Interim Results

Admiral Group PLC 04 September 2007 Admiral Group plc Results for the 6 months ended 30 June 2007 4 September 2007 Admiral Group plc ('Admiral' or 'the Group') today announces a strong interim result with a profit before tax of Â£86.3 million for the six months to 30 June 2007, an increase of 26% over the same period in 2006. Group turnover, comprising total premiums written, gross other income and investment income, rose 16% to Â£417.8 million. H1 2007 Highlights â€¢ Profit before tax up 26% at Â£86.3 million (H1 2006: Â£68.7 million) â€¢ Total interim dividend of 20.6p, up 70% (H1 2006: 12.1p) â€¢ Group turnover up 16% at Â£417.8 million (H1 2006: Â£359.2 million) â€¢ Vehicle count up 16% to 1.4 million (H1 2006: 1.2 million) â€¢ Profit from ancillary products and services up 15% to Â£37.7m (H1 2006: Â£32.9 million) â€¢ Confused.com made a profit of Â£19.7 million (H2 2006: Â£14.3 million) â€¢ Employee Share Scheme - approximately Â£3m worth of free shares will be shared amongst 2,000 staff based on the H1 2007 result Copies of this statement will be sent to all shareholders and will be available from the registered office. Comment from Henry Engelhardt, Chief Executive 'We are very pleased to again announce record results for the first half of 2007. Profits have increased by 26% to Â£86.3 million and customer numbers have increased by 16% to 1.4 million. 'The UK car insurance market continues to prove challenging, and we are delighted to have once again increased both underwriting and ancillary profits whilst substantially growing the number of vehicles insured. 'As a result of continuing growth in the market for car insurance price comparison, Confused.com enjoyed growth in volumes and revenue in the first half 2007 with profits of Â£19.7m, compared to Â£14.3m in H2 2006. However, previously we have said that there will be more competition in this sector. Some of this competition went live during the first part of 2007 and more competitors are on their way. We will work hard to defend our leadership position in this growing market. 'Balumba.es, our Spanish car insurer, has made a strong start and we are encouraged by the level of traffic it has attracted to its internet site in the first few months of trading. As we reported last time, our new German car insurer, AdmiralDirekt.de, will be launching in late 2007 or early 2008. We are also pleased to announce our plans for the Group's next European venture to launch in Italy in 2008.' Comment from Alastair Lyons, Chairman 'The Group has continued to grow profits and generate cash, and we are very pleased to be able to declare an interim dividend that is 70% higher than the same payment last year. 'In accordance with our policy of distributing surplus cash to shareholders we propose a further special dividend of 10.3p per share in addition to a 10.3p per share normal dividend based on 45% of after-tax profits. Our policy remains only to retain within the business what funds we need to provide a prudent contingency and support our plans for growth. 'We're especially delighted that the Group's fine performance in H1 2007 will mean every member of staff who has been with us in the first six months of the year will get free shares in the Group - worth around Â£3m in total. 'Since going public in September 2004 Admiral has declared dividends on six occasions amounting in total to Â£236m or 91p per share.' Comment from David Stevens, Chief Operating Officer 'Admiral Group raised rates on average by 5% in the year ending 30 June 2007. Based on our own conversion data this would appear to be in line with the market for this period. Since the end of June we have implemented further, moderate rate increases. 'Whether the rate of premium increases continues at this level, which is roughly equivalent to claims inflation, or whether it accelerates into 2008 will depend heavily on the underlying profitability of the market. The headline combined ratio for private motor in 2006 was 104%, which implies an adequate return on capital once investment income and ancillary revenues are taken into account. However, this result was flattered by a significant reserve release of 8.4%, which puts the run rate for the year 2006 in excess of 110%, which does not provide an adequate return on capital. 'I believe that the current level of reserve releases for the market is not sustainable in the long-term and that as these releases are expended it will put more pressure on individual insurers to accelerate increases. 'Admiral has continued to grow within this difficult environment and maintain a sizeable combined ratio advantage over the market average. It would be our intention to use this economic advantage to continue to offer consumers excellent prices which allows us to grow while continuing to provide attractive returns to our shareholders.' Financial review Key financial highlights Pre-tax profit rose sharply in the first half of 2007 - up 26% to Â£86.3m from Â£68.7m in the same period last year. Earnings per share showed similar growth - up 24% to 23.0p from 18.5p. The results of the four key elements of the Group's business were as follows: 6 months ended: Year ended: June June December 2007 2006 2006 Â£000 Â£000 Â£000 Underwriting profit 14,685 13,474 28,351 Profit commissions 9,355 9,639 19,926 Ancillary and other net income 42,511 36,846 75,985 Confused.com profit 19,702 8,747 23,080 Pre-tax profit 86,253 68,706 147,342 The Group achieved an increase in the underwriting result whilst growing market share across all businesses. The total number of vehicles insured rose 16% to 1.4m. This growth is encouraging at a difficult time for the UK market and demonstrates the ability of the business to grow share at all stages of the cycle. The share of profits arising from non-underwriting sources rose again - up to around 72% of profit from 66% in H1 2006. A 125% increase in Confused.com's profits contributed significantly to this ratio, as did continuing growth in income from ancillary products. Turnover, which measures the combined size of the Group's activities, grew significantly (16%) in the first half of the year compared to H1 2006: 6 months ended: Year ended: June June December 2007 2006 2006 Â£000 Â£000 Â£000 Total premium written 324,607 293,998 566,608 Other revenue 85,824 61,470 131,621 Net investment return 7,320 3,736 9,925 Group turnover 417,751 359,204 708,154 Fastest growth again came in the other revenue line, which predominantly reflects ancillary and Confused.com revenue. Total premium written increased by over 10%, whilst net investment return almost doubled compared to the same period last year. Underwriting Underwriting arrangements During 2007 the Group retains 22.5% (2006: 25%) of UK motor underwriting on a net basis (60% co-insured with Great Lakes - a UK subsidiary of Munich Re; 17.5% ceded to two reinsurers - Swiss Re, 10.0% and Partner Re, 7.5%). The Group also retains 35% of the risks generated by Balumba.es - its Spanish motor insurer, with 65% being reinsured by Munich Re under a long term treaty. The Group has also entered into further arrangements for Munich Re to underwrite 65% of the motor premiums arising from our new German business to be launched later this year or early next. Underwriting results Total premiums grew by 10% to Â£324.6m from Â£294.0m. The number of private cars insured by the Group rose 16% to 1.35m from 1.17m (higher than the growth in premium due to mix effects). Balumba had 16,600 customers at 30 June 2007, having started trading on 31 October last year. Premium rate increases of around 5% have been implemented in the UK motor business since 30 June 2006. Conversion rates have remained relatively static over the period, indicating that premiums have probably risen in the market as a whole at roughly the same pace. Quote volumes in UK motor rose substantially - up 48% to 11.2m from 7.6m. This primarily reflects the continuing development of price comparison sites as a distribution channel (over 80% of our UK quotes were provided through aggregators). Net insurance premium revenue (net earned premium) decreased slightly compared to the first half of 2006 - Â£71.6m, down from Â£74.9m. This reflects the 2.5% reduction in UK underwriting retention. The reported loss ratio increased by one point to 73%. The Group's approach to reserving has remained consistent, and as a result, reserve releases continued to contribute positively to the result - rising to Â£12.3m from Â£9.8m. Releases positively impacted the reported loss ratio by over 17 percentage points (H1 2006: 13 points). The UK motor expense ratio increased to 15.8% from 14.7%, and when Balumba's result is included, the Group ratio is 16.6%. The expense ratio is reconciled to the figures included in the income statement in note 7 below, whilst the underwriting result is reconciled later in this review (along with the reported loss ratio). The Group combined ratio increased by 2.7 percentage points, to 89.7% from 87.0%. Increased investment return more than offset this increase, and as a result the Group underwriting result increased by around 9%, to Â£14.7m from Â£13.5m. Profit commission Total profit commission recognised (co-insurance and reinsurance) decreased marginally to Â£9.4m from Â£9.6m. The comparative period does however include Â£2.0m relating to earlier year contracts with Hibernian Re (Â£0.5m has been recognised in the first half of 2007 relating to this contract). Excluding the Hibernian amounts, the total increased to Â£8.9m from Â£7.6m, resulting from continued positive development of prior year claims reserves. Ancillary and other net income 6 months ended: Year ended: June June December 2007 2006 2006 Â£000 Â£000 Â£000 Ancillary profit 37,743 32,929 67,022 Interest income 3,999 2,066 4,539 Instalment income 2,678 2,459 5,676 Gladiator Commercial profit 979 979 2,025 Other expenses and share scheme costs (2,888) (1,587) (3,277) Ancillary and other net income 42,511 36,846 75,985 Net contribution from ancillary products and services rose almost 15% to Â£37.7m from Â£32.9m. This is broadly in line with overall insured vehicle growth. Average gross UK income per average active vehicle moved marginally lower to Â£68 from Â£69 in the same period last year. Confused.com 6 months ended: Year ended: June June December 2007 2006 2006 Â£000 Â£000 Â£000 Confused.com operating profit 19,702 8,747 23,080 Confused enjoyed significant growth in quotes and income in the first half of the year, contributing to an increase in operating profit of over 125% to almost Â£20m. Total quotes in the first half of 2007 were 7.1m (6.1m motor, 1.0m other), up from 4.1m (3.8m motor) in the first half of 2006. Gross revenue rose around 116% to Â£34.3m (Â£29.4m motor) from Â£15.8m (Â£13.8m motor) in H1 2006. Confused also increased its share of home and travel insurance price comparison by improving market coverage and price competitiveness. Revenue growth has also been achieved in a number of other general insurance areas including, for example, van and motorbike insurance. Earnings per share (EPS) Earnings per share rose 24% to 23.0p from 18.5p - slightly behind the growth in pre-tax profit due to issues of shares to the trusts involved in administering the staff share schemes (see note 21). Taxation The total taxation charge reported in the income statement is Â£26.0m (H1 2006: Â£20.6m), representing 30.2% (H1 2006: 30.0%) of pre-tax profit. Investments, cash and investment return Total financial investments and cash at 30 June were Â£460.6m, up 13% from Â£408.4m twelve months earlier. This movement is after distributions to shareholders of almost Â£94m in the twelve month period since 30 June 2006 (Â£64m paid out in the twelve months leading up to that date). As reported in the 2006 full year results, the Group changed investment strategy in the latter part of 2006, moving away from fixed income mandates and into money market funds. The results of this change have been very positive for investment income, with net return almost doubling in H1 2007 compared to the same period last year. Total investment and interest income rose by 95% to Â£11.3m from Â£5.8m. Dividends There has been no change in dividend policy, which is based on the principle of returning excess cash to shareholders. The Directors expect to make a normal distribution of 45% of post-tax profits each half-year, and will regularly review the Group's available resources to determine whether it is appropriate for the Company to pay further special dividends. The Directors have declared an interim dividend for H1 2007 of 20.6p, which is made up of 10.3p per share normal payment and 10.3p special element based on the Group's resources at 30 June. This distribution is 70% higher than the interim payment declared in 2006. The dividend will be paid on Wednesday 17 October. The ex-dividend date is 19 September, the record date 21 September. Reconciliation of underwriting profit 6 months ended: Year ended: June June December 2007 2006 2006 Â£000 Â£000 Â£000 Net insurance premium revenue 71,647 74,863 144,955 Net insurance claims (54,191) (55,600) (107,145) Net expenses related to insurance contracts (10,091) (9,525) (19,384) Investment return (see note 6) 7,320 3,736 9,925 Underwriting profit 14,685 13,474 28,351 Reconciliation of loss ratios reported 6 months ended: Year ended: June June December 2007 2006 2006 Â£000 Â£000 Â£000 Net insurance claims 54,191 55,600 107,145 Deduct: claims handling costs (1,801) (1,470) (3,538) Adjusted net insurance claims 52,390 54,130 103,607 Net premium revenue 71,647 74,863 144,955 Loss ratio 73.1% 72.3% 71.5% Consolidated income statement 6 months ended Year ended 30 June 2007 30 June 2006 31 December 2006 Note Â£000 Â£000 Â£000 Insurance premium revenue 3 108,983 92,614 188,288 Insurance premium ceded to reinsurers 3 (37,336) (17,751) (43,333) Net insurance premium revenue 71,647 74,863 144,955 Other revenue 4 85,824 61,470 131,621 Profit commission 5 9,355 9,639 19,926 Investment and interest income 6 11,319 5,802 14,464 Net revenue 178,145 151,774 310,966 Insurance claims and claims handling expenses (85,186) (70,029) (136,472) Insurance claims and claims handling expenses recovered from reinsurers 30,995 14,429 29,327 Net insurance claims (54,191) (55,600) (107,145) Expenses 7 (36,033) (26,405) (54,528) Share scheme charges 21 (1,455) (420) (933) Total expenses (91,679) (82,425) (162,606) Operating profit 86,466 69,349 148,360 Finance charges 8 (213) (643) (1,018) Profit before tax 86,253 68,706 147,342 Taxation expense 9 (26,033) (20,613) (43,620) Profit after tax attributable to equity holders of the Company 60,220 48,093 103,722 Earnings per share: Basic 10 23.0p 18.5p 39.8p Diluted 10 23.0p 18.4p 39.8p Dividends paid (total) 11 62,412 38,666 70,104 Dividends paid (per share) 11 24.0p 14.9p 27.0p Consolidated balance sheet As at: 30 June 2007 30 June 2006 31 December 2006 Note Â£000 Â£000 Â£000 ASSETS Property, plant and equipment 12 7,165 6,741 7,448 Intangible assets 13 67,638 66,192 66,757 Financial assets 14 470,065 415,354 395,938 Reinsurance assets 15 108,511 68,660 74,689 Deferred income tax 19 354 - - Trade and other receivables 16 20,578 11,749 16,931 Cash and cash equivalents 17 144,792 129,449 191,242 Total assets 819,103 698,145 753,005 EQUITY Share capital 21 262 261 261 Share premium account 22 13,145 13,145 13,145 Retained earnings 22 206,190 178,617 205,682 Other reserves 22 (10) 17 (33) Total equity 219,587 192,040 219,055 LIABILITIES Insurance contracts 15 337,833 281,688 294,425 Deferred income tax 19 - 904 981 Trade and other payables 20 234,474 200,250 215,137 Current tax liabilities 27,209 23,263 23,407 Total liabilities 599,516 506,105 533,950 Total equity and total liabilities 819,103 698,145 753,005 Consolidated statement of recognised income and expense 6 months ended Year ended 30 June 2007 30 June 2006 31 December 2006 Â£000 Â£000 Â£000 Exchange differences on translation of foreign operations 23 - (50) Net expense recognised directly in equity 23 - (50) Profit for the period 60,220 48,093 103,722 Total recognised income and expense for the period 60,243 48,093 103,672 Consolidated cash flow statement 6 months ended Year ended 30 June 30 June 31 December 2007 2006 2006 Note Â£000 Â£000 Â£000 Profit after tax 60,220 48,093 103,722 Adjustments for non-cash items: - Depreciation 1,589 1,092 2,489 - Amortisation of software 216 234 446 - Unrealised (gains) / losses on investments (787) 893 (624) - Share scheme charge 2,542 1,200 2,667 Loss on disposal of property, plant and equipment and software 18 - 151 Change in gross insurance contract liabilities 43,408 27,558 40,295 Change in reinsurance assets (33,822) (14,494) (20,523) Change in trade and other receivables, including from policyholders (20,356) (15,760) (23,150) Change in trade and other payables, including tax and social security 20,054 17,918 33,652 Interest expense 213 643 1,018 Taxation expense 26,033 20,613 43,620 Cash flows from operating activities, before movements in investments 99,328 87,990 183,763 Net cash flow into investments held at fair value (57,394) (23,937) (1,073) Cash flows from operating activities, net of movements in investments 41,934 64,053 182,690 Interest payments (213) (643) (1,018) Taxation payments (23,407) (19,551) (40,931) Net cash flow from operating activities 18,314 43,859 140,741 Cash flows from investing activities: Purchases of property, plant and equipment and software (1,658) (3,293) (6,046) Net cash used in investing activities (1,658) (3,293) (6,046) Cash flows from financing activities: Repayments of borrowings - (22,000) (22,000) Capital element of new finance leases - 1,789 (1,451) Repayment of finance lease liabilities (717) (2,392) - Equity dividends paid (62,412) (38,666) (70,104) Net cash used in financing activities (63,129) (61,269) (93,555) Net (decrease) / increase in cash and cash (46,473) (20,703) 41,140 equivalents Cash and cash equivalents at 1 January 191,242 150,152 150,152 Effects of changes in foreign exchange rates 23 - (50) Cash and cash equivalents at end of period 17 144,792 129,449 191,242 Notes to the interim financial statements 1. General information and basis of preparation Admiral Group plc is a Company incorporated in England and Wales. Its registered office is at Capital Tower, Greyfriars Road, Cardiff CF10 3AZ and its shares are listed on the London Stock Exchange. The interim financial statements comprise the results and balances of the Company and its subsidiaries (the Group) for the two six month periods ended 30 June 2006 and 2007 and the year ended 31 December 2006. The consolidated results have been prepared using applicable International Financial Reporting Standards (IFRS) endorsed by the European Union. The financial statements of the Company's subsidiaries are consolidated in the Group financial statements. The Company controls 100% of the voting share capital of all its subsidiaries. In accordance with IAS 24, transactions or balances between Group companies that have been eliminated on consolidation are not reported as related party transactions. The comparative figures for the financial year ended 31 December 2006 are not the Group's Report and Accounts for that financial year, but are derived therefrom. Those accounts have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified and did not include any reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. The interim financial information has been prepared applying the accounting policies and presentation that were applied in the preparation of the company's published consolidated financial statements for the year ended 31 December 2006 Significant estimates Estimation techniques used in calculation of claims provisions: Estimation techniques are used in the calculation of the provisions for claims outstanding, which represents a projection of the ultimate cost of settling claims that have occurred prior to the balance sheet date and remain unsettled at the balance sheet date. The key area where these techniques are used relates to the ultimate cost of reported claims. A secondary area relates to the emergence of claims that occurred prior to the balance sheet date, but had not been reported at that date. The estimates of the ultimate cost of reported claims are based on the setting of claim provisions on a case-by-case basis, for all but the simplest of claims. The sum of these provisions are compared with projected ultimate costs using a variety of different projection techniques (including incurred and paid chain ladder and an average cost of claim approach) to allow an actuarial assessment of their likely accuracy and to include allowance for unreported claims. The most significant sensitivity in the use of the projection techniques arises from any future step change in claims costs, which would cause future claim cost inflation to deviate from historic trends. This is most likely to arise from a change in the regulatory or judicial regime that leads to an increase in awards or legal costs for bodily injury claims that is significantly above or below the historical trend. The claims provisions are subject to independent review by the Group's actuarial advisors. 2. Segment reporting Revenue and results for the six month periods ended 30 June 2006 and 30 June 2007, along with the twelve months to 31 December 2006, split by business segment are shown below. Consolidation adjustments represent the elimination of inter - segment trading, specifically interest charged on inter- company loans. The Directors consider there to be two business segments. These are private motor insurance and insurance broking (Confused.com and Gladiator Commercial). 30 June 2007 Private motor Insurance Consolidation insurance broking adjustment Group Â£000 Â£000 Â£000 Â£000 Net revenue 140,258 37,887 - 178,145 Profit after tax 45,434 14,786 - 60,220 Other segment items : Depreciation 1,486 103 - 1,589 Amortisation 3,622 - - 3,622 30 June 2006 Private motor Insurance Consolidation insurance broking adjustment Group Â£000 Â£000 Â£000 Â£000 Net revenue 132,905 18,869 - 151,774 Profit after tax 41,084 7,009 - 48,093 Other segment items : Depreciation 1,036 56 - 1,092 Amortisation 3,701 - - 3,701 31 December 2006 Private motor Insurance Consolidation insurance broking adjustment Group Â£000 Â£000 Â£000 Â£000 Net revenue 266,168 45,069 (271) 310,966 Profit after tax 85,699 18,023 - 103,722 Other segment items : Depreciation 2,366 123 - 2,489 Amortisation 6,508 - - 6,508 3. Net insurance premium revenue 30 30 31 June June December 2007 2006 2006 Â£000 Â£000 Â£000 Total motor insurance premiums before co- insurance 324,607 293,998 566,608 Group gross premiums written after co-insurance 132,517 102,899 196,378 Outwards reinsurance premiums (59,691) (29,966) (57,731) Net insurance premiums written 72,826 72,933 138,647 Change in gross unearned premium provision (23,534) (10,285) (8,090) Change in reinsurers' share of unearned premium provision 22,355 12,215 14,398 Net insurance premium revenue 71,647 74,863 144,955 The Group's share of the UK and Spanish private motor insurance business was underwritten by Admiral Insurance (Gibraltar) Limited (AIGL) and Admiral Insurance Company Limited (AICL). All contracts are short-term in duration, lasting for 10 or 12 months. 4. Other revenue 30 30 31 June June December 2007 2006 2006 Â£000 Â£000 Â£000 Ancillary revenue 45,259 40,141 81,527 Revenue from Confused.com 34,259 15,840 38,517 Instalment income earned 2,678 2,459 5,676 Revenue from Gladiator 3,628 3,030 5,901 Total other revenue 85,824 61,470 131,621 Ancillary revenue primarily constitutes income from sales of insurance products that complement the motor policy, but which are underwritten by external parties. 5. Profit commission 30 30 31 June June December 2007 2006 2006 Â£000 Â£000 Â£000 Total profit commission 9,355 9,639 19,926 6. Investment and interest income 30 30 31 June June December 2007 2006 2006 Â£000 Â£000 Â£000 Net investment return 7,320 3,736 9,925 Interest receivable 3,999 2,066 4,539 Total investment and interest income 11,319 5,802 14,464 7. Expenses 30 June 2007 30 June 2006 Insurance Other Total Insurance Other Total contracts contracts Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Acquisition of insurance contracts 3,877 - 3,877 3,476 - 3,476 Administration and marketing costs 6,214 25,942 32,156 6,049 16,880 22,929 Sub-total 10,091 25,942 36,033 9,525 16,880 26,405 Share scheme charges - 1,455 1,455 - 420 420 Total expenses 10,091 27,397 37,488 9,525 17,300 26,825 31 December 2006 Insurance Other Total contracts Â£000 Â£000 Â£000 Acquisition of insurance contracts 7,375 - 7,375 Administration and marketing costs 12,009 35,144 47,153 Sub-total 19,384 35,144 54,528 Share scheme charges - 933 933 Total expenses 19,384 36,077 55,461 The Â£6,214,000 (H1 2006: Â£6,049,000; Full year: Â£12,009,000) administration and marketing costs allocated to insurance contracts is principally made up of salary costs. Analysis of other administration and marketing costs: 30 30 31 June June December 2007 2006 2006 Â£000 Â£000 Â£000 Ancillary sales expenses 7,516 7,212 14,505 Confused.com operating expenses 14,557 7,093 15,437 Gladiator operating expenses 2,649 2,051 3,876 Central overheads 1,220 524 1,326 Total 25,942 16,880 35,144 Reconciliation of expenses related to insurance contracts to reported expense ratio: 30 30 31 June June December 2007 2006 2006 Â£000 Â£000 Â£000 Insurance contract expenses from above 10,091 9,525 19,384 Add: claims handling expenses 1,801 1,470 3,538 Adjusted expenses 11,892 10,995 22,922 Net insurance premium revenue 71,647 74,863 144,955 Reported expense ratio 16.6% 14.7% 15.8% 8. Finance charges 30 30 31 June June December 2007 2006 2006 Â£000 Â£000 Â£000 Term loan interest - 150 166 Finance lease interest 197 378 481 Letter of credit charges 16 115 221 Other - - 150 Total finance charges 213 643 1,018 9. Taxation 30 30 31 June June December 2007 2006 2006 Â£000 Â£000 Â£000 UK Corporation tax Current charge at 30% 24,856 23,259 45,430 Over provision relating to prior periods - corporation tax - - (648) Current tax charge 24,856 23,259 44,782 Deferred tax Current period deferred taxation movement 1,177 (2,646) (1,249) Under provision relating to prior periods - deferred tax - - 87 Total tax charge per income statement 26,033 20,613 43,620 Factors affecting the tax charge are: 30 30 31 June June December 2007 2006 2006 Â£000 Â£000 Â£000 Profit before taxation 86,253 68,706 147,342 Corporation tax thereon at 30% 25,876 20,613 44,203 Adjustments in respect of prior year insurance technical provisions - - 17 Expenses and provisions not deductible for tax purposes - - 114 Other timing differences 157 - (153) Adjustments relating to prior periods - - (561) Tax charge for the period as above 26,033 20,613 43,620 10. Earnings per share 30 30 31 June June December 2007 2006 2006 Â£000 Â£000 Â£000 Profit for the period after taxation 60,220 48,093 103,722 Weighted average number of shares - basic 261,369,556 260,257,778 260,632,740 Earnings per share - basic 23.0p 18.5p 39.8p Weighted average number of shares - diluted 261,709,556 260,698,278 260,906,740 Earnings per share - diluted 23.0p 18.4p 39.8p 11. Dividends Dividends were declared and paid as follows: 30 30 31 June June December 2007 2006 2006 Â£000 Â£000 Â£000 March 2006 (14.9p per share, paid May 2006) - 38,666 38,666 September 2006 (12.1p per share, paid October 2006) - - 31,438 March 2007 (24.0p per share, paid May 2007) 62,412 - - Total dividends 62,412 38,666 70,104 The dividends declared in March 2006 and March 2007 represent the final dividends paid in respect of the 2005 and 2006 financial years (September 2006 - interim payment for 2006). 12. Property, plant and equipment Improvements to Computer Office Furniture Motor Total short leasehold equipment equipment and fittings vehicles buildings Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Cost At 1 January 2006 680 9,534 2,623 1,372 12 14,221 Additions 808 902 1,151 336 - 3,197 Disposals - (5) - - - (5) At 30 June 2006 1,488 10,431 3,774 1,708 12 17,413 Depreciation At 1 January 2006 428 5,603 2,320 1,230 4 9,585 Charge for the year 34 869 138 49 2 1,092 Disposals - (5) - - - (5) At 30 June 2006 462 6,467 2,458 1,279 6 10,672 Net book amount At 30 June 2006 1,026 3,964 1,316 429 6 6,741 Cost At 1 January 2006 680 9,534 2,623 1,372 12 14,221 Additions 1,655 1,672 1,684 441 - 5,452 Disposals (2) (15) (138) (1) - (156) At 31 December 2006 2,333 11,191 4,169 1,812 12 19,517 Depreciation At 1 January 2006 428 5,603 2,320 1,230 4 9,585 Charge for the year 220 1,750 396 120 3 2,489 Disposals (5) - - - (5) At 31 December 2006 648 7,348 2,716 1,350 7 12,069 Net book amount At 31 December 2006 1,685 3,843 1,453 462 5 7,448 Cost At 1 January 2007 2,333 11,191 4,169 1,812 12 19,517 Additions 267 675 262 108 12 1,324 Disposals - (6) (2) (3) (12) (23) At 30 June 2007 2,600 11,860 4,429 1,917 12 20,818 Depreciation At 1 January 2007 648 7,348 2,716 1,350 7 12,069 Charge for the year 283 938 281 84 3 1,589 Disposals - (2) (1) (1) (1) (5) At 30 June 2007 931 8,284 2,996 1,433 9 13,653 Net book amount At 30 June 2007 1,669 3,576 1,433 484 3 7,165 The net book value of assets held under finance leases is as follows: 30 30 31 June June December 2007 2006 2006 Â£000 Â£000 Â£000 Computer equipment 2,575 3,510 2,996 Office equipment - 271 - 2,575 3,781 2,996 13. Intangible assets Goodwill Deferred Software Total acquisition costs Â£000 Â£000 Â£000 Â£000 Carrying amount: At 1 January 2006 62,354 3,328 808 66,490 Additions - 3,307 96 3,403 Amortisation charge - (3,467) (234) (3,701) At 30 June 2006 62,354 3,168 670 66,192 At 1 January 2006 62,354 3,328 808 66,490 Additions - 6,179 596 6,775 Amortisation charge - (6,062) (446) (6,508) At 31 December 2006 62,354 3,445 958 66,757 Additions - 4,169 334 4,503 Amortisation charge - (3,406) (216) (3,622) At 30 June 2007 62,354 4,208 1,076 67,638 14. Financial assets The Group's financial assets can be analysed as follows: 30 30 31 June June December 2007 2006 2006 Â£000 Â£000 Â£000 Investments held at fair value 315,815 278,981 257,634 Receivables - amounts owed by policyholders 154,250 136,373 138,304 Total financial assets 470,065 415,354 395,938 All receivables from policyholders are due within 12 months of the balance sheet date. Analysis of investments held at fair value: 30 30 31 June June December 2007 2006 2006 Â£000 Â£000 Â£000 Money market funds 315,815 - 257,634 Fixed income securities: Government bonds - 114,059 - Other listed securities - 151,475 - Variable interest securities: Other listed securities - 13,447 - 315,815 278,981 257,634 15. Reinsurance assets and insurance contract liabilities A) Analysis of recognised amounts: 30 30 31 June June December 2007 2006 2006 Â£000 Â£000 Â£000 Gross: Claims outstanding 222,306 187,490 202,421 Unearned premium provision 115,527 94,198 92,004 Total gross insurance liabilities 337,833 281,688 294,425 Recoverable from reinsurers: Claims outstanding 59,199 43,865 47,710 Unearned premium provision 49,312 24,795 26,979 Total reinsurers' share of insurance liabilities 108,511 68,660 74,689 Net: Claims outstanding 163,107 143,625 154,711 Unearned premium provision 66,215 69,403 65,025 Total insurance liabilities - net 229,322 213,028 219,736 B) Analysis of net claims reserve releases: The following table analyses the impact of movements in prior year claims provisions, in terms of their net value, and their impact on the reported loss ratio. This data is presented on an underwriting year basis. Six months ended 30 June 31 December 30 June 2006 2006 2007 Â£000 Â£000 Â£000 Underwriting year: 2000 370 740 - 2001 692 1,187 494 2002 1,937 323 646 2003 2,311 2,773 1,386 2004 4,091 3,857 4,675 2005 437 2,186 5,096 2006 - - - Total net release 9,838 11,066 12,297 Net premium revenue 74,863 70,092 71,647 Release as % of net premium revenue 13.1% 15.8% 17.2% Financial year ended 31 December 2002 2003 2004 2005 2006 Â£000 Â£000 Â£000 Â£000 Â£000 Underwriting year: 2000 6,188 5,176 1,480 370 1,110 2001 2,490 7,938 2,967 5,043 1,879 2002 - 2,975 3,229 5,166 2,260 2003 - - 1,513 4,622 5,084 2004 - - - 2,076 7,948 2005 2,623 Total net release 8,678 16,089 9,189 17,277 20,904 Net premium revenue 81,336 79,327 107,501 139,454 144,955 Release as % of net premium revenue 10.7% 20.3% 8.5% 12.4% 14.4% C) Reconciliation of movement in net claims reserve: 30 30 31 June June December 2007 2006 2006 Â£000 Â£000 Â£000 Net claims reserve at start of period 154,711 128,631 128,631 Net claims incurred 54,188 54,130 103,607 Net claims paid (45,792) (39,136) (77,527) Net claims reserve at end of period 163,107 143,625 154,711 D) Reconciliation of movement in net unearned premium provision: 30 30 31 June June December 2007 2006 2006 Â£000 Â£000 Â£000 Net unearned premium provision at start of period 65,025 71,333 71,333 Written in the period 72,826 73,499 138,647 Earned in the period (71,636) (75,429) (144,955) Net unearned premium provision at end of period 66,215 69,403 65,025 16. Trade and other receivables 30 30 31 June June December 2007 2006 2006 Â£000 Â£000 Â£000 Trade debtors 18,586 9,739 14,982 Prepayments and accrued income 1,992 2,010 1,949 Total trade and other receivables 20,578 11,749 16,931 17. Cash and cash equivalents 30 30 31 June June December 2007 2006 2006 Â£000 Â£000 Â£000 Cash at bank and in hand 140,169 112,206 164,989 Cash on short term deposit 4,623 17,243 26,253 Total cash and cash equivalents 144,792 129,449 191,242 Cash and cash equivalents includes cash in hand, deposits held at call with banks, and other short-term deposits with original maturities of three months or less. 18. Financial liabilities 30 30 31 June June December 2007 2006 2006 Â£000 Â£000 Â£000 Interest bearing bank loans - - - The Group's undrawn Â£30m debt facility is an unsecured revolving credit arrangement. Interest is charged on amounts drawn down based on LIBOR plus a margin. Funds continue to be available under the facility, which expires in 2008. 19. Deferred income tax 30 30 31 June June December 2007 2006 2006 Â£000 Â£000 Â£000 Liability brought forward at start of period 981 3,550 3,550 Movement in period - through income statement (1,177) (2,646) (1,162) Movement in period - through equity (158) - (1,407) (Asset) / liability carried forward at end of period (354) 904 981 The net balance provided at the end of the period is analysed as follows: 30 30 31 June June December 2007 2006 2006 Â£000 Â£000 Â£000 Tax treatment of Lloyd's Syndicates 510 1,170 1,936 Tax treatment of share scheme charges (1,014) 315 (853) Capital allowances 150 (392) 149 Other differences - (189) (251) Deferred tax (asset) / liability at end of period (354) 904 981 20. Trade and other payables 30 30 31 June June December 2007 2006 2006 Â£000 Â£000 Â£000 Trade payables 3,940 3,516 4,601 Amounts owed to co-insurers and reinsurers 132,910 111,502 124,238 Finance leases due within 12 months 653 1,796 1,337 Finance leases due after 12 months 28 450 61 Other taxation and social security liabilities 7,571 4,809 4,742 Other payables 17,261 11,023 13,708 Accruals and deferred income (see below) 72,111 67,154 66,450 Total trade and other payables 234,474 200,250 215,137 Analysis of accruals and deferred income: 30 30 31 June June December 2007 2006 2006 Â£000 Â£000 Â£000 Premium receivable in advance of policy inception 36,180 33,644 31,772 Accrued expenses 26,356 24,949 25,456 Deferred income 9,575 8,561 9,222 Total accruals and deferred income as above 72,111 67,154 66,450 Analysis of finance lease liabilities: At 30 June 2007 At 30 June 2006 Minimum Interest Principal Minimum Interest Principal lease lease payments payments Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Less than one year 690 37 653 1,879 83 1,796 Between one and five 455 5 450 years 32 4 28 722 41 681 2,334 88 2,246 At 31 December 2006 Minimum Interest Principal lease payments Â£000 Â£000 Â£000 Less than one year 1,383 46 1,337 Between one and five years 63 2 61 1,446 48 1,398 21. Share capital 30 30 31 June June December 2007 2006 2006 Â£000 Â£000 Â£000 Authorised: 500,000,000 ordinary shares of 0.1p 500 500 500 Issued, called up and fully paid: 262,375,407 ordinary shares of 0.1p 262 - - 261,186,599 ordinary shares of 0.1p - 261 260,720,271 ordinary shares of 0.1p - 261 - 262 261 261 During the first half of 2007, 1,188,808 new ordinary shares of 0.1p were issued to the trusts administering the Group's share schemes. 224,808 of these were issued to the Admiral Group Share Incentive Plan Trust for the purposes of this share scheme. These shares are entitled to receive dividends. 964,000 shares were issued to the Admiral Group Employee Benefit Trust for the purposes of the Admiral Group Senior Executive Restricted Share Plan (also known as the Unapproved Free Share Scheme). The Trustees have waived the right to dividend payments, other than to the extent of 0.001p per share, unless and to the extent otherwise directed by the Company from time to time. Rights to dividends have now been waived on a total of 2,327,000 ordinary shares in issue. Staff share schemes: Analysis of share scheme costs (per income statement): 30 30 31 June June December 2007 2006 2006 Â£000 Â£000 Â£000 SIP charge 609 217 495 UFSS charge 846 203 438 Total share scheme charges 1,455 420 933 Number of free share awards committed at 30 June 2007: Awards Vesting outstanding date SIP H1 05 scheme 581,565 September 2008 SIP H2 05 scheme 330,306 March 2009 SIP H1 06 scheme 316,328 September 2009 SIP H2 06 scheme 274,000 April 2010 SIP H1 07 scheme 340,000 September 2010 UFSS 2005 scheme 685,000 June 2008 UFSS 2006 scheme - 1st Award 604,187 April 2009 UFSS 2006 scheme - 2nd Award 77,248 September 2009 UFSS 2007 scheme 964,000 April 2010 Total awards committed 4,172,634 This reflects the maximum number of awards expected to vest before accounting for staff attrition. Of the 4,172,634 share awards outstanding above, 3,832,634 have been issued to the trusts administering the schemes, and are included in the issued share capital figures above. 22. Analysis of movements in capital and reserves Share Share Capital Foreign Retained Total capital premium redemption exchange profit and equity account reserve reserve loss Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 At 1 January 2006 260 13,145 17 - 167,990 181,412 Retained profit for the period - - - - 48,093 48,093 Dividends - - - - (38,666) (38,667) Issues of share capital 1 - - - - 1 Share scheme charges - - - - 1,200 1,201 As at 30 June 2006 261 13,145 17 - 178,617 192,040 At 1 January 2006 260 13,145 17 - 167,990 181,412 Retained profit for the period - - - - 103,722 103,722 Dividends - - - - (70,104) (70,104) Issues of share capital 1 - - - - 1 Currency translation differences - - - (50) - (50) Share scheme charges - - - - 2,667 2,667 Deferred tax credit on share scheme - - - - 1,407 1,407 charges As at 31 December 2006 261 13,145 17 (50) 205,682 219,055 Retained profit for the period - - - - 60,220 60,220 Dividends - - - - (62,412) (62,412) Issues of share capital 1 - - - - 1 Currency translation differences - - - 23 - 23 Share scheme charges - - - - 2,542 2,542 Deferred tax credit on share scheme charges - - - - 158 158 As at 30 June 2007 262 13,145 17 (27) 206,190 219,587 23. Financial commitments The Group was committed to total minimum obligations under operating leases on land and buildings as follows: 30 30 31 June June December Operating leases expiring: 2007 2006 2006 Â£000 Â£000 Â£000 Within one years - - - Within two to five years 1,997 - - Over five years 28,520 23,647 33,425 Total commitments 30,517 23,647 33,425 In addition, the Group had contracted to spend the following on property, plant and equipment at the end of each period: 30 30 31 June June December 2007 2006 2005 Â£000 Â£000 Â£000 Expenditure contracted to 226 1,021 1,539 Independent review report to Admiral Group plc Introduction We have been engaged by the Company to review the financial information for the six months ended 30 June 2006, which comprise the Group Income Statement, the Group Balance Sheet, the Group statement of recognised income and expense, the Group cash flow statement and the related notes. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. This report is made solely to the company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Listing Rules of the Financial Services Authority. Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual financial statements except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 Review of interim financial information issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with International Standards on Auditing (UK and Ireland) and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2007. KPMG Audit plc, Cardiff, 3 September 2007 This information is provided by RNS The company news service from the London Stock Exchange

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