Admiral Group PLC

LSE:ADM

Earnings Call Transcript 2021-Q4

[Operator]

Ladies

and gentlemen,

thank

you

for

standing

by

and

welcome

to

the

Admiral

Group

Full-Year

Results

2021

Conference

Call.

At

this

time,

all

participants

are

in

a

listen-only

mode.

After

the

speaker

presentation,

there

will

be

a

question-and-answer

session.

[Operator Instructions]

It

is

now

my

pleasure

to

introduce

Group

CEO,

Milena

Mondini.

[Milena Mondini de Focatiis]

Good

morning, everybody,

and

welcome

to

our

fourth

and

hopefully

last

virtual

results

presentation.

2021,

like

2020

before,

it

was

a very

interesting

year,

by

no

means

a

standard

one.

We

grew

in

all

our

business

and

recorded

strong

profits

with

COVID

still

remaining

a

relevant

feature.

The

team

is here

with

you

today,

and

Geraint, our

CFO,

will

give

you

more

detail

on

our

great

results. Cristina and

Adam,

respectively,

CEO

and

Deputy

UK

Claims

Director,

will

explain

how

UK

insurance

has

been

the

key

driver

of

these

exceptional

performance.

Costantino,

Head

of

International,

will talk

to

us

about

the

growth

and the

competitive

market

conditions

in

the

other

countries.

And

Scott,

CEO

of

Admiral

Money,

will

share

with

you

how

loans

is

leveraging

on

strong

foundation

and

is

primed

for

further

growth.

At

the

end,

I

will

share

how

proud

we

are

of

our

increased

effort

and

contribution

for

a

more

sustainable

future

for

the

larger

community

and

how

this

long-term

focus

is an

integral

part

of

our

strategy.

But

first,

the

key

highlights.

2021

has

been

a

year

of

growth

in

customer

and,

to

a

lesser

extent,

turnover

across

every

business

and

every

country

in

the

group.

We

continue

to

provide

a

strong

service

with

great

feedback

scores

and more

customer

decided

to

remain

with

us.

We

deliver

a

record

profit

of

£769

million

that

in

turn

resulted

once

again

in

a

record

dividend

of

£1.87

per

share.

And

keep

in

mind

that

this

excludes

the

additional

dividend

for

the

second

part

of

the

proceed

from

the

sales

of

Penguin

Portals.

The key

contributor

of

these

results

was

UK

Motor

Insurance,

also

benefit

from

lower

frequency

due

to

COVID, particularly

in

H1,

as

well

as

the

positive

evolution

of

the

back

year

reserves,

as

Cristina

and

Geraint will

explain

later.

As

COVID

knocks on

wind

and

we

gradually

return

to

more

normal

life,

we

expect

a

lower

level

of

profit

in

2022.

We

also

made

strong

progress

in

our

strategy.

We

are

indeed

growing

our

customer

base

internationally

and

in

other

lines

of

businesses

such

as

household

and

loans

in

the

UK.

Around

700,000

additional

customers

joined

the

Admiral

family

and

0.5

million

of

those

for

products

outside

UK

car

insurance.

And

these

new

cohort

of

customer

now

accounts

for

over

40%

of

the

total.

In

addition,

we

are

enhancing

our

capability

to

deliver

on

evolving

customer

needs,

a

leverage

of

new

data

and

modeling

techniques

to

improve

our

customer

experience

and

pricing.

This

is particularly

relevant

to

us

in

the

context

of

continuous

evolution

of

the

market

and

external

conditions

that

are

more

volatile

than

usual.

We

believe

that

we're

well placed

to

face

them.

Now,

let

me

start

with

the

reminder

of

our

overall

approach

to

value

creation.

Our

primary

aim

remains

to

continue

to

focus

on

doing

the

common

uncommonly

well,

from

risk

selection

to

claims

management

and

always

putting

our

customer

first.

This

continuous search

for

operational

excellence

results

in

a

market-leading

combined

ratio

that,

in

turn,

allows

us

to

grow

in

different

market

conditions.

And

our

ambition

now

is

to

transfer

the

same

virtuous

circle

into

other

business

lines.

How

we

will

achieve

that?

To

me,

the

secret

ingredient

is

always

being

a

truly

unique

and

powerful

culture,

engaging,

empowering,

fun,

data-driven,

curious,

inclusive

and

also

strong

alignment

of

interests

with

all

stakeholders,

starting

with

employees

who

are

incentivized

with

Admiral

shares.

As

mentioned

in

the

past,

we

strongly

believe

that

happy

employee

translates

into

happy

customers

that,

in

turn,

translate

into

happy

shareholders.

The

number

on

these

slides

are

an

average

of

last

five

years,

and

2021

was

no

different

with

strong

metrics

across

the

board

as

Geraint

will

explain

later.

But

it's

fair

to

say

that

2021

benefited

also

from

exceptional

circumstances

linked

to

COVID,

particularly

motor

insurance

where

the

starting

point

was

a

2020

record

low

combined

ratio

in

the

last 15

years

in

every

country.

In

2021,

with

the

gradual

release

of

restriction,

claims

frequency

generally

increased

towards

but

not

entirely

back

to

pre-COVID

level. And

at

the

same

time,

we

experienced

strong

claims

inflation.

So

premiums

should

have

followed

the

same

fortune

and

gone

up.

But

price

increases

have been

delayed

for

several

reasons

as

frequency

lagging

miles

driven

and

in

the

UK,

a

lower

percentage

of

bodily

injuries

in

the

claims

mix.

We've

seen

less

young

drivers

on

the

road,

less

congestion

in

peak

hours,

less

drink

and

drive

and,

in

the

second

half

of

the

year,

less

whiplash

notification.

As

some of

these

factors

are

unwinding,

we

should

expect

worsening

results

for

the

market

as

a

whole

in

2022

and

premiums

may

gradually

start

to

recover.

The

impact

of

COVID,

though,

was

different

by

country

and

by

business

line.

In

Europe

and

US,

where

shopping

habits

are

less

ingrained

and

in

a

context

of

lower

renewal

premium,

we

saw

less

shoppers

and

less reachers. This

was

particularly

true

in

the

direct

channel,

where

premiums

decrease

even

more.

And

Italy

and

Spain

were

particularly

affected

by

this

dynamic,

while

France

has

been

the

only exception

with

a

moderate

premium

increase.

In

the

US,

the

overall

frequency

benefit

was

lower

with

earlier

and

sharper

increase

in

miles

driven.

And

in

the

States,

we

also

saw

strong

inflation

in

acquisition

cost.

But

on the

other side, it's

worth

to

remind

that

COVID

forced

a

lot

of

people

to

become

more

aware

and

confident

with

the

line

shopping.

And

we

expect

that

direct

channel

growth

will

benefit

from

this

once

the

cycle

will

revert.

Young

motor

insurance,

the

impact

of

COVID

was

less

material in

the household where

the

main

change

was

in

the

mix

of

claims

with

less

escape

of

water

and

theft,

but

increased

accidental

damage

as

people

stayed

at

home

more.

And

finally,

loans

and

travel

insurance

market,

which

severely

contracted

in

2020, has started

to

recover

in

2021,

as

Scott

will

explain

later.

So

what's

next?

We're still

in

a

period with

a

concentration

of

sources

of

uncertainty

from

the

evolution

of

COVID,

the

virus

itself, the

regulations

in

place,

the

driving

behaviors

to

the evolution

of

claims

inflation

that

was

particularly

high

toward

the

end

of

2021

in

UK

and

we

issue

around

the

supply

chain

to

the

FCA pricing

reform

that

is

possibly

the

biggest

change

in

pricing

regulation

we've

seen

so

far.

And

while

the

reaction

of

the

market

is in

the

range

of

what

we

could

have

expected,

we'll

probably see

further iteration

of

pricing adjustment,

channel strategies,

or

new

products.

Finally,

the

way

insurance

company

operate is

so

different

from

what

used

to

be.

We've

seen

office

working,

remote

working,

partially

hybrid

working

and

in

2022

we'll

hopefully

see

what's

the

new normal

will

really

look

like.

In my

opinion,

hybrid

at

scale

may

be

a

great

opportunity,

but

will

also

be

more

complex

to

manage

and

will

require

focus

and

dedication.

It

also

has

an

impact

on

technology,

infrastructure,

and

talent

acquisition

and

retention.

All

this will

affect

the

market

as

a

whole,

and

we

are

not

immune,

of

course,

but

we

believe

that

we

are

in

a

good

position

as

some

of

those

changes

really

play

our

historical

strengths,

including

our

strong culture

and

focus

on

people,

as

well

as

efficient

claims

management,

pricing

sophistication

and

agility.

Having

said

that,

we're

not

resting

on

our

laurels.

We

are

continuing

to

invest

to

make

sure

we

nurture

the

technical

and

core

competencies

that

help

us

to

succeed

so

far. And

this

is

indeed

the

first

pillar

of

our

strategy,

to

make

sure

that

we're

always

ready

to

meet

ever

evolving

customer

needs

even

faster.

I

will

talk

more

about

this in

a

moment.

There

are

two pillars

of

our

strategy

also

remain

unchanged.

The

second

is to

take

our

competencies

and

transfer

them

into

new

line

of

business

with

the

objective

of

improving

our

proposition

to

our

customers,

increasing

our

engagement

with

them

and

increase

the

resilience

of

our

business

model.

How

we will

do

this?

In

a

very

Admiral

fashion,

trying

to

create

first

something

special,

learning

and

pivoting

fast,

and

then

scaling

it

once

we

gain

confidence

in

its

potential.

And

this

is

exactly

what

we

did

for

household

insurance

and

loans.

In

2021,

household

had

more

than

1.3

million

customers

and

loans

reached

the

milestone

of

more

than

£1

billion

disbursed

since

launch.

At

the

same

time,

we

are

planting

more

seeds

for

the

long term

mainly

through

Admiral

Pioneer,

our

new

ventures

arm,

that

this

year

launched

its

first

new

products

for

small,

medium

enterprises.

The

last

pillar of

our

strategy

is

also

center

on

our

customers.

Has

it

changed

the

way

they

move

around?

We

want

to

make

sure

we

evolve

our

offering

accordingly.

This

is

a

longer

term

objective

as

some

of

these

trends

are

still

nascent.

For

the

time

being,

we

are

mainly

focusing

on

testing

fleet

insurance

and

mastering

insurance

for

electric

vehicles

that

more

than

doubled

in

our

portfolio

last

year.

But

now,

let

me

go

back

to

the

first

one,

Admiral

2.0.

When

I

joined

Admiral,

Henry,

our

founder,

used

to

say

Admiral

is

a

speedboat

in

a

sea

of

tankers.

Now,

one

of

our

challenges

was

how

we

can

ensure

we

remain

a

speedboat with

the

required

agility

while

going

from

1

million

to

8

million

customers

and

for

one

to

many

products. And

this

has

been

where

we've

been

focusing

lots

of

our

attention

in the

last

two

years.

And

if

I

look

back

at

the

transformation

we

went

through,

it's

impressive.

Let

me

highlight

a

couple

of

examples.

Agile

methodology.

To me,

this

is

a

very

close

to

the

concept

of

speedboat.

Speed

focused

empowerment

to

teams

that

live

and

breathe

customer.

And

scale

agile is

the

industrialization

of

this

matter,

the

scale.

In

Italy,

where

we already

completed this

last

step,

we

doubled

productivity

and

substantially

increased

quality

of

releases.

But

what

I'm

most

passionate

about

is advanced

modeling

techniques.

We

love

data.

We

always

have.

In

the

past,

what

was

turning

us

on

was

a

new

piece

of

data.

Now,

more

and

more

is

the

ability

to

use

it

sooner.

With

more

advanced analytics

underpinned

by

solid,

cloud-based

data

structure,

we

can now,

for

example,

provide

real-time

feedback

to

our

telematics

customer

that

in

turn

improves

their

driving

and

this is

a

win-win

for

the

customer

and

for

the

business.

As

another

example,

we

were able

to

make

substantial

changes

to

pricing

in

advance

of

the

FCA

pricing

reform

relatively

quickly

for

new

business

and

renewal,

while

announcing

pricing

sophistication

at

the

same

time.

And

finally,

we

had

to

adapt

our

ways

of

working

not

only

because

of

COVID,

but

also

to

support

these

changes

and

to

ensure

strong

talent

where

it's

needed

the

most.

We

extended

our

recruitment

pool,

upskilled

and

reskilled

many

people.

And

I'm always

so

impressed

by

the

level

of

commitment

and

adaptability

of

our

colleagues

that

I

could

never

thank

enough.

Bringing

this

session

to

a

close,

we

have

delivered

strong

results

by

focusing

on

what

we

do

best

and

help

by

unusual

market

conditions,

while

continuing

to

innovate

to

capture

future

opportunities.

And

speaking

about

smart

working

and

smart

people,

let

me hand

it

over

now

to

Geraint,

who

is

featuring

these

pictures

as

smart

and

very

fun

news

of

our

annual

management

awards.

[Geraint Allan Jones]

Thanks,

Milena.

Hi,

everyone.

I'll

take

some

time

to

explain

the

large

increase

in

profit

Milena

highlighted

earlier

and

also

cover

some

decent

progress

on

top

line

and

custom

items. I'll

highlight

a

continued

very

strong

solvency

position

and

report

on the

final

and

full-year

dividends

for

2021.

To

start

with our

course, the

highlights,

as

you'll

see,

a

really

positive

set

of

figures

to

report

on

the

2021.

Profit

firstly,

the

pre-tax

result

was

up

to

£769

million

that's plus

26%

and

earnings

per

share

was

up

24%

to

£2.12

per

share.

Important

to note

that

both

of

those

figures

exclude the

impact

of

some

restructured

costs

that

we

took

in

2021,

which

I'll

cover

later.

And

as

we

flagged

previously,

the

H2

result

was

significantly

lower

than

H1.

Good

growth

in

customer

numbers,

not

too

far

away

from

plus

10% again,

now up

to

8.4

million.

And

turnover

up

to

£3.5

billion,

but

the

increase

there

was

lower

in

customer

growth

as

average

premiums

reduced

in

several

markets.

The

solvency

ratio

improved

year-on-year

to

195%

and

inevitably

with

such

a

strong

profit

for

the

year,

return

on

equity

was

very

strong.

The

full

year

dividend

was

19%

up

on

2020.

And

in

addition,

we'll

pay

two

of

the

three

Penguin

Portals

disposal

dividends

totaling

£0.92

per

share

with

the

2021

dividends.

Moving

on

now

to

look

at

revenue

and

customer

numbers.

Another

full

set

of

green

arrows

on

show

here,

which

is

pleasing.

All

our

businesses

grew

customers

year-on-year

and

in

the

second

half,

though

you'll

notice

that

the

rates

of

growth

in

some

cases

slowed

in

H2.

In

the

UK,

motor

customers

were

up

5%.

They

were

only

marginally

up

in

H2,

but

the

turnover

was

actually

pretty

flat

year-on-year

when

the

impact

of

the

2020

premium

rebate

was

considered.

Cristina

will

talk

more

about

the

second

half,

particularly

later

on,

Household

customers

and

turnover

both

up

very

nicely

again,

plus

13%,

plus

14%.

And

a

very

similar

story

to

the

half

year

for

our

international

business

is,

customer

numbers

were

up

quite

nicely,

plus

13%.

The

pressure

on

average

premium

levels

meant

that

turnover

growth

was

quite

a

bit

lower.

L'olivier

in

France

continues

to

grow

particularly

strongly.

And

finally,

it

was

a

really

pleasing

year

for

our

loans

business,

and

we

returned

to

some

strong

growth

here.

Balance

is

now

up

over

£600

million,

with

more

of the

same

planned

for

2022.

Let's

start

now

to

look

at

that

big

profit

increase.

This

is

the

group

income

statement

versus

2020

by

business

segments.

And

you

can

clearly

see

the

driver

of

the

year-on-year

increase

The

total

UK

insurance

results

was

nearly

£200

million

or

just

under

30%

higher

than

2020.

We

saw

further

improvement

in

the

UK

household

profits

to

over

£20

million

as

we

continue

to

grow

and saw

high

profit

commission.

But

the

motor

results

were

significantly

nearly

£190

million higher,

and

I'll give

a

bit

more

detail

on

that

on

the

next

page.

Outside

the

UK,

the

result

worsened

by

around

£20

million

compared

to

a

positive

COVID-impacted

results

for

2020.

All

the

businesses

continued

to

grow,

sometimes

in

very

challenging

markets,

as

we

saw

just

now.

But

we

saw

a

higher

loss

ratio

as

that

COVID

benefit

unwound

and

the

very

slightly

higher

expense

ratio

too.

Our

European

insurers

continue

to

be

profitable

overall

whilst

investing

small

amounts

in

new

products

in

France

and

Italy.

And

in

the

US, Elephant's

loss

was

higher

year-on-year

due

to

a

higher

loss

ratio

and

increased

acquisition

costs.

More

detail

later

on

the call.

Admiral

Loans'

results

improved

as

the

charge

for

expected

credit

losses

was

unsurprisingly

materially

reduced

versus

2020, and

the

relatively

small

loss

there

comes

despite

fast

growth

and

associated

acquisition

costs.

The split

of profit

for

the

year

was

around £480

million

in

H1

and

around

£290

million

in

H2.

It's

quite

different

as

the

impact

of

COVID

unwound

over

the

course

of

the

year. Hopefully,

it's

well

understood

that

both

2020

and

2021

years have

seen

unusually

high

levels

of

profit,

and

the

results

for

2022

will

be

lower.

Let's

go

into

a

bit

more

detail

now

on

the

UK

Motor

results.

This

is

the

UK

Motor

income

statement.

As

you

can

see,

profit

increased

from

£684

million

to

£872

million and

we've

highlighted

the

key

drivers

of

the

change.

Higher

premium,

higher

reserve

releases

and

higher

profit

commission

are

all

as

reported

at

the

half

year

and

indeed

much

of

the

positive

variance

resulted

from

the

first

half

results.

And

offsetting

those

positive

variances,

the

current

year

claims

cost

and

loss

ratio

are

higher

for

2021

than

2020

as

we

saw

a

more

normal

claims

environment

in

H2

and

consequently

a

higher

booked

ratio

for

the

year.

Let's

look

a

bit

more at

what's

driving

the

increases

in

claims,

reserve

releases

and

profit

commission.

On the

top

of

this

slide,

we

show

the

book

loss

ratios

by

underwriting

year for

the

recent

past.

For

example,

the

2018

underwriting

year

was

first

booked

at

92%

at

the

end

of

2018.

That

had

released

down

to

81%

at the

year-end

2019

and

has

come

down

to

73%

at

the

end

of

2021.

And

on the

bottom,

we

show

reserve

releases

and

profit

commission

split

by

underwriting

year

for

2021

on the

right

and

2020 on

the

left.

On reserve

releases,

in

the

first

half,

you

might

remember

that

we

saw

very

significantly

bigger

releases

in

2021

than

in

2020, and

a

number

of

those

underwriting

years

become

very

profitable. Releases

in

H2

were

much

more

in

line

with

H2

2020.

Because

of

the

very

positive

first

half,

2021's

releases

overall

were

higher

than

2020.

Because

of

the

level

of

profitability

of

a

number

of

the

underwriting

years,

we

see

much

higher

profit

commission,

as

you

can

see

in

the

green

on

the

bottom

charts,

most

evident,

of

course,

for

2020

year,

which

considering

the

stage

of

development

is

really

very

profitable.

In

summary,

as

at

the

half

year,

there

are

more

points

of

book

loss

ratio

movement,

and

each

point

of

movement

is

generating

more

profit.

We

have

reduced

the

level

of

margin

held

in

the

book

reserve

slightly

versus

the

end

of

last

year,

but it's

still

a

course

remains

appropriately

prudent.

We

will

go

now

to

look

at

solvency

and

dividend.

I'm

covering

solvency

first

on

the top

of

the

slide,

not

too

much

to

say

here.

The

year-end

position

is

very

strong,

just

under

200%.

We

see

a

similar

level

of

surplus

versus

the

end

of

2020 and

decreased

capital

requirements

both

at

the

half

and

full

year

2021,

which

is

partly

an

unwind

of

the

increase

in

the

requirement

that

we

saw

at

the

end

of

2020

relating

to

higher

profit

commissions

at

the

point.

On

dividend

on

the

bottom

of

the

slide,

we're

proposing

a

final

dividend

in

two

parts,

firstly

£0.72

per

share

in

respect

to

the

second

half

results, that's

91%

of

the

second half

earnings

excluding

the

impact

of

the

restructure

cost

or

113%

of

earnings

if

that

cost

is

included.

And

on

top

of

that

£0.72,

we

had

the

second

tranche

of

the

Penguin

Portals

disposal

which

is

£0.46

per

share.

And

that

makes

a

total

final

dividend

of

£1.18

per

share.

And

for

completeness,

the

full

year

dividend

is

£1.87

per

share

excluding

the

Penguin

Portals

element.

That's

a

healthy

19%

up

on

2020,

and

it's

£2.79

per

share

with

the

Penguin

proceeds.

Two

final

points

from

me

before I

wrap

up.

Firstly,

as

you

saw

a

few

slides

ago,

we

took

a

£56

million

restructuring

charge

in

the

UK

insurance

business

in

2021.

There

are

three

main

parts

of that

cost,

two

of

them

comprise

the

majority.

Firstly,

technology

impairments

which

were

mainly

due

to

the

upgrade

of

the

main

policy

system;

and

secondly,

the

costs

of

early

exits

or

downsizing

a

couple

of

our

offices

due

to

the

move

to

hybrid

working.

The

total

cost

across

those

three

areas was

actually

around

£65

million

with

a

large

bulk

of

it

taken

in

2021. And

we're

not

expecting

any

notable

impact

in

2022

and

beyond.

And

second,

you

might

remember

at

the

half

year,

we

were

just

concluding

negotiations

with

Munich

Re

on

the

expiring

30%

UK

co-insurance

contract.

We're

very

pleased

with

the

new

structure.

It's

very

long

term

with

the

co-insurance

agreement

running

to

2029,

which

means

our

partnership

will have

extended

to

nearly

30

years.

The

new

contracts

will

allow

for

greater

profit

commission

to

Admiral

than

the

expiring

ones.

That's

it

for

me.

So,

I'll

leave

you

with

some

key

points.

Continued

decent

growth

in

several

places,

though

a

bit

more

muted

in

H2

in

the

UK,

and

average

premiums

have

reduced

in

several

markets.

Profit

for

2021

was

very

high

and

had

an

already

very

strong

2020,

and

our

capital

position

remains

strong

after

another

increased

full

year

dividend.

I'll

hand

you

now

to

Cristina

to

talk

to

us

about

the

UK

insurance

business.

Cristina?

[Cristina Nestares]

Hello

and

welcome.

2021

has

been

a

very

strong

year

for

UK

insurance,

with

a

significant

increase

in

profit

and

good

growth.

However,

just

like

football,

it's

been

a

game

of

two

halves,

because

the

growth

in

profits

and

policies

has

been

concentrated

in

the

first

half

of

the

year.

Let's

start

with

a

summary

of

the

highlights.

As Geraint

has

mentioned,

the

main

feature

of

our

results

is

the

increase

in

profits.

Also,

we

have

motor

policies

growing

by

5%.

The

FCA

pricing

change

has

impacted

new

business

prices

in

line

with

expectations.

Claims

frequency

continues

to

be

low,

but

lots of

external

pressures

have

resulted

in

very

high

damage

inflation.

Our

expense

ratio

has

increased

by

1

point

due

to

high IT

investment

and

low

average

premium.

And

finally,

our

household

book

has

continued

growing

in

profits

and

sales.

Moving

to

market

prices,

during

the

second

half,

market

conditions

were

challenging

and

Admiral

became

less

competitive.

We

have

maintained

pricing

discipline

to

reflect

claims

inflation.

This

is

consistent

with

our

pricing

philosophy.

To

put

this

into

context,

let's

review

our

strategy

in

the

past

couple

of

years.

As

you

can

see on the

graph

on

the

right,

there

have

been

strong

increases

in

our

Times

Top

from

Q2

2020

to

Q1

2021,

which

resulted

in

significant

growth.

Since

Q2

last

year,

Admiral

prices

have

become

less

competitive,

which

has

resulted

in

no

growth.

Also

during

the

past

two

years,

we

have

had a

strong

retention.

And

finally,

our

Times

Top

has

increased

in

December.

This

month

has

been

impacted

by

lots

of

volatility

in

the

market

ahead

of

the

FCA

pricing

changes.

What

we

expect

for

the

first

half

of

2022? We

still

think

there

will

be some

volatility

in

market

prices,

and

Admiral,

like

always,

will

continue

to

maintain

pricing

discipline.

So,

what

has been the

initial

impact

of

the

FCA

reform?

From

our

perspective,

both

the

motor

and

household

market

have

behaved

on

average

rationally

and

have

increased

new

business

prices

in

line

with

expectations,

around

high-single

digits

for

car

and

double

digits

for

household.

However,

it's

still

too

early

to

understand

the

full

impact

of

the

reform

in

two

key

areas:

market

retention

and

the

price

comparison

market.

We

will

know

more

in

a

few

months.

Admiral

was

well prepared

for

the

reform,

and

our

initial

strategy

has

been:

first,

we

increased

new

business

prices

at

the

end

of

December,

and

our

price

increase

have

been

in

line

with

the

market.

Secondly,

we

launched

last

year

four

tiers

for

our

car

product

to

offer our

customers

a

wide

range

of

products

to

cover

their

needs.

This includes

our

essential

product,

which

has

a

lower

price

and

lower

coverage

than

the

standard

Admiral

product.

As

a

reminder,

we

offer

tiers

for

household

since

launch

with

good

effect.

We

believe

Admiral

is

well placed

to

face

this

reform.

We

have

strong

underwriting

capabilities,

good

customer

service,

and

a

strong

brand,

which

are

key

factors

for

success.

And

now,

I'm going

to

pass

it

to

Adam,

who

will

tell

us

much

more

about

claims.

[Adam Alexander Gavin, Deputy UK Claims Director, Admiral Group Plc]

Thanks,

Cristina,

and

good

morning,

everyone.

I'm

very

happy

to

be

here

today

to

talk to

you about

claims,

but I'm

conscious

that

some of

you

may

not have

met

me

before.

So,

as

Cristina

mentioned,

I'm

Adam.

I've

been

part

of

the

Admiral

Group

since

2003,

spending

virtually all

of

that

time

in

claims.

I've

worked

in

all

areas

of

claims,

but

the

majority

of

my

time

has

been

spent

in

the

technical

areas

in

bodily

injury.

I'll

start

by

giving

you

some

context

from

the

UK

motor

claims

market

in

the

last

year.

You

can

see

the

frequency

during

the

pandemic

has

been

significantly

below

expected

levels.

We

know

that

one

of the

main

factors

influencing

this

is

miles

driven,

which

has

been

suppressed

during

various

lockdowns.

We

also

know

that

as

frequency

reduces,

the

dynamic

on

our

roads

changes,

causing

the

typical

mix

of

accident

types

to

change.

The

slight

change

in

accident

mix,

together

with

some

changes

in

accident

times

caused

by

less

commuting,

is

causing

frequencies

to

lag

behind

miles

driven.

We

expect

some

of

these

trends

to

persist

after

we

hopefully

leave

COVID

behind

us.

Whilst

on

frequency,

I

thought

I'd

give

you

an

update

on

the

whiplash

reforms

too.

Nine

months

or

so

in,

we're

building

a

picture

of

the

market

post-reform,

and

despite

being impacted

by

some

COVID-related

factors,

we're

clear

now

that

the

whiplash

reforms

have

lowered

small

BI frequency.

It's

too

early

to

be

certain

about

the

exact

extents

of

that

reduction

or

changes

in

severity,

so

we

still

feel

the

range

we've

previously

given

on

savings

of £15

to

£25

per

policy

is

appropriate.

Over

the

next

year

or

so,

as

the

market

recovers

from

some

early

technology

challenges

and adapts

the

new

rules,

the

picture

of

small

BI

will

start

to

emerge

more

clearly.

Moving

on

to

damage

inflation

now,

the

chart

shows

some

steep

increases

in

recent

years.

There's

two

points

I'd

like

to

make

here.

Firstly,

you

can

see

the

inflation

dynamics

shifting

upwards

from

2018.

We

believe

this

is

down

to

the

underlying

inflation

on

repair

costs

caused

by

advancing

vehicle

technology.

Secondly,

you

can

see

inflation

accelerating

again

during

the

pandemic.

No

doubt

some

of

that

is

down

to

some

short-term

issues

in

the

immediacy

of

the

first

lockdown

such

as

extra

cleaning

costs

and

financial

assistance

given

to

some

garages.

However,

I

wanted

to

give

you

some

more

detail

on

what

we

believe

is

shaping

damage

inflation

across

the

market

in

the

next

slide.

Damage

claims

spend

is

largely

driven

by

two

factors,

the

residual

value

of

vehicles

and

the

cost

of

vehicle

repairs.

The

chart

on

the

top

of

this

slide

illustrates

the

unprecedented rise in

residual

vehicle

values

during

the

pandemic.

The

reason

for this

inflation

are

well

documented,

mainly

chip

shortages,

reducing

the

supply

of

new

vehicles

causing

secondhand

values

to

rise.

We're

not

anticipating

the

supply

of

new

vehicles

returning

to

normal

levels

this

year,

but

we

are

expecting

supply

to

gradually

increase

as

the

year

goes

on,

which

may,

in

turn,

reverse

out

some

of

the

inflation

that

we're

seeing.

The

chart

at

the

bottom

of

this

slide

shows

year-on-year

inflation

on

repairs

across

the

market.

You'll

see

the

rise

in

2020

and

2021.

We

believe

that

the

repair

industry

isn't something

of

a

perfect

storm.

Labor

costs

are

increasing

due

to

supply

shortages

caused

by

an

aging

workforce

and

Brexit.

Fuel

and

energy

costs

are

increasing

garage

overheads,

some

of

which

will

have

to

be

passed on

to

insurers.

There

are

challenges

securing

replacement

vehicles

and

driver

shortages

are

making

parts

distribution

challenging.

These

features

are

becoming

more

pronounced

since

the

end

of

2021,

and

we

believe

they

will

continue

to

cause

inflation

repairs

for

much

of

this

year.

Putting

this

alongside

the

rises

in

residual

vehicle

values

create

a

challenging

outlook

for

claims

inflation

in

2022.

Now,

I

want

to let

you

know

more

about

our

strategy,

what's

important

to

us

and

how

that

helps

us

to

manage

these

challenging

market

conditions

successfully.

The

graph

on

the top

left

shows

claims

inflation;

us

versus

our

competitors.

As

you

can

see,

we've

managed

claims

inflation

better

than

the

market.

I

wanted

to

spend

a

couple

of

minutes

letting

you

know

how

we've

been

able

to

do

that.

Firstly,

on

digital and

analytics,

you'll

see

from

the

slide that

we've

seen

good

growth

in

both

analytics

and

digital

during

the

pandemic.

Growth

in

these

two

areas

is

in

line

with

our

focus

on

optimizing

the

combined

ratio,

allowing

our

customers

to

interact

with

us

in

new

ways,

and

also

allowing

us

to

ensure

that

our

staff

can

add

value

on

the

claims

that we

feel

their

expertise

is

most

needed.

Secondly,

I

wanted

to mention

large

BI,

an

area where

we

feel

we

have an

advantage.

I

think the

last

time

we talked

to

you

about

the

experience

level

is

now

large

BI

team.

Since

then,

I'm

very

pleased to

tell

you

that they've

all

got

six

months

more

experience.

We

believe

that

our

people

are crucial

to

our

success

in

large

BI

and

all areas

of

claims.

We

work

with

many

stakeholders

on

large

BI

who

are always

highly

complementary

of our

claims

handling

strategy.

In

short,

that

strategy

is

to

focus

on

very

early

and

thorough

investigations

into

all

claims,

putting

claims

on

the

appropriate

track

as

soon

as

possible.

This

allows

us

to

strike

a

balance

between

investigating

where

appropriate

and

pushing

for

speedy,

collaborative

settlements

wherever

possible.

Finally,

I

wanted

to talk

about

our

customers.

Despite

these

challenging

market

conditions,

we're

getting

consistently

strong

feedback

from

our

customers.

I

mentioned

our

staff

earlier

when

talking

about

BI,

but

I

can't overstate

how

important

their

experience,

dedication

and

expertise

is

to

us.

They

are

there

for

our

customers

when

they

need

us

most,

and

they've

been exemplary

during

a

difficult

couple

of

years.

That's

it

from

me.

I'll

hand

you

back

to

Cristina.

[Cristina Nestares]

Thanks,

Adam.

Let's

now

take

a

look

at

our

expenses.

As

you

will have

noticed,

our

written

expense

ratio

has

increased

by

1

point.

This

was

a

result of

lower

average

premium,

and

also

it's

due

to an

increase

in our

IT

spend

which

we

think

is

the

right

thing

to

do

for

our

business.

In

the

past

few

years,

we

have

increased

our

spend in

technology

in

areas

like

system

upgrades,

cloud-based

architecture,

investments

in

data

and

digital,

and

cyber

security.

These

investments

have

supported

a

continued

shift

to

digital

channels

that

is unlocking

operational efficiencies,

as

seen

in

the

bottom

graph.

For

the

future,

we

expect

to

continue

to

strengthen

our

capabilities

and

make

further

investments,

in

line

with

the

Admiral

2.0

strategy

that

Milena

has

explained.

To

this

end, our

focus

will

continue

to

be

improving

the

overall

combined

ratio.

Moving

on

to

the

household

book,

2021

has

had

very

strong

results.

First,

significant

increase

in

profits

driven

by

strong

loss

ratio

development

of

prior years,

a

better

weather

year,

and

a

better

claims

outcomes

due

partly

to

the

pandemic.

Also,

our

household book

has

had

another

year

of

high

growth,

helped

by

our

multi-cover

proposition

and a

strong

retention.

Also,

we

continue

investing

in

making

our

household

offering

better

for

our

customers.

And

we

have

expanded

our

digital

capabilities,

which

will

also

help

future

growth.

And

we

have

launched

a

new

claims

system,

which

helps

deliver

faster

claims

outcomes,

improved

customer

experience

and

better

efficiency.

For 2022,

we're

expecting

profits

to

come

under

some

pressure.

Given

that

claims

will

continue

having

high

inflation,

there

might

be

changes

to

claims

mix

post-COVID,

and

we

expect

the

impact

of

the FCA

pricing

remedies

to

lower

profitability.

This is

all

for

UK

insurance

business.

2021

has

been

another

strong

year

for

the

UK

insurance

business.

And

now

over

to

Costi

to

tell

us

more

about

the

international

results.

[Costantino Moretti]

Thanks,

Cristina.

Good

morning,

everyone.

2021

was

a

year

of

investments

in

international

insurance

to

continue

growing

our

businesses

in

a

healthy

and

sustainable

way.

These

investments

in

growth

as

well

the

easing

of

COVID

benefits

have

impacted

our

short-term

results.

Let

me

start

with

the

long-term

perspective.

We

built

efficient,

customer-oriented

businesses,

strong

teams,

and

we

adopted

competitive

advantages

from

Admiral,

especially

in

risk

selection.

Our

strategy

remains

unchanged,

and

we continue

to

build

on

these

foundations

to

increase

economies

of

scale.

Now

for

the

short-term

perspective,

we

achieved

good

growth,

but

we

have

been

operating

in

competitive

markets

mainly

with strong

downwards

pressure

on

premiums

and

the

gradual

unwinding

of

COVID

benefits.

These

effects

mean

a

decrease

in

profitability

in

Europe

and

an

increase

of

losses

in

the

US.

However,

with

nearly

£700

million

in

turnover

and

1.8

million

customers

across

four

geographies,

we

remain

confident

in

the

long-term

trajectory

of

the

business

and

our

ability

to

improve

performance

where

market

cycles

revert.

Moving

now

to

Europe,

as

Milena

mentioned,

COVID

impacts

have

been

sharper

in

Italy

and

Spain,

decreasing

average

premiums

and

lowering

demand

for

new

car

insurance.

In

both

markets,

we

managed

double-digit

customer

growth

and

delivered

a higher

average

premium

than

our

competitors,

all

while

investing

in

expanding

distribution

channels.

France

is

a

bit

of

a

different

story,

as

the

market

was

somewhat

immune

from

COVID

impacts.

Average

premium

slightly

increased

in

the

last

two

years,

though

overall

shopping

declined

and

price

comparisons

quotes

were

down.

In

this

context,

L'olivier

achieved

26%

turnover

growth

leveraging

direct

acquisition

and

efficient

brand

investments,

all

at

higher

average

premiums

than

our

competitors.

We

also

continue

to

cultivate

the

household

business,

which

is

a

large

market

in

France

and

progressive

on

scaling

our

partnership

with

BlaBlaCar,

a

well-known

peer-to-peer

mobility

provider

with

a

large

customer

base

to

engage.

In

all

geographies,

we

continue

to

make

substantial

progress

in

better

use

of

data,

offering

more

digital

services

to

our

customers

and

making

our

technology

platform

more

reliable.

We

now

offer

a

fully

digital

journey

to

report

a

claim

and

thanks

to

artificial

intelligence

algorithms,

we

can

make

an

instant

settlement

offer.

Indeed,

leading

independent

surveys

rated

our

customer service

and

user

experience

among

the

best

in

class

with

both

ConTe

and

L'olivier

winning

top

awards

from

major

consumer

review

sites.

And

we

see

very

positive

outcomes

on

customer

loyalty.

We

continue

promoting

our

unique

culture,

and

we

are

proud

that

our

businesses

are

ranked

in

the

top

tier

of

the

Great

Place

to

Work

with

Admiral

Seguros

notably

number

one

in

Spain.

Before

and

during

the

pandemic,

our

business

has

remained

resilient

and

delivered

efficient

growth

and

positive

results

despite

market

adversities.

Over

the

last

four

years,

we

delivered

our

first £100

million on

a

cumulative

written

whole

account

basis

and

there

is

more

to

come.

Although

we

expect

markets

to

remain

challenging

in

the

next

months,

we

remain

focused

on

building

long-term

value

for

the

group

in

Europe.

Moving

now

to

the

US,

our

quick

return

to

pre-pandemic

mobility

patterns

led

to

more

stable

premiums

and

shopping

trends.

In

spite

of

a

hypercompetitive

market,

Elephant

customers

base

grew

by

10%.

On

the

downside,

as

COVID-related

loss

ratio

benefits

ended,

claim

frequency

and

severity

inflation

accelerated,

in

particular

in

the

second

half

of

2021.

We

moved

our

prices

up

significantly

in

the

last

quarter

to

respond

to

this

market

shift,

and

we

have

seen

many

competitors

take

similar

actions.

The

bottom

line

result

is

a

function

of

this

context

and

internal

improvements

of

our

business

foundations

have

not

been

sufficient

to

compensate

for

these

market

headwinds.

The

US

is

the

largest

market

where

we

operate,

and

we

acknowledge

that

it

is

an

expensive

one.

But

we

are

confident

that

we

have

built

a

solid

operations

with

good

insurance

capabilities.

Why do

believe

this?

We

are

making

good

progress,

and

there

are

three

dimensions

where

Elephant

is

doing

very

well,

loss

ratio

improvements,

efficient

growth

and

technology.

More

sophisticated

pricing,

investments

in

claims,

digitization

and

wider

use

of

analytics

made

our

loss

ratio

inflated

less

than

the

market

in

2021,

a

clear

signal

that

we

progressed

on

risk

selection

and

claims

handling.

We

grew 10%

by

shifting

our

acquisition

sources

towards

more

efficient

channels

like

agencies

and

price

comparison

websites.

We

kept

our

acquisition

cost

relatively

flat,

while

the

market

increased

by

12%

in

an

already

very

expensive

environment.

We

have

built

a

solid

technology

platform

which

enabled

all

these

achievements.

We

can

engage

new

commercial

partners

in

a

matter

of

days.

We

offer

a

full

set

of

digital

services

for

our

customers

and

we

are

pursuing

internal

efficiencies

with

more

operation.

We

believe

in

the

importance

of

the

US

market

for

our

strategy,

and

we

continue

to

adopt

a

rational

approach

in

building

a

long-term

sustainable

business.

To

wrap

up,

for

International

Insurance,

2021

was

a

year

of

growth,

investments

and

progress

on

business

fundamentals.

The

easing

of

COVID

benefit

has

impacted

our

short-term

results,

but

our

strategy

is

unchanged.

We

continue

to

grow

economies

of

scale,

with

a

disciplined

approach

to

loss

ratio

to

create

long-term

value

for

the

group.

Thank

you.

And

I

know

pass

over

to

Scott

to

tell

us

more

about

our

Loans

business.

[Scott William Cargill]

Thank

you,

Costi.

Good

morning,

everyone.

To

start

my

section,

a

few

key

highlights

on

the

performance

of

the

Loans

business

in

2021.

Firstly,

we're

back

to

growth.

The

Loans

book

finished

with

gross

balances

of

over

£600

million,

10%

higher

than

our

pre-COVID

peak

and

50%

up

from

last

year.

We're

also

seeing

positive

market

trends

with

comparison

going

back

to

pre-COVID

levels

and

as

a

category

share

going

to

22%

of

all

loan

volumes.

We

also

saw

pleasing

progress

on

our

operational

and

risk

selection

capabilities,

whilst

maintaining

an

appropriately

conservative

approach

to

provisioning.

2021

was

a

year

of two

halves,

however,

different

for loans

with

H2

being

more

positive.

We

started the

year

growing

cautiously

in

H1

and in

H2,

we

grew

more

meaningfully

as

our

outlook

improve

complete. We

finished

the

year

with

good

momentum

for

2022,

with

the

stock

book

of

£607

million.

We

also

kept

provision

conservative

at £50

million,

and

in

light

of

the

continued

uncertainty

and

economic

outlook,

we

included

£9

million

of

post-model

adjustments,

particularly

to

account

for

the

impact

of

inflation.

We

also

agreed

our

second

warehouse

funding

given

us

the

capacity

to

grow

in 2022.

That

takes

our

total

funding

capacity

up

to

£1

billion.

Our

adjusted

impairment

charge,

despite

the

growth

in

the

book,

improved

our

P&L

to

a

£5.5

million

loss,

which

is

within

the

range

provided

at

the

half

year.

We

are

providing

balanced

guidance

for

2022

in

the

range

of

£800 million

to

£950

million,

and

we

expect

the

bottom

line

to

improve

assuming

no

macroeconomic

shocks.

I

thought

it'd

be

worthwhile

to

take

a

moment

to

zoom

out

on

the

UK

loans

market

and

highlight

several

trends,

which

I

see

as

encouraging.

Firstly,

a

reminder

of

our

loan

profile.

We're

a

prime-focused

lender

distributing

mostly

through

comparison.

Our

average

loans

size

is

around

£8,500,

our

customer

APR

around

8%

with

a

net

interest

margin

of

6%.

The

chart

on the

left-hand

side

shows

the

overall

personal

loan

market

and

a category

share of

comparison

as

a

subset

of

that.

Nowadays,

over

90%

of

loans

in

the

UK

are

distributed

digitally.

What

you

can see

is

that

total

loan

volumes

are

still

under

pre-COVID

levels

and

are

expected

to

remain

there

until

2023.

However,

encouragingly,

the

comparison

market

has

already

recovered

to

pre-COVID

levels,

with

share

increasing,

as

I

mentioned,

now

making

up

22%.

We

continue

to

see

[indiscernible]



(00:42:03) from

both

distributors

and

customers

for

guaranteed

rates

and

acceptance

certainty.

It

is

a

gradual

shift

from

a

teaser

rate,

representative

rate

model

to

pre-approved

guaranteed

rate

model.

The

chart

on

the

right

demonstrates

a

real

example

of this,

showing

Admiral

ranking

top

with

100%

preapproval

and

guaranteed

rate

despite

it

being

higher

than

the

competitor

teaser

rates

being

offered.

This

was

something

that

Admiral

had

protected

being

a

market

trend.

I'd

like

to

move

on

now

to

talk

about

our

underlying

capabilities

and

ultimately

why

Admiral

is

having

success

in loans.

For

those

of

you who

have

followed

our

story

in

2019,

I

highlighted

several

capabilities

which

we

identified

as

success

ingredients

of

the

Admiral

formula

and

which

we

aim

to

combine

to

create

competitive

advantage

in

the

lending

market.

On

the

chart,

you

see

a

demonstration

of

pleasing

progress

on

our

competence

and

risk

selection.

To

show

the

real

performance,

which

is

often

hard

to

see

with

the

forward-looking

provisioning

impact

of

IFRS

9,

we've

taken

actual

defaults

per

annual

cohort

and

divided

by

our

actual

net

interest

income,

which

is

analogous

to

loss

ratio.

What

you

can see

here

is

that

since

2017,

we

have

year-on-year

seen

progressively

improving loss

outcomes

as

we

evolved

our

pricing

capabilities.

Something

which

isn't

on

the

slide,

however

something

which

I

find

exceptionally

positive,

is

the

relative

outperformance

of

our

loan

customers

who

also

hold

Admiral

insurance

products.

They

consistently

outperform

and

in

total

hold

over

£35

billion

of

consumer

debt.

Engaging

with

more

of

them

to

better

serve

their

needs

in

the

future

is

a

top

priority.

I

would

also

like

to

mention

another

key

ingredient,

which

is

tight

expense

control.

Our

cost/income

ratio

has

increased

temporarily

in

2022 as

we

invest

for

growth.

However,

over

70%

of

our

customers

are

already

being

serviced

digitally,

which

sets

us

up

well

for

efficiencies, and

I

expect

our

medium-term

operational

cost/income

ratio

to

be

materially

lower

than

legacy

competitors.

As

Milena

mentioned, and

as

I've

grown

to

learn,

what

makes

Admiral

successful

is

that

it does

the

common

things

uncommonly

well,

details

that

find

the extra

1%

to

2%

across

the

whole

value

chain.

Our

goal

in

Admiral

Loans

is to

apply

that

same

rigor

and

focus

to

carve

out

differentiation

and

a track

record

of

outperforming

returns.

With that, I'll pass back to Milena to wrap up.

[Milena Mondini de Focatiis]

Thanks,

Scott. Geraint,

Cristina,

Adam, Costantino,

Scott

have

just

shared

with

you

how

we

deliver

great

outcomes

for

our

customer

and

our

shareholders.

But

what

about

the

other

stakeholders?

We

believe

that

holding

the

harmony

of

positive

outcomes

for

all

our

stakeholders,

we

can

succeed

and

fulfill

our

purpose

to

help

more

people

to

look

after

their

future.

As

Adam

explained

earlier,

at

the

very,

very

heart

of

our

success

is

our

focus

on

the

great

people

who

work

with

us

today

and in

the

future

and

who deliver

the

winning

experience

to

our

customers.

These

are

the

key

foundation

that

Admiral

is

being

built

on

from

the

very

early days.

I'm

so

proud

that

we

are

independently

recognized

as

Great

Place

to

Work

year-after-year

and

in

every

country

we

operate

in,

including

being

named

number

one

in

Spain

and

number

five

in

the

UK, and

we

have

received

recognition

for

being

leaders

in

diversity

in

Europe.

We

also

increase

our

effort

to

support

climate

change

and

made

a

commitment

to

be

net

zero

by

2040, with

a

50%

emission

reduction

by

2030.

Finally,

since

the

beginning

of

COVID,

we

made

a

step

change

in

our

investment

to

support

local

communities,

and

we

will

continue

to do

so

in

the

future.

To

conclude,

we're

proud

of

the

growth

and

strong

results

we

have

delivered, which

were

thanks

to

our

focus

on

what

we

do

best

and

helped

significantly

by

COVID

tailwinds,

which

are

clearly

subsiding.

Our

strategy

remains

unchanged

and

is grounded

on

solid

foundations

and

technical

competencies

and

enhanced

data

and

technology

capabilities,

unique

culture

and

strong

team. We

will

continue

to

evolve

to

remain

smart

and

agile

and

navigate

the

change

ahead

of

us,

focused

on

delivering

the

best

outcomes

across

different

countries

and

business

line

and

for

all

our

stakeholders.

Thank

you.

And

with

that,

we're

ready

to

take

questions.

[Operator]

Thank

you.

[Operator Instructions]



Our

first

question

comes

from

the

line

of

Will

Hardcastle

with

UBS.

[Will Hardcastle, Analyst, UBS AG (London Branch)]

Oh, hi,

everyone.

Thanks

for

taking

the

question.

The

first

one

is

just trying

to

understand

the

level

of

gap

and

conservatism

in

the –

I

guess,

it's

in

the

underwriting

versus

accident

year,

but

you

also

provide

the

underwriting

years

for

both

the

ultimate

and

the

booked.

I

think

if

I

look

at

it

on

a

different

comparisons,

there's

a

massive

gap.

If

I

look

at

it

just

on

underwriting

years,

it

looks

like

5

points

on

the

initial

strike,

so

down

comparing

to

90%

with

the

85%,

for

example.

Do

you

think

it has

been

booked

fairly

standard,

there's

been

no

change

in

methodology

is

really

the

question

there.

And

then

second

one

is

just

in

terms

of

the

change

being

agreed

terms.

Obviously,

it's

not

now,

but

earlier

in

the

year,

is

there

any

way

that

we

can

sort

of

try

and

discuss

the

quantification

of

the

difference

that

would

give

you

in

a

normal

year?

Is

that

possible?

Thank

you.

[Milena Mondini de Focatiis]

So

[indiscernible]

(00:47:54)

Geraint.

[Geraint Allan Jones]

Good

morning,

Will.

Yeah,

I'll

do

both

of

those.

On

loss

ratio

margin,

first

of

all, there's

no

real

change

in

the

method,

and

I

think

if

you

do

the

maths

and compare

where

our

underwriting

year

book

ratios

are

at

the

end

of

2021

by

underwriting year, which

you

can

do

from

the

back

of

the

presentation

and

compare

it

to

where

we

were

at

the

end

of

2020. There's

not

really

a

big

visible

difference.

You're

right, there's

5

points

of difference

on

the

current

year

and

actually

not

too

far

difference

on

some

of

the

back

years.

If

you

add

all

that

up,

which

you

sort

of struggle

to

do

with

the

information

we

give,

is

actually

a

very

slight

reduction

in

the

level

of

margin

relative

to

the

best

estimate,

but

not

that

significant.

And

the

method

is

actually

very

consistent –

is

consistent.

[Will Hardcastle, Analyst, UBS AG (London Branch)]

I

guess,

just

a

slight

change

and

is

not

coming

throughout

the

years

essentially

or

is

that

more

at

the

back

end,

the

older

years?

[Geraint Allan Jones]

Yeah, it

comes

throughout

the

years. I

mean

the

way

we

think

about

it

just

to

measure

it,

took

a

reserve

base.

It's

not

an

individual

year

basis,

and

generally

you

find

that

the

bigger

margins

in

terms

of

percentage

points

are

on

the

most

recent

years.

That obviously

continues

to

be

the

case.

But

if

you

look

at

the

margin

held

across

all

the

years,

it

is

very

slightly

lower

this

year

than

it

was

last

year,

but

not

that

much.

The

second

question is

about

[indiscernible]

(00:49:07)

terms.

We've

got

some

info

in

the

back

of

the

pack

which

talks

about

how

much

of

the

profit

that

Admiral

now

retains

in

the

new

contract

versus

the

old

contract.

And

it

also

talks

about

the

change

in

the

nature of

the

contract

between

co-insurance

and

quota

share

and

so

on.

So

we

can

do

some

illustrative

maths

to

help

you

understand

what's

going

on

there.

Happy

to

talk

to you

about

that,

Will.

[Will Hardcastle, Analyst, UBS AG (London Branch)]

Okay.

Thanks.

[Operator]

Thank

you.

And

our

next

question

comes

from

the

line

of

Alexander

Evans

with

Credit

Suisse.

[Alexander Evans, Analyst, Credit Suisse Securities (Europe) Ltd.]

Hi.

Thanks

for

taking

my

questions.

Just

firstly,

maybe

on

the

UK

motor

policy

count

growth,

we've

seen

relatively

flat

in

the

second

half.

We've

also

seen

some,

it

looks

like,

pretty

aggressive

players

in

January

in

pricing

as

well.

I

just

wondered

what

your

sort

of

growth

expectations

are

for

2022.

And

then

also

maybe

just

on

inflation,

we've

seen

and

you've

highlighted

higher

claims

inflation

going

forward.

What

are

your

sort

of

expectations

on

your

reserve

assumptions

there?

How

does that

impact

your

large

bodily

assumptions,

and

where

do

you

see

the

inflation

being

most

impactful

for

Admiral?

Thanks.

And

then

maybe

as

well

just

on

sort

of

the

sort

of

expectations,

the

pricing

in

the

market,

I

think

you

talked

about a

few

iterations

of

people

reacting

to

it,

but

just

keen

to

hear

your

thoughts

on

how

you

think

it's

going to

develop

into

2022. Thank

you.

[Milena Mondini de Focatiis]

Morning, Alex.

I'm

going

to

focus

on

your

first

and

your

third

questions

because

they're

both

related

to

pricing

and

then

Adam

will

cover

inflation.

When

you

look

at

the

market

in

the

first

half

of

this

year,

I

think

it's

going

to

be

particularly

dynamic.

There's

going to

be

a

lot

of

volatility.

What

we

can

tell

you

about

Admiral

prices

is at

the

moment,

our

Times

Top

is

a

bit

higher

than

it

was

in

the

second

half

of

last

year.

And

again

expectations

for

this

year,

volatility

changes,

we

have

seen

a

lot

of

changes

during

January

and

February

from

competitors.

And

we expect

to

see

the

same

also

when

we

look

at

inflation.

It's

quite

high

this

year.

It

might

continue

increasing

and

we

might

see

also

frequency

coming

up,

which

will

both

have

an

impact

on

prices

in

the

market.

[Adam Alexander Gavin, Deputy UK Claims Director, Admiral Group Plc]

Hi,

Alex.

So

on

claims

inflation,

I

think

we'll

expect

damage

to

be

the

main

driver

of

that

for

the

next

year.

I

understand

why

large

BI

is

getting

some

attention

with

the

changes

in

the

actual industries

over

recent

years.

But

there's

been

inflation

largely

on

care

for

a

decade

or

more.

It's

something

we're

not

used

to.

We're very

happy

to

manage

that.

So,

yeah,

we're

thinking

mainly

the

damage

will

drive

that

this

year.

[Alexander Evans, Analyst, Credit Suisse Securities (Europe) Ltd.]

Okay.

Thank

you.

[Operator]

Thank

you.

Your

next

question

comes

from

the line

of

Thomas

Bateman

with

Berenberg.

[Thomas Bateman]

Hi.

Good

morning, everybody.

And

thanks

for taking

my

questions.

Just

first

question

on

your

kind of

new

[indiscernible]

(00:52:10)

of

products,

can

you

just

give

us

an indication

of

how

they

compare

to

kind of

your

previous

pricing

and

particularly

the lower

or

more

basic

product?

How

does

that

compare

to

previous

iterations

of

pricing?

And

where

are

you

seeing

the

most

demand

out

of

those

different

products?

Secondly,

are

you

seeing

any

decline

on

your

back

book

as

a

result

of

the

FCA

changes?

And

do

you

think

those

new

business

increases

are

sufficient

to

offset

anything?

And

is

that

the

case because

I

think

you

heard

that –

I

think

you

said

that

it

was

lower

profitability

expected

due

to

the

FCA

changes.

Yeah,

those

are

my two

questions,

please.

Thank

you.

[Milena Mondini de Focatiis]

Yes.

Morning,

Tom.

The

first

one

was

around

peers

both

in

household

and

car.

We

have

had

peers

in

our

household

products

since

launch

a

few

years

ago,

and

it

has

had

very

good

result.

We

launched

in

car

because

we

believe

it's

a

better

way for

offering

different

combined

products

to

our

customers.

And

this

year

we

have

seen

essentials,

which

is

our

lower-tier

product,

taking

a

bit

of

a

share,

but

I

think

it's

too

early

to

comment

exact

on

the

impact

of

this

product.

In

terms

of

the

back

book,

your

question

was

whether

we

had

seen

decline.

Again

a

bit

too

early.

The

changes

in

renewals

only

impacted

at

the

end

of

January.

We

are

seeing

retention

increasing

for

us

and

we

believe

for

the

market,

but

we

cannot

yet

say

how

much

this

impact

has

been.

And

in

terms

of

lower

profitability,

I

made

that

comment

especially

around

household

in

the

market,

which

is

basically

highlighting

the

fact

that

the

household

market

has

traditionally

very

high

retention,

meaning

they

are

long

books

or

big

books

in

the

market

with

long

tenure

and

I

think

profitability

might

be

impacted.

[Thomas Bateman]

Okay.

That's

good.

So

just to

be

clear,

you're

saying

that

the

home

market

is

likely

to

be

less

profitable,

but

you're

actually

seeing

a

bit

of

margin

expansion

because

of the

high

new

business

rates

and

actually

on

your

back

book,

you're

seeing

sufficient

new

business

increases?

[Milena Mondini de Focatiis]

Yes,

I

believe

some

players

in

the

household

market

might

have

profitability

impacted

because

the

decrease

in

renewal

rates.

And

yes,

to

the

other

comment.

[Thomas Bateman]

Okay.

That's

really

good.

Thank

you

very much.

[Operator]

Thank

you.

And

our

next

question

comes

from

the

line

of

James

Shuck

with

Citi.

[James A. Shuck, Analyst, Citigroup Global Markets Ltd.]

Yeah.

Good

morning,

everybody.

Two

questions

for

me,

please.

Firstly,

on

the

– I

suppose

the

book

to

loss

ratios

in

2019

and

2020,

if

I

look

at

how

they

were

booking

at

H1

and

then

the

development

into

full

year.

And

if

l look

at

the

ultimates

as

well

in

the

same

years,

2019

and

2020

and

how

they

developed

through

to

full

year

2021,

I

guess

I'm

surprised

by

the

lower

level

of

development

versus

previous

periods,

both

on

the

booked

basis

and

on an

ultimate

basis.

So

my

question

is

really

do

you

still

expect

the

ultimates

to

be

developing

favorably

over

time

or

are

you

now

booking

those

ultimates

closer

to

actual

best

estimate,

i.e.

with

far

less

embedded

conservatism

in

them?

Second

question,

really

around

guidance

of

2022,

I

know

you

said

that

the

profits

for

the

group

will

be

lower

in

2022

versus

2021.

It's

very

difficult

from

the

outside

really

to

model

your

PCW, the

PYD,

all

these

sorts

of

things

going

through

the

year.

My

question

is,

can

you give

us

some

guidance

for

– are you

still

guiding

towards

low

20s

on

the

PYD?

And

on

the PCW,

should

we expect

that

to

go

back

to

kind of

pre-pandemic-type

levels?

And

any

comments

around

FCA

impact

on

the

current

year

accident

loss

ratio

or

will

that

go

back

to

pre-pandemic

levels

as

well?

Thank

you.

[Geraint Allan Jones]

Good

morning,

James. Excuse me, I

think

we

lost

you

after

[indiscernible]



(00:56:28),

but

we'll

go

back

to

that.

I

got

about

three

or

four

of

them,

and

then

we'll

see

where we

go

from

there.

On

PYD

outlook,

I

think

guide

in

the

low

20s

is

probably

okay

as

an

idea,

as

a

guide

for

the

next

year

or

two.

I

don't

see

any

major

change

in

that.

There

is

less

inherent

conservatism

in

our

best

estimates

than

there

was

maybe,

say,

a

decade

ago,

but

actually

no

significant

change

over

the

past

couple

of years

in

that.

I

think

maybe,

James,

you've

been

a

bit

spoiled

by

the

ultimate

loss

ratio

development

and

the

book

loss

ratio

development

in

the

past

couple

of

–

six-month

periods.

In

the

second

half of

the

year,

it

was

lower

than

the

first

half.

That

is

for

sure.

But I

don't think

it

was

really

out

of

line

with

averages

over

the

past

few

years.

So,

nothing

to,

I

think,

of

concern,

I

would

say,

at

all

in

the

second

half of

the

year.

I

think

we've

mentioned

earlier

the

booking

pattern

versus

the

ultimate.

It

isn't really

that

different

at

the

end

of

2021

versus

the

end

of

2020. It's

a

bit

less

conservative, but

really

not

that

much

when

you

measure

the

points

of

gap

between

book

and

ultimate.

I

think

there

was

a

question

on

guidance

for

2022.

I

think

when

we

talk

about

that, it's

important

to remember

the

context,

I

think.

So

our

profits

over

the

past

couple of

years

have gone

£505 million

in

2019,

£608

million

in 2020,

and

then £769 million

in

2021.

The

motor

combined

ratio

reported

for the

last

couple

of years

has

been

around

70%

in 2021

and 2020.

And

historically

it

was

closer

to

80%.

So

there's

clearly

a

very

material

difference

in

2020

and 2021

based

on

COVID

and

the

pandemic,

which

is

not

going

to

repeat

in

2022.

So

that's

the

context.

We

don't

give

– James,

as

you

know,

we

don't

give

profit

guidance

and

definitely

not

a couple

of months

into

the

year.

But

clearly,

you

see

some

of

the

trends

in

the

pack,

some

of

the

data

points.

The

first

pick

of

the

loss

ratio

for

2021

underwriting,

for

example,

is

much

more

in

line

with

the

pre-pandemic

loss

ratio.

So

we're,

I

would

say, more

normal

rather

than

profits

declining,

obviously trying

to paint

a

slightly

more

positive

picture.

But I

think you've

got to

remember

that

2021

and 2020

were

exceptionally

high

years,

which

aren't

part

of

the

ongoing

trend

of

increasing

profits

over

time.

[James A. Shuck, Analyst, Citigroup Global Markets Ltd.]

I

think

you got

much

– I

think you

got

most

of

those.

If I could

just

come

back

on

one

thing.

The

FCA

price

walking

stuff,

as

that

gets

reversed

out,

would

you

expect

to

be

booking

a

drag

on

the

current

year

accounting

loss

ratio

from

that

in

2022?

[Milena Mondini de Focatiis]

Morning.

Just

to

say

that

I

think 2022

will

be

impacted

by

two

things.

First,

the

change

in

the

prices

because

of

the

FCA

reform,

but

also

a

very

dynamic

and

complicated

maybe

claims

market

given

the

high

inflation

and

possibly

increases

in

frequency.

Just

looking

at

the

FCA

reform,

yes,

we

think

it

will

have

an

impact

in

the

sense

that

renewal

rates

are

going

to

decrease.

However,

the

market

has

a

history

of

being

very

rational

and

therefore

I

believe

in

the

long

term

it

wouldn't have

a

major

impact.

[James A. Shuck, Analyst, Citigroup Global Markets Ltd.]

Okay.

Thank

you.

Thank

you very

much

for

that.

[Operator]

Thank

you.

And

our

next

question

comes

from

the

line

of

James

Pearse

with

Jefferies.

[James Pearse, Analyst, Jefferies International Ltd.]

Yeah. Hi,

everyone,

thanks

for

taking

my

questions.

So

you've had

a

really

significant

profit

commissions

on

your

quota

share

arrangements

in

2021.

Clearly,

margins

have

benefited

from

lower

claims

frequency

in

the

last

couple

of

years.

And

I

guess

when

that

benefit

falls

away,

would

you

expect

to

receive

any

material

commissions

from

your

quota

shares

in

future

years

when

we

return

to

more normal

margins

under

the

new

terms?

I

guess

I

ask

because

pre-pandemic

the

commissions

from

your

quota

share

arrangements

always

seemed

fairly

minimal.

The

second

question

is

just

on

international

business.

So

in

the

past,

you've

spoken

about

achieving

a €30

million

to

€60

million

annual

profit

by

2022

on

a

rich

and

whole

account

basis.

Is

that

still

the

case?

And

I

think

you've spoken

about

increasing

your

whole

account

share.

And

I'm

just

interested

to

hear

if

that

is also

still

the

plan,

kind

of

what

the timeframe

is

on

that

and

how

you'd

go

about

doing

that.

Thanks.

[Geraint Allan Jones]

Hi,

James.

I'll

take

the

first

one

on

profit

commission

on

quota

share.

So

I think

what

we've

seen

in

the

past

is

that

we've

commuted

our

UK quota

share

contracts

after

about

two

years and

that

means

that

the

profit

tends

to

develop

after

that

point.

So

it

doesn't

get

reported

as

profit

commission.

It

comes

through

the

reserve

releases

on

the

commuted

share

of

the

business

line

the

account.

So

pre-pandemic

average

combined

ratios

are

probably

in

the

80s,

so

there's

probably

20 points

of

margin.

So

there

clearly

is

profit

on

the

business

that

we

originally

reinsure,

but

it's

just

the

post

computation

that

flows

into

the

reserve

releases

on

community

reinsurance

line

rather

than profit

commission. And

we

sort

of

expect

that

to

be

the

case

in

the

future

as

well.

We're

certainly

not

expecting

the

disappearance

of

our

margin

from

here

on,

that's

for

sure.

[Costantino Moretti]

Good

morning.

Costantino

speaking.

So,

yes,

you're

right.

Back

in

2018,

we

shared

an

ambition

to

achieve €30

million

to

€60

million

written

profit

on

a

whole

account

basis

in

2022.

I

would

say

that

we

achieved

this

target

already

in

2019

and

in

2020,

and

then

it

is

too

early

to

make

a

call

on

where

2021

will

land,

and

it's

incredibly

early

to

comment

on

2022.

I

acknowledge

that

since

2018,

the

market

has

changed

with

lower

premiums,

in

particular

in

Italy,

where

we

have

the

largest

operation.

But

the

trajectory

of

our

European

businesses

is

solid.

We

are

growing

nevertheless

challenging

environments

and

we

are

confident

that

we're

building

long-term

value

for

the

group.

[James Pearse, Analyst, Jefferies International Ltd.]

Thanks.

Can

I

just ask

a

follow-up

question

on

the

profit

commission

question?

[Geraint Allan Jones]

Yeah.

[James Pearse, Analyst, Jefferies International Ltd.]

So,

I

guess

that

you're

kind

of

shifting

margin

kind

of

post

commutation

when

it

was

pre-pandemic.

I

guess

if

you're

recognizing

margin

in

the

profit

commissions

in

2021,

should

we

think

of

that

as

a

kind

of

headwind

to

future

releases

on

your

commutated

business

or

is

that the

wrong

way

to

think

about

it?

[Geraint Allan Jones]

No,

I

don't think

that's

the

case.

I

think

the

fact

we

recognize

in

profit

commission

earlier

than

usual

on

some

recent

underwriting

is

just

not

an

acceleration.

It's

just

the

different

level

of

profitability

of

some

of

those

years.

So

I don't

think

that's

a

change

in

profit

recognition

patterns

at

all.

It's

just

a

reflection

of

the profitability

in

those

most

recent

years.

So

I

wouldn't say

that's

a

change

in

trend.

No.

[James Pearse, Analyst, Jefferies International Ltd.]

Got

it.

Thanks.

[Operator]

Thank

you.

And

our

next

question

comes

from

the

line

of

Greig

Paterson

with

KBW.

[Greig N. Paterson, Analyst, Keefe, Bruyette & Woods]

Morning, everybody.

Can

you

hear

me?

[Geraint Allan Jones]

Yes.

[Milena Mondini de Focatiis]

Loud and clear.

[Greig N. Paterson, Analyst, Keefe, Bruyette & Woods]

Hello?

Can

you

hear

me?

[Geraint Allan Jones]

Yeah,

clearly,

Greig.

Go

for

it.

[Greig N. Paterson, Analyst, Keefe, Bruyette & Woods]

I

hope

everything's

well.

Three

quick

questions,

two

numbers.

One,

for

UK

motor

2021

on

a

written

basis,

what

was

the

average

year-on-year

rate

increase

that

you

achieved?

And

the

second

question

is

claims

inflation

you

came

out

to

2021.

I

wonder

if

you

could

give

us

a

broad

estimate

of

the

percentage

year-on-year

change.

And

the

third

question

is during

the

presentation it

was

mentioned

that

during

2021

we've

seen

a

lower

percentage

of

large

BI

claims.

I

assume

that

will

revert

back

in

2022, 2023

to

your

normal

sort

of

two-thirds

level.

I

was

wondering

what

the

impact

of

that

mix

change

would

be

have

on

inflation

– claims

inflation

you

came

out

in 2022

and

2023.

Thank

you.

[Milena Mondini de Focatiis]

Morning,

Greig. I'll

take

the

first

question,

and

then

Adam

[indiscernible]



(01:04:50).

So

on

price

increases

for

last

year,

what

we

did is

we

increased

prices

in

Q2

and

that

meant

that

for

the

rest

of

the

year,

we

lost

Times

Top,

as

you

could

see

in

the

graph

on

the

slide.

And

our

prices

reflected

the

claims

inflation

we

were

seeing

in

the

market.

I'm

not

going

to

go

into

detail

because

there

was

a

lot

of

volatility.

I

just

want

to

highlight

that

we

maintain

pricing

discipline.

[Greig N. Paterson, Analyst, Keefe, Bruyette & Woods]

You

can't give

me

a

number

for

the

average

price

increase

year-on-year

for

2021?

[Milena Mondini de Focatiis]

None.

Sorry,

Greig. Oh, so...

[Adam Alexander Gavin, Deputy UK Claims Director, Admiral Group Plc]

Hi.

Greig. Adam here.

[Greig N. Paterson, Analyst, Keefe, Bruyette & Woods]

Yeah,

no

number

on

that

though?

[Adam Alexander Gavin, Deputy UK Claims Director, Admiral Group Plc]

Hi,

Greig,

I'll

go

into

claims

inflation.

So

for

2021,

I

think

we

were

looking

at

sort

of

mid-single

digits

in

terms

of inflation.

We're

now

looking

at

perhaps

mid

to

high-single

digits

for

2022.

I

think

I've

covered

the

drivers

for

that

both

in

the

presentation

and

the

previous

question.

On

large

BI,

it's

very,

very

difficult

for

us

to

predict

that.

I

look

a

lot

of

large

BI

claims

and

they are

hugely

volatile.

I

think

we

saw

less

young

drivers

in

the

market

over

the

pandemic,

and

that

certainly

had

an

impact

on large

bodily

injury,

and

those

make

any

strong

predictions

on

it

for

2022, aside

from

the

fact

that

we're

well

used

to

managing

it

well.

[Greig N. Paterson, Analyst, Keefe, Bruyette & Woods]

Yeah.

I

mean, if

I

could

just

make

a

point.

When

you're

trying

to

model

the

year-on-year

progression

in

loss

ratios,

if

you

don't

know

what

the

claims –

the

premium

rate

increases

and

other

companies

do

provide,

it

does

really

make

it

difficult

and increase

the

information

risk

associated

with

investing

in

Admiral.

Well,

that's

my

two

cents.

Thank

you

very

much.

Cheers.

[Operator]

Thank

you.

And

our

next

question

comes

from

the

line

of

Youdish

Chicooree

with

Autonomous

Research.

[Youdish Chicooree, Analyst, Bernstein Autonomous LLP]

Good

morning,

everyone.

Thank

you

for

taking

my

question.

I

have

two

questions,

please.

The

first

one,

if

I

could

go

back

on

just

in

the

industry

pricing

in

the

first

couple

of

months.

You

talked

about

high-single-digit

price

increases

in

motor

and

even

higher

in

home.

Is

it

possible

at

all

to

just

give

us

the

split

of

how

new

business

pricing

is

progressing

and

what

renewal

pricing

has

done

in

the

first

couple

of

months.

That's

my

first

question.

And

then

secondly,

just

on

the

international

segment,

I

mean

in

terms

of

the

performance

in

2021,

I

get

the

point

that

COVID-related

frequency

benefit

unwound

last

year

and

there's

more

price

competition.

But

your

results,

if

I

compare

it

to,

let's

say,

pre-pandemic

levels

in

2019,

it's

materially

worse.

So,

I

was

just

wondering

if

you

could

give

us

a sense

of

the

trajectory

in

the

near term

because

you

mentioned

you're

increasing

prices

significantly

in

the

US,

I

would

think

at

least

that

segment

could

deliver

a

significant

improvement

this

year.

But

what

about

the

European

segment?

Is

that

basically

going to

take

a

few

more

years

before

it

breaks

even

again?

Thank

you.

[Milena Mondini de Focatiis]

Morning,

I'll

go

to

the

–

to

answer

the

question

on

prices

in

the

market

in

the

first

couple

of

months

and

then

Costi

will cover

on

the

international

side.

So

what

we

have

seen

so

far

in

the

market

only

relates

to

new

business

prices,

and

we're

pleased

to

say

that

we

feed

on

average.

The

market

has

been behaving

irrationally.

So

we

don't

yet

have

information

on

the

impact

on

renewal

prices.

But

I

am

going

to

assume,

given

what

we

have

seen

in

new

business,

that

in

car

we

will

see

around

mid-single-digit

decreases

in

renewals

and

a

bit

higher

decreases

in

household.

Again,

we

don't

have

this

information

and

it

would

take

a

few

months

until

we

can

know

more

about

what's

happening

in

the

market.

[Youdish Chicooree, Analyst, Bernstein Autonomous LLP]

Got

it.

Thank

you.

[Costantino Moretti]

Morning.

For

international,

I

think

the

angle

that

you're

looking

for

primarily

is

Europe.

So

for

Europe,

I

would

say

that

strategy

is

unchanged.

We

want

to

build

long-term

sustainable

businesses

which

deliver

meaningful

value

to

the

group.

And

we

are

continuing

to

build

scale.

And

this

will

likely

continue

in

the

future.

And

as

a

reminder,

we

are

in

the

toughest

part

of

the

market

cycles

particularly

in

Italy

and

in

Spain.

And

in

addition,

growth

costs

generally

more

in

Europe

than

in

the

UK

because

of

a

less

efficient

distribution.

And

also,

we

are

expanding

towards

new

source

of

traffic

like

agencies

and

intermediaries.

And

we

are

making

investments

for

that.

So,

in

2021,

we

delivered

a

strong

double-digit

growth

in

flattish

markets.

And

we

are

well placed

to

continue

growing

and

hopefully

benefiting

in

the

near

future

of

cycles

reversions.

And,

so

in

summary,

I

would

say

that

the

trajectory

of

our

European

business

is

strong

and

we

will

continue

to

build

scale

and

value

for

the

group.

Thank

you.

[Youdish Chicooree, Analyst, Bernstein Autonomous LLP]

All

right.

Got

it.

Got

it.

Thank

you.

[Operator]

Thank

you.

And

our

next

question

comes

from

the

line

of

Rhea

Shah

with

Deutsche

Bank.

[Rhea Shah, Analyst, Deutsche Bank AG]

Thank

you.

I've

just

got

two

questions.

So,

my

first

one

comes

back

to

the

FCA

pricing.

Some of

your

larger

peers

have

implied

that

they've

maintained

market

share

at

least

in

motor

in

the

first

couple

of

months

of

this

year.

So

I

just

wanted

to see

if

you

can

give

any

comments

on

your

own

market

share.

And

then

my

second

question

is

on

Admiral

Pioneer.

What

sort

of

trajectory

do

you

expect

for

the

Pioneer

losses

over

the

next

couple

of

years?

[Milena Mondini de Focatiis]

Morning.

Regarding

the

first

couple

of

months

of

the

year,

I

could

say

that

our

Times

Top

has

increased

a

bit

when

we

compare

it

to

the

second

half

of

last

year,

and

that

has

translated

into

a

small

increase

in

new

business

market

share.

However,

having

said

that,

I

will

caution

to

read

too

much

into

this.

This

is

going

to be

a

very

dynamic

market

in

the

next

few

months,

and

it's

too

early

to

make

concrete

comments

in

the

first

half

of

the

year.

[Cristina Nestares]

And

with

regard

to

Admiral

Pioneer,

the

main

intent

of

Admiral

Pioneer

is

really

to

build

business

for

the

longer

run

and

to

do

so

in

a

way

that

is

quite

agile

and

cost-effective.

So

we

have

a

structure

in

place

that

is

really

ready

to

test

and

learn. We

both potentially

fail

and

potentially

succeed

very

fast.

So

we

don't

expect

this

to

be

a

massive

change

in

our

investment

profile

in

the

longer

term.

And

just

as

a

reminder

in

the

past

that

we always

experiment

a

new

product,

a

new

proposition.

We're

doing

this

in

a

way

that

we

think

is

more

effective

and

more

efficient.

We

will

push

on

the

accelerator

when

we

find

something

that

is

very

exciting

and

we

feel

that

we

created

something

special.

But

I

wouldn't

expect,

as

mentioned,

massive

change

to

our

investment

profile

in

the

overall

context

of

Admiral,

probably.

[Rhea Shah, Analyst, Deutsche Bank AG]

Okay.

Thank

you.

[Operator]

Thank

you.

And

our

next

question

comes

from

the line

of

Thomas

Bateman

with

Berenberg.

[Thomas Bateman]

Hi,

there.

Sorry.

Me

again.

I

just want

to

come

back

to

the

reserving

question

one

more

time.

2021,

the

loss rate

share

does

seem

very,

very

conservative

at

90%

given some

of

the

frequency

discounts.

I

take

the

point

that

you're saying

margin

is

down

a

little

bit.

I'm

just

trying

to

understand

why.

I

know

at half

year

it

felt

like

you

processed

a

few

more

large

[ph]



BI

(01:12:43)

claims.

So

is

it

to

do

with

that

or

is

it

to

do

with

maybe

inflation

concerns

or

just

kind

of

weak

pricing

in

2021.

Anymore

color

you

can

give on that,

it's

really

great.

And

then

just

secondly

on

the

international

[indiscernible]



(01:12:55)

again,

you

gave the

impression

and

you're

looking

at

more

agents

and

intermediaries.

Is

there

a

slight

change

in

strategy

away

from

PCWs?

Thank

you.

[Geraint Allan Jones]

Hi,

Tom.

I'll

do

the

first

one.

So,

the

2021

book loss

ratio,

we've

gone

from

90%

against

the

ultimate

of

85%.

It

tends

to

be

conservative

early

on,

on

the

ultimate

basis,

and

it'll

be

very

conservative

early

on,

on

a

book

basis

that

will

develop

down

over

time.

Is

it

more

conservative

than

usual?

I

think

there

are

obviously

many

things that

go

into

the

determination

of

a loss

ratio.

Frequency

is

one,

inflation

is

another,

weak

pricing,

as

you

call

it,

was maybe a

bit

strong.

Pricing

is

another

factor

that

goes

into

it.

So

all

those

taken

into

account

we've

gone

for

85%

as

the

ultimate

at

this

point,

strongly

expecting

that

will develop

down

over

time.

So

do

I

think

it's

unduly

conservative?

I

think

it's

Admiral-like

conservatism

rather

than

unduly

conservative.

Does that

make sense,

Tom?

[Thomas Bateman]

Yes,

it

does.

So

that's

in

line

with

you

conservatism,

but

the

margins

come

down,

so

again

why

has

that

come

down?

Is

it

to

do

with

kind

of

the

reserve

releases

[indiscernible]



(01:14:06)

half

year

in

2021

or

is

there

something

else

going

on

there?

[Geraint Allan Jones]

No,

not

really. We've

been

saying

for

a

little

while

that we

thought

that

our

margin

was

at

the

upper

bounds

of

what

it

actually

could

be,

and we'd

expect

it

to

come

down

over

time

as

things

were

more

stable

in

the

market.

And

so

that's

what we've

done

at

the

end

of

2021.

There's

no

particularly

dramatic

reason.

Large

BI,

more

of

it

or

less

of

it

isn't

necessarily

a

factor.

What

we're

just

seeing

is

a

slightly

more

stable

outlook

for

claims

into

2022.

And

so

we've

reduced

the

margin

slightly,

certainly

not

materially, and

it's

still

very

conservative.

[Thomas Bateman]

That's

brilliant.

Thank

you.

And

just

on

the

International

stuff.

[Costantino Moretti]

On

International,

I

would

say

that

globally

speaking,

the

strategy

is

unchanged

and

we

want

to

be

at

large

and

sustainable

businesses.

But

we

acknowledge

that

distribution

has

some

growth

– well,

direct

distribution

has

some

growth

challenges,

clearly

has

grown

less

than

we

expected

years

ago.

But

we

need

also

to

consider

that

in

Europe,

we

are

observing

different

shopping

behaviors.

And

in

particular,

in

the

low

part

of

the

cycles,

people

shop

less

online.

So

expanding

towards

new

distribution

channels

was for

us

a

good

move,

and

we

believe

that

we

can

deploy

Admiral

competitive

advantages

also

in

this

distribution

channel,

primarily

risk

selection

and

customer

service.

So

we

stay

committed

to

build

long-term

larger

business

towards

distribution

expansion.

[Thomas Bateman]

Brilliant.

Thank

you.

[Operator]

Thank

you.

And

our

next

question

comes

from

the

line

of

Philip

Ross

with

Mediobanca.

[Phil Ross, Analyst, Mediobanca SpA (United Kingdom)]

Hi.

Good

morning.

A

couple

on

[indiscernible]



(01:15:58),

please.

Firstly,

thinking

about

claims

inflation,

it

is

a

bit

elevated

at

the

moment,

but

I

guess

you're

used

to

dealing

with

claims

inflation

over,

say,

6

percentage

points

in

the

chart

you

showed.

How

do

you

think

about

the

whiplash

savings?

Do

you

think

the

sort

of

few

points

sort

of

savings

that

you

expect

to

make

can

help

pay

for

higher

claims

costs

or

is

there

a

sort

of

separate

dynamic

in

the

way

those

savings

might

be

passed

on

through

premiums

to

customers?

Secondly,

on

large

BI,

we

do

continue

to

see,

I

think,

lower

levels

of

serious

injuries

on

UK

roads

and

certainly

on

the

government

data

available

to

mid-year

2021.

Can you

give

us

any

color

on

what

you

see

in

your

portfolio

currently

on

large

BI

and

maybe

just

how

long

those

sorts

of

trends

take

to

come

through

or

to

manifest

themselves

in

reserve

releases.

Thanks.

[Adam Alexander Gavin, Deputy UK Claims Director, Admiral Group Plc]

Hi,

Philip.

It's

Adam

here. On

to

large BI

first,

it's

a

bit

quicker.

I

think

last

year, large BI

was

generally

unremarkable

for

us,

for

the

most

I

can

say

[indiscernible]

(01:17:02)

really.

On

whiplash,

the

frequency

picture

is

becoming

more

apparent,

but

severity

is

still

quite

hard

for

us

to

understand.

As

you

pointed

out

in

your

question,

the

savings

will be

passed

back

to

customers.

We're

certain

the

rate

we've

given

is

good

and

it's

really

hard

to

say

anything

more

than

that

at

the

moment.

But

as

and

when

it

becomes

clear

this

year,

we'll

report

back.

[Phil Ross, Analyst, Mediobanca SpA (United Kingdom)]

Okay.

Thanks.

[Marisja Kocznur, Head-Investor Relations, Admiral Group Plc]

Thanks,

Phil.

We're going

to

move

on

to

webchat

questions.

There

are

a

number

of

questions

that

came

through

earlier

on

pricing

renewals,

FCA.

I

think

Cristina

has answered

all

of

them.

So

there

is

one

on

the

International for

Costantino.

Costi,

you

sound

more

bullish

on

the

US

market

than

ever.

Do

you

feel

you

now

understand

the

nuances

of

this

new

market

well

enough

to

drive

more

consistent

growth

here?

[Costantino Moretti]

So

on

the

US,

we

have

understood

that

efficient

acquisition

is

key

and

possible

to

achieve

and

that

we

have

built

a

good

operation

with

well-established

insurance

capabilities.

And

we

need

greater

scale.

The

US

is

the

largest

market

where

we

operate

and

it

offers

a

meaningful

opportunity

for

diversification.

As

the

market

is

large,

we

need

a

longer

time

to

develop

a

self-sustainable

business,

and

it

is

worth

reminding

that

test-and-learn

approach

is

in

our

DNA.

And

we

need

to

build

a

greater

scale

and

we

are

conscious

that

acquisition

costs

are

materially

higher

than

the

European

ones.

We

progressively

shifted

towards

more

efficient

source

of

traffic

like

agencies

and

price

comparisons,

which

deliver

a

very

positive

10%

growth

year-on-year.

But

we

managed

to

cap

the

acquisition

costs

flat

when

the

market

increased

by

12%.

Claims

frequency

and

severity

higher

than

pre-pandemic

levels

has

affected

the

results

this

year.

But

the

market

is

quickly

adjusting

the

price

levels

and

to

respond

to

that.

And

we

are

doing

the

same.

So

overall,

I

would

say

that

we

are

making

good

progress.

We're

confident

that

we

have

built

a

good

business

with

solid

insurance

capabilities

like

risk

selections

and

claims

handling,

but

also

with

a

very

good

technology.

So

we

believe

in

the

importance

of

the

US

market

for

our

strategy,

and

we

continue

to

adopt

a

rational

approach

to

growth

and

to

manage

with

discipline

the

loss

ratio

with

the

aim

of

building

a

long-term

self-sustainable

business.

Thank

you.

[Marisja Kocznur, Head-Investor Relations, Admiral Group Plc]

Thanks.

Our

next

question

is

from

Faizan

Lakhani.

I

think both

for

you Geraint.

The

first

one

is

it

would

be

my

assumption

that

the

2021

underwriting

year

would

still

be

a

very

good

year

given

the

residual

COVID

benefit. And in

conjunction

with

a

new

structure,

I

think

reinsurance

he's

referring

to,

would

it

be

fair

to

say

that

profit

commissions

on

that

year

should

still

be

very

strong

next

year?

The

second

question

is

related

to

household.

Could

you

provide

additional

color

on

how

the

household

insurance

profit

commission

structure

works?

Could

we

see

a

step

change

in

commissions

if

the

combined

ratio

goes

below

a

certain

level?

[Geraint Allan Jones]

Thanks,

Marisja.

So

the

–

one

of –

part

to the

first

question

was

about

the

new

reinsurance

structure.

That

actually

only

takes

effect

from

the

2022

underwriting

year.

So

actually

that's

the

thing

for

the

future

– for

the

current

underwriting

year

rather

than

anything

that

will

affect

2021.

And

on

2021,

we'd

still

expect

that

to

be

a

profitable

year,

I

think,

for

sure.

And

it'll

develop

from

where

we've

currently

booked

it

and where

we

currently

projected.

But

clearly, it

will be different

to 2020

and 2019.

So,

the

level

of

profit

commission

you

might

see

on

that

year

in

the

next

12 or

24

months

will

be

lower

in

2020 for

sure.

But

I still think

we'd

expect

to

see

profit

commission come

through

on

that

year

as

it

develops

and it

will,

we

think,

pretty

strongly

be

profitable.

On

household,

we

haven't

disclosed

the

full

details

of

the

contracts.

There

are

a

couple

of

what

have

been

long-term

[indiscernible]



(01:21:07) contracts,

and it

is

the

case

that

the

higher –

the

better

the

margin,

the

higher

percentage

of

profit

that

Admiral

will

make

on

those

contracts. And

you

have

seen

some

of

that

come

through

in

the

last

12 months

in

2021.

Those

contracts

actually

are

starting

to

come

towards

their

expiry

over

the

next

couple of

years.

We'll

be

looking

at

either

extensions

or

different

structures

there

with

hopefully

some

improvements.

We've

not

started

those

conversations

yet.

So

that's

something

to

look

out

for

maybe

in

the

next

couple

of years.

Hope

that

helps.

[Operator]

Thank

you.

And

our

next

question

comes

from

the

line

of

James

Pearse

with

Jefferies.

[James Pearse, Analyst, Jefferies International Ltd.]

Hi.

Sorry, just

a

follow-up

question

from

me

actually

on

the

internal

model.

I

just

wondered

if

we

could get

an

update

on

the

timeframe

of

your

internal

model

being

implemented.

And

it

also

should

be really

helpful

to

get

some

more

color

on

what

has been

causing

that

delay.

Thank

you.

[Geraint Allan Jones]

Hi,

James.

Yeah.

Nothing

really

too

much

to

report

on

that

at this

point.

We're

working

away

on

that.

Team

is

working

very

hard in

the

background

on

it.

When

we've

got

something

really

material

or

interesting

to

say,

we'll

obviously

come

back

and

say

it.

The

reasons

for

the

delay,

I

think

I

spoke

about

either

6

months

or

12 months

ago,

and

they

remain

the

same.

The

scope

of

the

model,

the

platform

was

built

on

the

documentation

around

it,

all

that

type

of

stuff

and

that's

what

we're

working

on.

The

plan's

underway,

but

we've

got

something

to

report.

Obviously

we'll

come

back

with

it.

[James Pearse, Analyst, Jefferies International Ltd.]

Thank

you.

[Operator]

Thank

you.

And

our

next

question

comes

from

the

line

of

James

Shuck

with

Citi.

[James A. Shuck, Analyst, Citigroup Global Markets Ltd.]

Yeah.

Hi. Thanks

for

taking

my

follow-ups.

I just

had

a

couple

of

things to

return

to.

One

of

them

is

the

topic

of IFRS

17.

I

think

I

asked

the

question

at

the

first

half

results

when

just

thinking

about

the

margin

over

best

estimate

and

the

degree

of

redundancy

that

can

be

booked

under

IFRS

17. And

Geraint,

I

think

you

said

you

wouldn't

expect

any

change

to

the

overall

level

of

reserve

and

conservatism

that

you

book.

I

wondered

if

you

could

just

expand

a

little

bit

on

that

for

me

because

getting

kind of

mixed

messages

from

other

companies

in

Europe

and

in

the

UK

when

it

comes

to

the

degree

of

prudence

that

you

can

book,

partly

because

you

need

to

reserve

closer

to

best

estimate.

So

just

keen

to

get

your

thoughts

around

that

in

a

little

bit

more

clarity,

please.

And

then

secondly,

it's

a

bigger

picture

question

when

it

comes

to

the

2022

outlook

in

the

UK

motor

market.

Admiral

has kind

of

consistently

outperformed

and

done

a

great

job

doing

that

on

a

year-by-year

basis.

Would

you

say

that

2022

is

going

to be

more

difficult

year

to

outperform,

just

given

the

degree

of

dislocation

in

the

market?

Thank

you.

[Geraint Allan Jones]

Hi,

James.

On

IFRS

17,

we

don't

believe

there's anything

in

that

accounting

standard

that

says

you

can't

hold

a

conservative

margin

if

that's

what

the

company

decides

it's

appropriate

to

do.

And

given

our

past

track

record,

assuming

we've

got

the

ability

to

do

that

under

the

accounting

standard,

you

might

expect

us

to

take

a

similar

approach

and

maintain

a

similarly

conservative

risk

appetite

on

margin.

So

I

don't

expect

at

this

point

we're

going

to see

a

radical

change

in

the

level

of

margin

that we

hold

in

our

reserves.

The

accounts,

of

course,

will

look

quite

different, and

there'll

be

some

enhanced

disclosure

on

that

level

of

conservatism

in

the

back

end,

I'm

sure.

But

in

terms

of

the

overall

level of

margin, at

this

point,

we're

not

expecting

a

change

in

it.

[Milena Mondini de Focatiis]

And

on

your

second

question

on

2022

outlook,

I

think

all

our

comments,

in

terms

of

our performance,

were

compared

to 2020

and

2021.

And

as Geraint

explained,

for

the

last

couple

of

years,

profit

increased

by

50%

and

we had

an

average

combined

loss

ratio

reported

basis

for

UK

Insurance

in

the

50%.

And

so

it

is

really

not

plausible

that

we

will

continue

on

that

phase

unless

there

are

a

very

strong

combination

of

favorable

event.

But

we're

not

in

relation

to

the

market

as

a

whole

where

I

think

we

do

have

a

very,

very

strong

position

where

one

place

would

change

ahead

in

terms

of

FCA

pricing

reform,

as

Cristina

mentioned,

strong

pricing,

strong

foundation.

We

also

have

a

lot

of

other

businesses

that

are

growing

[indiscernible]



(01:25:27)

are

very

excited

about

the

loans

business.

We

don't

talk

much

about

it.

But

it

is

a

very

exciting

opportunity

for

us.

And

we're

very

well

placed

also

in

terms

of

continue

to

be

competitive

in

our

core

markets.

So

just

to

remind

that

with

all

in

the

reference

to

very

exceptional

year,

with

some

feature

of

the

pandemic

that

we

all

hope

are

not

going

to

be

repeated

this

year.

[James A. Shuck, Analyst, Citigroup Global Markets Ltd.]

Okay.

Thank

you

very

much.

[Operator]

Thank

you.

I'll

now

turn

the

call

back

over

to

Milena

Mondini

for

any

closing

remarks.

[Milena Mondini de Focatiis]

Thank

you

very

much.

Just

like

to

thanks

everybody

for

your

time,

for

your

questions,

really

appreciate

it.

I

also

would

like

to

really

thanks

my

colleague

and

all

Admiral

employee

and

staff.

It

was

an

exceptional

set

of

results,

record

profit

and

dividend

and

more

importantly

a

great

service

to

our

customer

and

a

lot

of

innovation

and

effort

to

put

us

in

a

good

position

for

the

future.

Very,

very

happy

to

confirm

that

we

can

reward

also

all

our

colleagues

through

the

share

scheme

that

has

been

confirmed

this

year

as

well

with

up

to

£3,600

for

all

our

employees

across

the

group

of

10,000 people,

so

thank

you

very

much.

And

see

you

in

six

months.

[Operator]

Ladies

and

gentlemen,

this

concludes

today's

conference

call.

Thank

you

for

participating.

And

you

may

now

disconnect.