------------------
-------------------------------------
Total (16.8) 95.2
-------------------------------------
The adverse quota share result in 2023 is therefore driven by:
the 2021 underwriti
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 turnover(ii) £4.81bn £3.68bn +31% Insurance revenue £3.49bn £2.96bn +18% Group customers(ii,)(iii) 9.73m 9.20m +6% UK insurance customers(ii) 7.39m 6.96m +6% International insurance customers(ii) 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 (https://admiralgroup.co.uk/events/event-
details/2023-full-year-results). A copy of the presentation slides will be
available at the following link: Results, reports and presentations | Admiral
Group Plc (https://admiralgroup.co.uk/investor-relations/results-reports-and-
presentations) (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 betterconsumer 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
Our30(th) 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 13(th) globally as one of the
World's Best Workplaces(TM) by 2023 Great Place to Work®. We now have over 13,000
amazing colleagues and we celebrated Admiral's 30(th) 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 furthergrowth 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 IFRS 17 IFRS 4
2023 2022 Change v 2022 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
--------------------------------------------------------------------------------
2022 £m 2023 (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,
IFRS4. 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 95(th) 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 95(th)
percentile at the transition date of 1 January 2022, and remained at that
percentile during 2022. This results in lower reserve releases under IFRS 17 in
2022, and therefore lower profit.
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 lookafter 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 2022
2023 (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 note13 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 2022
2023 (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
-------------------------------------------------------------------------------
2022 £m 2023 (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
*3Insurance 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
-----------------------------------------------------------------------
2022
2023 (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 theincome 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 (93(rd) percentile confidence level) when compared
to the end of 2022 (95(th) 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 Core Motor loss ratio before Impact of claims Core motor loss ratio(*1) releases reserve releases 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
-------------------------------------2022
£m 2023 (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 underwriti
| Name | WKN | Börse | Kurs | Datum/Zeit | Diff. | Diff. % | Geld | Brief | Erster | Schluss | |
|---|---|---|---|---|---|---|---|---|---|---|---|
 |
ADMIRAL GROUP PLC LS-,001 | A0DJ58 | Frankfurt | 32,420 | 07.06.24 08:02:37 | +0,140 | +0,43% | 0,000 | 0,000 | 32,420 | 32,420 |
