Admiral Group PLC

LSE:ADM

Earnings Call Transcript 2022-Q4

[Milena Mondini, CEO]

Good morning, everybody, and welcome to Admiral 2022 Full Year Results. It's great to be able to see some of you in person after 3 years of virtual presentation. And for those who made it, thank you for making it despite the snow, the heavy snow.

Funny enough, the last time we did the results in this auditorium was the Beast from the East, and it was very challenging in terms of walking outside the auditorium. And just to stay in the theme with this snow, you may notice this shocking setting of Christmas jumper in the picture. But just to take distance, don't worry, this is not Admiral theme. It's just Admiral Group world.

Now there is no doubt that 2022 has been challenging -- a challenging year. There is no hiding from that. In that context, we still delivered a solid set of performance -- a solid set of results, and we believe we are on a strong footing for the future. As usual, the team and I will go through the results in detail. Let me start by giving you a bit of a highlight of 2022.

2022 was another year of macro uncertainty, dominated by high inflation across the market, combined with adverse weather events. The market response varies across geography, but it's clear that price increase lagged inflation, resulting in high combined ratios for the market. As we've done in the past, we increased rates earlier and most than our competitors, perfecting growth in our U.K. insurance business and seeking the right trade-off between margin and growth elsewhere.

We took particularly strong actions in the U.S. where the market was even more challenging. And this approach led us to deliver, despite the external challenge, a solid profit of £469 million for the group. This number included a profit of £616 million for our U.K. insurance business.

That is above 2019 prepandemic level and the loss of £49 million for U.S. We also increased group customer by 11%. International motor grew by mid-teens and other products more than that.

Our approach to reserving remains prudent, and we finished the year with a strong capital position. Our strategy also remain unchanged, and we continue to make progress, particularly in data, in technology and in new products.

Looking ahead, there is still uncertainty, but the market trends we are observing over the past few months allow us to believe that the insurance cycle in the U.K. market is likely reverting. And with the underwriting discipline we showed this year, we are well positioned for that.

Now given everything is going on with the broader market, let me share a bit more about the key trends that are impacting our business. Firstly, inflation impacted all the geography we operate in. As you can see in the graph on the right of the slide, we don't have comparable data for U.S., but we're observing similar patterns there. Also, motor claims frequency increased year-on-year, although stabilizing at a lower level than prepandemic. Market premium did increase, as you see in the graph, almost everywhere, but less and later than inflation.

As Cristina will explain, in the second half of the year, we started to see this trend reverting, leading to a slightly more positive outlook for 2023.

Another feature of 2022 is a depressed level of premiums. This was driven mainly by FCA pricing reform in U.K. and by low level of premiums in Continental Europe. In this context, as Costi will explain later, our growth in Europe is even more remarkable. Both this dynamic slightly improved in the second half of the year as well.

Beyond motor insurance, we experienced adverse weather events in U.K. and in France. We started the year with storms. We had a record-breaking dry and hot summer, and we finished the year with cold snaps. Volatility in macroeconomic indicators, including interest rate rise, increased uncertainty in the lending market.

And to conclude on a more positive note, people started to travel again, increasing demand for insurance-related product.

In this market context, we continue to do what we do best. We maintain underwriting discipline as well as a conservative approach to reserving and capital management, and we continue strengthening our platform for sustainable growth. We pushed through a double-digit price increase, which included more than 25% in U.S. and tightened underwriting criteria where appropriate. We prioritized margin over growth in U.K.motor and flexed the level of growth in other parts of the business where we are aiming to reach better economy of scale.

So by design, our business model, to the extent that is possible, has been proven to be resilient to market cycle. We remain a 95 percentile confidence level of U.K. reserving. We kept a prudent high coverage ratio for our loans business, a prudent look forward in view of potential further market trends, a solid capital position that leverage on strong reinsurance agreements and the focus on underwriting margin with conservative investment, and Geraint will expand on this later. But more importantly, we remain obsessed with our core components, pricing and claims management, with a very experienced and talented claims management team led by Lorna and Adam, who is here with us today and have a strong track record of maintaining our cost advantage versus market and managing inflation.

Looking forward, diversification will be another -- extremely important to mention, to add strength to our business model for the long term. The roller-coaster in terms of motor frequency and inflation over the last few years is a reminder of the importance of that. We continue to make progress on our product diversification in U.K., and I will expand on this in the next slide. Internationally, we continue to build good foundations for further growth in Europe with a more diversified distribution. In the U.S. as well as putting in place strong remedies to materially decrease loss in 2023, as Costantino will explain later, we're also actively looking at a broader range of options for the business.

In addition, in line with the sale in 2021 of our price comparison platform in Europe, we agreed a few days ago, to sell Compare.com, our U.S. platform site to Insurify, another leading price comparison platform. We will retain a minority stake in the combined entity and continue to focus on what we do best: delivering financial products to our customers.

Now 2 months ago, we turned 30 -- Admiral turned 30. I wish I was turning 30. In the first 20 years, we have focused only on motor. 10 years ago, we started our first product outside motor and by moving into household. It's worth taking a step back and look at our journey so far.

So in the last decade, the number of customers we serve increased by almost to [2.5x] to over 7 million. This growth -- more than half of this growth was driven by new products that now account for 1/3 of our customer base in U.K.

So let's take a look to the first new products we launched. Household, as mentioned, just turned 10 and has a market share of 7%. Loans and travel just turned just 5 last year and have respectively a 5% and 2% market share, with a combined customer base among the 3 products of 2.3 million customers. This growth was achieved in a typical Admiral style, organically, and with a low investment of less than £60 million. To put it in context, this is an equivalent of an acquisition cost of less than £2 per customer.

Cristina, Scott will expand on household and loans later. But it's worth mentioning that our travel business, despite a bumpy journey during the pandemic, is growing fast and is developing strong.

The reason why we're so excited about growth -- about diversification, it's not the growth itself. It's not only the growth itself, but it's also the resilience that we are ingraining in our core business with customers that own more products -- have more product with us, showing higher persistency and higher lifetime value than the others. And is also pleased to see that we were able to transfer our core competence into new product and, more specifically, in particular, I would say, more sophisticated risk selection.

Looking forward, our focus will be to make sure that we have a single view of the customer and for the customer with better joint user experience for our customer and also putting ourselves in the position to be able to exploit even more synergies.

The business diversification remains a core pillar of our strategy but is not nearly one. We'll also continue to stay close to our customer as they change the way they move around. Our priority is mastering the underwriting of electric vehicles and connected car and to continue testing new mobility propositions. At the same time, we continue to upgrade our data, our technology and also the setup of the organization to increase speed to market whilst maintaining a cost-conscious approach. Now the customer, the customer, the customer remain in the center but also the destination of our journey and our people, the engine that underpin our success.

Let me share now a few examples of progress made on our strategy this year. Two exciting piece of news, launch of pet insurance in the U.K. and Admiral Money making its first profit. It's also great to see doubling the number of customers that are benefit from lending and an insurance product from us. And as a result of this, showing better loss performance than the other, as Scott will explain later.

In the motor evolution space, we grew our electric vehicle base by 60% whilst adding new features as, for example, out-of-charge cover, and we invested in a car subscription platform, Wagonex to better understand this emerging trend.

It's very exciting to see the continued progress we made on ADMIRAL 2.0, including the launch of a new claims system that will reduce settlement time for many of our customers and the extension of our machine learning models now in power pricing for, respectively, 30% and 50% of our motor and household sales pricing.

So in conclusion, the last year -- in the last year, we both announced internal capabilities and built foundation for future growth. And this, combined with the underwriting discipline and agility, put us on a strong footing for the future.

Now to Geraint, who will give us more detail on Admiral financial performance.

[Geraint Jones, CFO]

Thanks, Milena. Hi, everyone. I'll cover the main points from our 2022 financial results, a challenging year it was, as Milena has mentioned. Then I'll go through what we're seeing on U.K. motor profit, loss ratios and reserves.

I'll give a brief update on a couple of other financial topics. And I'll finish on the healthy capital position and final dividend.

So let's get going. This slide shows the main group financial metrics for the year. And similar to half year, I'll remind everyone that 2021 was Admiral's most profitable year. The results were very positively impacted by COVID, of course. As we know that benefit has now largely disappeared and, instead, we see elevated claims inflation in 2022, leading to higher loss ratios and the second half also through some bad weather and property subsidence into the mix as well. So clearly, a challenging comparative year.

But with 1 or 2 exceptions, the 2022 numbers were actually quite reasonable, especially when you compare back to before the pandemic. Pretax profits and earnings per share were down around 40% versus 2021, £469 million and 124p. Those percentages are actually slightly better than they were at the half year position.

Return on equity, basically in line with the half year, lower than the past few years but still a very healthy number, and the reduction arises because of the lower profit but a bigger and a more diverse set of businesses and obviously higher amounts of capital back in those businesses.

The closing solvency ratio remained strong, and we are proposing a 91% payout for the second half, which will bring the full year dividend to 112p per share. And that's 90% of the full year earnings plus, of course, the 45p final payout of the Penguin release of capital from the interim.

Now despite very difficult markets in most places, the group continued to grow. So let's take a look at what's happening to customer numbers and revenue. Key messages to this slide are similar to the 2022 half year position, strong and pleasing growth in almost all our diversification businesses, while significant price increases in U.K. Motor led to a basically flat portfolio year-on-year. And Cristina will explain the mix effect that means that revenue in the U.K. is also basically flat despite those very significant rate increases.

We'll cover the details throughout the presentation, obviously, but it's nice to note now that just under 50% of customers come from non-U.K. motor diversification businesses. And I would point out that practically all of the international growth came in Europe as we were much more cautious on volume in the U.S., more really good growth from Admiral Money, too.

Moving on from the top line. Let's look at the drivers of the change in the profit year-on-year. This is the group income statement by business segment versus 2021. As you can see, U.K. insurance was the main driver of the change.

More detail on the motor result very shortly. But common with others in the market, we saw more adverse weather in 2022, especially in the second half, and that led our household business to report a small loss. We're very happy, though, that the non-weather loss ratio is progressing very nicely and is much better than the prepandemic number, and we're very excited by the progress in our household business.

The overall European results, as you can see, was a loss of £5 million, £3 million of which relates to new products, and we continue to nicely build those businesses in Europe and lots of confidence in what our teams in Europe are doing.

In the U.S., as reported at the half year, there was a very sharp market-wide spike in damage inflation. And despite very substantial price increases from our business, we see a significant loss for the full year. Costantino will explain more later, and Milena has already mentioned our response to the results that we're seeing in the U.S.

Final thing for me to point out here is the excellent first of many profit from Admiral Money, which is small for the time being, but we are very happy with it, especially given the backdrop. But U.K. motor is the big driver of the change. So let's take a closer look at that result.

This shows the income statement versus half year -- versus last year, sorry, with notes on the key movements. The main drivers of the change are consistent with the half year position, and there are basically 2.

Firstly, higher frequency combined with much higher inflation leads to a higher current period loss ratio. And then profit commission, which is very large in absolute terms of £170 million is lower than 2021's exceptional results, and that's due to the different level of profitability in the immediately preceding underwriting year. We've got the usual charts on releases and profit commission by underwriting year with a bit of history in the appendix, which shows you what's happening there.

Our loss ratios are, of course, the key driver of the profit. So let's take a look at what we're seeing on loss ratios. The chart shows the projected accident year loss ratios, and the change in the projection versus 6 months ago is shown in the brackets. We see continued improvements in the projections generally related to large injury claims. And over the course of 2022 as a whole, the improvements were large.

And those improvements come despite us building in a prudent allowance for potential inflation on future injury claim settlements, and Adam will talk more about that shortly.

We included some comments here on the high initial projection for 2022 accident year. Our recent years, as you know, are always cautiously projected, but there is particularly high uncertainty in 2022 as we set out on the slide. All being well, we, of course, expect that number will improve.

The margin in our booked reserves is still very prudent, as you can see, and as you'd expect, that it's a bit lower than it was at the end of 2021. It's now aligned with the top end of the range that we offset under IFRS 17 from 2023 onwards. And as we would usually say, as long as there are no big adverse shocks in claims development, reserve releases will continue to form an important part of our reported profits.

Moving on now to look at the capital position and the final dividend. Solvency set out at the top, we continued to report a strong position with 180% solvency ratio. It's a little lower than the comparative periods, as you can see, mainly due to financial markets. To illustrate, if you back out the impact of spread movements over 2022 as a whole, our closing ratio would be around 190%. We show waterfalls from the half year to the full year and the full year to the full year solvency positions in the appendix.

And on the bottom, we've got the dividend information. So we're proposing a final dividend of 52p per share. That's 91% of the second half profit, and it brings the total for the year to 157p including the final part of the Penguin Portals special dividend. And if you exclude that Penguin part, the full year payout is equal to 90% of earnings, and 90% remains our guidance, obviously, subject to the appropriate caveats on dividend.

A couple of comments here on financial topics before I wrap up. As I mentioned just now, 2022 was a lively year for financial markets, as we all know. So I've set out a few points here on our investments. The investment strategy hasn't changed. We haven't really materially shifted the asset allocation.

I'd still call it conservative, and it's well matched. But clearly, it's not immune to rate and spread movements, as you can see. Higher rates will mean higher income. And again, there's more detail in the back of the pack.

Briefly on reinsurance, we haven't notably changed the level of protection in our main motor excess of loss placements that renewed on the 1st of January. There were cost increases as we know but not what I call crazy. And nothing particularly new to report on proportional reinsurance or coinsurance. There was -- I noted on an earlier slide, there are some extended agreements, which took effect in the U.S. at the start of 2022, which have led to Admiral retaining a bigger share of the loss for 2022.

And lastly, despite the protests from my colleagues, I should mention IFRS 17, big changes coming from the half year. And our fantastic colleagues, Rachel and Katie along with Mauricio did a fantastic job briefing back in November, which -- and that's well worth a look for the key points of IFRS 17, which are set out again on the slide. Looking forward to the half year.

But to summarize a few key points on the results. 2022 was a difficult year. Now the backdrop was definitely one of the toughest in my time at Admiral. But overall, I think there's a lot to be proud of: very nice growth in our diversification businesses, higher U.K. motor profits than prepandemic, Admiral Money's results, just to name a few.

And I believe the actions that we've taken throughout 2022 leave us very well placed as markets continue to turn as we enter 2023. And of course, we continued to deliver a very healthy solvency position and a high dividend payout ratio.

And speaking a great combinations, I shall pass you now to Cristina and Adam, who will talk to us about the U.K.

[Cristina Nestares, CEO UK Insurance]

Thank you, Geraint. Good morning, everybody. I'm going to cover the key aspects of the results of the motor and household U.K. insurance book. I'm going to particularly focus on inflation -- sorry, on pricing and on the outlook for 2023.

And the second part of the couple, Adam is going to do a deep dive on motor claims.

Let's start with a summary of the highlights of the year for the U.K. business. 2022 has been a challenging year. It's been dominated by high inflation. In this environment, during this part of the cycle, Admiral has continued with its prudent and conservative approach.

We increased prices ahead of the market, and this has resulted in a decrease in customer numbers, in the second half, of 4%. Inflation remains high, but there are some early signs of damage inflation easing. And I'm very proud to say that Admiral still has an advantage in terms of claim cost versus the market, and it has continued throughout 2022. In terms of household, strong growth but results impacted by weather events. And finally, for 2023, we expect a better outlook for both household and motor.

Now let's talk about the pricing environment for the motor market, quite an interesting market. First, I want to be very clear about the price changes that Admiral has done in 2022. Back at the beginning of the year in January, because of the FCA change, we increased new business prices by double digits and decreased renewals by mid-single digits. These changes were very similar to what the rest of the market did. And then secondly, since March and to take into account the high inflation, we have increased prices by circa 25%, and these increases are both for new business and renewals.

When looking at the market, we have some public index. We can see the ABI, shows an increase of 7% in the premium year-on-year. Confused index, which only looks at new business, it's showing an increase of 19%.

Now I believe the graph on the right of the slide is quite interesting. Just to explain what the graph is, it's based on Pearson Ham. It's data by individual competitors' new business rates on price comparison. And the wages display, it's indexed to January 2021. In blue, Admiral.

In gray, individual peers. As you can see, Admiral started putting prices up ahead of the market and has continued putting prices up throughout the rest of the year.

As I already mentioned, this means we have lost competitiveness to the rest of the market. So in the second half of the year, we decreased our total book size by almost 4%. As a reminder, in the first half, we increased by 3%, mostly driven by high retention. So the combination for the full year, we have reduced our book size by a bit less than 1%.

Now you might be wondering why is our premium flat given all these strong price increases that I'm talking about. Well, 2 key reasons. The first one is a very -- it's a change in mix basically during 2022. The size -- the proportion of our renewal book increased versus previous years. And traditionally, renewal book has a much lower average premium than new business.

The second reason is most of these increases happen after May. So it takes some time until they are fully earning through.

And then finally, I just want to make clear that given these price increases, we feel very comfortable that the loss ratio of the policies we wrote in Q4 last year are going to be much better than the loss ratio of the policies that we wrote at the beginning of the year.

But now I'm going to pass you to Adam to talk more about motor claims. I'll come back later.

[Adam Gavin, Deputy Head of Motor Claims]

Thank you. Thanks, Cristina, and good morning, everyone. Actually, this monitor, off somehow. Here we go. It's really good to be here again, and I'll start with an overview on some of the key trends in damage and claim frequency.

Looking at frequency first. You'll see throughout 2022, we've seen a period of increased stability, maintaining a position of 10% to 15% below prepandemic levels. We're comfortable that some of the increases that we observed in Q4 were most likely due to normal seasonality, and reductions of this level of 10% to 15% appear to be the new norm. We continue to monitor this area very closely though.

On the same chart, you'll also see market damage severity indexed the same point in 2019. This is a combination of own damage and third-party damage. There's clearly still some volatility here, although it does appear that damage inflation is starting to ease at a market level after a period of significant increase.

Some more detail now on the primary drivers of damage inflation. The chart on the right of slide will hopefully be familiar to you by now. It shows U.K. residual vehicle values, which have been a key driver for damage inflation over recent years. Whilst these values are still elevated, they have stabilized over the last 6 months, which will feed through into overall claims inflation.

Increases in new vehicle supply and an economic -- potential economic downturn may influence this as well.

We do, however, continue to see elevated inflation in vehicle repairs. The drivers for this elevated inflation remain unchanged. But as a recap, there are capacity constraints caused by labor shortages, increased overheads and challenges in parts availability and distribution. You'll be aware that in more normal times, we experienced damage inflation in the mid-single digits due to advances in vehicle technology. There's no quick fix for some of these market-wide issues, so we anticipate seeing elevated inflation on repair compared to prepandemic levels throughout 2023.

It's important to remember though that the issues detailed above impact both own and third-party damage, and we normally recognize third-party inflation slightly slower than own damage due to payment delays between insurers, which means the inflation on third-party damage could persist for longer than own damage.

Moving on now to the next slide and some more detail on our performance, the outlook for 2023 and some information on key bodily injury trends. Despite the challenging market conditions, we continued to outperform our competitors when looking at overall cost. The chart on the left of this slide shows our average spend versus the market indexed to 2020 to cover the period of the highest uncertainty. It demonstrates our ability to manage this tough inflationary environment better than the market. Some key areas supporting this result have been an increase in analytics and digital capabilities as well as enhanced fraud detection.

Naturally, though, we believe that we have to be highly competitive in all areas of claims to maintain the consistent advantage.

We also made a change to our repair network in H2, consolidating our existing network into 5 strategic partners. Whilst it's early days, we're confident this is the right change to make to drive better outcomes in the short and long term. And it's a great example of our ability to execute key strategic change at pace.

Looking at claims inflation now. A reminder that at the half year, we estimated claims inflation at 11%, and we're maintaining this estimate of 11% for 2022 as a whole, given our usual prudent approach and the uncertainty that we still face. The outlook for inflation in 2023 remains challenging. However, the reduction in residual values points to a likely small decrease in claims inflation for 2023.

Next, I wanted to cover some of the key bodily injury trends, starting with the whiplash reforms. You may be aware that the Court of Appeal recently gave a much-awaited decision on multisite injuries, which we hoped might bring some greater certainty on severity. The insurance industry as a collective, though, has decided to appeal that decision, which unfortunately doesn't move us much further along. Uncertainty remains around the valuation of these injuries. What we can say is if the Court of Appeal decision would stand, we'd likely see savings towards the bottom end of the range we've previously given of £15 to £25, but we don't anticipate material changes to the frequency benefits already derived from the reforms.

Moving on to large bodily injury now, starting with care costs. At the half year results, we talked about the relationship between the ASHE care index and overall wage inflation, and we're pleased that inflation has progressed in line with our expectations on care. The majority of the impact of care inflation is being felt on a small number of claims almost exclusively above our excess of loss threshold, so not impacting our reserves materially. Some uncertainty remains regarding more general inflation in large bodily injury, and given the life cycle of these claims, it may take some time to manifest. Due to this uncertainty, we're taking a very cautious approach to development patterns in large bodily injury reserves.

On top of this caution, we also continue to hold what we feel are appropriately prudent provisions to cater for potential inflation that we're yet to see. Taking into account our approach to development patterns and our inflation provisions, we're confident that we are very well covered.

Lastly, I wanted to comment on the Ogden rate. The current economic climate has clearly created a more positive backdrop. However, significant uncertainty remains, especially as the government has launched a call for evidence on a dual discount rate. We anticipate the new Ogden rate being published at some point at the end of 2024 or the beginning of 2025. And given the current levels of economic and political uncertainty and also the complexity of the review, we propose no changes to our current reserves.

That's it from me, and I'll pass you back to Cristina, who will talk about household and wrap up on the U.K.

[Cristina Nestares, CEO UK Insurance]

For household, there are 3 parts of the story: growth, weather and underwriting discipline. In terms of growth, we grew 20%, with a higher growth in the first half of the year. And the key drivers of this growth has been above market retention and also an acceleration in our multi-cover proposition.

In terms of weather, 2022 has been a turbulent year. We had storms in Q1. It was followed by a lovely heat wave in the summer that, unfortunately, resulted in an increase in subsidence claims. And then in December, we had a cold snap that has meant an increase in burst frozen pipes. With all of this, we have done a prudent estimate impact of £32 million weather cost, reducing the household result to a loss of £6 million.

I'm pleased to say that when looking at the loss ratio nonrelated to weather or attritional loss ratio, we have actually seen an improvement versus prepandemic levels despite inflation. This is mostly done to continuous improvement in our claims handling, especially in how we manage our suppliers.

In terms of underwriting discipline, in the second half of the year, we increased prices by around 10% to take into account both inflation in the market and weather events.

And beyond our normal pricing discipline, we have continued making investments in our household business and making it stronger, mostly around pricing, analytics and digital, and this has resulted into an increase of our expense ratio. But as a reminder, our expense ratio is still well ahead of the market. When I say ahead, I mean well below the market. So looking at 2023 and beyond, I remain confident that the household business will continue to grow, building on the strong foundations of better-than-market expense ratio and improving loss ratio.

And finally, an outlook for 2023. Let's start with pricing. In terms of motor for 2023, Admiral has already increased prices by mid-single digits. And we have also seen very strong increases by some of our competitors. We expect these trends to continue.

We expect market and Admiral to continue putting prices up, especially in the first half. Now for this year, Admiral expects to maintain a pace of rate increases. That means our motor volume are not likely to grow in the first half. Historically, we have looked to grow at times when the market corrections have overshoot. And we need to get more certainty in the underlying inflation before we go back to growth.

In terms of household pricing outlook for 2023, we have also increased prices by about low single digits, and we're also seeing momentum in the market, and we expect this to continue throughout 2023.

In terms of claims for motor, as Adam has said, we expect a flat frequency and an improvement in damage inflation. However, there is still uncertainty in many areas like third-party, large bodily injure and whiplash.

In terms of household claims, we saw in 2022 building supply cost and repair cost inflation that has impacted inflation in the market, and we expect this to continue in '23. Also, the supply chain in household is under pressure because of the increase of long-tail claims related to subsidence and freeze. I was saying that in Admiral, we have managed to counterbalance these pressures on inflation by improving our claims management, and we expect this to continue throughout 2023.

So on a nutshell, during 2023, we will maintain pricing discipline, and we will continue prioritizing margin over growth. We do expect the loss ratio of both household and motor to improve for both the market and Admiral. However, it will take time for this improvement in the loss ratio to earn through.

This is all for the U.K. insurance results. '22 has been challenging year, but we have continued with our conservative approach. We think the market was a bit slow to respond to inflationary pressures, which resulted in a reduction in our book. But we are seeing, from Q4 and continuously this year, an increase in market prices.

Therefore, we think 2022 is the worst year in the cycle, and we expect a better outlook for '23.

And now over to Costi to talk to us about the international results.

[Costantino Moretti, Head of International Insurance]

Thank you, Cristina. Good morning, everyone. Let me take you through the results and outlook for our international businesses in 2022.

In Europe, we have established solid operations. And we are building a portfolio of valuable assets for the group that I'm confident will deliver meaningful profit in the long term. In the U.S., the significant negative impact of inflation has increased losses for the whole industry. And Elephant was not immune. We have been taking strong action that should deliver reduced losses in 2023.

Let me start with our European businesses on the next slide. In 2022, we continued to build scale in all our operations and diversified our distribution efforts that have started to pay off, bringing in new customers. The investments in new distribution capabilities are significant. In fact, if we take them out of our combined results, we would have been profitable this year.

In 2022, the market environment remained challenging. And we cautiously lowered our run rate and protected the bottom line with significant price increases, raising prices earlier than our competitors, which have continued throughout the year. Given our strategic objective to return meaningful profit to the group, it's important to continue to build scale. Over time, always assessing the optimal trade-off between margins versus growth.

Thanks to these actions, I believe we are in a good position for 2023, where we have seen early signs of market cycle changes. We've made strong progress in executing the Admiral 2.0 strategy, with a portfolio of initiatives that will help us to accelerate time to market of new features and products as well as the adoption of machine learning and gaining more efficiencies. A couple of weeks ago, our Italian business hit the milestone of 1 million customers. So this is a good moment to share more about the business and the solid performance delivered.

So moving to the next slide. ConTe is a clear example of the deployment of Admiral competitive advantages in another country. Among several good things ConTe has achieved, one to note is our risk selection capability, which has enabled a better loss ratio and a higher average premium than the direct market. These competitive advantages have underpinned a track record of profit and a growing customer base in a direct market that has been very challenging and where the average premium dropped more than 20% over the last 5 years.

ConTe's access has also been dependent on a spirit of continuous innovation. We were the first in the group to implement Scaled Agile, and we also focused on digital and automation investments that have paying dividends with an outstanding efficiency ratio. ConTe is also a well-trusted brand recognized as best in class for customer service and a great place to work for our staff.

The ConTe success story reinforces the importance of achieving scale to be sustainable, profitable. This is an important reason to continue grow in France and in Spain while following a methodical approach and leveraging new commercial opportunities. For example, in Spain, the partnership with a large retail direct bank, ING, should offer a meaningful growth opportunity in the long term.

Overall, 2022 has been a year of investment and solid progress on our strategy. And I remain very confident on the trajectory of the European businesses to generate meaningful value for the group.

Moving to the U.S. on the next slide. Results are very disappointing, with the business making a $60 million loss. As mentioned at the half year, we took strong action, and we did so to a greater extent in the second half of the year. Unfortunately, it takes some time to feed into results, and the majority of the impact will be visible in 2023.

An unprecedented level of claims inflation hit the U.S. motor insurance industry. No one has been immune from this, including large players that, in 2021, posted profits but have reported single- to double-digit billions of dollar losses for 2022.

You can see from the top right chart that we started from a lower average claims cost but saw exactly the same 21% market inflation across our claims book. The new reinsurance contracts increased, year-on-year, the share of losses retained by Admiral, though they supported a significant capital relief for the group.

Elephant continued to take actions and to react to the high inflationary environment. In H2, we implemented several strong actions that should produce significant benefit from 2023, where we expect to drastically reduce the losses. For example, we increased rates more than competitors, materially reduced acquisition spending by 40%, cut footprint in nonperforming segments, shift towards higher lifetime value customers, and we significantly reduced fixed costs. We are committing to reducing the losses for the U.S. and are confident that the actions we are taking will deliver better performance in 2023.

From a market perspective, we are seeing the first signs of a reduction in the impact of inflation whilst prices remained strong.

In conclusion, there is no doubt that we have lots of work to do. In the U.S., our focus on turning the performance around and unwavering, and the actions we are taking will reduce our losses for 2023. In Europe, we have a solid base that we continue to invest to deliver long-term value for the group.

Thank you. Now I'll pass over to Scott to talk about our loans business.

[Scott Cargill, CEO of Admiral Loans]

Thank you, Costi. Good morning, everyone. I'm pleased to report our very strong performance for Admiral Money in 2022. We've continued our philosophy of sustainable and efficient growth, and the loan book has grown to £888 million. This is up about £100 million on the half year and is in line with the guidance we provided a year ago.

And our fifth year from launch, I'm delighted to say we've delivered full year profitability for the first time, an important milestone for the business. And we've achieved this whilst retaining appropriate prudence in our credit loss provision with coverage of 7.2%, which includes post-model adjustments of £11.3 million to account for continued cost of living and mortgage rate pressure on our customers.

Importantly, our credit performance remains stable and comparable to prepandemic levels, and I'll cover a bit more on this later. It's also worth updating that we continued to take and make pleasing progress in our long-term investment in the business. One example of this is despite a relatively small scale, our cost-income ratio has now dipped below 50% for the first time, and we hope this to be an early demonstration of a likely long-term expense advantage.

Despite the external volatility and economic uncertainty, 2022 has been a positive year for Admiral Money. We are now beginning to play an increasingly important role in the consumer lending market. Since launching in 2017, we are proud to have provided more than 250,000 customers with over £2 billion of loans. And as Milena mentioned, our new business, in 2022, gave us a market share of around 2%. As you'd expect, U.K. inflation and the subsequent cost of living pressure that it creates has been front of mind since Q3 '21. We made very early decisive moves to increase the hurdles on our affordability models to ensure that after assessing our customers, we continue to lend responsibly and our customers can sustain the loan through any reasonable stress. To date, I'm pleased to confirm that our customer payment performance remains positive, with arrears and defaults in line with expectations.

Looking forward, I expect to see continued growth in our loan balances towards a £950 million to £1.1 billion range. And combined with a tightly controlled cost base, we should see further improvements in the bottom line in the years to come.

I'd like to move on now to talk about our underlying capabilities. In the past, I've highlighted 3 areas which we identified as success ingredients for the business: expense advantage, risk selection advantage and product differentiation. I've already mentioned our pleasing progress on cost-income ratio. And I'm also happy to report positive progress in our competence in risk selection. You can see this on the chart on the slide.

Over the past 5 years, we have improved our loss outcomes as we have evolved our credit and pricing capabilities and, importantly, are now showing multiple years of consistent outcomes.

As I said earlier, we see credit performance being stable and similar to prepandemic levels. For the first time, we are also showing relative outperformance for our customers who hold Admiral insurance products. You can see this on the green line. These are the customers where we have more data to inform our decisions. We consistently outperform and, in total, hold over £35 billion of consumer debt.

Engaging with more of them in the future is a key part of our strategy in Admiral Money. And in 2022, I'm pleased to report we have increased the percentage of sales to these customers.

I'd also like to pull out some customer feedback on our products. We are seeing increasing proof that U.K. customers are showing a preference for a preapproval, guaranteed rate proposition versus the traditional teaser rates offered by many of our competitors. They value the certainty and the transparency it offers and our NPS score of 72 and Trust Pilot score of 4.6 as evidence of this. And it's also a demonstration of economies of scale to come that over 80% of our customer interactions and Admiral Money are already digital.

They're going through digital channels.

So in conclusion, in 2022, we have continued our trajectory of sustainable growth. We've had the important milestone of profit for the first time. We've done that whilst remaining conservative on our provision and whilst continuing to invest in our long-term capabilities.

Looking to 2023, we entered with very good momentum and expect to benefit from a strong position in a growing market as we see a continued shift to comparison in credit score marketplaces. I'm optimistic for the year ahead and confident in the team's ability to continue to execute on our plans.

With that, I'll pass to Milena.

[Milena Mondini, CEO]

Thanks, Scott. And congratulations again, such a nice milestone. We recognized that 2022 has been a challenging year also for our people and our customers that have been impacted by cost of living challenges. For a majority of our people, one of the core of what we do, we provide permanent salary increase through the year, plus a range of benefit and support during the winter month when -- where most needed. It's great to continue to see excellent engagements score and to be so extensively recognized as a great place to work and as a diversity leader.

I can't thank enough Admiral crew for being such an amazing companionship on this journey. And I am pleased to note that once again this year, we'll award around 10,000 colleagues across the globe with £3,600 through our employee share scheme.

Customers remain our North Star, and we look after the most financially vulnerable ones with dedicated team and specific action as well this year. Helping more people to look after their future is our core purpose. And this doesn't stop with our customer and our colleagues. We continue to do our bit to secure a better future for the next generation. We decreased our carbon footprint this year, 32% on Scope 1 and 2 year-on-year, and we progressed in our journey to net zero as pledged last year.

And finally, while continuing to support emergency causes, we decided to concentrate our effort to support the broader community around the theme of employability that is helping people to find jobs also where more challenging to do so. Being a great place to work, it's a very important part of our DNA. So being a great place work and ideally a greater place to work for more people, it's something that's very close to our heart. Example of initiatives we're supporting, including girl -- supporting girls to learning to code or disadvantaged people to find job in developing countries.

So in conclusion, to wrap up, we have delivered a solid set of results despite challenging market condition. We reacted promptly to market condition, and we are in a good position for a reverting cycle, with some positive signs in the last few months, although uncertainty persist. We grew across most business, and we made good progress on our strategy. We continued to focus on our people and all our stakeholders and our culture that is the key strength of our model.

That's all for now. Thank you very much for listening, and we're happy now to take your questions.

Are you passing the microphone? Freya, please?

[Freya Kong, Bank of America]

Freya Kong from Bank of America. Firstly, you've talked about 2023 looking better than 2022 for motor. And given the pricing discipline that we've seen, do you think we get back to normal levels of profitability by '23? Or is that more of a '24 story?

And secondly, why did the 2022 underwriting yield opened at a much higher level than we saw at H1? And what's driven the slower development in the 2021 underwriting loss ratio?

[Milena Mondini, CEO]

So I think 20 -- are you going to take the second one? 2023, it's very early to comment at this point, and we normally don't give guidance. I think what is important to note is that from an underwriting point of view, we do expect the business to be more profitable than 2023, as Cristina mentioned. There are a few elements of uncertainty that persists and, more importantly, I would say, how big inflation is going to develop. We feel we are very prudently and conservatively reserved for account for the development of the high inflation, but it's early to comment at this stage.

It's important to reminder that there is a time for profit to go through -- to be earned through our account. But as I said, we start from a conservative assumption on the outlook for the future, but there is uncertainty, and we'll need to see how this is going to develop. Reserve release, everything being equal, we expect to continue to be an important part of our future.

On the second point, Geraint?

[Geraint Jones, CFO]

Yes, the 2022 underwriting year booked loss ratio increased from the half year to the full year point, as you say. The mechanics are that the ultimate projection of '22 is higher at the end of the year than it was at the middle of the year. Obviously, we didn't disclose the ultimate at the middle of the year, but that's what's happening in the background. And we've got an 8- to 9-point gap above the ultimate, I think, of the booked position at the year end.

It's not unusual for the year-end point ultimate to be higher than the midyear point. There's seasonality in it. And we've also added a bit more the inflation loading that Adam talked about on to the most recent year as well. So there's a few things that combine there. But reminder, the ultimate projection is cautious.

And then we've got an 8- to 9-point gap above that as well, which we obviously will release over time. So there's plenty to come out of that with a fair wind.

[Freya Kong, Bank of America]

Sorry, the 2021 development was a bit -- I think it's [indiscernible].

[Geraint Jones, CFO]

Yes. I mean similar reasons. The 2021 underwriting year, obviously, is a year of 2 halves, if you can have such a thing, and that the earning of '21 in 2022 was much more impacted by inflation, I think. So the first half of it was earned in '21, which was impacted by the pandemic and much less inflation. The second half of it was impacted by higher frequency and significantly higher inflation.

So that's quite an abnormal development plan for that year. But it's at a point now where you'd expect it to start drifting down towards the ultimate. And again, you'd expect the ultimate to drift down as well as we get more certainty in it.

[Ivan Bokhmat, Barclays]

This is Ivan Bokhmat from Barclays. I've got 2 questions, please. One is on U.K. motor, and this is perhaps a bit numbers-driven. But what you're talking about is an inflation of 11% and perhaps going to high single digits, if I interpret it correctly, for the next year.

But the price increases you have applied were over twice that level.

So I'm just trying to think if we go into 2023, what could prevent you from showing an appropriate improvement of margins from the current level? Because I think in 2022, part of the explanation was the mix, as you have alluded to, I mean, could there be anything else, changes to reserving, anything on reinsurance or something like that? And similarly, from that point, I guess, touching on what Freya just mentioned, the 102% booked loss ratio for 2022, is that a fair starting point for this analysis that you -- that I'm asking about?

And second question is, I mean, considering how much worse the profitability was for 2022. When we think about the year '23 and '24, the profit commission impact, how much lower would it be compared to, let's say, the £170 million that you booked this year?

[Milena Mondini, CEO]

Cristina, do you want to take the first one? And Geraint, the last one.

[Cristina Nestares, CEO UK Insurance]

Happy to, yes. What I understand from your question is whether there is anything preventing the loss ratio of 2023 to be much better than 2022. And the answer is, our expectation is that there is going to be a significant improvement. We have taken actions throughout '22, and we're already taking them in '23. That should result in a much better loss ratio.

The only question mark that remains is uncertainty around areas like large BI inflation. If you think about it, some of these claims take 5 years to close. So you sell business during this year, but actually, some of the claims take 5 years. It's hard to predict what could happen in the future. Everything we know today, including Ogden, makes us believe that it's going to be a good loss ratio year.

But if I have to single out causes of uncertainty will be inflation impacting large BI in the next 4 years.

[Geraint Jones, CFO]

The question on profit commission outlook for the next couple of years is a slightly difficult one to answer without giving you sort of guidance, I think. What we would say is that there is plenty of reserve release to come on years that are currently enormously profitable. So 2019 and 2020 underwriting years, for example, we'll still continue to release, and there is plenty of profit commission to be recognized on those years. But this is a cyclical business at the end of the day. And '21 and '22 underwriting years will be lower profitability underwriting years than the preceding ones, influenced by the pandemic partly.

So there's less profit commission to be earned on those years because there's less profit commission.

I forgot to say beyond that, really, we've got plenty of reserve releases to come. They will have a profit commission attached to them. As Cristina said, we would expect 2023 underwriting year to be negatively better than '22, which will be the trough of the cycle, I would imagine. But difficult to comment without giving any solid numbers, I think, again.

[Darius Satkauskas, KBW]

Darius Satkauskas from KBW. Two questions, please. So the first one is sort of coming back to that premium versus inflation angle. So I suppose you put on 25% rate increase in the U.K. motor, you're talking about sort of 12% inflation potentially coming down.

Can you help us understand what's the right base for the current year loss bit to apply some sort of margin expansion -- positive jaws going forward, whatever that may be? Irrespective of whether you get inflation right going forward, what's the right base for the current year on which we start thinking about the jaws? That's the first question.

And the second question is -- it is a slightly broader one. How much more do you think U.K. motor average premium needs to increase before the conservatively pricing motor insurers can start growing policy counts? Just a broader the question. We all know who they are.

But I suppose there's a bit of optimism about what's happened in the fourth quarter, but my understanding, it's still far below what needs to happen in terms of catching up with inflation in the past few years.

[Milena Mondini, CEO]

Cristina, do you want to comment?

[Cristina Nestares, CEO UK Insurance]

Yes. So a couple of things. You have highlighted how to look and compare the 25% price increases versus the 11% inflation. So just to mention a few things around them.

First -- sorry if I go very basic, but when you think about inflation, even though it's only 11%, it impacts every open claim from any policy you have had sold years ago or the previous year. So the impact of inflation, it's right there on that moment and continues to be for a number of years, whereas price increases take time to feed through. So there is a bit of a misalignment in time that can explain why the numbers sat very differently.

And then also, just as a reminder, we were starting from a very low base. It was COVID time. Frequency was very strong favorably, and there was a lot of competition in the market. So I think there was a bit of catch-up to do.

And then I think you also asked for our expectation of inflation for 2023. So if you're okay, I'm going to pass it to Adam on that one, and then I'll finalize on the expectations about growth.

[Adam Gavin, Deputy Head of Motor Claims]

Of course, it's -- I think I mentioned in the presentation, we're looking at something slightly lower than the 11% for last year. I think you said mid-high single digits. Maybe that's the right area if there is some uncertainty around that.

In terms of pricing?

[Cristina Nestares, CEO UK Insurance]

Yes. So I think your question was, when should we expect large competitors to start growing again. I don't think we're going to see that in the first half of the year. What I've been seeing from competitors, and I think the graph on pricing explains it very clearly, it's a very strong acceleration of price increases by key competitors since Q4, and we are seeing a continuation in Q1. And I do not expect this to revert anytime soon.

So not in the first half. Maybe in the second half, you could start seeing some competitors taking growth. Also, there are very different strategies. There are companies owned by be it houses, or they have different attitudes toward growth. But -- so my answer is not in the first half but possibly some in the second half.

[Faizan Lakhani, HSBC]

Faizan Lakhani from HSBC. So my question will come back to -- some of them have already been asked. But coming back to the point where premiums up 25%, claims inflation 11%, yes, premium takes time to add through. But just trying to bridge H1 to sort of full year, I think that 25% will earn through maybe you've got maybe 10% on an earned basis and inflation around 11%. It still feels like a big move from H1 to H2 in terms of the attritional loss ratio development in U.K. motor. So if you could help bridge that and how much of that's prudent.

The second question is sort of coming to the profit commission. I can see the sensitivity is quite low for 2021 and 2022 because I guess it hits a less profitable tranche. But I guess that acts the headwind over the next couple of years, potentially relative to what you've seen in the past. But at the same time, you benefited from fairly benign wage inflation for the last sort of 10 years. And now if you are at a normalized level, what can we expect in terms of reserve releases going forward?

And the third question is quite a basic question, but you mentioned policy count dropped off by 4% half-on-half. But from what I remember in the first half, you had van growth being quite strong. If we were to strip that out, what was the policy kind of growth in H2?

[Cristina Nestares, CEO UK Insurance]

If you can take the first and third?

[Milena Mondini, CEO]

Sure.

[Cristina Nestares, CEO UK Insurance]

So the first one is how should you look at the loss ratio of H2 versus H1. It's very clear. I was mentioning before, it's very clear to us that the performance, the loss ratio of the policies that we wrote towards the end of the year, it's very different than the performance of the policies growth at the beginning. I don't believe we give guidance or concrete numbers on halves, but they feel to me completely different books and very different set of prices. And you should think about '23 almost as a continuation of that.

More price increases at the beginning of Q3 and some early signs of better or an easing in inflation around damage. Sorry, I'm going to just leave it there, if that's okay.

In terms of growth of van, we give the numbers together. The reality is that the van book grew during the first half, and it has been much more flat in the second half. So the impact in our book of van in the second half has not been significant.

[Geraint Jones, CFO]

Now the 2 questions. One was reserve releases outlook, and the second one is profit commission. So the reserve release outlook, I think we would say that we reserved in U.K. motor at 95th percentile, is extremely prudent. And there's a lot of prudence that will come out over time as those loss ratios move towards their ultimate positions.

Plus, we would expect the ultimate to continue to improve. So our expectation is in the absence of adverse big shocks moving forward, that reserve releases will continue to be material and a really important part of our profitability.

And I think you've already really hit the nail or ahead of the profit commission. So the sensitivity of '21 and '22 to smallish movements in loss ratios is clearly very small because all we're doing is recognize in our share of the underwriting movements. The booked loss ratios have to move down a fair bit more, particularly on '22 before we see any profit commission. 21, you can sort of see on the -- in the back of the pack, at least just about start to recognize a little bit. But there's those years.

As we said, they will be the 2 worst years in the cycle. 2020 and 2019 were clearly enormously profitable years, and '23 as Cristina has explained, we expect to be much better than 2022. So they will deliver less profit commission in the next couple of years just by nature of the cyclicality and the fact they're lower-profit years.

[Faizan Lakhani, HSBC]

Sorry. Can I ask another question, if that's okay?

[Geraint Jones, CFO]

You're going to do it.

[Faizan Lakhani, HSBC]

You mentioned in your slides that mixed injury, you expect us to be the bottom end £15 to £25 sort of whiplash reform. But I'm surprised to see that you don't expect a change in frequency. And I would have assumed more sort of claims farming if there's an opportunity out there. So it sounds almost a little bit optimistic.

[Milena Mondini, CEO]

Adam?

[Adam Gavin, Deputy Head of Motor Claims]

Should I take that one? I think the key difference, Faizan, is that regardless of how much the claim would get in compensation, you have to get the claim of £5,000 for the loyalty to get paid. I think we've previously had a view, which we think is pretty solid that the activity was driven by income to the lawyers and the associated supply chain around that, which I think is a key differentiator versus the previous regime, and that's why we think it's £15 to £25 at the lower end of that.

[Thomas Bateman, Berenberg]

Thomas Bateman from Berenberg. You talked about the 95th percentile, and I think you alluded to your IFRS 17. They -- you've got a corridor probably around 90th percentile or so. So coming down from that 95th. What does that mean in terms of pound numbers?

And how quickly will that kind of prudence be released?

Second question, you talked about claims inflation for bodily injury above your excess of loss. What differentiates that claims inflation? Are those really high levels?

And finally, we obviously saw that you agreed a sale of Compare.com. I think you said that you're exploring options for the rest of the U.S. business. Could you elaborate a little bit more on that, please?

[Geraint Jones, CFO]

Shall I do percentiles for starters?

[Milena Mondini, CEO]

You do the percentiles. Adam, you take the one on the frequency. And I'll take on U.S.

[Geraint Jones, CFO]

Yes. So we hold a 95th percentile confidence level reserve position in U.K. motor and similar positions in our other businesses. From IFRS 17, we will have a corridor accounting policy, which says we will reserve between the 85th and the 95th percentile. And I think we've said for a number of years that we'd expect as the portfolio balances out to be less totally dominated by U.K. motor that we would hold a lower level of reserve margin in each line of business as they're more diversified.

I would expect us to move down-ish to around the 90th-ish percentile level. But they will take a few years to do that. I don't think we'll do that in one go. And at this point, we're not disclosing sensitivity to percentile movements. But you might expect under IFRS 17, where there's more disclosure that you start to see that kind of sensitivity reported.

So no information on that right now. We will move down from the 95th, I expect. But there's a gradual movement rather than a one lump.

[Adam Gavin, Deputy Head of Motor Claims]

Should I start the cost of care? Thomas, so primarily, what we're seeing at the moment is inflation in care, a proportion of our most serious accidents. And these are the ones involved in agency care on a 24-hour basis. Given the severity of these claims, they're almost exclusively above our XOL retention level. So they're not material impacting in our reserves, but the inflation is there on this proportion of our largest and most severe accidents.

[Cristina Nestares, CEO UK Insurance]

Milena, U.S.?

[Milena Mondini, CEO]

Sorry, last one, U.S. So in U.S., we think in context, the year has been particularly challenging, and the cost to explain all the remedies that were put in place to ensure that the loss for next year are going to be significantly reduced. That's our utmost priority at the moment, and we're continuing to monitor and take bold action, and we feel confident that we will see the impact of that -- of those actions coming into place.

If we step back for a moment from the current condition channel -- challenge that are market-wide issues, we do recognize that the U.S. has been more challenging than other countries in terms of finding sustainable way of growth and sustainable acquisition cost. So we continue to look at how we can improve the situation. We have -- we start from a very strong platform in the U.S., strong team, great customer service, good technology, a very efficient operation. And the market opportunity is very large.

So we need to find -- to understand how to address that. And at the moment, we are early stage, exploring very large set of options. Nothing is off the table at this moment, and we'll comment more when we'll have more to share.

Will, and then I think after, we will take questions from the phone.

[Will Hardcastle, UBS]

Will Hardcastle, UBS. The first one is a bit granular, so sorry. I guess, as there's been a lot of questions on the 102% booked loss ratio. I guess if we were to look at it on a slightly more narrower time scale, has the trend started to improve already if we were thinking about it from a month-on-month type vision? Or is there still a bit more that could nudge up before we own all those premium direct inflation through?

And sorry, just second one, a very quick one. On the home side of it, are we getting to a stage where you could perhaps give us a sort of a large weather budget-type thing for normal years so we'll understand how much over and above this was versus normal?

[Geraint Jones, CFO]

I think Cristina summed up -- the way we think about loss ratio is clearly underwriting year or accident year. We're running budgets all the time on the profitability at the level of business that we are writing currently. Cristina said that the profitability of the business in Q4 was materially better than the business in Q2, for example. So the 102% is not going that way but the opposite.

[Cristina Nestares, CEO UK Insurance]

And you're asking about whether we use a large weather budget. And it's something that we use internally, but I don't believe we'll close it this type of -- outside, yes.

[Milena Mondini, CEO]

Can we take question from the phone? If there is any question from the phone, operator?

[Operator]

We have one question from the phone. We are now taking the question from Rhea Shah from Deutsche Bank.

[Rhea Shah, Deutsche Bank]

I've got 2. So just going back to U.K. home, do you have any profit ambitions or growth ambitions or targets for U.K. home over the medium term? And are there any cross-selling synergies or opportunities that you're seeing across the U.K. home, motor and also the travel book as well?

And then the second question, going back to motor pricing. I think in Slide 21, you're showing in 1 of the charts that your new business pricing was increasing, but it looks like it has a slower rate than the market in Q4. So did you see any volume start to improve in Q4? Should we start to see volumes improve -- new business volumes improve early this year from that difference between your pricing and the market's pricing?

[Milena Mondini, CEO]

Great. Cristina, do you want?

[Cristina Nestares, CEO UK Insurance]

I'm happy to take both. The first question was around our ambition for household. I think I'd say it's a similar ambition for all our products. We first focus on having a good foundation in terms of loss ratio and expense ratio, and we take growth from there. So on household, we're very pleased to see that we have a much better expense ratio in the market.

I'm talking about a gap of 10 points, including the increase during this year. And I'm confident we will continue. We're seeing our loss ratio improving. I'm not going to say that we are yet the best in the market, but I have lots of data that suggests strong improvements and getting to become much better than the average.

And then you were also asking, I think, our ambition beyond in terms of the different products, and something that we think is a win-win for the customer is that our multi-cover proposition, multicar, multi-cover buying several products for us gives not only very strong discount but an easier experience and a better overall performance. So they get discounts. They get the easy customer journey, and we get better data about the customer and a better ability to serve them.

So good expectations for the future. As you know, we don't give a concrete target. I'm optimistic. And I'll say we're going to continue these -- all these businesses strongly. I mean just looking at household, it has been growing between 15% and 20% every year.

And I see no reason why this shouldn't continue in the future.

And then there was a final question around the gap of rate increases between Admiral and the market. And it's true that during Q4, the gap has reduced. So the average of the market has increased prices more than us during Q4. Still, they haven't catch up, but there was an acceleration. And yes, we saw in Q4, our market share of new business increased a bit.

However, going back into Q1 and as I mentioned, we have good mid-single digits. And our share of new business is stable and is not improving too much.

[Milena Mondini, CEO]

Well, I think -- do we have time for more? Time is up. I'm sorry. Thank you very much for listening. Thank you for coming, and thank you for your question. That's it for today.