Admiral Group plc announces full year results w...

About this update from Admiral Group Plc

[{"type":"text","content":"\n \n \n Admiral Group plc announces full year results with growth in Group profit and customers for the year ended 31 December 2021 \n \n \n \n \n 3 \n March 202 \n 2 \n \n \n Admiral Group plc announces full year results with growth in Group profit and customers for the year ended 31 December 202 \n 1 \n \n \n 202 \n 1 \n Results Highlights \n \n \n \n   \n 2021 \n 2020 \n % change \n \n \n   \n   \n   \n   \n \n \n Group Profit before tax, continuing operations 1 2 3 \n £769.0 million \n £608.2 million \n +26% \n \n \n Earnings per share, continuing operations 1 2 3 \n 212.2 pence \n 170.7 pence \n +24% \n \n \n   \n   \n   \n   \n \n \n Group profit before tax including discontinued operations and gain on disposal 3 \n £1,129.2 million \n £637.6 million \n +77% \n \n \n   \n   \n   \n   \n \n \n Full year dividend per share 4 \n 187.0 pence \n 156.5 pence \n +19% \n \n \n First and second special dividends per share from sale of Penguin Portals comparison businesses \n 92.0 pence \n - \n - \n \n \n   \n   \n   \n   \n \n \n Return on equity 1 23 \n 56% \n 52% \n 8% \n \n \n   \n   \n   \n   \n \n \n Group turnover 1 3 5 \n £3.51 billion \n £3.37 billion \n +4% \n \n \n Group net revenue, continuing operations 1 \n £1.55 billion \n £1.31 billion \n +19% \n \n \n Group customers 3 \n 8.36 million \n 7.66 million \n +9% \n \n \n UK insurance customers 3 \n 6.44 million \n 5.98 million \n +7% \n \n \n International car insurance customers 3 \n 1.81 million \n 1.60 million \n +13% \n \n \n   \n   \n   \n   \n \n \n Solvency ratio 3 \n 195% \n 187% \n 4% \n \n \n Around 10,000 employees each receive free shares worth up to £3,600 under the employee share scheme based on the full year 2021 results. \n \n Comment from Milena Mondini de Focatiis, Group Chief Executive Officer: \n \n ‘’Once again, we have delivered excellent service for a larger number of customers and a strong set of results, due to unusual market conditions, Admiral’s underwriting discipline and a focus on doing the common, uncommonly well. \n In 2021 we improved in all of our key metrics, including exceeding 8 million customers, increasing customer loyalty and recording exceptional profits of £769 million. \n We continued to evolve our market-leading core insurance competencies in claims and risk-selection. For example, the increased adoption of machine learning models has improved our pricing effectiveness and agility and put us in a good position to embrace changes such as the new FCA general insurance pricing practices. \n The strong performance of UK Motor insurance is the key driver of our results. We also continued to expand our customer proposition. In 2021 alone, beyond UK Motor we added more than half a million customers, now representing around 40% of total Group customers. We grew by double digits in both our UK Household and International businesses, despite challenging market conditions abroad, and our Loans stock balance is now larger than pre-Covid levels. We are pleased to see the results of our ability to export some of our competitive advantages to these new businesses and we are also planting seeds for further diversification in the longer term through Admiral Pioneer, for example with small business insurance. \n Our aim is to help more customers than ever to look after their future, and to do this better every day. We are also keen to contribute to secure the future of our communities by substantially increasing our investment and committing to net zero by 2040 at the latest. \n I would like to thank all my colleagues for their hard work and continued focus on our customers. They are the key to Admiral’s success and have made my first year as Group CEO so enjoyable.’’ \n \n Comment from Annette Court, Group Chair: \n \n ‘’A company is only as good as its people and Admiral is no exception. At the start of 2021, Milena Mondini de Focatiis took the helm as Group CEO and has successfully steered the Group through a difficult year to another set of positive results and increased profitability. \n The business has continued to grow its customer numbers and been recognised as a great place to work across operations as well as a Diversity Leader in Europe; proof that, during times of uncertainty, the Group continues to deliver for customers and colleagues. \n Admiral is an agile business that continues to deliver long-term sustainable growth by adopting a test-and-learn approach to its evolution. Diversification is a key focus for the Group and I believe that Admiral is on the right course, and as we successfully execute our strategy, will emerge even stronger. \n On behalf of the Board, I would like to thank everyone at Admiral for their hard work and dedication which made this year’s strong results possible.’’ \n \n Dividend \n \n The Board has proposed a final dividend of 118.0 pence per share (2020: 86.0 pence per share) representing a normal dividend (65% of post-tax profits) of 42.2 pence per share and a special dividend of 75.8 pence per share. The special dividend includes 46.0 pence per share as the second of three payments related to the Penguin Portals disposal proceeds. The dividend will be paid on 6 June 2022. The ex-dividend date is 5 May 2022 and the record date is 6 May 2022. \n \n Management presentation \n \n Analysts and investors will be able to access the Admiral Group management presentation which commences at 9:00am GMT on Thursday 3 March 2022 by registering on the Admiral website at www.admiralgroup.co.uk . A copy of the presentation slides will also be available on the website. \n \n Investors & Analysts: \n Admiral \n Marisja Kocznur                                [email protected] \n \n Media: Admiral Group plc      Addy Frederick                                  +44 (0) 7436 035615   \n \n Media: FTI Consulting    Edward Berry                                     +44 (0) 20 3727 1046 Tom Blackwell                                   +44 (0) 20 3727 1051 \n \n Chair Statement \n \n \n Background to the year \n Well that was quite a challenging year - again! Against this backdrop, Admiral continued to thrive. \n Milena Mondini de Focatiis took over as Group CEO back in January and has provided strong leadership. She has further built a high-performing team which continues to take the business from strength to strength, building on Admiral’s solid foundations and maintaining the key ingredients that make Admiral different. We remain focused on continuously strengthening our core competences while creating sustainable businesses for the future. \n The welfare of our people remains a top priority. I am proud of the way they have responded to the changing Covid situation in looking after each other, our customers and the community at large, whilst always remaining true to Admiral’s values. \n \n Looking back at 2021 \n Admiral has produced another strong set of results in 2021 in both reported profit and growth. This is once again due to our people. They make the real difference at Admiral and take care of all the little things that make that difference; continuously evolving and improving the business. They remain true to our purpose to - H elp more people to look after their future. Always striving for better together - ensuring that we do the right things in consideration of all of our stakeholders. \n The Group has continued to grow with turnover increasing by 4% to £3.51 billion, whilst customer numbers are 9% higher than 2020 at 8.36 million. Group pre-tax profit increased by 26% to £769 million. Covid continued to impact the results in all markets in which we operate. In the UK profits were strong due to accident frequency taking longer to return to more normal historical levels than expected and strong prior year development, notably in the first half of the year. We continue to maintain a prudent approach and, as a result, benefited from strong reserve releases from past years. Earnings per share rose by 24% and return on equity was 56%. The Group’s solvency ratio remains robust at 195% (187% at the end of 2020). \n In the UK we prepared for the changes resulting from the FCA market pricing study for general insurance that will affect Motor and Household insurance products. The full changes came into effect in January 2022, and we anticipate that they will have a significant impact on the market. We see this as an opportunity to continue to build on Admiral’s strengths and desire to do the right thing for customers. As a reminder, approximately 80% of Admiral customers shop around at renewal, so we are encouraged that the majority choose to remain with us; this being an indicator of our good customer experience and competitive pricing. \n International insurance delivered good customer growth but an overall loss as Covid-related accident frequency benefits returned to more normal levels and competitive activity increased in most markets. \n We have continued to grow our Loans business. The loans book remains resilient despite economic uncertainty largely as a result of our prime customer base and prudent approach. \n As I covered last year, we were pleased to complete the successful sale of our Comparison businesses, although we were sad to say goodbye to many colleagues. \n \n Dividend \n Our dividend policy remains that we pay a normal dividend of 65% of post-tax profit and distribute each year as a special dividend the available surplus over and above what we retain to meet regulatory requirements, the future development needs of our business and appropriate buffers. \n As a result of the sale of the Comparison businesses, we announced that the proceeds would be returned to shareholders as a further special dividend phased equally over the interim 2021, final 2021 and interim 2022 dividends. Therefore, the Directors have recommended a final dividend of 118.0 pence per share (2020: 86.0 pence per share) for the year to 31 December 2021 representing a distribution of 91% of our second half earnings (72.0 pence per share) as well as 46.0 pence per share as the second of three payments related to the Penguin Portals disposal proceeds. \n This will bring the total dividend for the year to 279.0 pence per share, an overall increase of 78%. This represents a pay-out ratio of 88% of full year earnings (187.0 pence per share) and 92.0 pence per share related to the Penguin Portals disposal. The Group has delivered a Total Shareholder Return (TSR) of 577% over the last 10 years. \n \n Group Board in 2021 \n The Board recognises the need for a strong corporate governance framework and supporting processes across the Group and believes that good governance, with the tone set from the top, is a key factor in delivering sustainable business performance and creating value for all the Group’s stakeholders. \n The Group strategy remains straightforward and highly focused on building customer-centric, sustainable businesses for the long-term. Within this context, we do not rest on our strengths, but rather strive to keep doing what we’re doing well and do it better year after year. \n In our UK Insurance business, we remain determined to strengthen our core competitive advantages and nurture our culture of innovation via our ‘test and learn’ approach. For example, we are continuing to deploy technology relating to digital and self-service to improve customer experience and overall efficiencies. \n We also continue to take these core strengths to new markets and new products, both in the UK and abroad, which enhances our diversification and the future growth of the business. We are agile enough to adapt to evolving business environments and encourage entrepreneurial initiatives to solve challenges and offer the best outcome to our customers, people and investors. One example is Admiral Pioneer, a business focusing on diversification through new business areas, that builds on our traditional ‘test and learn’ approach . \n From a governance perspective, we continue to apply the principles of the Corporate Governance Code which ensures that we will continue to take on board the views of all of our stakeholders in our discussions and decision making. As you would expect, we already have strong links with our people and in 2021, the Board revisited and enhanced several areas of focus including our culture, engagement, diversity, our impact on the environment and climate change, and how we give back and participate in the communities in which we operate. \n Once again Admiral was recognised as a great place to work in 2021 ranking as the 17 th best workplace in Europe by Great Place to Work as well as a Diversity leader in Europe by the Financial Times. We were awarded 5 th position at the ‘Best Big Companies to Work For’ awards in the UK and are the only UK company to be listed for 21 consecutive years. We were also named the 2 nd best workplace for women in the UK and recognised for our Wellbeing initiatives. I could go on..! \n Of course, this doesn’t happen by accident. We continue to believe that if people like what they do, they do it better. We strive to create a diverse and inclusive workplace where our people feel that they belong and their voices are valued. \n Having our people as shareholders remains a distinctive element of Admiral’s incentive schemes. These are designed to ensure that decisions are made by management to support long-term value growth, that the right behaviours are rewarded and that our people’s interests are aligned with those of shareholders. Our core belief is that over the long-term, share price appreciation depends on delivering great outcomes for our customers. \n During the year, I usually visit our overseas operations as well as being present regularly in South Wales. This year I had the pleasure of visiting our operations in the UK, France, Italy, Spain and the US – a mix of physical and virtual visits. All Non-Executive Directors participated in a number of these visits. We also attended the Employee Consultation Group meetings. This allowed us to keep contact with our people during this difficult period and directly hear their views and the challenges they faced. The Admiral culture still shines through. \n We reviewed the composition of the Board in 2021 and made two new appointments: Evelyn Bourke, who has a wealth of experience in financial services, risk, capital management and transformation, now chairs the Remuneration Committee; and Bill Roberts who has extensive insurance, underwriting and marketing experience brings valuable knowledge and insight on the US insurance market. Manning Rountree and Owen Clarke stepped down from the Board after many years. We are thankful for the huge contribution they have made. \n The Board and I feel that there is a good balance of experience, skills and knowledge to support and challenge the management team, and that operations are supported by effective governance and control systems. \n The Board remains focused on the following areas: \n \n Continuing to build on the remarkably special Admiral culture that places our people, customers and wider impact on the community at the heart of what we do \n Continuing our trajectory of growth, profitability and innovation \n Investing in the development and growth of our people \n Ensuring excellent governance and the highest standards \n Focusing on all aspects of ESG \n \n \n Our \n role in Society \n Admiral takes its role in society very seriously and has an active approach to Corporate Responsibility by focusing on all our stakeholders and the wider impact we have (more information in the Sustainability Report on the Admiral website). We are proud to be Wales’ only FTSE 100 headquartered company and employ over 7,000 people in South Wales. Our people play an active part in the communities in which we operate. We carefully consider our impact on the community and environment, including factors such as the green credentials of our buildings, raising funds for multiple charities, and considering the impact of climate change across the business. \n This year we announced our ambition to be net zero by 2040 and to be net zero across our operations for scope 1 and 2 emissions by 2030 6 . We aim to be an economically strong and responsible business over the long-term, guided by a clear purpose, to make a positive and significant impact not just on our customers and our people, but on the economy and society as a whole. \n \n Thank you \n On behalf of the Board, I would like to thank everyone at Admiral for their continued hard work, their adaptability and caring behaviour and their contribution to the Group’s results in 2021. I would also like to thank our shareholders for their support and confidence. Most of all I would like to thank our customers for placing their trust in us. \n \n Annette Court \n Group Chair \n 2 \n March 2022 \n \n \n Group Chief Executive Officer’s Review \n \n My first year as group CEO has been intense and not short of challenges; at the same time there has been plenty to be proud of. We have delivered – yet again – growth, strong financial results and increased customer loyalty, surpassing 8m customers and recording exceptional profits of £769 million 7 , due to unusual market conditions and Admiral’s disciplined approach. This has been achieved despite turbulent conditions, starting with continued disruption from Covid and ending with a massive collective effort to plan and build rate structures well-adapted to life post the FCA pricing reforms introduced in January 2022. \n There is no doubt that David left me big boots to fill… perhaps mine will be fancy Italian ones in a much smaller size! Admiral may have more in common with a finely crafted pair of shoes than you might expect. Our strong insurance capabilities and technical competences are the sole on which everything is built, our strategy is the design in continuous evolution to meet ever-evolving customer needs and our people and unique culture are the stitching which holds everything together. Like an expert shoemaker, we strive to produce high quality products by doing the common, uncommonly well. \n So what do I mean by this? It's common to all insurers who survive beyond infancy that they are competent in the core insurance disciplines - notably risk selection, claims handling and effective digital distribution and servicing. What sets Admiral apart from most of our peers is our ability to deliver on these consistently well and 2021 has been no different. \n This consistent track record is only possible as we continue to evolve and modernize our operating model and invest in innovation for the long term. The adoption of machine learning models has increased our pricing agility, enabling us to offer customers good value products while protecting loss ratios. This will stand us in good stead following the introduction of the UK FCA pricing remedies in January. We also made great progress in the adoption of Scaled Agile and our digital acceleration, deploying, for example, a new claims system that allows our UK Household customers to settle claims completely online if they wish to do so. \n Adapting and expanding our proposition to customers is a strategic priority for us. We are successfully scaling UK Household, reaching 1.3 million customers, and the Loans business grew to £607 million gross balances in 2021. Admiral Pioneer launched its first product for SMEs last year and continues to explore the evolution in mobility, seeding smaller businesses for the future. We now have over 1.8 million customers across our international businesses and continued to grow the customer base by 13% despite the market being as competitive as ever. We are also working on building distribution capabilities outside of price comparison to create more optionality for efficient growth and realise more economies of scale. \n A key feature of 2021 was saying goodbye to our friends at the Penguin Portals comparison businesses, and we wish them the best of luck. We successfully completed the sale process and believe a good outcome was achieved for all. This will give us the chance to focus even more on our main markets in the future. \n Our people and our unique culture are what makes Admiral great and will continue to do so. All our businesses have completed the moved to hybrid working this year. Covid continued to create uncertainty for both our businesses and colleagues, but we demonstrated our agility and ability to quickly adapt to meet our customers’ needs and continue to deliver the great service they expect from us. We have worked hard to ensure that Admiral remains a fantastic place to work, and this year we have been named among the top best places to work in every country in which we operate, including the 5th best super large workplace in the UK and 1 st in Spain. \n We have pledged to reach net zero emissions by 2040 as part of our commitment to long-term sustainability and environmental improvement. We are proud to support our local communities and in 2020 we established an Admiral Support Fund to provide support to those most impacted by the pandemic, setting aside £6 million over the past two years with over 350 organisations having received support. This includes a £1 million donation we made to UNICEF to help support our colleagues and communities in India. We are excited about the continuous evolution of our sustainability strategy and to continue to increase our support to our local communities. \n What a roller-coaster of a year! I am incredibly proud that we are now helping more customers than ever to look after their future. \n Thank you so much to our enlarged Admiral family, our customers, Board and shareholders who continue to support us. And more importantly, thank you to all my colleagues, our people, who are the key to Admiral’s success. \n \n Milena Mondini de Focatiis \n Group \n Chief Executive Officer \n 2 \n March 2022 \n \n \n Group \n Chief Financial Officer’s \n Review \n \n I closed my 2020 review hoping for a more cheerful 2021, and whilst the pandemic again put paid to that and Wales didn’t win the Euros (), Admiral’s financial performance was strong, with all our businesses growing customer numbers year-on-year along with a very positive bottom-line outcome for the Group. Let me start by giving a brief overview of the results: \n \n \n \n £m \n \n \n 2021 \n \n \n 2020 \n \n \n Change \n \n \n \n   \n   \n   \n   \n \n \n UK Insurance \n 894 \n 698 \n +196 \n \n \n International Insurance \n (12) \n 9 \n (21) \n \n \n Admiral Loans \n (6) \n (14) \n +8 \n \n \n Share scheme cost \n (63) \n (51) \n (12) \n \n \n Other \n (44) \n (34) \n (10) \n \n \n \n Continuing operations pre-tax profit* \n \n \n 769 \n \n \n 6 \n 08 \n \n \n +161 \n \n \n \n Restructure cost \n (56) \n - \n (56) \n \n \n \n Continuing operations profit after \n r \n estructure \n cost \n \n \n 713 \n \n \n 608 \n \n \n +105 \n \n \n \n \n * continuing operations = excluding results and gain on disposal of the Comparison businesses sold by the Group in 2021 \n \n The standout positive is clearly the big increase in UK Insurance profit - even more pronounced than in 2020 when the impact of Covid on the results was first seen. The UK Household business contributed another decent profit (£21m, up from £15m), though the Motor business profit was nearly £190m higher than 2020 and was the driver of the year-on-year increase. \n The main reason for the step-up v 2020 is very positive development of back year claims costs, leading to large releases of reserves and increased profit commission revenue. Both the 2020 and 2021 financial years also benefited from current period loss ratios that were notably lower than previous years, meaning profit for both financial years was clearly elevated compared to the recent past. \n It is important to note that profit in the second half of 2021 was lower than the first half (~£290m v ~£480m) as both the prior year claims movements and Covid frequency benefits were much more pronounced in the first six months. With frequency heading closer to normal levels during H2 (apart from the very end of the year) and premium rates having been discounted beforehand, a lower level of profit was to be expected. We expect that Group profit in 2022 will be lower than 2021 and 2020. \n You’ll note a £56m restructure charge in the 2021 numbers which reflects the cost of exiting leases on a number of the Group’s south Wales offices, impairment of some technology assets and costs relating to a voluntary redundancy programme carried out in late 2021. The move to smart working (reducing our office space need) and ongoing shift of technology to the cloud and other system upgrades (meaning some older systems required writing down) were the key reasons behind the charge. The total cost of the restructure is around £66m - £56m was recognised in 2021 with the balance to flow through in subsequent years. A large majority of the total is not an in-year cash outflow, and the restructure will result in cost savings in 2022 and beyond. The strong Group solvency position at the end of 2021 means we can ‘look through’ this charge when proposing the final dividend. \n The next biggest change in segment results year-on-year was the loss from the International Insurance business following the profit in 2020. Whilst we budgeted a loss for 2021, the actual result was a little worse than plan. A number of things contributed to the outturn, not least quite a big unwind of the lower Covid-related frequency seen in the 2020 loss ratios and highly competitive conditions in most markets which led to reduced average premium per customer. Consistent with our objective to continue to scale, our business continued to grow quite nicely, adding over 200,000 customers and increasing turnover by 6%. We also continued to invest in the technology and capabilities that we believe set the businesses up well for the future. \n Other points of note from the results include: \n \n The Admiral Loans result improved year-on-year, mainly due to a much lower credit loss charge resulting from reduced economic uncertainty. The business progressed very nicely and grew its balances to £607m from £402m. We’re planning for further strong growth in 2022 and hoping for a further improvement in the bottom line \n Share scheme costs moved higher due to an unusually positive combination of increased share price, higher assumed share plan vesting due to strong financial performance and also higher staff bonuses resulting from higher shareholder dividends. To us this is a good illustration of the alignment between reward for our people and outcomes for shareholders. In the absence of a material increase in the share price during 2022, we don’t expect as high a cost in 2022 \n And finally other costs (which include the results from the Admiral Pioneer businesses plus central overheads and finance costs) were also higher, mainly driven by Admiral Pioneer, where as well as the results from the existing Veygo business we started to invest in new ventures in SME insurance in the UK and mobility insurance in France \n \n \n Penguin Portals disposal \n \n Moving away from the results, we completed the sale of Penguin Portal Comparison businesses (confused.com in the UK being the largest member) at the end of April 2021. Cash proceeds were approximately £470m, whilst the gain recorded in the Group income statement in 2021 was around £400m. \n We have already started to return £400m of the proceeds to shareholders in the form of special dividends, split equally over the interim 2021, final 2021 and interim 2022 dividends. 46 pence per share of the total final 2021 dividend (of 118 pence per share) is in respect of the Penguin sale and the final 45 pence per share will follow in October 2022. \n Very best wishes to our former colleagues and friends in their new home. \n \n Co-insurance and reinsurance \n \n We were pleased in the first half of 2021 to conclude important negotiations with our largest reinsurer, Munich Re, to extend our risk sharing partnership in the UK car insurance business covering 40% of the total premium. The co-insurance contract which expires at the close of the 2021 underwriting year has been in effect in some form for nearly two decades and we’re delighted to be renewing the long-term arrangement. \n Munich will underwrite 20% of the business via a new co-insurance contract due to expire at the end of 2029 and a further 10% via a new quota share reinsurance contract expiring at the end of 2026. The existing 10% quota share contract will also remain in effect until at least the end of 2023. The changes should result in higher profit commission income for Admiral from 2022 onwards, compared to the expiring arrangements. \n \n Thank you \n \n It’s been said by my colleagues already in the report, but it can’t be said enough – my most sincere thanks to everyone across Admiral Group for their huge efforts – always, but especially over the past couple of pandemic-impacted years. I’m very much looking forward to getting back to the office and meeting colleagues more regularly, asap! \n \n Geraint Jones \n Group \n Chief Financial Officer \n 2 \n March 2022 \n \n \n 2021 Group \n Overview \n \n \n \n \n £m \n \n \n 20 \n 21 \n \n \n 20 \n 20 \n \n \n 2019 \n \n \n \n \n Group T \n urnover (£bn) * 1*2 *3 \n \n 3.51 \n \n \n 3.37 \n \n \n 3. \n 30 \n \n \n \n \n Continuing operations \n \n   \n   \n   \n \n \n Underwriting profit including investment income* 2 \n 347.0 \n 333.1 \n 238.0 \n \n \n Profit commission \n 304.5 \n 134.0 \n 114.9 \n \n \n Net other revenue and expenses * 2 \n 129.4 \n 153.4 \n 164.7 \n \n \n \n Operating profit \n , excluding \n restructure \n cost \n \n \n 7 \n 80.9 \n \n \n 6 \n 20.5 \n \n \n 517.6 \n \n \n \n \n Group profit before tax, excluding \n restructure \n cost \n \n \n 76 \n 9 \n . \n 0 \n \n \n 608.2 \n \n \n 505.1 \n \n \n \n \n Group profit before tax, including \n restructure \n cost \n \n \n 713.5 \n \n \n 608.2 \n \n \n 505.1 \n \n \n \n   \n   \n   \n   \n \n \n \n Statutory Group profit before tax, including discontinued operations and gain on disposal \n \n \n 1,129.2 \n \n \n 637.6 \n \n \n 522.6 \n \n \n \n   \n   \n   \n   \n \n \n \n Analysis of profit \n from continuing operations \n : \n \n   \n   \n   \n \n \n UK Insurance \n 894.0 \n 698.3 \n 597.9 \n \n \n International Insurance \n (11.6) \n 8.8 \n (0.9) \n \n \n Loans \n (5.5) \n (13.8) \n (8.4) \n \n \n Other \n (107.9) \n (85.1) \n (83.5) \n \n \n \n Group profit before tax, excluding \n restructure \n cost \n \n \n 769.0 \n \n \n 608.2 \n \n \n 505.1 \n \n \n \n   \n   \n   \n   \n \n \n \n Key \n metrics:          \n   \n   \n   \n \n \n Group loss ratio *2 *4 \n 58.5% \n 54.4% \n 64.9% \n \n \n Group expense ratio *2* 4 \n 26.7% \n 26.8% \n 23.7% \n \n \n Group combined ratio* 2*4 \n 85.2% \n 81.2% \n 88.6% \n \n \n Customer numbers (million) \n 8.36 \n 7.66 \n 6.98 \n \n \n   \n   \n   \n   \n \n \n Earnings per share* 3 continuing operations excluding restructure cost \n 212.2p \n 170.7p \n 143.7p \n \n \n Earnings per share, continuing operations including restructure cost \n 196.7p \n 170.7p \n 143.7p \n \n \n Dividends per share* 5 \n 187.0p \n 156.5p \n 140.0p \n \n \n Special dividends from sale of Penguin Portals \n 92.0p \n — \n — \n \n \n Return on Equity* 2*3 \n 56% \n 52% \n 52% \n \n \n Solvency Ratio* 2 \n 195% \n 187% \n 190% \n \n \n \n *1 \n Group Turnover in 2020 includes the impact of the ‘Stay at Home’ premium refund issued to UK \n M \n otor insurance customers, of £97 million. Refer to note 14 to the financial statements for a reconciliation to the net insurance premium impact of £21 million. \n *2 \n Alternative Performance Measures – refer to the end of this report for definition and explanation \n \n * \n \n \n 3 \n \n Group Turnover, Earnings per share, Return on equity presented on a continuing operations basis. 2021 Earnings per share and Return on equity exclude the impact of the UK Insurance \n r \n estructure cost \n * \n 4 \n See note 14 for a reconciliation of Turnover and reported loss and expense ratios to the financial statements \n . Ratios exclude the impact of the UK Insurance \n r \n estructure cost \n \n *5 \n \n The 2019 dividend of 140.0 pence per share includes the deferred special element of the 2019 final dividend of 20.7 pence per share that was paid alongside the interim 2020 dividend. \n \n Key highlights of the Group’s results for 2021 are as follows: \n \n All parts of the Group grew in 2021 with turnover up 4% and customer numbers up 9% year-on-year: The UK Motor business reported strong growth in the first half of the year, though was broadly flat in the second half as the market became more competitive and Admiral increased prices, whilst the UK Household and International Insurance businesses both continued to grow customer numbers strongly (at +14% and +13% respectively) Turnover outside the UK increased at a lower rate (+6%) than customer numbers due to the impact of very competitive markets on average premiums in those businesses \n Group profit before tax (continuing operations, before restructure cost) increased significantly to £769 million (+26%): The main driver was a near £190 million increase the UK Motor Insurance result, mainly due to improved prior year claims releases and profit commission  The UK Household result (£21 million, +£6 million) benefited from growth in the business and higher profit commission, as well as reduced levels of extreme weather in 2021 than 2020 Outside the UK, the International Insurance business combined result was around £20 million worse than 2020 resulting from a higher combined ratio (mainly due to the unwind of the Covid claims frequency benefits seen in 2020 but also due to expenses related to growth) Admiral Loans reported an improved result (2021: £6 million loss v 2020: £14 million loss) as the charge for expected credit losses reduced materially with the improved economic outlook; the business also grew its gross loans balances significantly (£607 million in 2021 from £402 million in 2020) \n \n \n Other Group items increased to £108 million (2020: £85 million) driven by investment in potential new ventures, primarily within Admiral Pioneer, and an increase in share schemes costs related to a higher share price and higher share scheme bonuses linked to the strong dividend \n \n \n Covid-19 impact \n \n The Covid-19 (‘Covid’) pandemic continued to impact the 2021 results across the Group. In most markets, whilst road traffic levels started to return towards normal levels, this was slower than expected as lockdown restrictions persisted for longer, particularly in the first half of the year. This resulted in continued lower claims frequency relative to pre pandemic levels in most markets, although the US saw a more rapid increase in frequency which has now returned to pre-pandemic levels. \n In light of an improved economic outlook, Admiral Loans grew more rapidly in 2021 and reported a lower charge for expected credit losses than in 2020. Provisions remain prudent, though reflect the reduced likelihood of a severe economic downturn. No significant increase in the level of defaults has been experienced to date. \n Admiral remained committed to supporting its customers, people and local communities throughout the pandemic. Measures in 2021 have included continued assistance for customers needing support, continue to prioritise the safety and wellbeing of our people and numerous community initiatives to support charities in the areas in which the Group operates. \n \n Earnings per share \n Earnings per share from continuing operations and excluding the impact of the UK Insurance restructure cost, increased by 24% to 212.2 pence (2020: 170.7 pence), in line with the growth in pre-tax profit. Earnings per share including the impact of the restructure cost is 196.7 pence, up 15% on 2020. \n \n Dividends \n 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 capital requirements including appropriate headroom above the regulatory minimum in line with internal risk appetite. \n The Board has proposed a final dividend of 72.0 pence per share (approximately £211 million), split as follows: \n \n 42.2 pence per share normal dividend, based on the dividend policy of distributing 65% of post-tax profits (continuing operations, including the impact of the restructure cost); plus \n A special dividend of 29.8 pence per share \n \n This final dividend (excluding the further special dividend referred to below) reflects a pay-out ratio of 91% for H2 2021, based on earnings per share from continuing operations, excluding the impact of the restructure cost (113% including the impact of the restructure cost). It is 16% below the 2020 final dividend in line with the lower second half earnings.    \n The total dividend from continuing operations for the 2021 financial year is 187.0 pence per share (approximately £547 million), 19% higher than 2020 (156.5 pence per share) and is equal to 88% of earnings per share for the year (95% of earnings per share net of restructure cost). \n The Group also confirmed with its half year results announcement in August 2021 that the net proceeds of £400 million from the disposal of the Penguin Portals Comparison businesses will be returned to shareholders in the form of special dividends phased equally over the interim 2021, final 2021 and interim 2022 dividends. The Board has consequently declared a further special dividend of 46.0 pence per share to reflect the second of these payments. \n Including the dividend from the Penguin Portals disposal, this brings the total final 2021 dividend to 118.0 pence per share, split 42.2 pence per share normal element and 75.8 pence per share special element. \n The total 2021 financial year dividend, including from the Penguin Portals disposal, is 279.0 pence per share, approximately £816.0 million. \n The final dividend payment is due on 6 June 2022, ex-dividend date 5 May 2022 and record date 6 May 2022. \n \n Return on equity \n The Group’s return on equity was 56% in 2021, increasing from 52% in 2020. The Group’s share of total post-tax profits from continuing operations grew by 26%, with this growth higher than the 11% growth in the Group’s share of average equity. The significant dividend payments in the year (2020 final and 2021 interim dividends) largely offset the strong 2021 profits and led to the lower growth in the Group’s share of average equity. \n \n The Group’s results are presented in the following sections as: \n \n \n \n UK Insurance – including UK Motor (Car and Van), Household, Travel \n \n \n International Insurance – including L’olivier (France), Admiral Seguros (Spain), ConTe (Italy), Elephant (US) \n \n \n Admiral Loans \n \n \n Other – including \n compare.com (US comparison) and Admiral Pioneer \n \n \n Discontinued operations – Penguin Portals Group and Preminen Price Comparison Holdings Limited Group (disposal of which completed in April 2021) \n \n \n Group Capital Structure and Financial Position \n \n \n \n UK Insurance Review \n \n \n UK Insurance Review – Cristina Nestares, CEO UK Insurance \n Without doubt, the last couple of years have been quite different to what we’ve been used to. But reflecting on them now, it feels (within Admiral at least) that the important things have stayed exactly the same. And it’s the sameness in our core values and our approach to our people, customers and products that has contributed to yet another strong year, and which positions us well for any challenges of 2022. Focus on the right things, test and learn, make incremental improvements, care about people…all those little things add up and drive the right outcomes, as they always have done. \n A consistent theme in Admiral’s history has been the underwriting performance of the UK Car insurance business and knowing how to balance the desire to grow with the discipline and judgement to do so at the right time. The changing face of the pandemic has made it harder than ever to make the right call, where lockdowns and varying restrictions have impacted mobility and claims frequency to make pricing decisions more complex than usual. We took a more cautious approach than most in the second half of the year as the backdrop of increasing inflation and the anticipated rebound in claims frequency made growth a little less attractive, and therefore maintained a stable book size in the final six months of the year. \n It’s this sensible approach to underwriting, along with the effectiveness of our claims teams (whether working from home, in the office or in face-to-face meetings with claimants) that has continually led to strong current year results, and the consistent stream of back-year releases. In 2021, the result has of course benefitted from the exceptional tailwind of favourable frequency, particularly in the first half of the year, but at the same time demonstrated the exact same positive underlying themes as previous years. \n Another constant, and a cornerstone of Admiral’s values, is to focus on the customer, the customer, the customer … It’s very pleasing therefore that we’ve expanded our tiered proposition, that was previously only available for Household insurance. We now provide four distinct options for motor customers, ranging from an Essentials tier aimed at price-sensitive customers to the Platinum proposition that provides increased customer benefits. Whilst continuing to improve our products and streamlining our sales process is important, what’s even more satisfying is that our customer-centric approach throughout the lifecycle is valued. A key output of that is a customer satisfaction that places our retention rate significantly above market norms, including for customers that have made a claim in the year. \n We continue to enhance our customer proposition, and the increasing investment in new products together with improvements in our IT platforms and pricing capability has resulted in an increase in costs in the year, which is more apparent given the reduction in average premiums since the start of the pandemic. However, we’ve also taken the opportunity to restructure some of our cost base by exiting some buildings and writing off some of our IT estate. We expect to continue to invest over the next several years to maintain strong foundations for our future, and to allow us to continue to provide a market-leading service to customers and market-leading results for our investors. \n A key part of that future is our UK Household business, which will enter its tenth year in 2022. The business has grown by almost 14%, with UK Household customers reaching 1.3m by the end of the year. We achieved this whilst delivering an increased profit of £21.3 million (up 38% vs. 2020) which is a great result. \n It would be remiss to mention the future without referencing the FCA pricing reforms that came into force on the 1 st of January. There remains a good deal of uncertainty around the market’s response to what is one of the biggest pricing changes in recent years, but we’re confident that the foundation we’ve laid, and particularly our pricing excellence and customer focus, leaves us very well placed to meet the challenges and take advantage of the opportunities this brings. \n Finally, I’ll come back to another topic that we hope will never change. The way we work has altered dramatically since the start of the pandemic and will continue to evolve in 2022 as we continue to embrace smart working. However, Admiral’s culture and the engagement of our team is central to our success and very close to our heart. We are therefore delighted to feature in the Best Companies to Work For awards for the 21 st year in a row, making the top-5 for the 5 th consecutive year. It was also very rewarding to appear 2 nd in the list of Best Companies to Work for Women, another indication of Admiral’s ongoing commitment to its culture. \n \n UK Insurance financial performance \n \n \n \n \n £m \n \n \n 2021 \n \n \n 2020 \n \n * \n \n \n 2 \n \n \n \n 2019 \n \n * \n \n \n 2 \n \n \n \n \n \n Turnover \n \n *1 \n \n \n \n 2,751. \n 7 \n \n \n 2,672.0 \n \n \n 2,635.0 \n \n \n \n Total premiums written \n 2,453.2 \n 2,373.3 \n 2,321.7 \n \n \n Net insurance premium revenue \n 612.6 \n 539.7 \n 533.2 \n \n \n \n Underwriting profit including investment income \n *1 \n \n \n 394. \n 9 \n \n \n 346.5 \n \n \n 257.4 \n \n \n \n Profit commission and other income \n 499.1 \n 351.8 \n 340.5 \n \n \n \n UK Insurance profit before tax, excluding \n r \n estructure cost \n \n \n 89 \n 4.0 \n \n \n 698. \n 3 \n \n \n 597. \n 9 \n \n \n \n Restructure cost \n (54.0) \n — \n — \n \n \n \n UK Insurance profit before tax, including \n r \n estructure cost \n \n \n 8 \n 40.0 \n \n \n 698. \n 3 \n \n \n 597. \n 9 \n \n \n \n \n \n *1 \n \n Alternative Performance Measures – refer to note 14 at the end of this re \n port for definition and explanation \n \n *2 \n \n Re-presented to statutory profit before tax from group share of profit before tax \n \n \n Split of UK Insurance profit before tax \n \n \n \n \n £m \n \n \n 2021 \n \n \n 2020 \n \n * \n \n \n 1 \n \n \n \n 2019 \n \n * \n \n \n 1 \n \n \n \n \n Motor \n 871.7 \n 683.6 \n 592.0 \n \n \n Household \n 21.3 \n 15.4 \n 7.5 \n \n \n Travel \n 1.0 \n (0.7) \n (1.6) \n \n \n \n UK Insurance profit before tax, excluding \n r \n estructure cost \n \n \n 894.0 \n \n \n 698. \n 3 \n \n \n 597. \n 9 \n \n \n \n \n \n *1 \n \n Re-presented to statutory profit before tax from group share of profit before tax \n \n \n Key performance indicators \n \n \n \n   \n \n 2021 \n \n \n 2020 \n \n \n 2019 \n \n \n \n Vehicles insured at year end *1 \n 4.97m \n 4.75m \n 4.37m \n \n \n Households insured at year end *1 \n 1.32m \n 1.16m \n 1.01m \n \n \n Travel policies insured at year end *1 \n 0.15m \n 0.07m \n 0.09m \n \n \n \n Total UK Insurance customers \n *1 \n \n \n 6.44m \n \n \n 5.98m \n \n \n 5.47m \n \n \n \n \n * \n \n 1 \n \n Alternative Performance Measures \n – refer to the end of the report for definition and explanation. \n \n Key highlights for the UK insurance business for 2021 include: \n \n Overall growth in UK Insurance business customer numbers of 7% to 6.4 million. The Motor business grew 5% year-on-year – mainly in the first half of the year – as Admiral moved prices up ahead of the market in the second half in response to increasing claims frequency. \n The Household business reported strong growth in customers, reflecting competitive pricing and growth in Admiral’s MultiCover offering \n A 27% increase in UK Motor profit to £871.7 million (2020: £683.6 million) driven by positive development of prior period claims resulting in significantly higher reserve releases and profit commission, especially in the first half of the year \n A strong increase in Household profit to £21.3 million (2020: £15.4 million profit) as a result of growth in the business, higher profit commission and more benign weather than in 2020 \n \n In addition, a review of the UK Insurance cost base was carried out in the second half of 2021. The outcome was a one-off restructure cost of £66.0 million, of which £55.5 million is reflected in the 2021 accounts (£54.0 million within UK Insurance and £1.5 million of share scheme expenses) and the remaining amount will flow through in future years. The cost is primarily related to the impairment of technology assets and the cost of exiting a number of buildings in South Wales as a result of the shift to hybrid working, as well as the cost of a voluntary redundancy programme offered to employees in late 2021. \n The majority of the cost is not an in-year cash outflow and Admiral expects the impact of future benefits to be reflected in the combined ratio in the long term as a result of this restructure. The UK Insurance financial narrative below is focused on the results excluding the impact of this restructure cost. \n The business continued to invest in technology and digital capabilities as part of the Admiral 2.0 strategy to strengthen core competencies and increase the speed of delivery on customer expectations. Investments included the implementation of a new claims management system and continued digital development and modern technology enhancements such as cloud technology and data analytics, and are expected to have positive combined ratio benefits in the long term.   \n \n UK Motor Insurance financial review \n \n \n \n \n £m \n \n \n 2021 \n \n \n 2020 \n * \n 5 \n \n \n 2019 \n * \n 5 \n \n \n \n \n Turnover \n \n *1 \n \n \n \n 2, \n 522.5 \n \n \n 2,473.8 \n \n \n 2,455.3 \n \n \n \n Total premiums written *1 \n 2,244.3 \n 2,193.0 \n 2,158.5 \n \n \n Net insurance premium revenue \n 496.5 \n 451.4 \n 452.6 \n \n \n Investment income *2 \n 40.8 \n 50.8 \n 30.4 \n \n \n Net insurance claims \n (86.1) \n (97.1) \n (164.7) \n \n \n Net insurance expenses \n (95.6) \n (77.2) \n (74.7) \n \n \n \n Underwriting profit including investment income \n * \n 3 \n \n \n 355.6 \n \n \n 327.9 \n \n \n 243.6 \n \n \n \n Profit commission \n 290.6 \n 124.7 \n 112.2 \n \n \n \n Underwriting profit and profit commission \n \n \n 646.2 \n \n \n 452.6 \n \n \n 355.8 \n \n \n \n Net other revenue * 4 \n 225.5 \n 231.0 \n 236.2 \n \n \n \n UK Motor Insurance profit before tax \n \n \n 871.7 \n \n \n 683.6 \n \n \n 59 \n 2.0 \n \n \n \n Restructure cost \n (49.6) \n — \n — \n \n \n \n UK Motor insurance profit including \n restructure \n cost \n \n \n 822.1 \n \n \n 683.6 \n \n \n 592.0 \n \n \n \n \n *1 Alternative Performance Measures – refer to the end of this report for definition and explanation \n *2 Investment income \n includes \n £2.7 million \n of intra- \n g \n roup interest (20 \n 20 \n : £2. \n 9 \n million; 201 \n 9 \n : £ \n 2.8 \n million) \n *3 \n Underwriting profit excludes contribution from underwritten ancillaries (included in net other revenue) \n * \n 4 \n Net other revenue includes instalment income and contribution from underwritten ancillaries and is analysed later in the report. \n *5 \n Re-presented to statutory profit before tax from group share of profit before tax \n \n \n Key performance indicators          \n \n \n \n £m \n \n \n 2021 \n \n \n 2020 \n \n \n 2019 \n \n \n \n Reported Motor loss ratio *1,*2 \n 53.0% \n 49.2% \n 60.7% \n \n \n Reported Motor expense ratio *1,*3 \n 19.7% \n 19.8% \n 19.1% \n \n \n Reported Motor combined ratio \n 72.7% \n 69.0% \n 79.8% \n \n \n Written basis Motor expense ratio \n 19.9% \n 18.8% \n 18.5% \n \n \n Reported loss ratio before releases \n 78.8% \n 72.3% \n 87.6% \n \n \n   \n   \n   \n   \n \n \n Claims reserve releases – original net share *1,*4 \n £128.1m \n £104.3m \n £121.7m \n \n \n Claims reserve releases – commuted reinsurance *1,*5 \n £189.2m \n £137.3m \n £121.7m \n \n \n Total claims reserve releases \n £317.3m \n £241.6m \n £243.4m \n \n \n   \n   \n   \n   \n \n \n Other Revenue per vehicle \n £59 \n £61 \n £66 \n \n \n Vehicles insured at year end \n 4.97m \n 4.75m \n 4.37m \n \n \n \n *1 \n Alternative Performance Measures – refer to the end of this report for definition and explanation \n *2          Motor loss ratio adjusted to exclude impact of reserve releases on commuted reinsurance contracts. Reconciliation in note 14b. *3          Motor expense ratio is calculated by including claims handling expenses that are reported within claims costs in the income statement. The impact of reinsurer caps is excluded. Reconciliation in note 14c. *4          Original net share shows reserve releases on the proportion of the portfolio that Admiral wrote on a net basis at the start of the underwriting year in question. *5          Commuted reinsurance shows releases, net of loss on commutation, on the proportion of the account that was originally ceded under quota share reinsurance contracts but has since been commuted and hence reported in underwriting profit rather than profit commission. UK Motor profit increased by 27% during 2021 to £871.7 million (2020: £683.6 million) with the reported combined ratio increasing to 72.7% (2020: 69.0%). \n Market prices remained depressed throughout 2021. Admiral increased rates ahead of the market in the second half of the year to reflect claims frequency returning towards more normal pre-pandemic levels as well as increasing claims inflation. The customer base grew by 5% year-on-year to 4.97 million (2020: 4.75 million) as reduced new business growth was partly offset by strong retention. Turnover growth was more muted at 2% (£2.52 billion v £2.47 billion) as a result of lower average premiums in the Car insurance business in particular. \n The results were impacted by a number of factors: \n \n Net insurance premium revenue increased by 10% to £496.5 million (2020: £451.4 million), with the ‘Stay at Home’ premium rebate reducing net insurance premium in 2020 by £21.3 million. Excluding this impact, net insurance premium increased by 5% reflecting the growth in both Car and Van books in 2021. The majority of this growth came in the first half of the year. \n Investment income was lower than 2020 at £40.8 million (2020: £50.8 million). The prior period benefitted by £12.9 million from additional investment income on cash held by Admiral relating to the portion of the portfolio reinsured under quota share contracts (income that was initially allocated as due to reinsurers in 2019, but subsequently released and recognised in the 2020 income statement). \n Excluding movements on reinsurer allocations and movements in provisions for asset impairments (£2.6 million charge in the year, reflecting the growing asset base), underlying investment income was broadly consistent with 2020. \n The 2021 reported loss ratio was higher than the 2020 reported loss ratio at 53% (2020: 49%), the result of a higher current financial period loss ratio, partially offset by more favourable prior period releases. \n \n \n \n \n Reported Motor Loss Ratio   \n \n   \n   \n   \n   \n \n \n   \n   \n \n Reported loss ratio before releases \n \n \n Impact of claims reserve releases - original net share \n \n \n Reported Loss Ratio \n \n \n \n \n 2020 \n \n   \n \n 72.3% \n \n \n -23.1% \n \n \n 49.2% \n \n \n \n Change in current period loss ratio \n   \n +6.5% \n — \n +6.5% \n \n \n Change in claims reserve releases – original net share \n   \n — \n -2.7% \n -2.7% \n \n \n \n 202 \n 1 \n \n   \n \n 78.8% \n \n \n - \n 25.8 \n % \n \n \n 53.0% \n \n \n \n \n The current accident period loss ratio was just over 6 points worse than 2020 as a result of increased claims frequency as road usage continued to move closer to pre-pandemic levels, with the trend increasing throughout the year \n The higher current period loss ratio was partially offset by higher reserve releases on Admirals’ original net share of the business, which improved the reported loss ratio by close to 26 percentage points in 2021, 3 percentage points higher than in 2020. This reflects the strong positive development of claims reserves, in particular during the first half of the year \n The margin held above ultimate outcomes in the financial statement reserves remains both significant and prudent. In relative terms, it is slightly lower than that held at the end of 2020, reflecting the assessment of a modest reduction in the level of uncertainty in the claims reserves than in recent periods \n Reserve releases from commuted reinsurance and profit commission were significantly higher in 2021 than in 2020, with a combined total of £479.8 million (2020: £262.0 million), as follows: \n \n \n \n \n £m \n \n   \n \n Reserve releases – commuted reinsurance \n \n \n Profit commission \n \n \n Total \n \n \n \n \n 2020 \n \n   \n \n 137. \n 3 \n \n \n 124.7 \n \n \n 262.0 \n \n \n \n Change in commuted releases \n   \n +51.9 \n — \n +51.9 \n \n \n Change in profit commission \n   \n — \n +165.9 \n +165.9 \n \n \n \n 2021 \n \n   \n \n 189.2 \n \n \n 290.6 \n \n \n 479.8 \n \n \n \n \n Releases on reserves originally reinsured but since commuted were higher at £189.2 million (v £137.3 million in 2020), with underwriting years 2017 – 2019 making a more significant contribution than equivalent years at the same stage of development in 2020. This is consistent with the more favourable releases on the original net share and reflects the larger than usual movements in loss ratios on those underwriting years in H1. \n Profit commission was significantly higher at £290.6 million (2020: £124.7 million). This increase is positively impacted by profit commission recognised on the 2020 underwriting year. 2020 is more profitable than previous underwriting years at the same stage of development as a result of the Covid-related claims frequency trends. \n The reported expense ratio was broadly consistent at 19.7% in 2021 (2020: 19.8%) with the written basis ratio showing a modest increase to 19.9% (2020: 18.8%) as a result of lower average premiums and continued investment in technology and other assets as noted above \n \n \n Other revenue (including ancillary products underwritten by Admiral) and instalment income decreased to £225.5 million (2020: £231.0 million) primarily resulting from lower contribution from optional ancillaries. Further detail is set out in the Other Revenue and Instalment Income section below.   \n \n \n Claims and reserves \n As noted above, the Covid pandemic and relevant lockdowns led to fewer miles driven, resulting in significantly lower Motor claims frequency. The lockdown impact was less severe in 2021 compared to 2020, but remained below pre-Covid levels. \n Claims inflation continued, in particular driven by higher accidental damage claims due to a substantial increase in second-hand car residual values which was in turn due to a shortage in the supply of new vehicles. Large bodily injury and small bodily injury claims experience remained benign, with frequency increasing in line with overall the trend of increased miles driven. As expected, the first projection of the 2021 accident period loss ratio is higher than 2020 at the same point as a result of these factors. \n The Group continues to reserve conservatively, setting claims reserves in the financial statements well above actuarial best estimates to create a margin held to allow for unforeseen adverse development. \n \n Other Revenue and Instalment Income \n \n \n UK Motor Insurance Other Revenue – analysis of contribution: \n \n \n \n \n £m \n \n \n 20 \n 21 \n \n \n 20 \n 20 \n \n * \n \n \n 1 \n \n \n \n 201 \n 9 \n \n * \n \n \n 1 \n \n \n \n \n Contribution from additional products & fees, including those underwritten by Admiral * 2 \n 200.8 \n 203.4 \n 217.6 \n \n \n Instalment income \n 100.2 \n 100.9 \n 83.9 \n \n \n \n Other revenue \n \n \n 301.0 \n \n \n 304.3 \n \n \n 301.5 \n \n \n \n Internal costs * 3 \n (75.5) \n (73.3) \n (65.3) \n \n \n \n Net other revenue \n \n \n 225.5 \n \n \n 231.0 \n \n \n 23 \n 6.2 \n \n \n \n \n Other revenue per vehicle \n \n * \n \n \n 4 \n \n \n \n £59 \n \n \n £61 \n \n \n £66 \n \n \n \n \n Other revenue per vehicle net of internal costs \n \n \n £4 \n 7 \n \n \n £50 \n \n \n £56 \n \n \n \n *1 Re-presented to statutory profit before tax from group share of profit before tax *2 Additional products underwritten by Admiral Included in underwriting profit in income statement but re-allocated to Other Revenue for purpose of KPIs *3 Internal costs reflect an allocation of insurance expenses incurred in generating other revenue *4 Other revenue (before internal costs) divided by average active vehicles, rolling 12-month basis \n Admiral generates other revenue from a portfolio of insurance products that complement the core car insurance product, and also fees generated over the life of the policy. \n The most material contributors to net other revenue continue to be: \n \n Profit earned from Motor policy upgrade products underwritten by Admiral, including breakdown, car hire and personal injury covers \n Revenue from other insurance products, not underwritten by Admiral \n Fees such as administration and cancellation fees \n \n \n Interest charged to customers paying for cover in instalments \n \n Overall contribution (other revenue net of costs plus instalment income) decreased to £225.5 million (2020: £231.0 million), reflecting lower revenue due to the impact of whiplash reforms on the Motor Legal Protection ancillary. \n Other revenue per vehicle was lower at £59 (gross of costs; 2020: £61), as a result of the factors mentioned above. Net Other Revenue (after deducting costs) per vehicle was £47 (2020: £50). \n \n UK Household Insurance financial performance \n \n \n \n \n £m \n \n \n 20 \n 21 \n \n \n 20 \n 20 \n \n \n 2019 \n \n \n \n \n Turnover \n \n *1 \n \n \n \n 218.8 \n \n \n 193.8 \n \n \n 171.3 \n \n \n \n Total premiums written *1 \n 198.5 \n 175.9 \n 154.9 \n \n \n Net insurance premium revenue \n 49.1 \n 43.2 \n 37.2 \n \n \n \n Underwriting profit \n 1*2 \n \n \n 3.9 \n \n \n 2.5 \n \n \n 0.7 \n \n \n \n Profit commission and other income \n \n 17.4 \n \n \n 12.9 \n \n \n 6.8 \n \n \n \n \n UK Household insurance profit \n excluding \n restructure \n cost \n \n \n 21.3 \n \n \n 15.4 \n \n \n 7.5 \n \n \n \n Restructure cost \n (4.4) \n — \n — \n \n \n \n UK Household insurance profit \n including \n r \n estructure cost \n \n \n 16.9 \n \n \n 15.4 \n \n \n 7.5 \n \n \n \n *1 Alternative Performance Measures – refer to the end of this report for definition and explanation *2 Underwriting profit/(loss) excluding contribution from underwritten ancillaries \n \n Key performance indicators \n \n \n \n   \n \n 202 \n 1 \n \n \n 2020 \n \n \n 2019 \n \n \n \n Reported Household loss ratio *1 \n 63.3% \n 64.8% \n 69.1% \n \n \n Reported Household expense ratio *1 \n 30.3% \n 29.4% \n 28.9% \n \n \n Reported Household combined ratio *1 \n 93.6% \n 94.2% \n 98.0% \n \n \n Impact of extreme weather and subsidence *1 \n 2.2% \n 5.3% \n — \n \n \n Households insured at year end *1 \n 1.32m \n 1.16m \n 1.01m \n \n \n \n \n *1 \n          Alternative Performance Measures – refer to the end of this report for definition and explanation \n The number of households insured increased by 14% to 1.32 million (2020: 1.16 million). Turnover increased by 13% to £218.8 million (2020: £193.8 million).  The Household business grew strongly in 2021 within a competitive market with premium pressure in the second half of the year ahead of the introduction of the FCA pricing reforms. The continued increase in MultiCover sales supported this growth, particularly as a result of strong retention. \n The business continued to improve pricing capabilities in the year, improving loss ratio performance and expanding digital capabilities to support future growth. Over the year, the impact of weather was relatively benign with some impact from storm Arwen in the final quarter (2 point impact on the loss ratio vs much higher 5 point loss ratio weather impact in 2020). Claims trends associated with the impact of Covid remained largely unchanged, with favourable experience on escape of water and theft. The business continued to strengthen its claims capabilities, including the upgrade of its claims management system which offers improved digital servicing and advanced data capabilities. The reported loss ratio for the period improved to 63.3% and included 4 percentage points of favourable development on prior accident years. \n A combined ratio of 93.6% (2020: 94.2%) resulted in a net underwriting profit of £3.9 million (2020: £2.5 million), which was supplemented by profit commission and other income of £17.4 million (2020: £12.9 million). This led to a 38% increase in profit to £21.3 million (2020: £15.4 million), before the impact of the restructure cost. After the restructure costs of £4.4 million are included, the profit for the year is £16.9 million, a 10% improvement on 2020. \n The increase in profit commission and other income in the year is attributable to quota share reinsurance and has increased primarily due to favourable loss ratio performance in the recent underwriting years. Other income is broadly consistent year on year. \n \n International Insurance \n International Insurance – Costantino Moretti – CEO, International Insurance \n \n In 2021 our international operations made strong progress in continuing to build sustainable, long term businesses in the context of sophisticated and complex markets. Despite a challenging year with negative average premium development putting pressure on margins in Europe, competition in the US increasing direct acquisition costs, and rising frequency trends in all markets, we are proud of the response of our businesses which exhibit an adaptability we are confident will propel them to further success. Turning first to the US, Elephant made strong headway in its channel diversification efforts in response to high cost per sale in direct acquisition. The team's focus on the agency channel in particular, has paid dividends, and this channel now represents almost 20% of Elephant's new business sales, up from about 12% last year. This combined with other efforts on new business sales has enabled Elephant's vehicle base to increase by 10% whilst slightly improving the expense ratio. Though increasing claims inflation impacted loss ratios in the second half of the year, the Elephant team took action in line with the market to address this impact. In Europe, our businesses performed well despite difficult market conditions. Each business continued to grow the customer base despite continued headwinds from the pandemic, stagnant aggregator volumes and strong competition. Distribution diversification has paid off in all three of our European businesses: for ConTe and Admiral Seguros brokers accounted for more new business sales than ever, and for L’olivier focus on direct channels has enabled very strong growth, with turnover up 26%. \n Across the International Group our businesses made further investments into Admiral 2.0. While ConTe adopted Scaled Agile in 2020 and saw material benefit in 2021, Admiral Seguros and L’olivier laid the framework for this methodology in 2021 and are poised to implement it across all departments in 2022. Further digitisation of customer touchpoints across all four International Businesses generated record percentages of transactions completed online. \n 2021 was a successful-but-challenging year in which our International businesses continued to adapt to the unusual circumstances of the pandemic. We are proud of our performance and look forward to an even stronger 2022 as we work towards our strategy of building sustainable, scaled, and profitable businesses in the long term. \n \n France – Pascal Gonzalvez – CEO, L’olivier \n \n 2021, bis repetita: a very strong performance despite market adversity. \n L'olivier grew turnover by 26% in 2021, in the context of a challenging market where price comparison quotes decreased by 7%. We managed to double our customer base in less than 2.5 years, to end the year with over 360,000 customers. \n Our growth was coupled with a high quality of service as we maintained an excellent Net Promoter Score and we won an important award for 'best customer service of the year' in the non-life insurance category. \n To achieve this level of growth, L'olivier started to diversify its acquisition channels and products. \n One such example is a new partnership with BlaBlacar, the leading online carpooling marketplace and app in France. In 2021 we launched a co-branded motor insurance product with an innovative telematics offering, for which we are seeing early signs of good growth. \n Also, we accelerated our multi-product journey with further investment in our Household insurance book and the launch of electric scooter insurance. \n In parallel, we continued to make progress on our mantra to reach our 2023 vision: #3D, Data & Digital to Double. \n I strongly believe we are on the right path – with a strong team and clear strategy - to make it happen! \n \n Italy – Antonio Bagetta – CEO, ConTe \n \n Without a doubt 2021 will be remembered as a very tough and challenging year, yet one where the team continued to work together to build the business and serve our customers well. \n Despite fierce competition in the market and significant price decreases during the pandemic, ConTe ended 2021 with a profit for the eighth year in a row and with a 10% increase in our active customer base. \n These results have been possible thanks to optimising our distribution channel sales and a significant improvement in our customers’ digital journey. \n Our business size, cost-conscious culture, and tech and digital investments have driven our expense ratio improvement in a market where premiums are shrinking. \n We always aim for sustainable growth. That’s why we evolved our risk selection towards a stronger tech-data-driven approach, digitising underwriting and antifraud procedures, and whilst continuing to grow in our largest channel, price comparison, we also focused more on broker channel profitability than ever before. \n ConTe continued to strengthen its brand in the Italian market with presence on TV and with a partnership with the national football team. These strategic marketing investments resulted in ConTe being one of the most recognised and appreciated brands among direct insurance companies. \n Our people always come first. In 2021, we worked hard to improve our work-life balance in a post Covid world to retain, attract and develop the best talent. The new Smartworking4Future team, following close engagement with staff, launched our new Hybrid Model testing various new initiatives such as Short Friday (shorter work day!). The ConTe team remains highly engaged and motivated, continuing to prioritise our customers and build a stronger business into 2022. \n \n Spain – Sarah Harris – CEO, Admiral Seguros \n \n Admiral Seguros grew active policies in 2021 by 13% against the backdrop of a challenging market, and at the same time our people remained highly engaged and we were ranked #1 Best Workplace by the Great Place to Work Institute. This is a testament to the strong culture of teamwork across Admiral Seguros, especially evident during the uncertainties of Covid. In addition, we increased our digital capabilities, allowing an acceleration towards a truly omnichannel offering for our customers. \n From a market perspective, car insurance shopping continued to be significantly below 2019 levels, particularly affecting the aggregator market. Claims driving frequency remained depressed in the first half of the year, picking up over the summer months closer to pre-Covid levels. Not so for prices, where aggressive repositioning by several players led to a soft market throughout 2021. In this context we maintained a disciplined approach to pricing. Policy growth was mostly driven by good renewal performance, together with continued expansion into the broker channel, where we continue to see opportunity. We made good progress against our digital objectives, seeing more than a 40% uplift in customer logins to our digital portal. The number of claims registered online doubled over the course of the year. We increased our investment in digital capabilities and started a transformation to agile working across the organisation, which we expect to bear fruit during 2022. Loss ratio remained under control across all channels, with positive development on back years. \n And what of the future? In 2022 we will continue to adapt the way we work together, fully implementing a hybrid working model. We have ambitious plans to continue improving in digital and data capabilities, and to offer an even better service to our customers. \n \n US – Alberto Schiavon – CEO, Elephant \n \n 2021 was a mixed year for Elephant – on the one hand, we returned to growth, entered new states (Ohio, Georgia), and improved our loss ratio compared to the market; yet at the same time we reported a higher loss as claims costs increased across the market. Our continued effort in improving Elephant’s ease of doing business, superior technology stack, advanced risk selection, and competitive prices is showing some promising results, yet the market remains quite volatile and still challenging. \n By year end, vehicles in force had grown by 10%, with stronger sales particularly in our Agency distribution channel. Elephant is continuing to learn how to deploy our competitive advantages in this new channel, while we benefit from the endorsement of bigger, more familiar brands that attract customers we haven’t traditionally seen. \n From a loss experience perspective, the beginning of the year continued to see frequency-related benefits from 2020. By H2, however, Elephant and industry peers saw these benefits disappear as driving levels returned to normal. The intensity and speed of this ‘return-to-normality’ was quite sudden, resulting in higher overall losses this year. In response, we increased rates in line with other carriers, in addition to a stronger internal focus on data analytics and technology, risk selection and anti-fraud. While Elephant closed the historical loss ratio gap with the rest of the market, we remain prudent on the 2022 outlook, especially in anticipation of inflationary trends. \n I am incredibly proud and grateful to all our Elephant ‘Herd’ members for their hard work and dedication in 2021 and look forward to the many exciting projects planned for 2022. \n \n International Insurance Review \n International Insurance financial performance \n \n \n \n \n £m \n \n \n 2021 \n \n \n 2020 \n \n \n 2019 \n \n \n \n \n Turnover \n \n *1 \n \n \n \n 690.3 \n \n \n 648.8 \n \n \n 623.6 \n \n \n \n Total premiums written *1 \n 623.8 \n 584.0 \n 562.6 \n \n \n Net insurance premium revenue \n 221.0 \n 204.2 \n 168.6 \n \n \n Investment income \n 0.5 \n — \n 1.5 \n \n \n Net insurance claims \n (170.8) \n (139.3) \n (137.2) \n \n \n Net insurance expenses \n (91.7) \n (78.8) \n (53.0) \n \n \n \n Underwriting result including investment income \n \n *1 \n \n \n \n (41.0) \n \n \n (13.9) \n \n \n (20.1) \n \n \n \n Net other revenue \n 29.4 \n 22.7 \n 19.2 \n \n \n \n International Insurance result \n \n \n (11.6) \n \n \n 8.8 \n \n \n (0.9) \n \n \n \n \n Key performance indicators \n \n \n \n Reported Loss ratio *2 \n 73.7% \n 64.3% \n 76.8% \n \n \n Expense ratio *2 \n 44.8% \n 43.9% \n 37.6% \n \n \n Combined ratio *3 \n 118.5% \n 108.2% \n 114.4% \n \n \n Combined ratio, net of Other Revenue *4 \n 106.3% \n 97.9% \n 103.7% \n \n \n   \n   \n   \n   \n \n \n \n Vehicles insured at period end \n \n \n 1 \n .81 \n m \n \n \n 1.60m \n \n \n 1. \n 4 \n 2m \n \n \n \n \n *1          Alternative Performance Measures – refer to the end of this report for definition and explanation. *2          Loss ratios and expense ratios have been adjusted to remove the impact of reinsurer caps so the underlying performance of the business is transparent. \n \n \n *3 \n          Combined ratio is calculated on Admiral’s net share of premiums and excludes o ther revenue. It excludes the impact of reinsurer caps. Including the impact of reinsurer caps the reported combined ratio would be 2021: 119% ; 2020: 1 07 %; 2019: 113 %. \n \n \n *4 \n          Combined ratio, net of o ther r evenue is calculated on Admiral’s net share of premiums and includes Other Revenue. Including the impact of reinsurer caps the reported combined ratio, net of o ther r evenue would be 2021: 107%; 20 20 : 96 % 201 9 : 102%. \n \n International Motor Insurance - \n Geographical analysis \n \n \n \n \n 20 \n 21 \n \n \n Spain \n \n \n Italy \n \n \n France \n \n \n US \n \n \n Total \n \n \n \n Vehicles insured at period end (m) \n 0.37 \n 0.85 \n 0.36 \n 0.23 \n 1.81 \n \n \n Turnover* 1 (£m) \n 88.5 \n 212.7 \n 175.7 \n 213.4 \n 690.3 \n \n \n \n \n \n \n \n 2020 \n \n \n Spain \n \n \n Italy \n \n \n France \n \n \n US \n \n \n Total \n \n \n \n Vehicles insured at period end (m) \n 0.33 \n 0.77 \n 0.29 \n 0.21 \n 1.60 \n \n \n Turnover* 1 (£m) \n 83.9 \n 213.0 \n 139.3 \n 212.6 \n 648.8 \n \n \n \n *1          Alternative Performance Measures – refer to the end of this report for definition and explanation \n \n Split of \n International Insurance \n result \n \n \n \n \n £m \n \n \n 2021 \n \n \n 2020 \n \n \n 2019 \n \n \n \n European Motor \n 4.8 \n 15.3 \n 9.0 \n \n \n US Motor \n (13.0) \n (4.8) \n (9.6) \n \n \n Other \n (3.4) \n (1.7) \n (0.3) \n \n \n \n International Insurance result \n \n \n (11.6) \n \n \n 8.8 \n \n \n (0.9) \n \n \n \n Admiral has several insurance businesses outside the UK: Spain (Admiral Seguros), Italy (ConTe), US (Elephant Auto) and France (L’olivier). \n The key features of the International Insurance results are: \n \n Positive growth trajectory continued in 2021 within competitive markets, with customer numbers increasing by 13% to 1.81 million (2020: 1.60 million) and combined turnover rising by 6% to £690.3 million (2020: £648.8 million) \n An aggregate loss of £11.6 million (2020: £8.8 million profit), consisting of profit in the European Motor insurance businesses at £4.8 million (2020: £15.3 million) and a deterioration in Elephant Auto’s result (increased loss from £4.8 million to £13.0 million year-on-year) \n A higher combined ratio (net of other revenue) of 106% (2020: 98%), primarily the result of a higher reported loss ratio across the European and US motor businesses, with the Covid-related frequency benefits experienced in 2020, almost fully unwinding by the end of 2021 \n An increased investment of £3.4 million for new product development primarily related to the new French home insurance business \n Increase in the combined expense ratio to 44.8% (2020: 43.9%). In addition to investments in strengthening business fundamentals to further build scale towards long term sustainable businesses, the operations invested in some short-term growth opportunities. Continued premium pressure in both the Spanish and Italian markets also impacted the ratio. \n \n \n European \n M \n otor \n Insurance \n \n The European insurance operations in Spain, Italy and France insured 1.58 million vehicles at 31 December 2021 – 14% higher than a year earlier (31 December 2020: 1.39 million), whilst turnover was up 9% at £476.9 million (2020: £436.2 million). The aggregate motor insurance profit of £4.8 million was a result of continued profitability in Italy, which was offset by losses in France and Spain. \n The European combined ratio net of other revenue (excluding the impact of reinsurer caps) increased to 99% from 89%, primarily the result of loss ratio trends noted above.    During the year, all businesses maintained a focus on improving core fundamentals, whilst cautiously expanding into new distribution channels to enhance future growth prospects and exploring new diversification opportunities. \n Admiral Seguros (Spain) grew customers by 13% to 368,900 (31 December 2020: 327,500). The growth was supported by good progress in the broker distribution channel and was achieved despite strong market competition and pressure on premiums. \n ConTe (Italy) faced similar challenging markets conditions seen in Spain with some competitors aggressively discounting premium rates. Despite market conditions, ConTe still performed strongly, increasing vehicles insured by 10% to 853,300 (31 December 2020: 776,300). \n L'olivier assurance (France) experienced near record growth in 2021. The customer base increased by 25% to 362,600 at year end (31 December 2020: 291,000). Investments to strengthen L’olivier’s market presence drove strong direct channel growth. \n \n US Motor Insurance \n \n In the US, Admiral underwrites motor insurance in eight states (Virginia, Maryland, Illinois, Texas, Indiana, Tennessee, Ohio, Georgia) through its Elephant Auto business. Elephant insured 228,700 vehicles at the end of 2021, 10% higher than 2020, and also saw higher turnover of £213.4 million (2020: £212.6 million). \n Elephant reported a higher loss for the period of £13.0 million (2020 loss of £4.8 million), impacted by challenging market conditions as the US saw a more rapid return to pre-Covid claims frequency levels than the European markets together with increasing claims inflation, particularly in the second half of the year. The market responded by increasing premiums, and Elephant responded similarly with base rate increases. Competition in the market remained strong, with large players increasing investment in advertising which led to higher acquisition costs. The business continued to focus on improving fundamentals such as risk selection and the digital customer offering, whilst improving persistency and more efficient acquisition. \n \n Admiral Loans \n \n \n Scott Cargill – CEO, Admiral Financial Services Limited \n \n 2021 has been a fantastic year for Admiral Loans - strong growth, customer payments performing better than expected and exciting improvements in our capabilities. \n Admiral Loans is now a relevant participant in what is a large market in the UK and we’ve issued over 175,000 loans to date. Our loans book now stands at over £600 million, 50% growth year on year whilst retaining a focus on prime lending, proof that UK customers are ready for a guaranteed rate proposition, and they value the certainty and transparency it offers. \n Progress in 2021 was particularly pleasing. The adoption of open banking drove up new business conversion. Distribution expansion allowed us to access more customers. Enhancing our self-service functionality allowed 75% of transactions to be processed digitally enabling future expense efficiency. A new cloud-based data platform allows us to remain focussed on analytics. \n We also made pleasing progress on integrating more closely with the UK insurance business to offer loans to these customers. In addition, we were winners of the Moneyfacts Consumer Awards in both categories of best personal loans provider and best car finance provider. \n Looking to 2022, we enter with strong momentum. Monthly revenue increased 50% through 2021 and we enter 2022 at an all-time record level. We expect to benefit from our strong position in a growing market as we see a continued shift to comparison and credit score marketplaces. I expect to see continued growth in our loan balances towards the £800-950 million range during 2022 assuming current economic conditions. Combined with a tightly controlled cost base, we should see improved economics in the coming years. I am optimistic for 2022 and am confident in the team’s ability to execute on our business plan. Admiral built successful businesses by doing the common things uncommonly well and Admiral Loans enters 2022 in good shape to achieve the same in UK lending. \n I’d like to finish by thanking our customers and all of my colleagues and wish everyone the best for 2022. \n \n Loans Financial Review \n \n \n \n \n £m \n \n \n 202 \n 1 \n \n \n 2020 \n \n \n 2019 \n \n \n \n Total interest income \n 36.6 \n 36.8 \n 30.8 \n \n \n Interest expense *1 \n (8.8) \n (10.1) \n (9.1) \n \n \n \n Net interest income \n \n \n 27.8 \n \n \n 26.7 \n \n \n 21.7 \n \n \n \n Other fee income \n 1.1 \n 2.1 \n 1.9 \n \n \n \n Total income \n \n \n 28.9 \n \n \n 28.8 \n \n \n 23.6 \n \n \n \n   \n   \n   \n   \n \n \n Movement in expected credit loss provision and write-off of Loans \n (10.7) \n (25.8) \n (14.3) \n \n \n Expenses \n (23.7) \n (16.8) \n (17.7) \n \n \n \n Admiral Loans result \n \n \n ( \n 5.5 \n ) \n \n \n (13.8) \n \n \n (8.4) \n \n \n \n \n \n *1 \n \n Includes \n £2.7 \n million \n intra-group interest expense \n (20 \n 20 \n : £2. \n 9 \n million; 201 \n 9 \n : £ \n 2.8 \n million) \n \n Admiral Loans offers a range of unsecured personal loans and car finance products through comparison channels and also direct to consumers via the Admiral website. \n Gross loan balances totalled £607.0 million (2020: £401.8 million), with a £50.2 million (2020: £42.0 million) provision, leading to a net loans balance of £556.8 million (2020: £359.8 million). Admiral Loans updated its expected credit loss models with the latest economic assumptions and management overlays to reflect the expectations of performance. This update reflects an improved economic outlook compared to the prior year, but still retaining caution with uncertainty remaining in the economy. This update led to an £8.2 million net additional impairment provision (2020: £18.0 million), with provision to loan balance coverage ratio falling to 8.2% (2020: 10.4%). The total expected credit loss charge including write-offs was £10.7 million (2020: £25.8 million). For further information, refer to note 7 in the financial statements. \n Admiral Loans recorded a pre-tax loss of £5.5 million in 2021 (improved from £13.8 million in 2020). The improved loss predominantly reflects the reduction in credit loss charge recognised in the period as noted above. \n Expenses have increased to £23.7 million (2020 £16.8 million) as investment was made ahead of scale, coupled with higher loan acquisition costs expensed as incurred on increased new loan origination. \n Admiral Loans is currently funded through a combination of internal and external funding. The external funding is secured against certain loans via transfer of the rights to the cash-flows to two special purpose entities (“SPEs”), the second of which was incorporated in October 2021. The securitisation and subsequent issue of notes via SPEs does not result in a significant transfer of risk from the Group. \n \n Other Group Items \n \n \n Other Group items financial review \n \n \n \n \n £m \n \n \n 20 \n 21 \n \n \n 2020 \n \n \n 2019 \n \n \n \n Share scheme charges, excluding restructure costs \n (63.3) \n (50.9) \n (49.0) \n \n \n Other central overheads \n (19.8) \n (22.9) \n (20.0) \n \n \n Finance charges \n (11.4) \n (12.1) \n (11.3) \n \n \n Admiral Pioneer \n (10.2) \n (0.8) \n — \n \n \n Other business development costs \n (3.7) \n (1.0) \n (2.1) \n \n \n Compare.com loss before tax \n (3.5) \n (2.3) \n (7.2) \n \n \n Other interest and investment return \n 4.0 \n 4.9 \n 6.1 \n \n \n \n Other Group items \n \n \n (107.9) \n \n \n (85. \n 1 \n ) \n \n \n (8 \n 3.5 \n ) \n \n \n \n Share scheme charges relate to the Group’s two employee share schemes (refer to note 9 to the financial statements). Charges increased by £12.4 million (excluding discontinued operations) in 2021, to £63.3 million. The increase in the charge is driven by a combination of the expected increase of the proportion of shares that will eventually vest following strong Group results, as well as a higher share price and higher bonuses linked to the Group’s dividend. \n Finance charges of £11.4 million (2020: £12.1 million) primarily represent interest on the £200 million subordinated notes issued in July 2014. \n Other central overheads totalled £19.8 million and include the cost of a number of major Group projects, such as preparation for the significant new insurance accounting standard, IFRS 17 and the development of the internal model. Excluding the £6 million cost of the Covid-19 relief fund in the prior year, the overheads are approximately £3 million higher as a result of these regulatory projects and other matters that are unlikely to be repeating. \n As part of the investment in product diversification, Admiral launched the Admiral Pioneer business in 2020 to focus on new product diversification opportunities. This currently operates the Veygo short term car insurance business, as well as investment in new products such as tool insurance in the UK and small fleet insurance in France. The business made a loss of £10.2 million in 2021. \n Compare.com reported a higher loss of £3.5 million as a result of increased investment in marketing and acquisition in a challenging market environment in the US. \n Other interest and investment income decreased to £4.0 million in 2021 (2020: £4.9 million). \n \n Discontinued Operations (Comparison) \n \n \n \n \n £m \n \n \n 2021 \n \n \n 2020 \n \n \n 2019 \n \n \n \n Profit before tax in period \n 11.3 \n 29.4 \n 21.8 \n \n \n Gain on disposal \n 404.4 \n — \n — \n \n \n \n Total \n profit \n before tax from discontinued operations \n \n \n 415. \n 7 \n \n \n 29.4 \n \n \n 21.8 \n \n \n \n On the 30 April 2021, the Group announced that, following regulatory and competition authority approvals, RVU had completed the purchase of the Penguin Portals Group and Admiral’s 50% share of Preminen. MAPFRE also sold its 25% holding in Rastreator and 50% holding in Preminen to RVU. The total transaction value was settled in cash on completion. \n The cash proceeds from the disposal amount to £471.8 million; with the gain on disposal being £404.4 million. \n The Group has confirmed plans for the use of the net proceeds from the disposal and will return £400 million to shareholders in the form of special dividends phased equally over the interim 2021, final 2021 and interim 2022 dividends. \n \n Group Capital Structure and Financial Position \n \n The Group continues to manage its capital to ensure that all entities are able to continue as going concerns and that regulated entities comfortably meet regulatory capital requirements. Surplus capital within subsidiaries is paid up to the Group holding company in the form of dividends. \n The Group’s regulatory capital is based on the Solvency II Standard Formula, with a capital add-on to reflect recognised limitations in the Standard Formula with respect to Admiral’s business (predominantly in respect of profit commission arrangements in co- and reinsurance agreements and risks arising from claims including Periodic Payment Order (PPO) claims). \n The Group continues to develop its partial internal model to form the basis of future capital requirements. The expected timescale for formal application has been extended beyond 2021 as a result of a decision by the Admiral Group Board to review certain aspects of the model. In the interim period before submission, the current capital add-on basis will continue to be used to calculate the regulatory capital requirement. \n The estimated and unaudited regulatory Solvency II position for the Group at the date of this report is as follows: \n \n Group capital position (estimated and unaudited) \n \n \n \n Group \n \n \n 2021 \n £bn \n \n \n 2020 \n £bn \n \n \n \n Eligible Own Funds (post dividend) *1 \n 1.36 \n 1.47 \n \n \n Solvency II capital requirement * 2 \n 0.70 \n 0.79 \n \n \n \n Surplus over regulatory capital requirement \n \n \n 0.66 \n \n \n 0.68 \n \n \n \n \n Solvency ratio (post dividend) \n * \n 3 \n \n \n 195% \n \n \n 187% \n \n \n \n *1        2021 Own Funds includes a deduction for the third tranche of Penguin Portals dividend which is expected to be paid alongside the 2022 interim dividend in October 2022 *2 Solvency capital requirement includes updated capital add-on which is subject to regulatory approval. *3        Solvency ratio calculated on a volatility adjusted basis. \n The Group’s 2021 solvency ratio is strong at 195%. The solvency ratio has increased by eight percentage points from the end of 2020, with surplus capital remaining at a consistent level. Both Own Funds and the Solvency Capital Requirement have returned to a more typical level after increasing at the end of 2020 as a result of the strong underwriting profitability of the Covid-impacted periods. \n The Solvency Capital Requirement includes an updated capital add-on which remains subject to regulatory approval. The solvency ratio based on the previously approved capital add-on, that is calculated at the balance sheet date rather than the date of this report, and will be submitted to the regulator within the Q4 Quantitative Reporting Template (QRT) is as follows: \n \n \n \n Regulatory solvency ratio (estimated and unaudited) \n \n 2021 \n \n \n 2020 \n \n \n \n Solvency ratio as reported above \n 195% \n 187% \n \n \n Change in valuation date \n (5%) \n (5%) \n \n \n Other (including impact of updated, unapproved capital add-on) \n (9%) \n 24% \n \n \n \n Solvency ratio (QRT basis) \n \n \n 1 \n 81 \n % \n \n \n 206% \n \n \n \n The Group’s capital includes £200 million ten year dated subordinated bonds. The rate of interest is fixed at 5.5% and the bonds mature in July 2024. The bonds qualify as tier two capital under the Solvency II regulatory regime. \n \n Solvency ratio sensitivities (estimated and unaudited) \n Estimated sensitivities to the current Group solvency ratio are presented in the table below. These sensitivities cover the two most material risk types, insurance risk and market risk, and within these risks cover the most significant elements of the risk profile. Aside from the catastrophe events, estimated sensitivities have not been calibrated to individual return periods. \n \n \n   \n \n 2021 \n \n \n 2020 \n \n \n \n UK Motor – incurred loss ratio +5% \n -9% \n -10% \n \n \n UK Motor – 1 in 200 catastrophe event \n -1% \n -1% \n \n \n UK Household – 1 in 200 catastrophe event \n -3% \n -2% \n \n \n Interest rate – yield curve down 50 bps \n -3% \n -4% \n \n \n Credit spreads widen 100 bps \n -9% \n -6% \n \n \n Currency – 25% movement in euro and US dollar \n -3% \n -3% \n \n \n ASHE – long term inflation assumption up 0.5% \n -5% \n -3% \n \n \n Loans – severe peak unemployment scenario \n -1% \n -1% \n \n \n \n Taxation \n The tax charge from continuing operations reported in the consolidated income statement is £130.2 million (2020: £106.2 million), equating to 18.2% of pre-tax profit (2020: 17.5%). The increase in the effective tax charge is the result of lower non-taxable investment income recognised in the year, and a higher level of unrecognised deferred tax. \n \n Investments and cash \n \n \n Investment strategy \n Admiral Group’s investment strategy remains the same - the focus is on capital preservation and low volatility of returns. Admiral has an asset liability matching strategy to control interest rate, inflation and currency risk, holds a prudent level of liquidity and has a high-quality credit profile. All objectives continue to be met. The Group’s Investment Committee performs regular reviews of the strategy to ensure it remains appropriate. \n In 2021, the strategy has continued to focus on delivering efficient and low volatility returns by widening the opportunity set of investments without material change in market risk capital allocated to investments. Additional inflation protection was bought towards the start of the year. It holds a range of government bonds, corporate bonds, alternative and private credit assets, alongside liquid holdings in cash and money markets. \n Admiral has a responsible investment strategy to reduce Environmental, Social and Governance (ESG) related risks, whilst achieving sustainable long-term returns. Importantly, ESG criteria are considered within investment decision making and ensures all our asset managers are signatories of the UN Principles for Responsible Investment and have strong and credible practices. The average ESG score in the portfolio is ‘A’ from MSCI. \n Admiral is a member of the Institutional Investors Group for Climate Change and has used the Net Zero Investment Framework to implement a Net Zero strategy. The weighted average carbon intensity of the corporate bonds is below benchmark and there’s a target in place to reduce this by 50% by 2030. Admiral also ensures the asset managers have suitable engagement practices and are engaging with climate laggards. \n \n Cash and investments analysis \n \n \n \n \n £m \n \n \n 2021 \n \n \n 2020 \n \n \n 2019 \n \n \n \n Fixed income and debt securities \n 2,594.3 \n 2,101.3 \n 1,957.8 \n \n \n Money market funds and other fair value instruments \n 1,063.0 \n 1,339.3 \n 1,160.2 \n \n \n Cash deposits \n 85.3 \n 65.4 \n 116.5 \n \n \n Cash \n 372.7 \n 351.7 \n 281.7 \n \n \n \n Total \n \n *1 \n \n \n \n 4,115.3 \n \n \n 3,857.7 \n \n \n 3,516.2 \n \n \n \n \n *1 \n Total Cash and Investments include £147.2 million (2020: £74.8 million; 2019: £ \n 58.9 \n million) of Level \n 3 \n investments. Refer to note 6 \n e \n in the financial statements for further information \n \n Investment and interest income in 2021 (net of impairment charges) was £42.6 million, a decrease of £10.3 million on 2020 (£52.9 million). 2020 investment and interest income was impacted by adjustments related to investment income on cash held by Admiral relating to the portion of the motor insurance business reinsured under quota share contracts. £12.9 million of income earned in 2019 was recognised in the 2020 income statement as the projection of the result of the 2019 underwriting year improved to a profitable level. \n The underlying rate of return for the year (excluding changes in investment income allocated to reinsurers) on the Group’s cash and investments was 1.1% (2020: 1.3%). \n The Group continues to generate significant amounts of cash and its capital-efficient business model enables the distribution of the majority of post-tax profits as dividends. \n \n Cash flow \n \n \n \n \n £m \n \n \n 2021 \n \n \n 2020 \n \n \n 2019 \n \n \n \n Operating cash flow, before movements in investments \n 637.8 \n 959.8 \n 518.1 \n \n \n Transfers to financial investments \n (266.5) \n (176.0) \n (188.7) \n \n \n Operating cash flow \n 371.3 \n 783.8 \n 329.4 \n \n \n Tax payments \n (126.7) \n (175.0) \n (92.8) \n \n \n Investing cash flows (capital expenditure) \n (69.2) \n (43.1) \n (33.6) \n \n \n Financing cash flows \n (750.7) \n (454.3) \n (392.4) \n \n \...

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