Annual Report (ESEF) • Mar 24, 2023
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Delivering difference. Admial Group plc Annual Repot and Accounts 2022 2022 Financial and Stategic Highlights Sustainability Highlights Financial Highlights 1 Group proit before tax, Earnings per share, Group turnover, Group net revenue and Return on equity are presented on a continuing opeations basis 2 Group proit before tax, Earnings per share and Return on equity exclude the impact of one-of restructure costs in 2021 totalling £55.5 million 3 Alternative Peformance Measures, see page 306 4 Relational NPS, methodology updated in 2022 Gender split across the Group 50%(Female) 50%(Male) (2021: 51% female, 49% male) Emissions (tonnes C0 2 per employee) 0.3 tonnes (2021: 0.5 tonnes) Net Promoter Score (NPS) Group aveage across our opeations 4 >50 (2021: >50) £469.0m £769.0m £608.0m 2022 2021 2020 Groups profit before tax 1,2,3 £469.0m £713m including restructure costs 124.3p 212.2p 170.7p 2022 2021 2020 EPS 1,2,3 (pence) 124.3p 35% 56% 52% 2022 2021 2020 ROE 1,2,3 35% 9.28m 8.36m 7.66m 2022 2021 2020 Customers 3 (million) 9.28m £3.68bn £3.51bn £3.51bn 2022 2021 2020 Turnover 1,3 £ 3.68bn 180% 195% 187% 2022 2021 2020 Solvency ratio 3 (post dividend) 180% £1.49bn £1.55bn £1.31bn 2022 2021 2020 Net revenue 1 £ 1.49bn 112.0p 187.0p 156.5p 2022 2021 2020 Dividend per share (pence) 112.0p Our purpose as a business, and the reason we exist, is to ‘Help more people to look after their future. Always striving for better, together’. It defines who we are, and the way that we do things. Contents Company Oveview 4 About us 6 Our Business Model 8 What we do 9 The drivers of our success 12 Creating value for our stakeholders Stategic Repot 16 Chair’s Statement 20 Chief Executive Officer’s statement 24 Q&A with Milena, Geaint, Cristina and Costantino 28 Our Stategy 38 Our Sustainability Approach 40 Key Peformance Indicators 41 2022 Awards 42 Group Chief Financial Officer’s review 48 UK Insuance review 56 International Insuance review 61 Admial Money review 63 Other Group Items 64 Group Capital Structure and Financial Position 68 Creating Sustainable Value for our Stakeholders 95 Streamline Energy and Carbon Repoting 97 Task Force on Climate-related Financial Disclosures 112 Section 172 Statement 113 Non-financial information statement 114 Principal Risks and Uncetainties 122 Viability Statement Corpoate Governance 126 Governance at a glance 128 Introduction to Governance 130 Board of Directors 136 Governance Repot 158 Nomination and Governance Committee 171 Audit Committee Repot 178 Group Risk Committee Repot 183 Remuneation Committee Repot 186 Remuneation at a Glance 187 Directors’ Remuneation Policy 196 Annual Repot on Remuneation 210 Directors’ Repot Financial Statements 215 Independent Auditor’s Repot 226 Consolidated Income Statement 227 Consolidated Statement of Comprehensive Income 228 Consolidated Statement of Financial Position 229 Consolidated Cash Flow Statement 230 Consolidated Statement of Change in Equity 231 Notes to the Financial Statements 293 Parent company financial statements 296 Notes to the Parent Company Financial Statements 304 Consolidated Financial Summay (unaudited) Additional Information 306 Glossay See page 87 See page 85 See page 74See page 77 For our people... For our customers... For our communities... For our shareholders... Adding value. Delivering difference. Admial Group plc Annual Repot and Accounts 2022 1 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Contents 4 About us 6 Our Business Model 8 What we do 9 The drivers of our success 12 Creating value for our stakeholders Company Oveview 4th Best company to work for in 2022 Our purpose-led approach Help more people to look after their future. Always striving for better, together. We focus on doing the right thing. Our purpose deines the reason why we exist, and the way that we do things. We ty to be there to help and to provide reassuance, suppot and relief when our customers need it most. We price our products fairly and competitively to provide good inancial value and make sure customers can access the right kind of sevices. We help protect individuals’ cars and homes to protect people’s futures – all whilst providing an environment where our colleagues can grow, and strive to do better evey day. Admial Group plc Annual Repot and Accounts 2022 2 Company Oveview Helping drive positive impact in communities across the globe In response to some of the devastating global weather events in 2022, we launched a new Global Emergency Fund to provide help to those afected. In Pakistan, where looding impacted over 30 million people, we donated £50,000 to the British Red Cross to aid their Pakistan Flood appeal. This donation is expected to help 3,500 people by providing them with warm clothing ahead of the winter months. We also saw the devastating impacts of Hurricane Fiona across Atlantic Canada. Thousands of our colleagues, their families and communities were left without power due to fallen trees and downed powerlines. We donated $150,000 to the Canadian Red Cross Hurricane Fiona Appeal, Feed Nova Scotia and a number of other employee-nominated charities to give relief to those afected. Helping protect UK homes from water damage Admial has patnered with Ondo and their LeakBot sevices this year to help our UK Household customers avoid costly water leaks. LeakBot is a smat water leak detector that monitors an entire home’s plumbing and requires no professional installation. The device uses its technology to measure the low of water and alets the customer via their smat phone or tablet about any non-routine water loss. We are currently ofering LeakBot to 20,000 Platinum Household customers on a trial basis. Selected customers will receive a LeakBot device at no cost as well as one free LeakBot engineer visit if a leak is detected. Helping our people grow We launched a new leadership and skills development hub in 2022 to help give employees the right guidance, suppot, and skills development oppotunities. The hub provides access to a ange of development courses and progammes from both our internal development teams and external sources. Courses and content within the hub are updated regularly and if an employee feels conident with the skills they have developed at their current level they can access resources within the following level. The hub was built on a famework which aims to make development and career progression planning easier for all. Colleagues currently have access to over 17,000 courses, as well as access to the LinkedIn Learning platform. Admial Group plc Annual Repot and Accounts 2022 3 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information About us Admiral Group plc is a global financial services company offering motor, household, travel and pet insurance, as well as personal lending products. UK Motor Insuance UK Household Insuance Admial is one of the largest car and van insurers in the UK. Admial has a growing household insuance business. Admial Group plc is headquatered in Cardiff, South Wales, and is proud to be Wales’ only FTSE 100 company. We have a strong international presence, with oices in countries including Fance, Italy, Spain, US, Canada, Gibaltar and India. Customers (million) 4.94m (2021: 4.97 million) Turnover 5 (billion) £2.49bn (2021: £2.52 billion) Net insuance premium revenue (million) £471.0m (2021: £496.5 million) Customers (million) 1.58m (2021: 1.32million) Turnover 5 (billion) £255.4m (2021: £218.8 million) Net insuance premium revenue (million) £55.6m (2021: £49.1 million) Our business segments 5 Alternative Peformance Measures – refer to the end of the repot for deinition and explanation Admial Group plc Annual Repot and Accounts 2022 4 Company Oveview International Insuance Loans People employed globally >11,000 Customers worldwide 9.28m Turnover worldwide 5 : £3.68bn Admial ofers unsecured personal loans and car inance products. Customers (million) 143,213 (2021: 111,900) Total Income (million) £44.9m (2021: £28.9 million) Gross Balances (million) £0.89bn (2021: £0.61 billion) Admial has motor insuance businesses in Spain, Italy, Fance, and the US and a small household insuance business in Fance. Customers (million) 2.04m (2021: 1.81 million) Turnover 5 (million) £795.9m (2021: £690.3 million) Net insuance premium revenue (million) £241.8m (2021: £221 million) Admial Group plc Annual Repot and Accounts 2022 5 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Total Turnover 6 £3.68bn 75% UK Insurance 3% Loans and Other 22% International Insurance Our Business Model 1. Our purpose 2. Leveaging on what we do A strong, purpose-led business model that adds value and delivers difference. Read more on page 8 UK Insuance Admial is one of the largest motor insurers in the UK. In addition, we are apidly growing our household, tavel, and pet insuance businesses. International Insuance Admial has established motor insuance businesses in Spain, Italy, Fance and the US, as well as a small Household business in Fance. Loans and other products Admial ofers unsecured personal loans and car inance products, as well as comparison sevices in the US. 6 Alternative Peformance Measure see page 306 Our purpose Help more people to look after their future. Always striving for better, together. Admial Group plc Annual Repot and Accounts 2022 6 Company Oveview 3. Achieved through our drivers to success 4. In line with our stategic priorities 5. In order to create value for our stakeholders Read more on page 9 Read more on page 28 Read more on page 74 Acceleating towards Admial 2.0 Aim: Strengthen our core competencies and increase speed of delivey to best seve our customers. • Digital First • Scaled Agile • Customer-Centric Innovation • Smat Working • Data and advanced analytics Diversiication Aim: Increase customer engagement and business resilience. • Scale up promising products • Strengthen customer proposition • Leveage core strengths • Innovate in product design Excellent customer sevice • Simple and clear communication • Responsible sales and tansparent claims processes • Satisied customers Unique company culture • Communication • Equality • Recognition and reward • Fun Opeational excellence • Good value inancial products • Risk selection and data analytics • Eicient claims management • Financial discipline Eicient capital employment • Good risk management • Strong shareholder returns Tack record of long-term proitable growth • Prudent reseving philosophy • Test-and-learn approach • Responsible and sustainable opeations Evolution of Motor Aim: Evolve our propositions for changes in mobility. • Understand changes in mobility • Evolve our proposition • Develop competencies for the future • Innovate in product design Customers People Patners & Suppliers Shareholders Communities Environment Admial Group plc Annual Repot and Accounts 2022 7 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Insuance undewriting Admial Group’s primay business is to sell car, van, home, tavel, and pet insuance in the UK, Europe (Spain, Fance, Italy), and the US. The majority of our customers buy our products through the price comparison channel, with a smaller propotion of customers buying directly from us, as well as the broker and agency channels. In addition to our core insuance products, we geneate other revenue from the sale of ancillay add-ons and from fees geneated over the life cycle of a policy. The Group’s core market is the UK, where we estimate we have 17% share of the private car insuance market and a 7% share of the private home insuance market 7 . Outside of the UK, we leveage the knowledge, skills, and resources from our established UK business to promote expansion overseas and grow both our international businesses and new ventures outside of insuance undewriting. Risk sharing A key feature of our business model and success is the use of extensive reinsuance and co-insuance patnerships. These are propotional risk-sharing agreements, where insurers outside of the Group undewrite the majority of the risk geneated, either through co-insuance or quota share reinsuance contacts. These arangements include proit commission terms which allow Admial to retain a signiicant potion of the proit geneated. Investing premiums Admial’s proitability is primarily geneated by the Group’s undewriting activities but we also geneate investment income by investing the premiums we collect. The majority of our proits are paid out in dividends, with a propotion held back to pay for our claims and future investment oppotunities, linked to the capital requirements for the business. Our investment stategy is focused on capital presevation and low volatility of returns. Admial has an asset liability matching stategy to control interest ate, inlation, and currency risk. We hold a prudent level of liquidity and have a high-quality credit proile. Unsecured personal lending, car inance, and other products Outside of our insuance businesses, we sell a ange of unsecured personal loans and car inance products through the price comparison channel and via the Admial website. Our core lending business opeates in the UK (under the Admial Money band) and is funded through a combination of internal and external inancing. Other businesses include a small price comparison business in the US and a recently created entity (opeating under the Admial Pioneer band) designed to test new products and identify future sources of earnings. Read more about our Co-insuance and reinsuance on page 66 Read more about our Investing on page 65 Our Business Model What we do 7 Based on 2022 data from the Association of British Insurers (ABI) Admial Group plc Annual Repot and Accounts 2022 8 Company Oveview Excellent Customer Sevice 2022 has been a diicult year for the industy and for Admial. However, whilst we continue to experience diicult economic conditions, our focus on providing good customer sevice remains unchanged. Simple and clear communication We aim to create simple insuance products which are easily understood and accessible to all. We promote an inclusive experience and make sure customers can reach us at any point, whether that be digitally, or over the phone. We also acknowledge that individual customers may have diferent needs when it comes to being informed about our products. Our Vulneable Customer Policy allows for an appropriate system to be implemented identify vulneable customers and ensures suicient controls are in place so that these customers receive appropriate suppot. Responsible sales and tansparent claims processes We comply with all relevant regulatoy requirements and actively review our pactices to ensure we opeate in line with relevant policies. When selling insuance products, we provide customers with key chaacteristic information about our products, covering the most crucial features and limitations. This makes sure customers can make informed decisions and can buy the right products for their needs. This extends to our claims pactices where we work hard to deliver fair outcomes in a timely manner. We provide clear guidance on the full claims process and make sure customers can easily reach us to resolve any issues. Satisied customers We regularly measure customer satisfaction across seveal key benchmarks to stay close to customers’ developing needs and better understand areas where our sevice fails to meet expectations. We use the globally recognised Net Promoter Score® (NPS) as the key metric for measuring customer loyalty through customers’ willingness to recommend Admial Group’s bands. Obtaining regular customer feedback is core to the way we do business as it allows us to understand what we are doing well but also enables us to identify the priority areas for improvement. 2022 Highlights • >50 Group aveage NPS score across our opeations 8 • Voted Best Big Insuance Company in the UK Insuance Choice Awards • Number 1 Ranked Italian insurer on Trustpilot Household insuance teams suppot customers impacted by extreme weather This year, a number of extreme weather events devastated communities across the world. At the stat of 2022, we saw catastrophic storms and looding hit areas of the UK. We took a proactive approach to protecting our customers during this time. Before the storms made landfall, our Household insuance team contacted all customers who held policies in areas of risk. We explained the risks of possible looding and asked if any help was required. Throughout the period, we continued to monitor lood warnings and added customers to our contact list if their risk exposure were to increase. During storms Dudley, Eunice and Fanklin, we made sure that enough suppot was in place for what we knew would be an inlux of customers contacting us. This included enlisting help from employees across the business, including our oices in Delhi, to manage the increased number of calls. We made calling to make a claim easy with online banners and increased the number of employees on phones and webchat to assist with questions from customers. Similarly, in Gironde, southern Fance, we saw wildires cause damage across the region. Our French Household business quickly contacted customers afected by these ires and made sure they were given quick access to alternative accommodation in cases where they were displaced. Our Business Model The drivers of our success Our drivers of success are what we believe makes us different from our peers. They help us maximise the value we create for our stakeholders and stand out as a go-to financial sevices provider for our customers. 8 Relational NPS, methodology updated in 2022 Admial Group plc Annual Repot and Accounts 2022 9 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Unique company culture Over time, we’ve come to believe strongly that creating a great place for our people to work goes a long way towards building long-term commercial success. We believe that Admial’s culture and the four pillars of our culture, are the foundation for why our people enjoy coming into work evey day and why Admial is celebated as a great place to work. Communication We encouage a culture of open and tansparent communication at all levels of the business. We ask colleagues to give us their suggestions on how we can improve, tell us how they are feeling, and the ways in which we can help. Our Group CEO, Milena Mondini, opeates an open-door policy and regularly engages with colleagues through the ‘Ask Milena’ initiative. This philosophy extends to our senior managers and directors who also engage regularly with our colleagues to keep them informed on what is happening in the business and answer their questions. Equality We view all of our people as being equally impotant to the business regardless of their position, gender, or background. We strive to promote a sense of fairness in eveything we do and to provide an environment where eveyone has the oppotunity to succeed. In paticular, we have multiple Diversity and Inclusion working groups made up of employees across the business. These working groups exist to give a voice to all our colleagues and empower them to play an active role in shaping our employee propositions and policies. Recognition and Reward Admial’s share ownership scheme is a core foundation of our culture and plays an impotant role in employee recognition and reward. We believe that a company works best if people feel like they own a pat of their company, and so through the scheme, all employees that have been with the company for more than a year become shareholders in Admial. Fun If people ike what they do, they do it better. This manta has been at the core of Admial’s culture since day one. We encouage our colleagues to spend time together and get to know each other. We dedicate resources to our own Ministy of Fun (MOF). The MOF helps to organise various events for people to paticipate in and gives them something fun to look foward to. 2022 Highlights • 86% of colleagues believe Admial is a great place to work 9 • 88% of colleagues feel that management is approachable and easy to talk to 10 • 96% of people feel that people are treated fairly regardless of their ace 11 Read more in Our Customers on page 74 Top 10 returns! Top 10 is Admial’s annual depatmental competition to crown the best 10 depatments across the organisation. Each year depatments are tasked with creating a video or in-person show and answer a set of questions surrounding a core theme. In 2022 the theme was based on our purpose ‘Hep more people look after their future. Always striving for better together’. In paticular, depatments had to answer the following: “How does your depatment represent and demonstate Admial Group’s purpose statement?”. This year teams were encouaged to be as creative as possible, and we had submissions that went above and beyond and included themes such as The Grinch, I’m a Celebrity Get Me Out of Here, and Juassic Park. The results ceremony was back in-person for the irst time since 2019, giving a great oppotunity for colleagues to get back together and celebate. Our Business Model The drivers of our success continued 9 Great Place to Work Suvey result 10 Great Place to Work Suvey result 11 Great Place to Work Suvey result Admial Group plc Annual Repot and Accounts 2022 10 Company Oveview Opeational Excellence Good value inancial products We take great pride in providing good value inancial products and sevices that meet customer needs. Through our existing products we actively work to maximise the value of our core businesses and with new products, seek to lay the foundations for future growth. Risk selection and data analytics Our unique approach to risk selection is built upon large amounts of claims experience, undewriting skill, and increasingly, on insights from big data and analytics. We take a data-driven approach in eveything we do, and it is the foundation behind our business decision-making. Eicient claims management Our eicient claims management is backed by a culture of continuous improvement, proactive engagement, decades of experience in claims handling, and great customer sevice. Financial discipline Admial is focused on bottom line proitability and building sustainable businesses in the long- term. This focus guides decisions made across our opeations. Our cost-conscious approach is strongly embedded across the organisation given our employees are also shareholders and this tanslates to a competitive expense atio. Eicient Capital Employment Risk management Admial shares a large propotion of risk with co- and reinsuance patners. These patnerships are underpinned by a long tack-record of strong undewriting results. Sharing risk allows us to hold less capital due to bearing less risk, giving a superior return on capital for our shareholders whilst ensuring protection for losses. We include an assessment of the projected solvency of the business as pat of the capital plan and Own Risk and Solvency Assessment. This includes consideation of principal risks facing the Group, as well as consideation of emerging risks such as climate change. Strong shareholder returns We are committed to returning excess capital to shareholders. We believe that with limited cash, management remains focused on the most impotant aspects of the business. We don’t stave our business, but neither do we provide them the luxuy of excess capital. Tack record of long-term, proitable growth Test-and-learn approach Admial has a strong culture of innovation and organic growth. All our businesses have been built from the ground up. We identify and understand oppotunities; take measured steps to test our understanding of the challenges and efectiveness of our solutions; and learn from these experiences. Prudent approach and reseving philosophy Our tack record of success is in pat due to our robust reseving approach, where we hold prudent reseves which we release over time as we gain more information on the development of claims or defaults across our insuance and loans businesses respectively. In addition, we continuously improve and build on our key competitive advantages including cost eiciency, risk selection, data analytics, digital capabilities and claims management efectiveness. Responsible and sustainable opeations Cental to our approach towards long-term value creation is our continued dedication to drive positive outcomes for all our stakeholders. We appreciate that our stakeholders’ needs evolve over time, and we consciously adapt to remain a responsible, sustainable business for the long-term. 2022 Highlights • 50% Aveage combined atio over the past ive years 12 • 47% of customers are now from non-UK Motor businesses • 180% Solvency Ratio 12 Weighted aveage Admial Group plc Annual Repot and Accounts 2022 11 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Customers are at the heat of our business. As a customer- centric organisation, we seek to create products that provide more people with the oppotunity to access good financial sevices products. The needs of our customers shape the products we deliver, and the ways in which we do so. Value created in 2022 • We launched a new claims system for our UK Motor customers • We added our MultiCar proposition to price comparison platforms • We suppoted UK and French Household customers impacted by loods • We continued to provide fair and afordable products across the Group • We launched Admial Pet in the UK We believe that people who like what they do, do it better. This attitude enables our test- and-learn culture, opeational excellence, happier and more productive employees, and ultimately better outcomes for our customers and stakeholders. Value created in 2022 • We strengthened our reward package for colleagues • We upgaded our learning and development platform • We launched a new health and wellbeing stategy focused on mental health • We improved the Group’s recruitment onboarding platform • Members of the Group Board engaged with employees via the Employee Consultation Group Our patners and suppliers are integal to us achieving our stategic goals. They comprise a mix of financial patners, reinsuance patners, IT hosting, distribution and claims sevices patners. We work hard to foster strong relationships to mitigate risks across our businesses and to deliver on our stategic ambitions. Value created in 2022 • Admial Pioneer invested in Wagonex, a subscription-based platform for car manufacturers • We formed new stategic patnerships with industy-leading suppliers across the UK • We patnered with Ondo’s LeakBot sevices to protect customers from water leaks Our Customers Our People Our Business: Patners and Suppliers Our Business Model Creating value for our stakeholders We are dedicated to building strong and sustainable businesses that are focused on achieving positive outcomes for all our stakeholders. Admial Group plc Annual Repot and Accounts 2022 12 Company Oveview Shareholder engagement is key to helping investors understand Admial’s stategy and investment case. It allows us to explain our decisions and ationale, whilst providing oppotunities for shareholders to give their feedback. Value created in 2022 • Management actively engaged with existing shareholders and potential investors • We organised a shareholder and analyst education session to help them navigate the introduction of the new IFRS17 accounting standard • The Group Chair and Senior Independent Director held corpoate governance meetings with key shareholders A culture of giving and a sense of responsibility for the community is shared across the whole Group. Our employees play a key role in how we engage with our communities, and we work collectively to drive long-term change both inside and outside the Group. Value created in 2022 • We launched a new Community Stategy focused on getting more people into sustainable work • We introduced a new Global Emergency Fund to suppot communities across the globe • We suppoted over 200 organisations via our long-standing community match fund • We worked with seveal charities to provide employees with access to volunteer initiatives Admial is mindful that it is increasingly impotant to demonstate responsible business behaviour with regards to the environment, not just because our stakeholders demand it, but also because it is the right thing to do. Value created in 2022 • We launched a climate positive employee engagement progamme • We funded the planting and monitoring of over 30,000 trees in Kenya • We patnered with Carbon Intelligence to suppot us in our net zero ambitions • We installed electric vehicle charging points in our oices • We fully ofset our carbon emissions via the purchase of Gold Standard carbon credits Read more about how we engage with and create value for stakeholders, on page 68 Our Business: Shareholders Our Society: Communities Our Society: Environment Admial Group plc Annual Repot and Accounts 2022 13 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Contents 16 Chair’s Statement 20 Chief Executive Statement 24 Q&A with Milena, Geaint, Cristina and Costantino 28 Our Stategy 38 Our Sustainability Approach 40 Key Peformance Indicators 41 2022 Awards 42 Group Chief Financial Officers Review 48 UK Insuance review 56 International Insuance review 61 Admial Money review 63 Other Group Items 64 Group capital structure and financial position 68 Creating Sustainable Value for our Stakeholders 95 Streamline Energy and Carbon Repoting 97 Task Force on Climate-related Financial Disclosures 112 Section 172 statement 113 Non-financial information statement 114 Principal Risks and Uncetainties 122 Viability Statement Stategic Repot It’s the little things that add up We recently had a customer, Mr Doyle, who called to renew his van insuance. During the call, he chatted to Leeanne, our Customer Loyalty agent, about his love of dogs and what he’d like to use the van for. Connect to Customer is a goodwill initiative that enables Customer Loyalty colleagues to send gifts or cards, after inteactions with customers. Thanks to Leeanne’s thoughtful suggestion, they sent a parcel of dog treats and toys to our customer Mr Doyle, who quickly took to LinkedIn to sing her paises. “Mr Doyle explained he’d lost his family dog Jessie and that he calls his van ‘the Jessie van’. He went on to say that if he ever won the lottey, his dream would be to have a rescue centre where he would employ people to cuddle the dogs and give them the love they deseve. That made the hair on my arms stand up, I knew I had to do a little something. That’s when I decided to email our Connect to Customer team with a message asking to send Mr Doyle blankets, treats and some toys for the animals he would rescue. He was so passionate about helping less fotunate dogs, he was vey genuine and a lovely man to speak with.” Adding value. Delivering difference. For our customers Admial Group plc Annual Repot and Accounts 2022 14 Stategic Repot Admial Money sponsors Fintech Wales progamme The Foundy, FinTech Wales’ 12-week intensive acceleator progamme, provides world-class mentorship and suppot to help incubate, acceleate, and scale stat-up organisations within the Welsh ecosystem and beyond. In 2022, Admial Money was a proud co-sponsor to ‘season 2’ of the Foundy progamme which focussed on successfully validating, fundaising and scaling a new venture. Admial Money also worked sepaately with seveal of the stat-ups involved, and a number of the unsuccessful applicants, to identify areas of potential collaboation and suppot. Admial Group plc Annual Repot and Accounts 2022 15 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Annette Cout Group Chair “ We continue to believe that if people like what they do, they do it better.” Adding value. Delivering difference. Chair’s Statement Admial Group plc Annual Repot and Accounts 2022 16 Stategic Repot I am honoured to be leading the Board of Admial as the Group enters its 30th year – happy bithday Admial! As previously announced, I will step down as Chair at the AGM in April 2023 having seved 11 years on the Board, with six of those as Chair. I leave with a mix of pride and deep fondness for this vey special company which I believe remains one of the FTSE 100’s best kept secrets. This year has, once again, been challenging for the sector due to the macro-economic environment. The Ukainian-Russian war impacted energy costs, high inlation led to higher claims costs and, in the UK, the market adjusted to the FCA’s pricing reforms. As a result, Admial has repoted lower Group proit of £469 million with turnover of £3.68 billion. This is driven by UK Motor insuance proitability. Admial has led the market in taking strong pricing action to combat claims cost inlation and continues to focus on long-term value creation. Despite the challenging backdrop, our customer numbers are up 11% to 9.28 million and our solvency remains strong at 180%. The UK Motor insuance marketplace is cyclical and we believe we are now close to the bottom of this cycle. Admial has a proven tack record of quickly adapting to navigate the cycle and remains focused on continuously evolving its existing competences while creating sustainable businesses for the future. Looking back Admial is a special business with a distinctive culture. Our purpose – To help more people to look after their future. Always striving for better together – underpins eveything we do and ensures that we strive to do the right thing in consideation of all our stakeholders. I am immensely proud to have been pat of Admial’s success stoy. It has been a hugely enjoyable and rewarding experience. During my time on the Board I have experienced the tansition of CEOs from Heny to David, and then to Milena – all have strong entrepreneurial leadership skills, passion for the Admial culture, and a focus on building on our competitive advantages whilst evolving the stategy within the emerging landscape. I’m often asked what has been key to Admial’s success and, essentially, I believe it’s a lot of small things that have never changed and make a big diference: • Delivering for our customers – Admial remains focused on ‘the customer, the customer, the customer’ and during my time on the Board, customer numbers have grown from 3.6 million in 2012 to 9.3 million in 2022 – a testament to our customer-centric approach • Admial’s relentless focus on the fundamentals of risk selection, pricing discipline, claims efectiveness and expense eiciency underpinned by a healthy obsession with data and analysis and a low- risk approach • Admial’s agility, innovation and culture of continuous improvement through a test-and-learn approach has ensured that it creates products and sevices that truly meet customers’ evolving needs. After all, it was Admial that launched the irst car insuance comparison site, the irst 10-month policy, and acceleated the adoption of multicar and multicover • Admial’s commitment to doing the right thing and strong conviction and ethical foundation means it’s perhaps unsurprising that we were the only insurer in the UK to issue a £110 million Stay-At-Home refund for UK customers during the Covid pandemic and we established a £6 million Covid Fund to suppot impacted communities • Admial’s culture – this drives all of the above. We believe that ‘people who like what they do, do it better’. We are always looking for new ways to add value and have consistently been recognised as a great place to work for over 11,000 colleagues. A key foundation stone of Admial that has been continuously reinforced as the company has grown is that eveyone matters regardless of their role. This is demonstated by the fact that all colleagues receive shares 13 in the company evey year Evolution Although elements remain constant, Admial continues to grow and evolve, with a key pillar of the stategy being diversiication. We are making great progress in most opeations, and have now built, amongst others: • A signiicant UK household business which is growing strongly and now seves 1.6 million customers • Admial Money, our UK loans business has achieved a small proit in its ifth year and is taking a suitably prudent approach to increasing its book • Sizeable and growing businesses in Europe • Admial Pioneer, a business that builds on our taditional test-and-learn approach to focus on diversiication through new business areas • A business in the US, which is a challenging market, and for which we are considering options Almost half of our customers are now from non-UK Motor insuance business. Dividend Our proposed inal dividend of 52.0 pence per share brings dividends for the year to 112.0 pence per share, a full-year pay-out of 90% against a backdrop of after- tax proits (from continuing opeations) 36% lower than last year. The inal dividend of 52.0 pence per share comprises a normal dividend of 37.5 pence per share and a special dividend of 14.5 pence per share. The Group has delivered a Total Shareholder Return (TSR) of 259% over the last 10 years (as illustated in the chat on page 206). 13 Employees paticipate in the Approved Share Incentive Plan (SIP) after completing a minimum of 12 months’ sevice Admial Group plc Annual Repot and Accounts 2022 17 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information People Once again Admial was recognised as a Great Place to Work in 2022, including being awarded 19th best workplace in Europe and fouth best workplace in the UK. We also received an award for being in the Best Companies list for 20 consecutive years and received awards for diversity and wellbeing. These accolades help to position us as a destination employer which is crucial in the current competitive market for talent. Having our people as shareholders remains a distinctive element of Admial’s incentive schemes. These are designed to ensure that decisions suppot long-term value growth, that the right behaviours are rewarded and that our people’s interests are aligned with those of shareholders. We believe that, over the long-term, share price appreciation depends on delivering great outcomes for our customers. (Futher details can be found in the Remuneation Committee repot on page 183). Customers Admial’s purpose is to help people to look after their future and the business has really lived by its purpose during the year, ensuring that Admial has been there for its customers when they need us most. The UK business has invested in technology that reduces the time it takes to settle motor claims – hopefully removing a pain-point during what can be a stressful time for customers. In response to the cost-of-living crisis, our teams have looked at ways to help and suppot insuance and loans customers who are inancially vulneable. 2022 saw extreme weather from lash loods to forest ires and a freeze event. Admial colleagues chose to take a proactive approach, identifying customers in the impacted areas and contacting them to understand how we could suppot them. These are just a few examples of the little things that the business does that can make a big diference for customers, and that make me proud to be a pat of Admial. Chair’s Statement continued The Board in 2022 The Board recognises the need for a strong corpoate governance famework and suppoting processes across the Group and believes that good governance, with the tone set from the top, is a key factor in delivering sustainable business peformance and creating value for all the Group’s stakeholders. The Board has been able to resume meeting in person this year as well as visits to colleagues overseas. I have visited our overseas locations along with one or more fellow non-executive directors (NEDs) and we also attended Employee Consultation Group (ECG) meetings. These allowed us to keep contact with our people and directly hear their views and the challenges they face. The Admial culture still shines through. Jean Park stepped down in Januay 2023 after having seved nine years on the Board and chairing the Group Risk Committee. She has also been a member of the Remuneation and Nomination and Governance Committees and acted as the Senior Independent Director. We will miss her unstinting suppot and wise counsel. I would like to thank her on behalf of the whole Board for her huge contribution. Read more in our Governance repot on page 136 “ Once again Admiral was recognised as a Great Place to Work in 2022.” Annette Cout Group Chair Admial Group plc Annual Repot and Accounts 2022 18 Stategic Repot Our focus areas for the Board remain to: • Continue to build on the remarkably special Admial culture and in so doing putting our people, customers and wider impact on the community at the heat of what we do • Continue our long-term tajectoy of growth, proitability and innovation • Invest in the development and growth of our people • Ensure excellent governance and the highest standards • Focus on all aspects of ESG Our role in Society – doing the right thing Admial takes its role in society vey seriously and has an active approach to Corpoate Responsibility which focuses on all our stakeholders and the wider impact we have (more information in the Sustainability Repot on the Admial website). We are proud to be Wales’ only FTSE 100 headquatered company. We employ over 8,000 people in South Wales and our people play an active pat in the communities in which we opeate. We carefully consider our impact on the community and environment, including factors such as the green credentials of our buildings, aising funds for multiple charities, and the impact of climate change across the business. As previously announced, the Group’s ambition is to be net zero by 2040 and to be net zero across our opeations for scope 1 and 2 emissions by 2030. The business veriies its carbon emissions for our current opeations using a third paty and these were subsequently ofset to become carbon neutal. We will apply for approval of our Science Based Targets in 2023. Our aim is to be an economically strong and responsible business over the long-term, guided by a clear purpose, to make a positive and signiicant impact not just on our customers and our people, but on the economy and society. New Chair I am delighted that Mike Rogers will take on the role of the new Chair of Admial. He has a great tack record and signiicant experience which will beneit Admial in its next exciting phase of evolution – and demonstates a great understanding of the Group’s culture. I am conident that the current Board and new Chair are well-equipped with the skills and knowledge to continue to build and strengthen Admial and build a sustainable business in the long-term while retaining Admial’s distinctive culture. Annette Cout Group Chair 7 March 2023 A goodbye and thank you from Annette Cout I have thoroughly enjoyed evey year I have been pat of Admial. I am gateful to our shareholders for their suppot as I stayed on as Chair to ensure a successful tansition to Milena as Group CEO. I would like to thank Admial’s customers for putting their trust in us and our colleagues for their dedication in ensuring that we are there for customers when they need us most. I wish Mike, Milena and the whole leadership team evey success for the future and I will be cheering Admial on from the side lines. I feel privileged to have been pat of this special company. Thank you for your suppot. Annette Admial Group plc Annual Repot and Accounts 2022 19 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Adding value. Delivering difference. Milena Mondini de Focatiis Chief Executive Officer “ It’s the little things we do every day that combine to add value for all our stakeholders.“ Chief Executive Officer’s Statement Admial Group plc Annual Repot and Accounts 2022 20 Stategic Repot 2022 was another year of navigating stormy waters and, once again, we’ve adapted well and shown ourselves to be disciplined and agile as we increased our customer base by 11% to 9.28 million while delivering profits of £469 million. 14 We’ve not been immune to the changes in external conditions including the implementation of the FCA’s pricing reforms, increased claims frequency post Covid, supply chain challenges, adverse weather and high levels of inlation which had a vey big impact on our business, paticularly on the cost of claims. At times, over the last 12 months, it has felt similar to sailing in the middle of a storm: knowing the desired destination but with the challenge of recognising when to steer into the winds that ty to blow us of course – whilst never losing focus on where we’re going. The cyclical nature of insuance is not new. We were quicker than most to react to the changing market conditions and implemented price increases ahead of others in response to higher inlation. Although the premium increases impacted our ate of growth in the shot term, we continued prioritising sustainable growth over chasing unproitable volumes. This discipline resulted, for our insuance business in the UK, in delivering a proit of £616 million, above 2019 pre-pandemic levels and it will put us on a strong footing for when the cycle turns. The international markets were also under pressure with vey low market aveage premiums in Italy and Spain. The US experienced more adverse market conditions than others. Although Elephant quickly put in place aggressive remedies, such as premium increases in excess of 25% in 2022 and a dastic reduction in advetising spend, the business registered a disappointingly high loss of £49 million 15 . Elephant remains an eicient opeation with a strong team delivering great sevice to its customers – who voted it one of the Best insuance companies in US among over 3,300 bands. We are continuing to assess the options for Elephant to reach its full potential in such a huge market. Despite the headwinds, we were deinitely not blown of course in 2022. To the contay, we made substantial progress against our long-term objectives and continued to deliver on new initiatives that will help us to emerge from this period stronger than ever before. We’re developing new capabilities, especially in data and technology, to enhance our customer experience. For example, we launched a new claims management system which will reduce settlement time for many UK motor customers and have established a Data Academy to acceleate our evolution into an even more digital-irst and data driven organisation. Our Stategy for 2023 The evolution of Motor The way that people move around is changing and Admial’s third pillar focuses on evolving our proposition to meet those demands. Admial stays close to emerging trends and continues to apply its test and learn philosophy to futher develop competencies. Acceleate evolution towards Admial 2.0 Our priority is to acceleate the evolution of our business towards Admial 2.0, an organisation that builds and uses historical strengths but is even more agile. Whilst we continue to put the customer first, we aim to focus on our technology and data to do so. Product diversification Our Group-wide approach is focused on increasing business resilience and adapting to the evolving needs and expectations of our customers. See page 28 See page 34 See page 31 14 Group proit – 2022: £469 million; 2021: £769 million, excluding restructure costs, 2019: £505.1 million 15 Elephant loss – 2022: £48.9 million loss; 2021: £13.0 million Admial Group plc Annual Repot and Accounts 2022 21 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Chief Executive Officer’s Statement continued We believe that our diversiication stategy is key to increasing our resilience over the long-term, as well as to improving the engagement and experience for our customers, and by leveaging our strengths, we will deliver more value to our shareholders. Over the past year, Admial Money, our UK Loans business, delivered its irst proit in its ifth year, we launched Pet insuance and we developed new patnerships and distribution channels in international insuance. In the UK speciically we are experiencing strong customer growth in the Household, Loans and Tavel businesses that increased their turnover by 31% to £350 million combined in 2022. We now also count two million customers across our international businesses, up by 13%. We are aware that this has been a challenging year also for our customers and our people and looking after them is our core purpose. We continue to do our best to suppot customers and we have a team dedicated to suppoting those more inancially vulneable ones. For our colleagues, we’ve responded by reviewing and making permanent adjustments to colleagues’ salaries as needed and providing a ange of additional beneits and suppot. We always talk about the team, the team, the team because our ability to deliver is due to our all-hands-on deck approach. We now have over 11,000 colleagues whose dedication and hard work make this all possible and I’m always so proud to see the team’s efots recognised externally. This year we’ve received a ange of awards across all our businesses and geogaphies. We continue to ank as one of the Best Multinational Workplaces for the 20th consecutive year by the Great Place to Work Institute and were named a Diversity Leader by the Financial Times. Having a positive impact on our wider society is also cental to our ethos. We are progressing well with our net zero goal and reduced our scope 1 and 2 emissions 16 by 32% year on year. We refocussed a large pat of our efot to sustain the communities in which we opeate on the theme of “employability” which aligns closely with our purpose to “help more people to look after their future”. We feel lucky to be pat of the Admial family that is such a great place to work, and we would like to contribute to make the world a good place to work for more people. 1 Group proit before tax, Earnings per share, Group turnover, Group net revenue and Return on equity are presented on a continuing opeations basis 2 Group proit before tax, Earnings per share and Return on equity exclude the impact of one-of restructure costs in 2021 totalling £55.5 million 3 Alternative Peformance Measures – see page 306 £469.0m £769.0m £608.0m 2022 2021 2020 Groups profit before tax 1,2,3 £469.0m £713m including restructure costs 124.3p 212.2p 170.7p 2022 2021 2020 EPS 1,2,3 (pence) 124.3p 16 Location based emissions Admial Group plc Annual Repot and Accounts 2022 22 Stategic Repot Speaking about the Admial family, I am vey sad to say goodbye to Annette Cout who has been our Board Chair since 2017. I’ll always be personally gateful to Annette for the invaluable help in the tansition between David and myself, and for her wise counsel and warm suppot at evey step of my Admial journey. And, on behalf of all my colleagues, I would like to thank Annette for her consideable contribution to the Board, her strong commitment to Admial and its people, and the guidance and suppot she has always generously ofered to the wider management team over the last 11 years, while embedding the Admial culture at her vey heat. I wish Annette all the best for her future. I look foward to working with Mike Rogers over the coming years as incoming Chair and I’m conident his breadth of experience in inancial sevices and beyond will add great value to Admial. Finally, I would really like to thank all my colleagues across the Group for their hard work over the last year. I look foward to working together in 2023 – and crucially celebating Admial’s 30th bithday. This is a great oppotunity for us to relect on the amazing journey the Group has been on over the last three decades and the strong foundations we laid out for the next 30 years of growth. Milena Mondini de Focatiis Group Chief Executive Officer 7 March 2023 “ I would like to thank all my colleagues across the Group for their hard work over the past year.” Milena Mondini de Focatiis Chief Executive Officer Admial Group plc Annual Repot and Accounts 2022 23 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Q: Milena, how would you describe the market environment in 2022? A: This year has seen its share of challenges both for Admial and the industy. We stated the year with Omicron and soon after learned of the events in Ukaine. Globally, macroeconomic conditions worsened and we experienced some of the highest inlation in decades. In Motor, we’d already seen higher costs of replacing cars and repairs due to lockdowns, but now saw increased pressure from higher energy and labour costs. Low claims frequency, a prominent feature of the market in 2020 and 2021, slowly moved upwards as economies reopened – though still remaining below pre-pandemic levels. As we exit 2022 and move into 2023, there are some early positive signs. Some elements of inlation look to be normalising such as used car prices, and are hopeful that supply chain pressures will ease in 2023 – but there are also elements ofsetting this, so signiicant levels of uncetainty remain. Q: Cristina, building on Milena’s comments, what have been the key challenges the UK personal lines market faced this year? A: 2022 was marked by both signiicant regulatoy change, namely the Geneal Insuance Pricing Pactices reform, and heightened inlationay pressure. With regards to the pricing reform, the market shift we saw in early 2022, when it irst came into force, was in line with our expectations. New business prices increased at the beginning of the year and retention also increased across the market as fewer people were incentivised to shop around. On inlation, the macroeconomic conditions are really what are driving the conversation and I think most of our peers would agree that we’ve never spent so much time talking about claims inlation! Here the stoy in 2022 continued to be around accidental damage, driven largely by used car price inlation, and the impact of higher energy costs and supply chain disruption. For Household insuance, macro challenges also led to higher inlation in the market, which were then compounded by severe weather conditions causing storms, subsidence and freezes. Q&A with Milena, Geaint, Cristina and Costantino “It’s a volatile market, but we’re well-positioned to succeed.” Adding value. Delivering difference. Milena Mondini de Focatiis Chief Executive Officer Admial Group plc Annual Repot and Accounts 2022 24 Stategic Repot Q: Turning to our international markets, Costantino, what did the picture look like in 2022 for the European and US opeations? A: I’m at risk of sounding like a broken record here, but the fact is that the inlationay pressure experienced by the UK was to a large degree also seen in Europe and the US – albeit a bit lagged in some markets with larger impacts in the second half of the year. Claims frequency is still tacking below pre Covid levels in Europe despite economies reopening. The European markets have also experienced strong competition over the last few years, with paticular premium pressure in Italy and Spain and hence lower aveage premiums despite claims costs increasing. This trend of persistent claims inlation was even more prominent in the US where it led to disappointing loss peformance for Elephant and the market as a whole – with claims costs impacted by various factors including high labour costs, increases in repair times and higher credit hire costs. So, in a nutshell, we saw challenging market conditions oveall. That said, we’ve increased ates by double digits in all of these markets. And we’ve taken the oppotunity to build on the fundamentals of the business. In Europe, we continued to invest in growth towards achieving scale which we think is the right decision for the long-term sustainability and proitability of these businesses. On the contay, in the US we slowed growth in the second half given the challenging market conditions and took strong action including strong base ate increases, narrowing our footprint to focus on higher peforming segments and focusing on a customer base of higher lifetime value. So, we’re keeping focused on the fundamentals and taking action where needed, to continue to build sustainable businesses. Read more in our Governance repot on page 136 Q: Milena, looking at cyclicality in the industy – how do you think about it and what’s changed in recent years? A: Looking at the last few years, there have clearly been much shoter cycles than in the past. This was initially driven by the impact of Ogden, but more recently due to the Covid pandemic, followed by the macroeconomic uncetainty and high inlation mentioned earlier. Whilst it is diicult to predict how the cycle will look in the future, cyclicality will continue to be impacted by inlation and existing macroeconomic uncetainty. Admial has a long- standing tack record of managing the cycle well. Our approach has continued to be that of focus and discipline, which means at times we will prioritise proitability over growth. This sometimes requires shot term tade-ofs, and we have this done more recently within the context of high claims inlation. However, these decisions are always made in the context of continuing to focus on building sustainable and proitable businesses in the long-term. We are strengthening our core businesses but also looking at a multitude of diversiication oppotunities for the future. Geaint Jones Group Chief Financial Officer Admial Group plc Annual Repot and Accounts 2022 25 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Q: Geaint, what is your current dividend policy, and do you foresee any changes in the policy or pay-out atio? A: There’s been no change in our approach to setting dividends. Our formal dividend policy is to pay 65% of post-tax proit as a normal dividend and then pay a special dividend on top, comprising capital we don’t need to retain for solvency requirements and bufers. Our aveage pay-out atio over the past few years is around 90% and changes in dividend period on period tend to be broadly in line with changes in post- tax proit. As we see things today, we don’t expect changes in the level of pay-out moving foward. The solvency atio is the main constaint and we’re comfotable with the post-dividend atio of 180%. Q: Milena, are you comfotable with the way that hybrid ways of working are embedded across the business – and within this new environment how do you maintain Admial’s culture? A: Hybrid working has changed the way we work, but it doesn’t change the foundations of our culture. Admial continues to be all about ‘the team, the team, the team’. We continue to encouage people to work together and challenge them – whether in an oice or online – to drive better outcomes for the business. It has also been rewarding to see that our engagement scores have remained at or above pre-pandemic levels and our Great Place to Work ankings continue to be industy leading. We were anked in the Top 20 best places to work in Europe and 4th in the UK. These awards are a testament to a strong culture that’s deeply embedded within the organisation. Q: Cristina, how has the household book peformed and how have the difficult weather conditions that you mentioned above impacted the book? A: Weather events are a feature of household insuance, with severe events geneally occurring evey few years. 2022 was one of those years. The winter in 2022 saw some weather leading to higher storm and freeze claims, together with a wondefully warm summer which unfotunately also led to elevated subsidence costs. This severe weather, combined with inlationay pressures, negatively impacted the household result by £32m, leading to a loss of £6 million. Although a challenging year, the household book grew by almost 20% and we continue to enhance our pricing and data analytics and to drive claims eiciencies which showed through in futher improvements in our attritional loss atios. We also celebated the business’ 10-year anniversay – Happy bithday to the Household Team! Whilst still a relatively young book we have a strong and experienced management team who’ve successfully grown our household proposition to deliver great sevice to 1.6m customers. I am excited to see what the next 10 years has in store for Household! Read more on page 54 Q&A with Milena, Geaint, Cristina and Costantino continued Cristina Nestares CEO, UK Insuance Admial Group plc Annual Repot and Accounts 2022 26 Stategic Repot Q: Costantino, Elephant in the US experienced a challenging year, can you provide an update on the peformance and outlook? A: 2022 was a diicult year for Elephant, with vey strong claims inlation leading to a disappointing result for the business. The team continued to focus on strengthening fundamentals – we increased base ates by double digits, slowed growth, narrowed our footprint and strengthened risk selection and pricing. In addition, we strongly reduced our cost base through cutting acquisition and advetising costs, and continued to shift the business towards more eicient distribution channels. We’re continuing to look for ways to improve and we are considering options for the future of the business. Although a challenging year, I’d like to thank the strong and committed team at Elephant who have been working vey hard to seve our customers within a challenging period. Elephant was recognised for this in 2022 by making the Forbes list of America’s Best Insuance Companies. This award is voted for by customers and only 35 carriers were selected out of a list of over 3,000. Amazing to see! Q: Milena, 2022 has been a difficult year not just for businesses but for many communities around the world, can you share more about what Admial’s done to help? A: We have a long-standing approach at Admial of making sure we have a positive impact on our communities. 2022 was no diferent. To suppot communities impacted by storms and loods we set up a new Global Emergency Fund. The fund is focused on making donations that target those in need quickly. In 2022, we suppoted the Welsh Refugee Council to help refugees secure employment in the county, we suppoted the British Red Cross relief efots in Pakistan and donated to communities impacted by Hurricane Fiona in Canada. Under our new Together for Better Community Stategy we’ve also begun working with organisations like Geneation. These organisations strive to tansform the education system into an employment system. We are looking to pilot progammes in India and Italy, suppoting paticipants get sustainable jobs across the technology, sevices, and healthcare sectors. Our selected patnerships will see us help more people to achieve their full potential and secure fulilling and sustainable employment regardless of background or location, from helping women in tech, talented young people, adults with additional learning needs and those futhest away from the labour market. Read more on page 46 Q: Geaint, given the difficult conditions in 2022 – how has the Group peformed and what can we expect going foward? A: As Milena highlighted, 2022 was deinitely a challenging year. However, all in all, the Group produced a pretty pleasing set of results. We unsurprisingly see a reasonable drop in Group proit when we compare against 2021 and 2020, though it’s impotant to remember that both those years beneited from exceptional circumstances given the impact of the pandemic on claims costs and proitability. In 2022, we experienced the unwind of the positive covid related impacts, higher claims inlation and bad weather. We expect that 2022 was the worse point of the cycle and that 2023 should improve following actions, including signiicant price increases. Early signs in Europe are positive and we project improving loss atios as well as continued growth. In the US, we’ve taken some pretty dastic actions to improve the bottom line, whilst businesses such as Admial Money and Pioneer continue to grow and develop. Admial Money in paticular is showing pleasing progress, repoting its irst (of many!) proit in 2022 despite the diicult backdrop. Costantino Moretti CEO, International Insuance Admial Group plc Annual Repot and Accounts 2022 27 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Scaled Agile • Following the successful implementation of Scaled Agile in ConTe last year, our Spanish opeation followed suit in 2022. Teams across both businesses worked together to embed Scaled Agile principles in Seguros and to build on the learnings from ConTe in the previous year. This teamwork has allowed a smooth agile tansition within the business, which helps with delivering projects to the market quickly Customer Centric Innovation • Great customer sevice is a core strength of our business. We are continuously seeking improvements on the digitalisation of customer journeys and app adoption • We’ve added a new Claims Total Loss Process inside MyAccount, enabling customers to manage total vehicle loss claims online • We’ve enabled customers to adjust their policy tiers and ancillaries online during any point of their policy period • We’ve added single sign on with our app and MyAccount, reducing the time it takes customers to sign into their potal Smat Working • We have fully adopted hybrid working across our opeations – new town hall spaces have been built to host depatment and team engagement events which keep colleagues up to date on depatment-wide news and celebate team and individual successes Data and advanced analytics • Initial steps to deploying Admial’s UK Next Geneation Architecture have been taken. This is a set of foundational technologies that allows Admial to bring an improved customer experience and broader product oferings to our customers. This will help suppot faster deployment of new products and sevices, an enhanced web and mobile platform to improve customer self-sevice, and the ability to provide a single view of the customer to both agents and our patners Oveview Our aim is to acceleate the evolution of our core businesses toward what we call Admial 2.0, an organisation that leveages on Admial’s historical strengths whilst being even more agile and technology focused. This includes embacing smater ways of working and attacting new talent. But, above all else, it is a company that continues to put the customer irst and that leveages on data and advanced analytics to constantly improve their experience. Core Competencies: • Digital First • Scaled Agile • Customer-Centric Innovation • Smat Working • Data and advanced analytics Progress in 2022 Digital irst • We’ve continued to simplify our technology estate, removing legacy systems and improving our oveall opeational resilience • We’ve integated a new claims management system in our UK Motor function – building a more eicient and convenient system for our customers. As a result of these changes we are already seeing greater digital adoption through increased ate of use • We’ve enhanced our ating capability by implementing new machine learning techniques over the past few years. These models have improved our risk predictions as well as faud detection capabilities. Similar approaches are being adopted in other pats of the business, ensuring our customers continue to receive fair and competitive prices • Internationally our US band Elephant has strengthened their digital claims journey to increase the speed of claims resolution. Over two-thirds of new claims now stat on the Elephant app 1. Acceleating towards Admial 2.0 Our Stategy Relevant Principal Risks and Uncetainties Read more on page 114 A B C D E F G H I J K Admial Group plc Annual Repot and Accounts 2022 28 Stategic Repot Admial 2.0 case study: Progamme NEO We’re excited to announce that our new claims management system, Guidewire Claim Centre (GWCC), has gone live across our UK Motor function. This is a great achievement and a testament to the commitment from our Progamme Neo team. Having used our previous claims system for 20 years, our new claims system will tansform the way our claims are managed. The Guidewire Claim Centre is more eicient, it ofers better data insight, and it will enrich our customer experience. Customers now have a truly digital experience, giving them more choice and lexibility on how they inteact with us. GWCC will also improve our communication with both customers and suppliers and give us greater ability for futher integation in the future. We irst went live with the system in Household Claims in August 2021, allowing us to learn and improve on a smaller subset of our oveall UK claims. We then took those learnings on board when launching with our much larger product, UK Motor insuance. We went live with the Motor system in August 2022. Claims employees have been receiving taining on the new system and are already enjoying its beneits. We have received lots of positive feedback already on how quick, eicient, and simple the system is. Likewise, feedback from customers has been just as positive. Customers have shared how simple the digital low is and how clear it is to navigate in addition to the ease with which their claim can be managed fully online, meaning they don’t have to call in, giving them more lexibility and time. “I am so excited to get to this position! It is the culmination of so much hard work across the Programme and the department, and the feedback from our employees who have been through training has been unbelievable. Thank you and well done to everyone involved. Going live is just the start, roll out will take some time and we look forward to all the future improvements for our customers, employees and results that this launch will inspire.” Lorna Connelly Head of UK Motor Claims Admial Group plc Annual Repot and Accounts 2022 29 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Digital improvements in Italy Digitalisation, agility, quality and security are the pillars of ConTe’s customer-centric approach. Digitalisation, agility, quality and security are the pillars of ConTe’s customer-centric approach. Striving to put our customers at the centre of what we do, in 2022 ConTe made seveal improvements. For digital users, ConTe acceleated the digitalisation journey, with now over half of our customers’ tansactions being peformed online. We continued their adoption of Scaled Agile, with the focus on executing more and constantly delivering value to the customers. During 2022, we made good strides towards claims digitalisation. Customers can now self-repot a claim autonomously through their personalised area on the website. In addition to this they can use the app to upload pictures of the damage and state their preference of how they would like to repair the vehicle. Streamlining this process has resulted in great customer feedback, with a 4.8/5 ating on web app usability, and signiicantly increasing the use of digital channels. Data Academies This summer we launched a new Data Academy in the UK to provide first class data taining for our colleagues. To that end, over 700 employees across UK insuance, Pioneer, Admial Money and Admial Law have been brought together in a single Data Community. They can access monthly newsletters, lunch and learns, taining sessions and development progammes. We are also collaboating with the EU Analytics Academy to suppot and develop our data professionals and share our learnings across the Group. In September 2022, we patnered with Women in Data to show our investment in increasing diversity across data roles as well. Since the launch of the Data Academy, over 300 people have attended an event or taining session and there have been over 1,000 newsletter reads. At the heat of the Admial 2.0 stategy is data, and the Data Academy is also rolling out an ambitious ‘Data Skills’ taining pathway to the business to increase their data conidence and skills and help people make better data driven decisions. Our Stategy 1. Acceleating towards Admial 2.0 continued Admial Group plc Annual Repot and Accounts 2022 30 Stategic Repot Progress in 2022 Scale up promising products • Within the UK, we have seen sustained growth in Household and Tavel, and good progress on our new Pet proposition • We’ve brought in additional expetise in Household and strengthened our supplier network. We’ve also leveaged our new claims management system to improve customer pricing • Post-pandemic, the tavel market has strongly bounced back. We’ve grown our opeations to suppot higher demand and continue to meet customer needs Strengthen Customer Proposition • We now ofer a new product to customers in the UK – Pet insuance. The product is available to customers online and via price comparison websites • Toolbox by Admial launched a commercial insuance MVP in 2021 by ofering lexible, easy-to- buy tool insuance direct to UK tadespeople. In 2022, Toolbox extended its product ange to include other core business insuances (e.g. public & employers liability) and began to test possible future routes to scale • We launched our MultiCar proposition on price comparison, helping expand the reach of our popular customer insuance Leveage Core Strengths • Since 2017, Admial has built a prime loan book and become a meaningful paticipant in the UK personal lending market. To date, we’ve issued over 250,000 loans to customers and disbursed over £2 billion in lending Innovate in product design • We’ve patnered with Ondo insuance and their Leakbot device. Leakbot is a smat water-leak detector which alets customers to leaks in their home and helps prevent damage • We launched an online journey for our Landlord insuance proposition, allowing customers to purchase Landlord policies directly from our website Oveview Diversiication is a key element for Admial to build a sustainable business for the future. Our approach has been to take the skills and learnings from our current business and ind ways to leveage them in building successful future businesses. In the past 10 years, we’ve launched seveal products including household insuance, tavel insuance, pet insuance and a personal lending business. Our diversiied business model means that customers can engage with us across a number of products, and we can suppot a large variety of their needs. Our approach to product diversiication is to make focussed, staged investments on a select number of new product oppotunities across the inancial sevices sector, whilst strengthening and complementing existing customer propositions. Core Competencies: • Scale up promising products • Strengthen customer proposition • Leveage core strengths • Innovate in product design 2. Diversification Relevant Principal Risks and Uncetainties Read more on page 114 A B C D E F G H J K Admial Group plc Annual Repot and Accounts 2022 31 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information “I am super excited to have reached this milestone, this is the culmination of so much hard work from so many people across the business! I truly believe we have built a fantastic range of products and services that will deliver great value for our customers and continue to build on the foundations of what has made Admiral a leader across our flagship products. The business has achieved solid growth following launch and plan on building on the strong start throughout 2023”. Pritpal Powar Head of Pet Launch of Pet in the UK We launched Admial Pet in 2022 to offer a new and exciting product for our customers. This is a new market for Admial and a good stepping-stone for our Group diversiication stategy. To celebate this milestone, we patnered with Warner Brothers and the 2022 ‘DC League of Super Pets’ ilm, which saw some lucky colleagues attend a special screening at the Warner Brother’s headquaters in London! • Admial Pet has lots of additional features above the basic Pet insuance product, including: – ‘Pawsquad’, an online sevice that enables customers to speak to a qualiied, UK-registered vet 24/7 for advice and treatment options free of charge – Innovative and customer centric digital journeys across sales and claims – Multi-Pet, insuance cover that allows customers to insure all their pets on one policy and make savings of up to 15% Our Stategy 2. Diversification continued Admial Group plc Annual Repot and Accounts 2022 32 Stategic Repot Tavel turns 5 Bouncing back from Covid and pandemic restrictions, this year the Tavel depatment sold over 800,000 policies! The depatment has tripled in size over the year, with a creation of a band-new team in Delhi who ensure our customers can contact us more conveniently. Over 2022, we have improved our customer potal and launched a new, shoter online journey (Instaquote) for our customers. Digital improvements have also happened within our claims process, whereby we now ofer an electronic notiication of loss journey. This has helped increase the levels of customer self-sevice, and gives a faster and more eicient process for our customers. Household celebate 10 years Our Household product and team turned 10 years old in 2022. Household has been an Admial success stoy from the stat and was our first diversification product beyond Motor. We now have over 1.5 million customers and strong plans in place to acceleate that growth in the coming years. The Household team are continuously seeking improvements in our pricing, claims management, and the sevice our customers receive. Some of our key achievements over the years include an expanded digital ofering, new product launches within the household line, simple quote journeys with Instaquote, and strengthened supplier patnerships. In addition, since the launch of our new claims system last year, our Household colleagues have been rolling out new software from our patner CoreLogic. This software helps to enhance how our panel of suppliers can integate with our claims system. Finally, the Household Insuance team continue to work on improving and growing our product ofering. Landlord insuance now has an online journey, meaning our customers can purchase a landlord policy directly from our website. Admial Group plc Annual Repot and Accounts 2022 33 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Evolve our proposition • We improved our electric vehicle cover to now include an out of charge feature provided by the AA. If customers run out of charge whilst on cover with us, the AA will recover them to the nearest charge point or any other destination of their choice Develop competencies for the future • We collaboated on an autonomous simulation project funded by the government under its innovation funding scheme. The simulation tested automated driving systems in a vitual environment and across multiple diferent scenarios • These projects help us build our knowledge of autonomous systems, their risks, and the types of tools we can use to understand those risks. It also helps us build our network in the space and build connections with relevant organisations Innovate in product design • We launched LittleBox Pod, a new telematics product that works alongside the Admial app to record where, when and how the customer drives. Each journey is shown to the customer in the app and they receive instant individual, personalised feedback • Our Veygo app has had a re-band, improving the customer experience and making it easier for customers to get what they want quicker Oveview Admial’s third stategic pillar is built on evolving our proposition for changes in mobility. The way people move around is changing. Diferent views exist on future mobility trends and where the greatest future impact will be. To stay close to these trends, we are harnessing our test and learn philosophy, looking at emerging propositions, and developing core competencies that will be relevant for the future. Core Competencies: • Understand changes in mobility • Evolve our proposition • Develop competencies for the future • Innovate in product design Progress in 2022 Understand changes in mobility • Our designated mobility team continued to test and learn how changes in mobility will impact our products and how we can adapt to changing customer needs • We have invested in Wagonex, the UK’s leading mobility subscription platform provider to better understand changes in mobility 3. Evolution of Motor Our Stategy continued Relevant Principal Risks and Uncetainties Read more on page 114 B C D E F G J K Admial Group plc Annual Repot and Accounts 2022 34 Stategic Repot LittleBox Pod (Telematics product expansion) As pat of our stategy to be the leading insurer in analytics and data, LittleBox Pod is a new telematics product that we’re offering to our customers. Launched in November, it is the third device added to the LittleBox product line alongside the hard install and the Plug & Drive. The Pod is a small discreet device that the customer self- installs to the inside of their windscreen via a peel and stick back. The device itself is only 2 inches x 2 inches in size and is battey powered with a 4+ year lifespan or 4,000 hours of driving. Customers download and register with the Admial App, which then links wirelessly with Bluetooth to help collect and use the Pod data. The LittleBox Pod works alongside the Admial app to record where, when and how the customer drives. Each journey is shown to the customer in the app and they receive individual, personalised trip feedback. The Pod also uses tacking on phone distactions, harsh baking, acceleation, speed and night-time driving to calculate our customers driver score. This score is then uploaded automatically on a weekly basis through the app, so customers can instantly view their driving habits. Through this channel, our customers can stay closer than ever to their feedback on how to improve their driving peformance, and ultimately bring their premiums down. Admial Group plc Annual Repot and Accounts 2022 35 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Pioneer’s investment in Wagonex In 2022, Admial Group’s venture building business Admial Pioneer made its first stategic investment into Wagonex, one of the UK’s leading mobility subscription platform provider. Wagonex, designs, builds, and manages lexible, all-inclusive technology automotive subscriptions which enable vehicle suppliers to ofer subscription options direct to consumers. This investment suppots Admial Group’s ambition to diversify and enhance its digital proposition and extend into new mobility trends. It will also provide the Group, which already ofers shot-term motor insuance, with insight into the speciic insuance needs of vehicles provided to customers on a subscription basis. “Our aim is to support long-term diversification by identifying new markets and ventures where our existing strengths and knowledge give us a competitive advantage. We believe that Wagonex’s best-in-class technology and strong position in the rapidly expanding car subscription market makes it a perfect fit for our first strategic investment. We look forward to working closely with Toby and the team as they continue to expand Wagonex in the UK and beyond.” Emma Huntington CEO, Admial Pioneer Our Stategy 3. Evolution of Motor continued Admial Group plc Annual Repot and Accounts 2022 36 Stategic Repot Tap. Vey. Go – Veygo’s new and improved app Since its launch in 2017, Veygo’s journey has gone from strength to strength. With the vision to anticipate future trends in the shot-term insuance marketplace, keeping up to date within the digital space is essential. Veygo product marked 5 years of tading in October 2022. The band ofers lexible, shot term car insuance for customers looking for learner driver insuance or tempoay insuance. The product is key to our growth in motor evolution and diversiication. With 3 million policies already purchased by its happy customers, we can’t wait to see what else is to come for our colleagues in Veygo. Although it is only 5 years old, the speed in which technology evolves in our fast- developing world, meant, in order to meet and exceed our customer’s needs, it was time to futher develop the app and its capabilities. Tap.Vey.Go is the new campaign to tell customers about the new and improved Veygo app, making sure tempoay and learner insuance is available for our customers on the go. It is another example of how we’re bringing our business stategy to life, ensuring excellent customer sevice, increasing customer retention, and excelling in tech. We’ve also made it possible for customers to purchase monthly rolling subscription policies through the website with zero cancellation fees on expiy. It demonstates Veygo’s commitment to meet customer’s developing needs of on demand cover. Veygo’s new app, has developed the tech futher to improve the customer experience and make it easier for customers to get what they want much quicker, signiicantly reducing the number of screens and questions they must answer before being shown a price. This has made the speed of getting cover a lot quicker for our customers. In addition, all of Veygo’s propositions are now on the app, making it easier for customers to get the exact product they are after. The app is designed speciically with young people in mind and making sure we can provide the correct product in the correct ways to our customers. Admial Group plc Annual Repot and Accounts 2022 37 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Our Sustainability Approach G r e a t p l a c e t o w o r k G r e a t c u s t o m e r e x p e r i e n c e s P o s i t i v e i m p a c t o n s o c i e t y S u c c e s s f u l b u s i n e s s Help more people to look after their future. People Highlights in 2022 19 th Best Multinational Workplace in Europe 3 rd Great Place To Work for women in the UK 86% of colleagues believe Admial is a great place to work 19 Society (Community and Environment) Highlights in 2022 Over 3,300 recorded volunteer hours by employees 32% reduction in scope 1 and 2 carbon emissions >£400k donated via our Global Emergency Fund We have a purpose-led sustainability approach which provides an agreed upon famework to focus investments and drive strong sustainable peformance. At the core of our approach is Admial’s purpose to help more people look after their future. Always striving for better, together. Our sustainability approach builds on our purpose and purpose famework and targets four key areas – Customers, People, Society, and Business. Admial Group plc Annual Repot and Accounts 2022 38 Stategic Repot Download the PDF of the Sustainability Repot at admialgroup.co.uk Our peformance this year is described on page 40 Read more about our sustainability approach on page 68 Striving for better together. Admial Group plc Sustainability Repot 2022 17 Relational NPS, methodology updated in 2022 18 UK Motor customers , monthly score aveaged over the year 19 Great Place To Work (GPTW) suvey result 20 Total Shareholder Return (TSR) for Admial Group plc shares over the ten-year period to 31 December 2022 21 Weighted aveage G r e a t p l a c e t o w o r k G r e a t c u s t o m e r e x p e r i e n c e s P o s i t i v e i m p a c t o n s o c i e t y S u c c e s s f u l b u s i n e s s Always striving for better, together. Business Customer Highlights in 2022 +259% Total Shareholder Return 20 AA MSCI ESG ating 50% aveage Return on Equity last 5 years 21 Highlights in 2022 >50 Group aveage NPS across all countries 17 Voted Best Big Insuance Company in the UK Insuance Choice Awards >85% UK Motor customers likely to renew after a claim 18 Admial Group plc Annual Repot and Accounts 2022 39 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Key Peformance Indicators In order to implement, develop and measure the Group’s stategic peformance, we monitor seveal financial and non-financial key peformance indicators (‘KPIs’). Group Proit Group share of proit before tax -39% (2021: +26%) Customer satisfaction Customers likely to renew after a claim >85% 22 (2021: >90%) Customer sevice Net Promoter score >50 (2021: >50%) Digital strides Customer engagement >50% 23 >50% MTAs 23 done online Growth Group customer numbers +11% (2021: +9%) International Growth International customers +13% (2021: +13%) Diversiication UK Household customers +18% (2021: +14%) Great place to work GPTW ankings 4th Positive impact on society Number of hours donated by employees +3,300 Net Zero by 2040 Carbon emissions reductions 32% 24 (2021: -8%) Shareholder Returns EPS -41% (2021: +24%) Capital Position Solvency atio 180% (2021: 195%) Financial measures Non-financial measures 22 Monthly score aveaged over the year 23 Mid Term Adjustments (UK opeations) 24 Reduction in scope 1 & 2 emissions Admial Group plc Annual Repot and Accounts 2022 40 Stategic Repot Other Awards 2022 Awards Best Car and Home Insuance provider, Insuance Choice Awards Recognised by the Fundación Diversidadas as being a Diverse and Inclusive Workplace, Spain Listed on Forbes’ list of American Best Insuance Companies, US India’s Best Workplaces in IT and IT-BPM Best Big Insuance company, Insuance Choice Awards Team of the Year (IT Digital), Fintech Awards Wales Listed in Top 75 Social Mobility Employer Index, UK Élection du Sevice Client de l’Année (ESCDA) Award, Fance Atlantic Canada’s Top Employers and Nova Scotia’s Top Employers, Canada Richmond Times Dispatch Top Workplaces, US Silver Award, Workplace Wellbeing Wales awards Best Workplace for Wellbeing UK, 4th Best Place to Work in Data, DataIQ Awards Best Car Finance Provider of the Year, Moneyfacts Armed Forces Employer Recognition Scheme Gold Award Best Big Companies to Work For in the UK 2nd Best Big Company for Wellbeing Best Companies Best Workplace for Women 3rd Great Place to Work UK Great Place to Work UK Best Workplaces 4th Best Multinational Workplace in Europe 19th Great Place to Work Italy 4th Great Place to Work Fance 7th Great Place to Work Canada 4th Great Place to Work Spain 2nd Great Place to Work International Admial Group plc Annual Repot and Accounts 2022 41 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Adding value. Delivering difference. Geaint Jones Group Chief Financial Officer “ The Group delivered a solid set of results in 2022 within the context of macroeconomic uncertainty and the highest level of inflation in decades.“ Group Chief Financial Officer’s Review Admial Group plc Annual Repot and Accounts 2022 42 Stategic Repot With the impact of the pandemic fading, spiking inlation across our markets was the big stoy for Admial in 2022. This had a number of impacts around the Group, but most impotant was probably the notable increase in aveage claims costs, especially to damage claims. We back ourselves to manage insuance cycles efectively – quickly identifying and responding to trends – and we increased prices signiicantly during the year, especially in the UK and US, to counteact the inlation. In the UK paticularly, our ates appear to have moved materially more than competitors (until the last quater maybe), and hence we stopped growing in UK motor in H2. Loss atios were adversely impacted despite the ate increases. We noted when repoting our half year results in August 2022 that 2019 is a better comparison to the 2022 igures, ather than the exceptional 2020 and 2021 years which were distoted by the huge positive impact of the pandemic on claims costs and proitability. My review of the results therefore looks also at 2019, the last pre-pandemic full year: 2022 was undeniably a challenging year, though with one or two exceptions, the Group result was pretty pleasing. There are lots of moving pats in the comparisons of course (which are discussed in detail in the stategic review), but there are a few stand-out obsevations: Looking irst at the UK Insuance result, we unsurprisingly see a big fall against 2021 but a small increase v 2019. Maybe it goes without saying, but the reduction from 2021 is vey predominantly motor insuance related and is mainly due to the combination of a) the unwind of the positive covid related impacts and b) the higher inlation in 2022. Those efects led to higher current year claims and lower proit commission. The UK Household result was also impacted by much higher than usual severe weather-related claims (seen across the market), signiicantly moving the result from a proit of £21 million to a loss of £6 million. If we adjust both years to take out the impact of severe weather and subsidence claims, proit would have been broadly lat at around £25 million. Comparing back to 2019, UK proit and turnover were modestly higher in 2022, though the increase in customer numbers is much higher at nearer 30%. There are various ofsetting movements that result in the higher proit, including the worse weather in 2022, but also stronger back year reseve movements and associated proit commission in 2022 compared to more positive current year claims in 2019. £m 2022 2021 2019 Change v 2021 Change v 2019 UK Insuance 616 894 598 (278) +18 Europe Insuance (5) 1 9 (6) (14) US Insuance (49) (13) (10) (36) (39) Admial Money 2 (6) (8) +8 +10 Admial Pioneer (16) (10) – (6) (16) Share scheme cost (52) (63) (49) +11 (3) Other costs (27) (34) (35) +7 +8 Continuing opeations pre-tax proit 469 769 505 (300) (36) Restructure cost – (56) – +56 – Continuing opeations proit after restructure cost 469 713 505 (244) (36) Admial Group plc Annual Repot and Accounts 2022 43 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Investments and investment income Another feature of 2022 was volatility in inancial markets, paticularly in terms of higher interest ates (three year UK gilt up from 0.7% to 3.6%) and wider spreads on corpoate bonds (UK investment gade spreads up ~80bps). Admial’s investment stategy (unchanged for a while) is reasonably cautious and is focussed on matching asset and liability duation (aveage life of the assets and claims liabilities is around three years), currency and to some extent inlation. The potfolio is of high credit quality, and we hold vey prudent levels of liquid assets. There are appropriate ESG targets in place and we’ve committed to a net zero potfolio by 2040 at the latest. Notwithstanding the above, the potfolio is subject to valuation changes from spreads and ate movements (the latter is well matched to changes in the values of claims liabilities). Movements in unrealised losses in 2022 were £256m, though values recovered notably in the last months of the year and into early 2023. As ates moved up in the year and maturing assets and cash inlows were invested, the level of return increased (aveage return in 2022 of 1.6% vs 1.1% in 2021). If ates remain higher than their long-term lows for the foreseeable future then we will earn higher investment income (for context, each additional 100bps of return = ~£35m in additional investment income). IFRS17 Big change is coming from 2023 with the new IFRS17 insuance accounting standard inally coming into efect. Our team has worked extremely hard to get us ready for the new standard which will introduce big diferences in accounting and presentation. We held a market brieing in November 2022 on the key impacts for Admial (slides and webcast on our corpoate website are woth a look) and to reiteate those key messages are: • No change on Admial’s stategy or the ultimate proitability of our businesses • No change on dividend policy or expectations • Admial will use the simpliied approach, though there may be some impacts on timing of proit recognition • We will continue to be vey prudent in claims reseving It’ll be interesting to see if the adoption of the standard leads to improved tansparency and compaability. I’d like to close by vey sincerely thanking the IFRS17 project team for their work over the past few years – nice work team! Geaint Jones Group Chief Financial Officer 7 March 2023 In UK motor, at the end of 2022 we have reduced the size of the margin in the booked reseves (though it wasn’t a signiicant driver of proit), in pat because some of what we hold that margin for has manifested in the best estimate reseves (in terms of higher inlation). Our philosophy regarding reseving remains sacrosanct and the closing margin position remains vey cautious – around a 95th percentile position – which is aligned with the top end of the accounting policy ange we expect to adopt under IFRS17 from 2023. If there are no big shocks in claims development moving foward, we expect signiicant reseve releases to feature as an impotant pat of proit. Moving now to Europe, where despite the higher claims inlation and continued strong growth (+15% in customer numbers, over €600m turnover), the result was only modestly lower at a loss of £5 million vs a proit of £1 million in 2021 (£9m proit in 2019). The combined EU motor result was only vey slightly negative (higher loss atios, investing in expanding distribution in Spain were notable drivers), and we continued to invest in expanding the product line (paticularly Household in Fance and Pet in Italy). Given the backdrop, I think it’s a decent result for what continues to become a more material pat of the Group. A disappointing change in 2022 though was the Elephant result in the US, which was a bit under £40 million worse than both compaative years. The US auto insuance market experienced severe increases in the cost of claims during the year, and despite substantial ate increases, Elephant’s loss atio was adversely impacted (85% in 2022 v 73% and 82% in 2021 and 2019 respectively). The H2 result was worse than H1, as the ate increases take their time to impact the results and claims costs continued to inlate. Many or even most of Elephant’s competitors appear to have fared much worse. As my colleagues have noted, we’re assessing the best way foward for Elephant, and in the meantime the focus of the team is on materially improving the combined atio and signiicantly reducing the loss. And inally, returning back to the UK – Admial Money delivered its irst full year proit – small at the minute admittedly but given the economic situation, it’s a ine result the team should be vey proud of, and we believe it’s the irst of many, hopefully growing, positive results. We remain prudently provided for expected credit losses. We continue also to invest in growing new businesses under the Admial Pioneer umbrella – notably Veygo (lexible shot term car insuance) and Toolbox by Admial (business insuance for tadespeople) both of which are making vey nice progress. Hopefully exciting times ahead for those businesses. Group Chief Financial Officer’s Review continued Admial Group plc Annual Repot and Accounts 2022 44 Stategic Repot 2022 Group Oveview £m 2022 2021 2019 % change vs. 2021 % change vs. 2019 Group Turnover (£bn) 123 3.68 3.51 3.30 +5% +12% Undewriting result including investment income 12 143.3 347.0 238.0 –59% –40% Proit commission 170.9 304.5 114.9 –44% +49% Net other revenue and expenses 1 166.7 129.4 164.7 +29% +1% Opeating proit 480.9 780.9 517.6 –38% –7% Group proit before tax 3 469.0 769.0 505.1 –39% –7% Group proit before tax, including restructure cost 469.0 713.5 505.1 –34% –7% Analysis of proit: UK Insuance 615.9 894.0 597.9 –31% +3% International Insuance (53.8) (11.6) (0.9) nm nm International Insuance – European Motor (1.6) 4.8 9.0 nm nm International Insuance – US Motor (48.9) (13.0) (9.6) nm nm International Insuance – Other (3.3) (3.4) (0.3) nm nm Admial Money 2.1 (5.5) (8.4) nm nm Other (95.2) (107.9) (83.5) –12% +14% Group proit before tax 3 469.0 769.0 505.1 –39% –7% Key metrics: Group loss atio 14 72.0% 58.5% 64.9% +14pts +7pts Group expense atio 14 29.7% 26.7% 23.7% +3pts +6pts Group combined atio 14 101.7% 85.2% 88.6% +17pts +13pts Customer numbers (million) 9.28 8.36 6.98 +11% +33% Earnings per share 3 124.3p 212.2p 143.7p –41% –14% Dividends per share 5 112.0p 187.0p 140.0p –40% –20% Special dividends from sale of Penguin Potals 45.0p 92.0p – – – Return on Equity 13 35% 56% 52% –21pts –17pts Solvency Ratio 1 180% 195% 190% –15pts –10pts 1 Alternative Peformance Measures – refer to the end of this repot for deinition and explanation 2 Undewriting proit including investment income includes prior period claims reseve releases on business originally reinsured but subsequently commuted. Excluding these releases, the 2022 undewriting result is a loss of £45.6 million (2021: proit of £157.8 million, 2019: proit of £116.3 million) 3 Group Turnover, Group Proit before tax, Earnings per share, Return on equity presented on a continuing opeations basis. 2021 Group proit before tax, Earnings per share and Return on equity exclude the impact of the £55.5 million UK Insuance restructure cost 4 See note 14 for a reconciliation of Turnover and repoted loss and expense atios to the inancial statements. Ratios exclude the impact of the UK Insuance restructure cost in 2021 5 The 2019 dividend of 140.0 pence per share includes the deferred special element of the 2019 inal dividend of 20.7 pence per share that was paid alongside the interim 2020 dividend Admial Group plc Annual Repot and Accounts 2022 45 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Group highlights The Group delivered a solid set of results in 2022 within the context of macroeconomic uncetainty and the highest level of inlation in decades. In response, the business increased prices and ates where applicable, but the impact of these changes will take time to earn through in the underlying result. This is within a context of two outlier years of elevated Group proits in 2020 and 2021, as a result of Covid and other factors. Hence, comparisons include both the 2021 year impacted by Covid, but also the 2019 pre-Covid year. Highlights of the Group’s results for 2022 are as follows: • Businesses across the Group grew strongly in 2022 with turnover up 5% and customer numbers up 11% year-on-year: – The UK Motor business grew in the irst half of the year primarily driven by growth in renewals customers, although this growth reversed in the second half as Admial maintained pricing discipline, increasing prices ahead of the market. Oveall Motor customers and turnover were both down 1% compared to 2021 – UK Household continued to grow customer numbers strongly (+20%), which alongside a notable contribution from UK Tavel led to oveall UK Insuance customer growth of 8% – Outside the UK, International Insuance customers increased by 14%, and turnover by 15% • Group proit before tax for the year was £469 million, 39% lower than the exceptional result for 2021 and 7% lower than 2019: – UK Motor insuance proit was £623 million – lower than 2021 (£872 million, excluding restructure cost), as a result of both an increase in claims frequencies post the low levels during the pandemic and the impact of claims inlation, but £31 million higher than 2019 (£592 million) – UK Household was impacted by a number of severe weather events in 2022 resulting in a loss of £6 million (2021: £21 million proit), with the severe weather proit impact of £32 million (2021: £4 million) – International Insuance business combined result was £42 million lower than 2021: – This was primarily driven by elevated market-wide claims inlation in the US, with a £49 million loss, £36 million worse than 2021 (loss of £13 million) – The EU Motor result was also lower with a small loss of £2 million compared to a proit of £5 million in 2021; also impacted by claims inlation, continued competitive market conditions in Italy and Spain placing pressure on premiums and investment in channel diversiication – Admial Money repoted its irst proit of £2 million (2021: £6 million loss); within the context of macroeconomic uncetainty the business continued a prudent approach to growth, maintaining favouable default experience and tightening lending criteria – Other Group items decreased to £95 million (2021: £108 million), impacted by lower share scheme costs and higher investment income at the parent company level, patially ofset by a larger investment in Admial Pioneer Economic uncetainty, Covid-19, and the cost of living crisis Macro-economic uncetainty and high levels of inlation impacted the market and the Group’s peformance in 2022. In Motor insuance, elevated used car prices continued to drive inlation, which together with higher repair costs, longer repair timescales and higher projections of future wage inlation, contributed to signiicantly higher claims inlation across the countries in which Admial opeates. Admial took a disciplined approach to preseve undewriting margin, increasing prices in all businesses, which impacted growth. The impacts of these price changes are expected to continue to low through into 2023. In Household insuance, severe weather events had a large impact on results in both the UK and Europe. Admial continues to take a long-term approach to the business, maintaining pricing discipline and a prudent approach to reseving for insuance claims. Within the context of an uncetain macroeconomic outlook and increasing interest ates, Admial Money took a prudent approach to growth and risk selection, tightening undewriting criteria and aising prices. Provisions for credit losses remain appropriately prudent, though no signiicant increase in the level of arrears and defaults has been seen to date. Admial remained committed to suppoting customers, people and communities during a challenging 2022. This included a continued focus on customer sevice. From an employee perspective, Admial continued to adapt and embace hybrid working for employees and suppoted colleagues as pat of the cost of living crisis through increased salaries and other suppot measures. From a community perspective, the business renewed the community fund stategy to focus on suppoting employability, investing in new projects and created more oppotunities for colleagues to get involved. 2022 Group Oveview Admial Group plc Annual Repot and Accounts 2022 46 Stategic Repot “ Admiral continues to take a long term approach to the business, maintaining pricing discipline and a prudent approach to reserving for insurance claims.” Geaint Jones Group Chief Financial Officer Earnings per share Earnings per share (EPS) for 2022, is 124.3 pence (2021: 212.2 pence). The relative reduction compared to 2021 is in line with the fall in pre-tax proit noted above. 2022 EPS is 14% below the 2019 compaative, a larger reduction than the change in pre-tax proit due to a higher efective tax ate in 2022 compared to 2019 (in turn primarily related to the much higher loss in the US during 2022, against which no deferred tax is recognised). Return on equity The Group’s return on equity was 35% in 2022, 21 percentage points lower than 2021 and 17 points lower than 2019. This is the result of a signiicant growth in the aveage equity since 2019, suppoting the Group’s larger businesses, together with lower earnings in 2022 as noted above. Dividends The Group’s dividend policy is to pay 65% of post- tax proits as a normal dividend and to pay a futher special dividend comprising earnings not required to be held in the Group for solvency capital requirements including appropriate headroom above the regulatoy minimum in line with internal risk appetite. The Board has proposed a inal dividend of 52.0 pence per share (approximately £155 million), split as follows: • 37.5 pence per share normal dividend; plus • A special dividend of 14.5 pence per share The 2022 inal dividend relects a pay-out atio of 91% of earnings per share for the second half. 52.0 pence per share is 28% lower than the inal 2021 dividend of 72.0 pence per share (excluding the 46.0 pence special dividend from the sale of Penguin Potals businesses) with the movement being broadly in line with the reduction in post-tax proits. Following the two payments of 46.0 pence per share alongside interim and inal dividends in 2021, a futher special dividend of 45.0 pence per share was paid with the 2022 interim dividend, relecting the inal payment of the phased return to shareholders of the proceeds from the sale of the Penguin Potals comparison businesses which completed in 2021. The total amount returned to shareholders from the three payments was just over £400 million. The total 2022 inancial year dividend, including the third special dividend from the Penguin Potals disposal, is 157.0 pence per share, approximately £465 million. Excluding the Penguin Potals special dividend, the total 2022 inancial year dividend is 112.0 pence per share, relecting a pay-out atio of 90% (2021 and 2019 compaatives 88% and 94%). The inal dividend payment will be paid on 2 June 2023, the ex-dividend date is 4 May 2023 and the record date is 5 May 2023. The Group’s results are presented in the following sections as: • UK Insuance – including UK Motor (Car and Van), Household, Tavel and Pet • International Insuance – including L’olivier (Fance), Admial Seguros (Spain), ConTe (Italy) and Elephant (US) • Admial Money • Other – including Admial Pioneer (New ventures) • Group Capital Structure and Financial Position Admial Group plc Annual Repot and Accounts 2022 47 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information UK Insuance It’s been another interesting year and one that’s brought some new challenges to contend with. We have navigated our way through by remaining focused, keeping our customers cental in our decision making and continuing to find ways to make a difference, but we’ve also faced some unique circumstances with not only industy but economy- wide impacts. We successfully implemented the new FCA pricing reform at the stat of 2022, with the market adjusting in line with our expectations. Shotly after, the UK experienced the largest spike in inlation in 40 years following the stat of the war in Ukaine and alongside this, a severe supply and demand post-pandemic shotage signiicantly impacted claims inlation for insurers. Global supply chain shotages of car spare pats, subsequent delays to car repairs, limited availability of new cars and labour shotages have all led to higher damage repair and second-hand car costs, with inlation at double digits. The impact of these conditions has been felt industy-wide and despite Admial’s scale advantages providing some protection against these challenges, inevitably, higher claims costs and our prudent reseving philosophy have led to a higher 2022 loss atio compared to recent years. Cristina Nestares CEO, UK Insuance “ Admiral’s difference is it’s unique culture. It’s one of the fundamental cornerstones to our success over the last 29 years.” Read more about our outlook in Our Q&A on pages 24–27 Admial Group plc Annual Repot and Accounts 2022 48 Stategic Repot Read more about Our Awards on page 41 At Admial we’ve responded to inlationay pressures by maintaining pricing discipline, increasing prices in Motor insuance by more than 20% by the end of the year. Our decision to acceleate ate increases earlier than the market led to a reduction in competitiveness and a contaction in our new business market share. However, this is consistent with our position on growth; only growing when conditions are suppotive. We strongly believe this is the right approach for the long-term sustainability of the business. Although customer loyalty and strong retention has helped to sustain the size of our motor book, we ended the year with our customer base broadly lat year-on-year. Despite the challenging tading environment, we remain committed to improving the customer experience and have continued to invest in new capabilities enabling customers to access more sevices via digital channels. We’ve also advanced our multi-product proposition and improved business resilience by improving the structure of our repair network. In suppot of our UK diversiication stategy, we have continued to invest in our home pricing and data analytics capabilities, improved customer journeys to make it easier to access Admial’s multi- product ofering and the discounts this afords customers, and we launched a new Pet insuance proposition. In Motor, our tiered product ange ofers customers more choice and we’ve grown our electric vehicle proposition by more than 60% as well as investing futher in pricing and data and analytics capabilities. It was great to see our Household insuance business proudly celebate its tenth year in 2022 and our book grew by 20%, ending the year with 1.6 million policies (growing from 1.3 million in 2021). Notwithstanding this pleasing growth, the Household business was not immune to the inlationay pressures already referenced and also had to contend with seveal weather events during the year including storm Eunice, a long dy summer leading to an increase in subsidence claims and freezing conditions in the winter months – all of which have afected current year inancial results. Sustaining competitive advantage by fostering a strong culture, focusing on core values, and caring for our people is a consistent and impotant thread throughout our histoy. And in 2022, as the cost- of-living crisis began to materialise, in addition to colleagues’ annual pay reviews, we gave two permanent salay increases to our more junior colleagues and provided winter weather payments to help them with their energy bills, making a positive diference for a large propotion of our colleague population. In celebation of the strength of our culture and people engagement, we also received some external recognition and we’re delighted that our UK business was named the second Best Big Company to Work For in the UK and received a special award as Best Big Company for Wellbeing at the Best Companies Awards 2022. We remain committed to being there for our colleagues, just as they are committed to being there for our customers when they need us most. 2022 has cetainly been one of the most signiicant and challenging years the insuance industy has navigated in recent decades but I’m incredibly proud that throughout, we have not lost sight of what makes us Admial. Remaining consistent with our core values, leveaging our strengths in pricing and claims, continuing to invest in new capabilities for the long- term success of the business and looking after our people will all be remembered as stand out positives for the year. A big thanks to our team for their suppot, commitment, and hard work! Admial Group plc Annual Repot and Accounts 2022 49 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information UK Insuance continued UK Insuance inancial peformance £m 2022 2021 2020 2019 Turnover 1 2,784.3 2,751.7 2,672.0 2,635.0 Total premiums written 2,489.7 2,453.2 2,373.3 2,321.7 Net insuance premium revenue 628.8 612.6 539.7 533.2 Undewriting proit including investment income 1 247.1 394.9 346.5 257.4 Proit commission and other income 368.8 499.1 351.8 340.5 UK Insuance proit before tax 615.9 894.0 698.3 597.9 Restructure cost – (54.0) – – UK Insuance proit before tax, including restructure cost 615.9 840.0 698.3 597.9 1 Alternative Peformance Measures – refer to note 14 at the end of this repot for deinition and explanation Split of UK Insuance proit before tax £m 2022 2021 2020 2019 Motor 622.6 871.7 683.6 592.0 Household (6.3) 21.3 15.4 7.5 Tavel & Pet (0.4) 1.0 (0.7) (1.6) UK Insuance proit before tax 615.9 894.0 698.3 597.9 Key peformance indicators 2022 2021 2020 2019 Vehicles insured at year end 1 4.94m 4.97m 4.75m 4.37m Households insured at year end 1 1.58m 1.32m 1.16m 1.01m Tavel & Pet policies insured at year end 1 0.44m 0.15m 0.07m 0.09m Total UK Insuance customers 1 6.96m 6.44m 5.98m 5.47m 1 Alternative Peformance Measures – refer to the end of the repot for deinition and explanation Key highlights for the UK insuance business for 2022: • Closing UK Insuance customers of just under 7 million, 8% higher than the end of 2021 and 27% higher than the end of 2019, with signiicant contributions from UK Household and Tavel and the UK Motor book slightly lower during 2022 • Strong UK Motor proit of £623 million, down from the elevated proit of £872 million in 2021, but higher than the 2019 pre- pandemic proit of £592 million • A loss of £6.3 million for UK Household primarily driven by weather events; excluding the severe weather impact of £31.6 million, proit was £25.3 million Admial Group plc Annual Repot and Accounts 2022 50 Stategic Repot UK Motor Insuance inancial review £m 2022 2021 2020 2019 Turnover 1 2,493.0 2,522.5 2,473.8 2,455.3 Total premiums written 1 2,217.9 2,244.3 2,193.0 2,158.5 Net insuance premium revenue 471.0 496.5 451.4 452.6 Investment income 2 35.0 40.8 50.8 30.4 Net insuance claims (159.8) (86.1) (97.1) (164.7) Net insuance expenses (126.1) (95.6) (77.2) (74.7) Undewriting proit including investment income 3 220.1 355.6 327.9 243.6 Proit commission 170.2 290.6 124.7 112.2 Undewriting proit and proit commission 390.3 646.2 452.6 355.8 Net other revenue 4 232.3 225.5 231.0 236.2 UK Motor Insuance proit before tax 622.6 871.7 683.6 592.0 Restructure cost – (49.6) – – UK Motor insuance proit including restructure cost 622.6 822.1 683.6 592.0 1 Alternative Peformance Measures – refer to the end of this repot for deinition and explanation 2 Investment income includes £2.2 million of inta-group interest (2021: £2.7 million; 2020: £2.9 million; 2019: £2.8 million) 3 Undewriting proit excludes contribution from undewritten ancillaries (included in net other revenue) 4 Net other revenue includes instalment income and contribution from undewritten ancillaries and is analysed later in the repot Key peformance indicators £m 2022 2021 2020 2019 Repoted Motor loss atio 1,2 71.5% 53.0% 49.2% 60.7% Repoted Motor expense atio 1,3 21.8% 19.7% 19.8% 19.1% Repoted Motor combined atio 1 93.3% 72.7% 69.0% 79.8% Written basis Motor expense atio 1 20.1% 19.9% 18.8% 18.5% Repoted loss atio before releases 1 97.8% 78.8% 72.3% 87.6% Claims reseve releases – original net share 1,4 £124.0m £128.1m £104.3m £121.7m Claims reseve releases – commuted reinsuance 1,5 £189.1m £189.2m £137.3m £121.7m Total claims reseve releases 1 £313.1m £317.3m £241.6m £243.4m Other Revenue per vehicle 1 £58 £59 £61 £66 Vehicles insured at year end 1 4.94m 4.97m 4.75m 4.37m 1 Alternative Peformance Measures – refer to the end of this repot for deinition and explanation 2 Motor loss atio adjusted to exclude impact of reseve releases on commuted reinsuance contacts. Reconciliation in note 13b 3 Motor expense atio is calculated by including claims handling expenses that are repoted within claims costs in the income statement. The impact of reinsurer caps is excluded. Reconciliation in note 13c 4 Original net share shows reseve releases on the propotion of the potfolio that Admial wrote on a net basis at the stat of the undewriting year in question 5 Commuted reinsuance shows releases, net of loss on commutation, on the propotion of the account that was originally ceded under quota share reinsuance contacts but has since been commuted and hence repoted in undewriting proit ather than proit commission UK Motor proit decreased by 29% to £622.6 million (2021: £871.7 million) with the repoted combined atio increasing to 93.3% (2021: 72.7%), relecting a higher current year loss atio (excluding prior year releases) as a result of higher claims inlation as well as an increase in claims frequency compared to the low levels during the pandemic. Proit commission was lower than 2021, also due to the lower current year proitability. Both 2020 and 2021 are considered exceptional periods, delivering much lower loss atios than in previous years as a result of Covid-related factors. Market prices increased in the irst half of the year in response to the FCA reforms; Admial remained well positioned and saw an increase in retention. From a claims perspective, claims frequency gadually increased over the course of the year although still remains lower than pre-pandemic levels. Global inlation and factors such as a supply constaints for new cars leading to signiicant inlation in used car values and hence total loss claims, and car pats, resulted in much higher claims inlation from Q2 onwards which continued through the remainder of the year. Admial Group plc Annual Repot and Accounts 2022 51 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information UK Insuance continued Admial increased ates ahead of the market, by over 20% during the year in response to the elevated claims inlation, maintaining pricing discipline and prioritising undewriting proitability over growth. This impacted Admial’s pricing competitiveness compared to the market and hence impacted the growth of the book, which resulted in a lower number of vehicles insured at the end of the year, compared with the stat (2022: 4.94 million; 2021: 4.97 million). Turnover was relatively lat at £2.49 billion (2021: £2.52 billion), as a result of lower aveage premiums in the Car insuance business. This relected the lower growth of the book as well as the efects of the FCA reform, and a competitive market environment, in paticular as the proile of the book moved towards lower risk, renewals customers. The results were impacted by a number of factors: Undewriting Proit and Proit Commission • Net insuance premium revenue decreased by 5% to £471.0 million (2021: £496.5 million), relecting lower growth in new business and a lower aveage premium impacted by the FCA reform which resulted in a shift in mix towards the renewals book (geneally lower aveage premiums), and a lag in the earning of ate increases made in the second, third and fouth quaters of the year. • Investment income was lower at £35.0 million (2021: £40.8 million), with higher underlying investment income being ofset by a reduction in income arising from cash held by Admial relating to the potion of the potfolio that is ceded through quota share reinsuance (£20.0 million reduction; 2021: £1.6 million reduction). Refer to the Investment Income section later in the repot. • There are a number of trends impacting UK motor claims in 2022 which resulted in the increase in repoted loss atio (53.0% in 2021 to 71.5% in 2022): Repoted Motor Loss Ratio Repoted loss atio before releases Impact of claims reseve releases – original net share Repoted Loss Ratio 2021 78.8% –25.8% 53.0% Change in current period loss atio +19.0% +19.0% Change in claims reseve releases – original net share –0.5% –0.5% 2022 97.8% –26.3% 71.5% • The current period loss atio increased by 19.0% which is the result of: – Higher than usual levels of claims inlation, paticularly in relation to damage claims (futher detail follows below) – Continuing return towards pre-pandemic road usage over the last 12 months (although still below historic levels) and therefore an increase in claims frequency compared to 2021 – Slightly lower aveage premium in the period following a shift in potfolio mix towards renewals business • Prior period releases were relatively lat when compared with 2021 at around 26%: – Admial continues to see favouable development in best estimate reseves, paticularly for large bodily injuy claims which are initially projected cautiously – This beneit is patially ofset by an allowance in the best estimate for the potential efects of excess inlation on bodily injuy claims – The margin held above best estimate reseves remains signiicant and prudent – it is estimated to sit around the 95th percentile conidence level, a reduction from the end of 2021 (contributing to the prior period reseve release) and consistent with the top end of the percentile ange the Group expects to set for reseving under IFRS 17 Admial Group plc Annual Repot and Accounts 2022 52 Stategic Repot Claims Inlation and Reseving Admial’s actuarial reseving team calculates best estimate claims reseves for UK motor claims reseves, using standard actuarial techniques applied to paid and incurred claims data, overlayed with assumptions and judgements where it is considered that the data does not fully relect potential future trends and developments. The best estimate claims reseves are validated through comparison with projections peformed by an independent, external actuarial irm. Projections showed an increase in aveage ultimate claims cost in the irst half of 2022 compared to 2021 of around 11%, and this remained similar for the second half of the year as claims inlation persisted. The impact of inlation on third paty and own damage claims is obseved reasonably quickly, with the elevated levels due to market-wide factors such as high second-hand car values (impacting total loss claims), pats supply chain issues and underlying challenges in supply of labour leading to higher repair costs. The longer-term impacts of the current inlation spike on bodily injuy claims is highly uncetain. Admial has not obseved material changes in inlation for bodily injuy claims settled in 2022, when compared to 2021. However, given the longer-tailed nature of these claims, a consevative allowance has been made in the best estimate reseve is held to relect the potential impacts of higher than historic levels of future wage inlation on cetain elements of bodily injuy claims reseves. In addition to the inlationay environment, there continues to be a high level of uncetainty within motor claims across the market arising from (and not limited to), the continued adjustment of claims frequency post Covid, the impact of the whiplash reforms on smaller bodily injuy claims and the future path of the Ogden discount ate. As a result of this uncetainty, Admial continues to hold a signiicant and prudent margin above best estimate reseves. • Reseve releases from commuted reinsuance and proit commission were notably lower in 2022 than in 2021, with a combined total of £359.3 million (2021: £479.8 million), as follows: £m Reseve releases – commuted reinsuance Proit commission Total 2021 189.2 290.6 479.8 Change in commuted releases –0.1 –0.1 Change in proit commission –120.4 –120.4 2022 189.1 170.2 359.3 • Releases on reseves originally reinsured but since commuted were lat at £189.1 million (2021: £189.2 million), a higher level than seen in years prior to 2021. Undewriting years 2018 – 2020 made a signiicant contribution, consistent with the releases on the original net share, relecting the larger than usual movements in loss atios for those undewriting years in H1 • Proit commission was signiicantly lower at £170.2 million (2021: £290.6 million). This is the result of the higher current period loss atio, meaning that no proit commission is recognised on the 2021 or 2022 undewriting years, compared to the unusually high £150 million recognised on the 2020 undewriting year in 2021. Futher information on the Group’s co-insuance and reinsuance arangements is provided later in this repot • The repoted earned expense atio was higher at 21.8% in 2022 (2021: 19.7%) with the written basis atio at around 20%. The higher earned basis atio primarily results from the lower aveage premiums noted above. As a result of movements in the underlying earned expense atio, net insuance expenses also included a higher propotion of costs incurred as a result of quota share reinsuance expense caps (£32.6 million vs £10.1 million in 2021) relating to the 2021 and 2022 undewriting years. The caps will result in an increased level of proit commission on these undewriting years in the future should they be proitable on an ultimate basis Admial Group plc Annual Repot and Accounts 2022 53 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information UK Insuance continued Other Revenue and Instalment Income UK Motor Insuance Other Revenue – analysis of contribution: £m 2022 2021 2020 2019 Contribution from additional products & fees, including those undewritten by Admial 1 207.4 200.8 203.4 217.6 Instalment income 91.3 100.2 100.9 83.9 Other revenue 298.7 301.0 304.3 301.5 Internal costs 2 (66.4) (75.5) (73.3) (65.3) Net other revenue 232.3 225.5 231.0 236.2 Other revenue per vehicle 3 £58 £59 £61 £66 Other revenue per vehicle net of internal costs £48 £47 £50 £56 1 Additional products undewritten by Admial included in undewriting proit in income statement but re-allocated to Other Revenue for purpose of KPIs 2 Internal costs relect an allocation of insuance expenses incurred in geneating other revenue 3 Other revenue (before internal costs) divided by aveage active vehicles, rolling 12-month basis Admial geneates other revenue from a potfolio of insuance products that complement the core car insuance product, and also fees geneated over the life of the policy. The most material contributors to net other revenue continue to be: • Proit earned from Motor policy upgade products undewritten by Admial, including breakdown, car hire and personal injuy covers • Revenue from other insuance products, not undewritten by Admial • Fees such as administation and cancellation fees • Interest charged to customers paying for cover in instalments Oveall contribution (other revenue net of costs plus instalment income) was broadly consistent at £232.3 million (2021: £225.5 million). Other revenue per vehicle was £58 (gross of costs; 2021: £59), with Net Other Revenue (after deducting costs) per vehicle at £48 (2021: £47), both largely consistent with 2021. UK Household Insuance inancial peformance £m 2022 2021 2020 2019 Turnover 1 255.4 218.8 193.8 171.3 Total premiums written 1 235.9 198.5 175.9 154.9 Net insuance premium revenue 55.6 49.1 43.2 37.2 Undewriting (loss)/proit 2 (13.2) 3.9 2.5 0.7 Proit commission and other income 6.9 17.4 12.9 6.8 UK Household insuance (loss)/proit (6.3) 21.3 15.4 7.5 Restructure cost – (4.4) – – UK Household insuance (loss)/proit including restructure cost (6.3) 16.9 15.4 7.5 1 Alternative Peformance Measures – refer to the end of this repot for deinition and explanation 2 Undewriting proit/(loss) excluding contribution from undewritten ancillaries Admial Group plc Annual Repot and Accounts 2022 54 Stategic Repot Key peformance indicators 2022 2021 2020 2019 Repoted Household loss atio 1 91.2% 63.3% 64.8% 69.1% Repoted Household expense atio 1 33.5% 30.3% 29.4% 28.9% Repoted Household combined atio 1 124.7% 93.6% 94.2% 98.0% Impact of severe weather and subsidence (loss atio) 1 32.0% 2.2% 5.3% – Impact of severe weather and subsidence (£m) 1 31.6 3.8 4.8% – Households insured at year end 1 1.58m 1.32m 1.16m 1.01m 1 Alternative Peformance Measures – refer to the end of this repot for deinition and explanation The household book continued to grow in 2022, with the number of households increasing by 20% to 1.58 million (2021: 1.32 million) and turnover increasing by 17% to £255.4 million (2021: £218.8 million). The continued level of growth, within a competitive market environment, was in pat driven by continued growth in the multicover proposition as well as in the price comparison channel. Aveage market premiums were lower in the irst half of the year as a result of the FCA reforms, and retention increased for Admial and the market. Admial increased ates, paticularly in the second half of the year in response to higher claims inlation. The repoted loss atio for the period was impacted by severe weather and subsidence events and as a result was higher at 91.2% (2021:63.3%). The weather events included storms during the irst half of the year and subsidence and freeze events in the second half, with the freeze event contributing roughly half of the 32pt impact. Excluding the impact of the severe weather events, the repoted loss atio was 59.2% (2021: 61.1%). Releases from prior year loss atios reduced the repoted loss atio by 1.9pts (2021: 3.7pts). The combined atio of 124.7% (2021: 93.6%) resulted in a net undewriting loss of £13.2 million (2021: £3.9 million proit), in pat ofset by proit commission and other income of £6.9 million (2021: £17.4 million), lower than the prior year as a result of the impact of weather events on proit commission. This resulted in a £6.3 million loss (2021: £21.3 million proit, excluding restructure cost). Excluding the impact of the weather events, the Household result was a proit of £25.3 million (2021: £25.1 million). The expense atio was also slightly higher at 33.5% (2021: 30.3%) as a result of investment in technology, including a new claims management system. Admial Group plc Annual Repot and Accounts 2022 55 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information International Insuance “ We are proud of our performance and look forward to an even stronger 2023 as we work towards our strategy of building sustainable, scaled, and profitable businesses in the long-term.” International Insuance In 2022 we continued to strengthen the business fundamentals and preseve scale while we weathered the storm of turbulent market conditions. In each of our businesses, inlation caused by the tail-wind efects of the pandemic and the Ukainian-Russian war, increased costs of repair and replacement, driving claims severity up throughout the year. We’re proud that we continued to grow despite new vehicle shopping declining across Europe in 2022, thanks in large pat to continued investment in channel and product diversiication by each business to sustain value creation for our shareholders. In Admial Seguros and Conte, intermediay sales grew to represent 30% and 12% of new business sales respectively, while in L’olivier efots in improving direct acquisition contributed to customer growth of 10%. Loss atio results in Europe are mainly a product of higher claims severity inlation in each county. As costs continued to rise throughout the year, declining or stagnant premiums, especially in Italy, exacerbated loss atios. This increase in market loss atios was patially counterbalanced by our prudent approach that led us to increase prices ahead of the market. This was in addition to investments in growth and technology in each of our European businesses. These elements led to a combined result that is close to breakeven for European Motor insuance with a small loss of £1.6 million. We are conident that the investments we’ve made in Europe in diversiication, digitisation and infastructure have set us on the right footing for proitable growth when market conditions improve and more scale is gained, paticularly in Fance and Spain. In the US, we saw the same severity inlation trend in 2022 as we did in Europe, but to an even greater extent with, for example, repair costs up a 21% since 2020 25 . The Elephant team has taken seveal actions to curb adverse loss atio outcomes and protect the bottom line, including dastic base-ate increases, reducing exposure to any unproitable footprint and withdawal from the direct to consumer (expensive) channel. However, these actions are not immediate ixes, and thus we see a disappointing result in the US. We are committed to improving results in the US in the shot term, and anticipate the actions taken in 2022 will help alleviate loss atio pressure, to signiicantly improve the bottom line result in the near future. We are proud of the businesses we’ve built internationally, and the quality of products and sevice that we ofer customers in those markets, with seveal industy awards being won by our businesses. While 2022 was a challenging year, we believe we’ve set our businesses on the right footing to deliver long-term value to the Group by establishing a diversiied set of channels and products, digitising the customer experience to meet them where and when they need it, and modernising our tech-stack to enable eicient scaling. Costantino Moretti CEO, International Insuance 25 Data source: CCC; for 2022 data only available YoY up to Q3 2022 Admial Group plc Annual Repot and Accounts 2022 56 Stategic Repot Pascal Gonzalvez CEO, L’olivier Fance Over the last three years, the L’olivier potfolio has increased by 85%, making us one of the fastest growing motor insurers in the French market. In the same period, we also diversiied our products and deployed an ambitious digitalisation stategy. L’olivier managed to achieve these results in one of the toughest market environments in decades, with car sales dropping to a record low, while high inlation suddenly reappeared. Add to that a couple of historical hailstorms, and you get yourself one vey challenging year, to which L’olivier responded by taking a protective approach toward margins, leading to a slightly slower pace of growth. Our continuous progress in digitisation tanslated into faster and better sevice for our customers and increased eiciency. In addition to opeational excellence, this led us to win, for the second year in a row, the award for “best customer sevice of the year” in the non-life insuance categoy 26 and we maintained a level of Net Promoter Score (NPS) 27 far higher than market aveage for insuance. Despite the challenging market environment, L’olivier’s team has been delivering continuous improvement and quality to its customers, which proves its ability to navigate unstable grounds and keep creating value. Italy In 2022 ConTe managed to deliver earned proit for the ninth year in a row. We ended the year with 973,000 happy customers, resulting in double-digit growth (+14%). Sustainable growth is our main objective: in the second half of the year we aised our prices materially to protect 2022 proitability and to prepare a robust baseline for 2023. As a result, we grew, we kept the loss atio under control and we limited aveage premium reduction. Market aveage premium is still under pressure due to the lower number of new car registations and lower claims frequency (when compared to pre-Covid). In this context, we built on the Admial DNA of a cost-conscious culture – we limited investments in marketing but were still able to maintain top band awareness as a result of new TV advetisements and a patnership with the Italian National football team. We also continued to improve our digital ofering for customers which has resulted in improved internal eiciencies, together with an improved customer experience where 50% of customers choose to complete tansactions online. We are the one of the most appreciated bands among direct insuance companies – voted best on Google and Trustpilot. Oveall, we kept a strong culture of focus and cost control in 2022 but we continued to invest materially in our long-term stategic objectives: data and analytics, as well as channel diversiication. All of this has been possible thanks to our people. We are proud to have achieved the 4th place in the Great Place to Work Italy anking, thanks to our innovative, lexible hybrid model and wellbeing initiatives. Antonio Bagetta CEO, ConTe 26 Awarded by ESCDA (Elu Sevice Client De l’Année) https://escda.fr/ 27 Based on analysis by L’obsevatoire des Parcours Clients by PMP and Skeepers Admial Group plc Annual Repot and Accounts 2022 57 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information International Insuance continued Saah Harris CEO, Admial Seguros Spain In the context of global uncetainty, the Admial Seguros team remained focused on a few key things – we continued growing much faster than the market, we signed the irst Admial Group bancassuance agreement with ING in Spain, and we continued to invest in business tansformation. We were also proud to be named #2 Best Place to Work in Spain for our size. In 2022 our customer base grew 18% in a slow-growth market driven by our multi-channel stategy and by better retention and conversion in main sales channels. Growth was achieved whilst we increased prices in reaction to higher inlation. In June we signed a long-term distribution agreement with ING for auto insuance after a competitive tender process in Spain. The patnership is a recognition of our excellent customer experience and capabilities. As pat of the Admial 2.0 stategy, we continued to invest in business tansformation. We adopted Scaled Agile and stated a refresh of key pats of our technology stack that will be key for our future. In the meantime, we worked to embed our core loss atio capabilities into newer channels and continued to innovate in digital processes to provide a better customer experience. Our 2022 actions have required investment which have impacted the shot-term results for the business, but we are conident we’ve made the right choices for long-term value-creation. In 2023 we will continue our path towards sustainable scale in our motor business. We strive to do this whilst improving eiciency, building competitive advantage across all channels, and fostering a culture that thrives in the hybrid world and is customer obsessed. We are proud of what we have achieved so far and excited about what 2023 has in store. US Persistently high claims inlation was the main theme for the US Auto Insuance Industy during 2022 and greatly impacted Elephant’s shot term stategic priorities. As a response to these market challenges, Elephant took decisive action including substantial base ate increases (+25% in multiple phases), signiicant reductions in advetising spend and slowing growth to protect the bottom line. We are conident these changes are suicient to ofset the severity trend we’ve seen: Elephant’s relative base ate increases surpassed many key competitors in the second half of the year, and the loss atio gap with the market continues to trend positively. As Elephant saw the impacts of claims frequency normalising to near pre-pandemic levels, the business experienced a record high increase in oveall repair costs impacting claims severity, increasing 8% versus the market increase of around 11% 28 . As we wait for the ate actions to earn through, the 2022 oveall loss to Admial was £48.9 million 29 . Elephant’s actions to slow growth as we weather the market cycle resulted in a 1% reduction in policies in-force since the irst half of the year. To futher achieve the scale needed and control the high cost of acquisition, we have focused our acquisition efots towards higher retaining customers and expanded distribution towards independent agencies. Vehicles-per-policy increased from 1.5 to 1.8, helping to maximize the yield on our marketing spend. As we move into 2023, we will continue to protect the bottom line and optimise customer lifetime value and expect to see our actions become more visible in our earned results. While 2022 was a challenging year, Elephant was recognised on the Forbes list of America’s Best Insuance Companies 2023. Elephant was one of only 35 carriers out of 3,300 evaluated to make the list, providing conidence that the investments we’ve made in seving our customers over the years haven’t gone unnoticed. This is cetainly a solid recognition from our customers that our staf delivers great sevice at evey stage of the policy. I remain incredibly gateful for their tremendously hard work, resilience, and positive attitude. 28 Data source: CCC; YoY to Q3 2022 29 Elephant loss – 2022: £48.9 million; 2021: £13.0 million Albeto Schiavon CEO, Elephant Admial Group plc Annual Repot and Accounts 2022 58 Stategic Repot International Insuance inancial peformance £m 2022 2021 2020 2019 Turnover 1 795.9 690.3 648.8 623.6 Total premiums written 1 720.5 623.8 584.0 562.6 Net insuance premium revenue 241.8 221.0 204.2 168.6 Investment income 2.3 0.5 – 1.5 Net insuance claims (220.3) (170.8) (139.3) (137.2) Net insuance expenses (115.1) (91.7) (78.8) (53.0) Undewriting result including investment income 1 (91.3) (41.0) (13.9) (20.1) Net other revenue 37.5 29.4 22.7 19.2 International Insuance result (53.8) (11.6) 8.8 (0.9) Key peformance indicators Repoted Loss atio 2 80.9% 73.7% 64.3% 76.8% Expense atio 2 44.5% 44.8% 43.9% 37.6% Combined atio 3 125.4% 118.5% 108.2% 114.4% Combined atio, net of Other Revenue 4 110.1% 106.3% 97.9% 103.7% Vehicles insured at period end 2.04m 1.81m 1.60m 1.42m 1 Alternative Peformance Measures – refer to the end of this repot for deinition and explanation 2 Loss atios and expense atios have been adjusted to remove the impact of reinsurer caps so the underlying peformance of the business is tansparent 3 Combined atio is calculated on Admial’s net share of premiums and excludes other revenue. It excludes the impact of reinsurer caps. Including the impact of reinsurer caps the repoted combined atio would be 2022: 139%; 2021: 119%; 2020: 107%; 2019: 113% 4 Combined atio, net of other revenue is calculated on Admial’s net share of premiums and includes Other Revenue. Including the impact of reinsurer caps the repoted combined atio, net of other revenue would be 2022: 123%; 2021: 107%; 2020: 96%; 2019: 102% International Motor Insuance – Geogaphical analysis 2022 Spain Italy Fance US Total Vehicles insured at period end (m) 0.43 0.97 0.40 0.24 2.04 Turnover 1 (£m) 104.6 227.9 194.9 268.5 795.9 2021 Spain Italy Fance US Total Vehicles insured at period end (m) 0.37 0.85 0.36 0.23 1.81 Turnover 1 (£m) 88.5 212.7 175.7 213.4 690.3 1 Alternative Peformance Measures – refer to the end of this repot for deinition and explanation Split of International Insuance result £m 2022 2021 2020 2019 European Motor (1.6) 4.8 15.3 9.0 US Motor (48.9) (13.0) (4.8) (9.6) Other (3.3) (3.4) (1.7) (0.3) International Insuance result (53.8) (11.6) 8.8 (0.9) Admial Group plc Annual Repot and Accounts 2022 59 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information International Insuance continued Admial has seveal insuance businesses outside the UK: Spain (Admial Seguros), Italy (ConTe), Fance (L’olivier) and the US (Elephant Auto). The key features of the International Insuance results are: • Positive growth tajectoy continued in 2022 within competitive markets, with customer numbers increasing by 13% to 2.04 million (2021: 1.81 million) and combined turnover rising by 15% to £795.9 million (2021: £690.3 million) • An aggregate loss of £53.8 million (2021: £11.6 million loss), consisting of a loss in the European Motor insuance businesses of £1.6 million (2021: £4.8 million proit) and a deterioation in Elephant Auto’s result (increased loss from £13.0 million to £48.9 million year-on-year) • A higher combined atio (net of other revenue) of 110.1% (2021: 106.3%), primarily the result of a higher repoted loss atio across the European and US motor businesses driven by higher claims inlation across all markets as well as premium pressure in the Spanish and Italian markets • An investment of £3.3 million (2021: £3.4 million) for new product development primarily related to the new French home insuance business and seveal product tests in Italy European Motor Insuance Admial’s European insuance opeations in Spain, Italy, and Fance insured 1.80 million vehicles at 31 December 2022, 14% more than the previous year (31 December 2021: 1.58 million). Turnover increased by 10% to £522.9 million (2021: £474.6 million). The combined European Motor result relected a net loss of £1.6 million (2021: £4.8 million), with proitability in Italy ofset by more challenging outcomes because of competitive market pressures in Fance and Spain. The European combined atio net of other revenue (excluding the impact of reinsurer caps) increased to 104% from 99%, primarily driven by lower aveage premiums and higher claims inlation. In addition, these businesses continued to focus on improving core fundamentals, whilst investing in the future of the business through expansion into new diversiication oppotunities and distribution channels, paticularly the intermediay channel and patnership oppotunities, to enhance future growth prospects. ConTe in Italy saw a proitable year with improved customer retention despite a highly competitive market resulting in continued premium pressure. Vehicles insured increased by 14% to 0.97 million (31 December 2021: 0.85 million), with the business continuing to invest in growth through innovation and distribution expansion. Admial Seguros (Spain) saw continued growth, with an 18% increase in customer numbers to over 0.43 million (2021: 0.37 million). This was largely driven by growth in the broker channel and improved retention, although oveall results were impacted by strong inlation in the market. The business also invested in strengthening existing distribution channels, exploring growth through new patnerships, and progressing in its agile tansformation. L’olivier Assuance (Fance) continued to grow strongly in 2022 and remains one of the fastest growing Motor insurers in the French market. The customer base increased by 11% to 0.40 million (2021: 0.36 million). L’olivier targeted growth via the direct channel and maintained high customer satisfaction through continuous digital sevice and eiciency improvements. The result was negatively impacted by high inlation and seveal hail events in H1 that had an estimated £2 million impact. US Motor Insuance In the US, Admial undewrites motor insuance in eight states through its Elephant Auto business. Elephant insured 0.24m vehicles at the end of 2022, 4% higher than 2021 (2021: 0.23m) and Turnover increased to £268.5 million (2021: £213.4 million). The business repoted a higher loss of £48.9 million (2021: £13.0 million loss) largely due to a surge in claims severity inlation across the US market. To mitigate the impact of higher inlation, Elephant aised base ates materially, by more than 30%, and prioritised higher customer lifetime value over new sales growth. In paticular, the composition of the book shifted towards higher quality, multi- vehicle policies. Targeted expansion in the agency and patnership channels also provided mechanisms by which the business can continue to scale eiciently. Changes in reinsuance agreements from the 2022 undewriting year (primarily driven by capital eiciency consideations) resulted in a futher increase in the Admial net share of losses compared to 2021. Admial Group plc Annual Repot and Accounts 2022 60 Stategic Repot Admial Money 2022 has been a diicult and complex year for many businesses in the UK, however it has been a vey positive and pleasing year for Admial Money. We have continued our philosophy of safe, eicient growth and despite all the external economic challenges we delivered our irst full year proit. Admial Money plays an increasingly impotant role in the consumer lending market. Since launching in 2017 we are proud to have provided more than 250,000 customers with over two billion pounds of loans. Our personal loans and car inance book now stands at £0.89 billion, our second consecutive year of 45%+ growth and our cost income atio continues to improve, falling to 49.7% in 2022 (2021: 82%) . We anticipate this will continue to fall as we approach scale. We retain a irm focus on prime lending and are seeing increasing proof that UK customers are showing a preference for our guaanteed ate proposition, valuing the cetainty and tansparency it ofers. Our 2022 NPS score of 71 and Trust Pilot score of 4.6 is futher evidence our exceptional customer propositions and sevice commitment is setting us apat in the consumer lending market. UK inlation and the subsequent cost of living pressure it creates has been front of mind since 2021. We made early decisive moves to increase the hurdles in our afordability models to ensure that after assessing our customers, we are lending responsibly, and they can sustain the loan through any reasonable stress. To date customer payment peformance remains positive with low arrears and defaults in line with expectations. Our irst full year proit of £2.1 million for 2022 is an impotant milestone for the business. We’ve achieved this whilst continuing to retain appropriate prudence in our credit loss provision with coveage of 7.2% on the book which includes post model adjustments of £11.3 million. Progress in building our capabilities in 2022 has been strong. The continued adoption of open banking has improved our decision making and onboarding journey. Enhancing our self-sevice functionality now results in 80% of customer tansactions being processed digitally and new machine learning models are used to suppot decision making across the business. We also continued to make pleasing progress on integating more closely with the UK insuance business to ofer loans to these customers, with over 50% of our new customer lows from either current or recent Admial Insuance customers. In addition, we were again winners of the Moneyfacts Consumer Awards best car inance provider of the year award. Looking to 2023, we enter with strong momentum. We expect to beneit from our strong position in a growing market as we see a continued shift to comparison and credit score marketplaces. I expect to see continued growth in our loan balances towards the £950 million to £1.1 billion ange during 2023, assuming current economic conditions. Combined with a tightly controlled cost base, we should see futher improved economics in the coming years. I am optimistic for 2023 and conident in the team’s ability to execute on our business plan. Admial built successful businesses by doing the common things uncommonly well and Admial Money enters 2023 in good shape to achieve the same success in UK lending. I’d like to inish by thanking our customers and all of my colleagues and wish eveyone the best for 2023. “ We enter 2023 with strong momentum: we expect to benefit from our strong position in a growing market.” Scott Cargill CEO, Admial Money Admial Group plc Annual Repot and Accounts 2022 61 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Money continued Admial Money distributes and undewrites unsecured personal loans and car inance products for UK consumers through price comparison, credit scoring applications and direct channels. The proposition is focused on ofering real ates to provide customers tansparency and cetainty. Admial Money recorded a pre-tax proit of £2.1 million in 2022 (improved from £5.5 million loss in 2021), the irst full year proit in the histoy of the business. Gross loan balances grew strongly, up 46% to £0.89 billion (2021: £0.61 billion), with a £63.7 million (2021: £50.2 million) credit loss provision, leading to a net loans balance of £823.7 million (2021: £556.8 million). This increase in potfolio led to a 60% increase in net interest income to £44.6 million (2021: £27.8 million). Admial Money continued to carefully manage afordability and credit criteria for new lending in 2022 to relect the higher interest ate and elevated inlation environment. At the same time interest ates on new loans were increased to relect the rising cost of our funding. These measures will help ensure sustainable inancial peformance into the future. The credit loss charge increased to £20.6 million (2021: £10.7 million), driven by the signiicant increase in the potfolio during the year. Oveall, an appropriately prudent approach has been taken to calculating the credit loss provision, including post model adjustments for cost of living, motgage increases and forecast uncetainty, relecting the level of uncetainty in the current economic environment. For futher information, refer to note 7 in the inancial statements. Admial Money is funded through a combination of internal and external funding sources. The external funding is secured against cetain loans via tansfer of the rights to the cash-lows to two special purpose entities (“SPEs”). During H1 2022 one of the SPEs was extended, providing funding with improved terms for the next three years. The securitisation and subsequent issue of notes via SPEs does not result in a signiicant tansfer of risk from the Group. Admial Money Financial Peformance £m 2022 2021 2020 2019 Net income 58.7 36.6 36.8 30.8 Interest expense 1 (14.1) (8.8) (10.1) (9.1) Net interest income 44.6 27.8 26.7 21.7 Other income 0.3 1.1 2.1 1.9 Total income 44.9 28.9 28.8 23.6 Movement in expected credit loss provision and write-of of Loans (20.6) (10.7) (25.8) (14.3) Expenses (22.2) (23.7) (16.8) (17.7) Admial Money proit/(loss) before tax 2.1 (5.5) (13.8) (8.4) 1 Includes £1.5 million inta-group interest expense (2021: £2.7 million; 2020: £2.9 million; 2019: £2.8 million) Admial Group plc Annual Repot and Accounts 2022 62 Stategic Repot Other Group Items Other Group items inancial review £m 2022 2021 2020 2019 Share scheme charges, excluding restructure costs (51.7) (63.3) (50.9) (49.0) Other cental overheads (16.3) (19.8) (22.9) (20.0) Finance charges 1 (12.1) (11.4) (12.1) (11.3) Admial Pioneer (15.6) (10.2) (0.8) – Other business development costs (10.9) (7.2) (3.3) (9.3) Other interest and investment return 11.4 4.0 4.9 6.1 Other Group items (95.2) (107.9) (85.1) (83.5) 1 Share scheme charges exclude restructuring costs of £1.5 million, recognised in 2021 2 Includes £0.7 million inta-group interest expense (2021: £nil; 2020: £nil; 2019: £nil) Share scheme charges relate to the Group’s two employee share schemes (refer to note 9 to the inancial statements). Charges decreased by £11.6 million (excluding discontinued opeations) in 2022, to £51.7 million. This was more in line with previous years when excluding the elevated level in 2021 which was linked to a higher share price and higher bonus pay-outs due to higher dividends. Other cental overheads were lower at £16.3 million (2021: £19.8 million), and include the cost of a number of major Group projects such as prepaation for the signiicant new insuance accounting standard, IFRS 17 and the development of the internal model. Finance charges of £12.1 million (2021: £11.4 million) primarily represent interest on the £200 million subordinated notes issued in July 2014. Admial Pioneer, launched in 2020 to focus on new product diversiication oppotunities, made a loss of £15.6 million in 2022 (2021: £10.2 million). The business continued to invest in growing the Veygo shot term car insuance business, as well as investing in new products such as tool insuance in the UK (Toolbox by Admial). Other business development costs repoted a higher loss of £10.9 million (2021: £7.2 million), which included an improved loss from Compare.com of £2.8 million (2021: loss of £3.5 million) ofset by increased investments in new ventures. Other interest and investment income increased to £11.4 million in 2022 (2021: £4.0 million), as a result of higher government bond yields and a £4.7 million gain arising from the sale of government bonds in the period (2021: nil). Admial Group plc Annual Repot and Accounts 2022 63 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Group Capital Structure and Financial Position The Group continues to manage its capital to ensure that all entities are able to continue as going concerns and that regulated entities comfotably meet regulatoy capital requirements. Surplus capital within subsidiaries is paid up to the Group holding company in the form of dividends. The Group’s regulatoy capital is based on the Solvency II Standard Formula, with a capital add-on to relect recognised limitations in the Standard Formula with respect to Admial’s business, predominantly in respect of proit commission arangements in co- and reinsuance agreements. The Group continues to develop its patial internal model to form the basis of future capital requirements. As previously noted, the expected timescale for formal application has been extended as a result of a decision by the Board to review cetain aspects of the model. In the interim period before submission, the current capital add-on basis will continue to be used to calculate the regulatoy capital requirement. The estimated and unaudited regulatoy Solvency II position for the Group at the date of this repot is as follows: Group capital position (estimated and unaudited) Group 2022 £bn 2021 £bn 2020 £bn Eligible Own Funds (post dividend) 1 1.20 1.36 1.47 Solvency II capital requirement 2 0.66 0.70 0.79 Surplus over capital requirement 0.54 0.66 0.68 Solvency atio (post dividend) 3 180% 195% 187% 1 2021 own funds included a deduction for the third tanche of the Penguin Potals dividend that was paid alongside the 2022 interim dividend in October 2022 2 Solvency capital requirement includes updated capital add-on which is subject to regulatoy approval 3 Solvency atio calculated on a volatility adjusted basis The Group’s solvency atio remains strong at 180%. The solvency atio reduced by 15 percentage points since the end of 2021, primarily due to a reduction in Own Funds of approximately £160 million as a result of lower geneation of economic capital. Widening credit spreads impacted the Own Funds during the irst half of the year, with the impact patially reversing during the second half. The Solvency Capital Requirement includes an updated capital add-on which remains subject to regulatoy approval. The solvency atio based on the previously approved capital add-on, that is calculated at the balance sheet date ather than the date of this repot, and will be submitted to the regulator within the Q4 Quantitative Repoting Template (QRT) is as follows: Regulatoy solvency atio (estimated and unaudited) 2022 2021 2020 Solvency atio as repoted above 180% 195% 187% Change in valuation date (11%) (5%) (5%) Other (including impact of updated, unapproved capital add-on) (19%) (9%) 24% Solvency atio (QRT basis) 150% 181% 206% The Group’s capital includes £200 million ten year dated subordinated bonds. The ate of interest is ixed at 5.5% and the bonds mature in July 2024. The bonds qualify as tier two capital under the Solvency II regulatoy regime. Solvency atio sensitivities (estimated and unaudited) Estimated sensitivities to the current Group solvency atio are presented in the table below. These sensitivities cover the two most material risk types, insuance risk and market risk, and within these risks cover the most signiicant elements of the risk proile. Aside from the catastrophe events, estimated sensitivities have not been calibated to individual return periods. 2022 2021 2020 UK Motor – incurred loss atio +5% -11% -9% -10% UK Motor – 1 in 200 catastrophe event -1% -1% -1% UK Household – 1 in 200 catastrophe event -4% -3% -2% Interest ate – yield cuve up 100 bps -2% +5% +7% Interest ate – yield cuve down 100 bps +2% -5% -7% Credit spreads widen 100 bps -9% -9% -6% Currency – 25% adverse movement in euro and US dollar vs sterling -3% -3% -3% ASHE – long-term inlation assumption up 0.5% -3% -5% -3% Loans – severe peak unemployment scenario 1 -1% -1% -1% 1 Refer to note 7 to the inancial statements for futher information on the ‘severe’ scenario Admial Group plc Annual Repot and Accounts 2022 64 Stategic Repot The change in interest ate sensitivity relects both the Group’s continued focus on asset liability matching and the change in impact of interest ate movements on the solvency capital requirement in higher yield environments. Taxation The tax charge repoted in the consolidated income statement is £97.2 million (2021: £130.2 million), equating to 20.7% of pre-tax proit (2021: 18.2%). The increase in the efective tax charge is primarily the result of the higher loss in the US insuance business for which no deferred tax asset is recognised. Investments and cash Investment stategy Admial Group’s investment stategy focuses on capital presevation and low volatility of returns. The business follows an asset liability matching stategy to control interest ate, inlation and currency risk. A prudent level of liquidity is held and the investment potfolio has a high-quality credit proile. In 2022, the focus remained on asset liability matching, and lows were invested into high quality assets to take advantage of rising risk-free ates, whilst being cautious on the credit outlook. The Group holds a ange of government bonds, corpoate bonds, alternative and private credit assets, alongside liquid holdings in cash and money market funds. In line with our investment approach, the aim is to reduce the Environmental, Social, and Governance (ESG) related risks in our potfolio whilst continuing to achieve sustainable long-term returns. In 2022, the potfolio weighted aveage ESG score had an MSCI A ating. Investment income £m 2022 2021 2020 Investment return 64.6 46.9 47.8 Movement on accruals held for insurer funds withheld (20.0) (1.6) 12.9 Movement in provision for expected credit losses 1.8 (2.6) (7.8) Total 46.4 42.7 52.9 Net investment income for 2022 was £46.4 million (2021: £42.7 million). Investment income in 2022 was adversely impacted by investment income adjustments related to UK motor quota share reinsuance arangements of £20.0 million (2021: £1.6 million). Provisions for expected credit losses developed favouably, leading to a £1.8 million release of provisions (2021: £2.6 million adverse impact). The investment return on the Group’s investment potfolio (excluding unrealised gains and losses, the release of the investment income accruals held in relation to reinsuance contacts and the movement in provision for expected credit losses) was £64.6 million in H1 2022 (compared to £46.9 million in 2021). The annualised ate of return was higher at 1.6% (2021: 1.1%), mainly as a result of higher reinvestment yields as interest ates rose throughout the year. The increase in yields and widening of credit spreads in 2022 resulted in a reduction in the market value of the potfolio of £255.6 million (2021: £50.1 million reduction). That movement is relected in the statement of other comprehensive income. The Group continues to geneate signiicant amounts of cash and its capital-eicient business model enables the distribution of the majority of post-tax proits as dividends. Total cash and investments at 31 December 2022 was £3,705.8 million (31 December 2021: £4,115.3 million), the lower balance at the end of the current period relecting the market value reduction noted above as well as the payment of the inal tanche of the Penguin Potals disposal proceeds to shareholders. Cash and investments analysis £m 2022 2021 2020 Fixed income and debt securities 2,372.7 2,594.3 2,101.3 Money market funds and other fair value instruments 934.7 1,063.0 1,339.3 Cash deposits 101.4 85.3 65.4 Cash 297.0 372.7 351.7 Total 1 3,705.8 4,115.3 3,857.7 1 Total Cash and Investments include £198.2 million (2021: £147.0 million; 2020: £74.8 million) of Level 3 investments. Refer to note 6e in the inancial statements for futher information Admial Group plc Annual Repot and Accounts 2022 65 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Group Capital Structure and Financial Position continued Cash low £m 2022 2021 2020 Opeating cash low, before movements in investments 367.3 637.8 959.8 Tansfers to inancial investments 189.0 (266.5) (176.0) Opeating cash low 556.3 371.3 783.8 Tax payments (91.2) (126.7) (175.0) Investing cash lows (capital expenditure) (101.0) (69.2) (43.1) Financing cash lows (692.8) (750.7) (454.3) Loans funding through special purpose entity 267.8 185.9 (46.2) Net contributions from non-controlling interests – – 2.4 Foreign currency tanslation impact (14.8) (5.3) 2.4 Net proceeds from sale of Comparison entities – 457.0 – Cash included in the disposal of Comparison entities – (41.3) – Net cash movement (75.7) 21.0 70.0 Unrealised (losses)/gains on investments (255.6) (47.3) 40.7 Movement in accrued interest 113.2 17.4 54.8 Net increase in cash and inancial investments (407.1) 257.6 341.5 The main items contributing to the opeating cash inlow are as follows: £m 2022 2021 2020 Proit after tax 371.8 996.7 527.8 Change in net insuance liabilities 39.6 40.8 94.8 Net change in tade receivables and liabilities 68.2 (65.3) 65.3 Change in loans and advances to customers (280.6) (205.2) 77.3 Non-cash income statement items 71.1 (261.7) 84.8 Taxation expense 97.2 132.5 109.8 Opeating cash low, before movements in investments 367.3 637.8 959.8 The net decrease in cash and investments in the year is £407.1 million (2021: £257.6 million increase). The main drivers include the unrealised losses on investments as a result of interest ate and credit spread movements as noted above, and dividend payments to shareholders (including the two inal tanches of the Penguin Potals special dividend). Co-insuance and reinsuance Admial makes signiicant use of propotional risk sharing agreements, where insurers outside the Group undewrite a majority of the risk geneated, either through co-insuance or quota share reinsuance contacts. These arangements include proit commission terms which allow Admial to retain a signiicant potion of the proit geneated. Although the primay focus and disclosure is in relation to the UK Motor insuance book, similar longer-term arangements are in place in the Group’s international insuance opeations and the UK Household and Van businesses. UK Motor Insuance Munich Re and its subsidiay entity, Great Lakes, currently undewrites 40% of the UK Motor business. From 2022, 20% of this total is on a co-insuance basis (via Great Lakes) and will extend to 2029. The remaining 20% is on a quota share reinsuance basis and these arangements now extend to 2026. The Group also has other quota share reinsuance arangements conirmed to at least 2024, covering 38% of the business written. The nature of the co-insuance propotion undewritten by Munich Re (via Great Lakes) in the UK is such that 20% of all Motor premium and claims for the 2022 year accrue directly to Great Lakes and are not relected in the Group’s inancial statements. Similarly, Great Lakes reimburses the Group for its propotional share of expenses incurred in acquiring and administering this business. Admial Group plc Annual Repot and Accounts 2022 66 Stategic Repot The quota share reinsuance arangements result in all Motor premiums, claims and expenses that are ceded to reinsurers being included in the Group’s inancial statements. These quota share agreements opeate on a funds withheld basis and include cetain features such as expense caps and an allocation of investment income earned on the funds held by Admial on behalf of the reinsurers. These features result in higher proit commission should the undewriting year reach proitability. Admial tends to commute its UK Car Insuance quota share reinsuance contacts 36 months after inception of an undewriting year, assuming there is suicient conidence in the proitability of the business covered by the reinsuance contact. After an undewriting year is commuted, movements in inancial statement loss atios result in reseve releases (or strengthening if the loss atios were to increase) ather than reduced or increased proit commission. During the irst half of 2022, just over half of the quota share reinsuance covering the 2020 undewriting year was commuted. The majority of quota share reinsuance covering 2019 and prior undewriting years was commuted prior to the stat of this half year period. Refer to note 5d(v) of the inancial statements for futher analysis of reseve releases on business originally reinsured but subsequently commuted. UK Household Insuance The Group’s Household business is suppoted by long-term propotional reinsuance arangements covering 70% of the risk, that run to at least 2024. In addition, the Group has non-propotional reinsuance to cover the risk of catastrophes stemming from weather events. International Car Insuance In both 2021 and 2022 Admial retained 35% (Italy), 30% (Fance) and 30% (Spain) of the undewriting risk in each county respectively. In the USA, 40% (2021: 45%) of the risk was retained within the Group. Excess of loss reinsuance The Group also purchases excess of loss reinsuance to provide protection against large claims and reviews this cover annually. The excess of loss cover remained similar to prior years with cover stating at £10 million. Rates increased within the context of increasing market ates as a result of higher inlation. The household insuance book excess of loss reinsuance also saw an increase in ates, for the same relative level of cover. Proit commission Admial is potentially able to earn material amounts of proit commission revenue from co- and reinsuance patners, depending on the proitability of the insuance business undewritten by the patner. Revenue is recognised in the income statement in line with the inancial statement loss atios on Admial’s retained undewriting. Note 5c to the inancial statements analyses proit commission income by business, type of contact and by undewriting year. Principal Risks and Uncetainties The Group’s 2022 Annual Repot will contain an analysis of the Principal Risks and Uncetainties identiied by the Group’s Enterprise Risk Management Famework, along with the impacts of those risks and actions taken to mitigate them. Disclaimer on foward-looking statements Cetain statements made in this announcement are foward-looking statements. Such statements are based on current expectations and assumptions and are subject to a number of known and unknown risks and uncetainties that may cause actual events or results to difer materially from any expected future events or results expressed or implied in these foward-looking statements. Persons receiving this announcement should not place undue reliance on foward-looking statements. Unless othewise required by applicable law, regulation or accounting standard, the Group does not undetake to update or revise any foward-looking statements, whether as a result of new information, future developments or othewise. Admial Group plc Annual Repot and Accounts 2022 67 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Creating Sustainable Value for our Stakeholders Admial’s purpose famework tanslates our purpose into action and shows how we plan on living by our purpose statement – including what that statement means to not only our people but our company, our business, and our society. Our sustainability approach builds on our purpose famework and targets four key areas – Customers, People, Business, and Society – with defined ambitions for each of these: • People: Be one of the best places to work in the world • Customer: Provide great customer experiences • Business: Build successful businesses with opeational resilience • Society: Make a diference through a positive impact on society Materiality assessment In order to capture and address the ESG issues that matter most to our business and stakeholders we an a materiality assessment in 2021. The outcome of the materiality assessment currently drives our sustainability approach as well as other key business initiatives and decisions. We acknowledge that these ankings will likely change over time and we will look to conduct futher materiality assessments in the future. For futher detail on the methodology behind our materiality assessment please see Admial’s 2022 Sustainability Repot You can read more in our Section 172 statement (stating on page 112) to see how these priorities feed into our stategy and reinforce our purpose Our purpose is embedded into the purpose famework Our purpose Great customer experiences Provide great customer experiences A great place to work Be one of the best places to work in the world Positive impact on society Make a diference through a positive impact on society Successful business Build successful businesses with opeational resilience Our results revealed the following priorities: Focus Area Stakeholder Our impact Risk governance and business resilience Business Read more on page 114 Talent Acquisition & Development People Read more on page 77 Great Sevice Customer Read more on page 74 Educational Oppotunities Society Read more on page 87 Long-term shareholder value Business Read more on page 85 Product Quality Customer Read more on page 74 Eco-friendly products Business/Society Read more on page 91 Impact of opeations on climate change Society Read more on page 87 Employability and social mobility Society Read more on page 87 Diversity & Inclusion People Read more on page 80 Admial Group plc Annual Repot and Accounts 2022 68 Stategic Repot “ The outcome of the materiality assessment currently drives our sustainability approach as well as other key business initiatives and decisions.” Our purpose is embedded into the purpose famework Materiality matrix Aggregated across all suvey responses, workshops, management discussions and SWG feedback People Customer Society (Community and Environment) Business Stakeholder key Manage FocusMonitor Community Health and Wellbeing Homelessness and housing Spots, ats and culture External efots to ight climate change Strong ethical patnerships Long-term shareholder value Governance and business resilience Talent acquisition and development Diversity and Inclusion Investing responsibly Smat, green and safe mobility People engagement People, health and wellbeing Fair and afordable price Product quality Innovation Great sevice Impact of opeations on climate change Eco-friendly products Educational oppotunities Employability and social mobility Financial inclusion Executive Remuneation * Actively monitored and maintained as pat of our culture Admial impact Impotance of stakeholders Admial Group plc Annual Repot and Accounts 2022 69 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial’s alignment with the United Nations’ Sustainable Development Goals The Sustainable Development Goals (SDGs) are a set of 17 global goals developed by the United Nations, which deine global priorities and aspiations for 2030. The goals aim to address major societal and environmental concerns. The most relevant goals where we believe Admial contributes are listed for each of our stakeholders below. Goal 8: Decent Work and Economic Growth Target (8.2): Achieve higher levels of economic productivity through diversiication, technological upgading and innovation. Target (8.3): Promote development-oriented policies that suppot productive activities, decent job creation, entrepreneurship, creativity and innovation, and encouage growth of micro-, small- and medium-sized enterprises, including through access to inancial sevices. Admial’s contribution • Tansfer core strengths from UK Motor business into new ventures, such as Admial Money and Pioneer • Leveage historical data and experience to test and learn in new markets and develop products which suppot economic development • Provide insuance cover to both fully electric and hybrid vehicles • Telematics ofering both incentivises and suppots safer driving pactices for our customers Goal 11: Sustainable Cities and Communities Target (11.2): Provide access to safe, afordable, accessible, and sustainable tanspot systems for all. Creating Sustainable Value for our Stakeholders continued Customers People Goal 3: Good Health and Wellbeing Target (3.4): Promote mental health and wellbeing. Admial’s contribution • Ranked Best Big Company for Wellbeing in the UK in recognition of our employee suppot initiatives • Long standing gaduate tainee progamme • Fully gender balanced Group Board 30 • Launched an international mentoring progamme, Get Discovered, to develop and empower high potential women across the organisation Goal 4: Quality Education Target (4.4): Increase the number of youths and adults who have relevant skills, including technical and vocational skills, for employment, decent jobs, and entrepreneurship. Goal 5: Gender Equality Target (5.5): Ensure women’s full and efective paticipation and equal oppotunities for leadership at all levels of decision making in political, economic, and public life. 30 As of 31 December 2022 Admial Group plc Annual Repot and Accounts 2022 70 Stategic Repot Goal 8: Decent Work and Economic Growth Target (8.6): Substantially reduce the propotion of youth not in employment, education or taining. Admial’s contribution • Our Community Stategy ‘Together for Better’ is – committed to tansforming futures in our local communities • Established patnerships with Geneation to help people obtain access to life-changing careers. • Committed to net zero emissions by 2040 and cutting emissions in half by 2030 • Launched climate positive employee engagement progamme to educate and enable colleagues to suppot our net zero commitments • Celebated Black Histoy Month to relect on the diverse histories of people of African and Caribbean descent Goal 10: Reduced Inequalities Target (10.2): Empower and promote the social, economic, and political inclusion of all, irrespective of age, sex, disability, ace, ethnicity, origin, religion or economic or other status. Goal 13: Climate Action Target (13.3): Improve education, awareness-aising and human and institutional capacity on climate change mitigation, adaptation, impact reduction and early warning. Goal 12: Responsible Consumption and Production Target (12.6): Encouage companies, especially large and tansnational companies, to adopt sustainable pactices and integate sustainability information into their repoting cycle. Admial’s contribution • Actively engaged with ESG ating providers and integated feedback into our sustainability disclosure • Repoting against the Sustainability Accounting Standards Board (SASB) standards • Aligned disclosure with all recommendations under the Task Force on Climate-Related Financial Disclosure (TCFD) famework • Received external veriication of carbon emissions data and aiming to set Science-Based Targets Society Business Admial Group plc Annual Repot and Accounts 2022 71 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Creating Sustainable Value for our Stakeholders continued Sustainability Working Group: A Sustainability Working Group was established in 2020 to help identify, monitor and facilitate the implementation of sustainability ambitions across Group opeations. The working group suppots the Group Board and Admial’s executive leadership team to ensure adequate oversight is in place around sustainability-related decision-making. This includes monitoring the latest market developments around ESG, suppoting subsidiay entities with their sustainability commitments, and sharing best pactice ESG management. In 2021, sustainability champions were appointed from across the business to own the ESG ambitions disclosed in this repot. Each champion repots progress against these ambitions directly to the Sustainability Working Group. Climate Change Steering Group: Given the impact of climate change and the increased focus the area has received in recent years, a subcommittee dedicated to climate change was created in 2021. The Climate Change Steering group repots directly to the Sustainability Working Group. Forums & Ministries: Seveal internal forums and Ministries exist across the business to uphold the pillars of our culture and monitor areas related to sustainability such as employee diversity, happiness and wellbeing. For example, the Diversity and Inclusion forum consists of six working groups and drives Diversity and Inclusion initiatives across the Group. Seveal ministries such as the ministy of fun and the ministy of health organise regular events to keep colleagues happy and engaged. Sustainability Governance Group Board: The Admial Group Board is responsible for promoting the long-term sustainable success of the Group and is its principal decision-making forum. It is the principal governing body for sustainability- related issues and takes ownership of sustainability and climate-related topics and associated stakeholder engagement. The Board approves our Environment, Social and Governance (ESG) ambitions which can have a material impact on Admial. Milena Mondini, Group CEO, is the appointed Sustainability representative on the Group Board. Board Committees: The Board has delegated authority to seveal permanent Committees that deal with sustainability related matters where relevant and matters in accordance with written Terms of Reference. The principal Committees of the Board – Audit, Remuneation, Group Risk and Nomination and Governance play an impotant role in the Group’s sustainability related decision-making processes. For example, the Group Risk committee oversees the management of climate-related risk and ensures appropriate oversight is in place. To see the Group Governance Structure, and all Board Committees please turn to page 126 Admial Group plc Annual Repot and Accounts 2022 72 Stategic Repot 31 The use by Admial Group of any MSCI ESG research LLC or its ailiates (“MSCI”) data, and the use of MSCI logos, tademarks, sevice marks or index names herein, do not constitute a sponsorship, endorsement, recommendation, or promotion of Admial Group by MSCI. MSCI sevices and data re the propety of MSCI or its information providers, and are provided ‘as-is’ and without waranty. MSCI names and logos are tademarks or sevice marks of MSCI 31 Members of the Sustainability Working Group are reviewing the drivers behind our lower CDP score in 2022 and putting in place a plan of action to improve peformance going fowards 32 Copyright ©2022 Sustainalytics. All rights reseved. This repot contains information developed by Sustainalytics (www.sustainalytics.com). Such information and data are proprietay of Sustainalytics and/or its third paty suppliers (Third Paty Data) and are provided for informational purposes only. They do not constitute an endorsement of any product or project, nor an investment advice and are not waranted to be complete, timely, accuate or suitable for a paticular purpose. Their use is subject to conditions available at https://www.sustainalytics.com/legal-disclaimers 33 A decile ank of 1 indicates high relative peformance versus a decile ank of 10 which indicates poor relative peformance 34 Improved result (a higher mark indicates stronger peformance against the Dow Jones Sustainability Index scoring requirements) MSCI MSCI ESG ating assessment 31 • 2022: AA • 2021: A ISS ESG ISS ESG peformance • 2022: C- • 2021: C- • 4th Industy decile ank (2021: 4th) 33 Dow Jones Dow Jones Sustainability Index • 2022: 48/100 34 • 2021: 37/100 Totoise Totoise Responsibility100 index • 2022: 63rd out of 100 • 2021: 21st out of 100 CDP CDP Climate Score 31 • 2022: D • 2021: C Sustainalytics Sustainalytics ESG Risk Rating 32 • 2022: 21.0 • 2021: 22.3 • 21st percentile subindusty anking (2021: 8th) 2022 ESG ating DISCLOSURE I NSIGHT ACTION Admial Group plc Annual Repot and Accounts 2022 73 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Why they matter to us stategically, and how they inluence the opeation of the business Customers are at the heat of our business, and eveything that we do. As a customer-centric organisation, we seek to provide more people with the oppotunity to access good inancial sevices products. The needs of our customers shape the products we deliver, and their feedback and expectations feed into the design of our channels and platforms. In 2022, we assessed our customer-centric stategy and opeational culture to ensure that the business was well aligned with best pactice recommendations. Our assessment provides conidence that we have efective pactices and monitoring in place to suppot excellent customer sevice, as well as signiicant resources dedicated to taining customer facing employees across the business. What matters to our customers, and encouages them to maintain a relationship with Admial Considering seveal inluences, including the latest regulatoy guidance, we believe that key factors that are impotant to our customers include: • Great sevice • Fair, afordable pricing • Good quality products • Accessible products and channels • A resilient business How we engage to conirm what matters to our customers There are oppotunities for us to communicate and engage with our customers, and vice versa, throughout the diferent points in the customer life cycle. Some of these mechanisms include: • Discussions with our; customer sevice teams, new business and renewals teams, our claims teams, and our complaints teams • Online customer potals • Live chats with agents • Social media • Admial App messages • Customer feedback (comment forms, suveys, SMS) • Customer focus groups • Perception studies Frequently reviewing the engagement mechanisms across our customer experiences, paticularly throughout digital journeys, allows us to understand what is most impotant to our customers and helps us to continually reine and improve our sevice. Board oversight, taining, and escalation The Board continues to receive updates from Management on the treatment of existing customers and the various processes that are designed to ensure fair outcomes throughout the customer journey. Customer satisfaction levels and employee feedback is fed into Board discussions which ultimately shapes stategic decision making, including plans related to digital investment and future diversiication. The Board also receives annual feedback on the Conduct Risk famework through the Group Risk Committee. During 2022, the Board also spent signiicant time reviewing seveal actions that were implemented in 2021 in response to the FCA’s pricing remedies, including but not limited to; • Ensuring that renewing home and motor insuance consumers are quoted prices that are no more than they would be quoted as a new customer through the same channel • Make it simpler for customers to stop automatic renewals if they wish to do so • Ensuring that we deliver fair value on all insuance products • Updating and enhancing the model used to estimate the savings arising from the whiplash reforms, introduced by the UK government on May 31, 2021 Creating Sustainable Value for our Stakeholders continued Our Customers Admial Group plc Annual Repot and Accounts 2022 74 Stategic Repot 35 A subsidiay NED of EUI Limited, the entity considered as ‘The Firm’ by the FCA Regulatoy Authority • Preparing and enhancing opeations in anticipation of the new Consumer Principle from the FCA, that requires irms to act to deliver good outcomes for all retail customers • Approval of the Consumer Duty Implementation plan • Appointment of an Independent Director as Consumer Duty Champion during Q3 35 The Board also received updates on (i) the progress to deliver the technology and digital stategies, which have a direct impact on the improvements made to customer journeys, and (ii) information security and cyber risk, including crisis management, both from a customer and reputational impact perspective. What value do we create for our customers? In 2022, Admial delivered numerous changes impacting customers for the better. Some examples of the value delivered to our customers include: • Improved Claims System for UK Motor Customers (NEO) + Read more on page 29 • We added our Multicar proposition to PCW platforms + Read more on page 76 • We suppoted UK and French Household customers impacted by loods + Read more on page 9 • We launched a new loans product, ConTe Prestiti, in Italy in Q3 + Read more on page 150 • We launched Admial Pet + Read more on page 32 Increased focus on Net Promoter Score (NPS) We commit to providing excellent and eicient customer sevice, and to improving our oferings with customer feedback. We use NPS to measure and drive peformance across the Group. Although NPS was already a key metric for Admial, the oppotunity was taken during 2022 to increase measurement of NPS, whilst aligning business leaders and delivering company-wide taining on the impotance of recording and tacking scores. Continued delivey of fair and afordably priced products During 2022, Admial has continued to ofer fair and afordable pricing, and we continued to evolve our understanding of customers’ needs to aid product design (e.g., Admial Essentials, and lexible shot-term cover provided by Veygo). What are the risks and oppotunities that could afect the relationship and, therefore, Admial’s success? Ahead of 2022, Admial recognised that the implementation of the FCA’s pricing remedies would afect geneal insuance customers on a market-wide basis, and subsequently anticipated the changes required before the regulation came into force in Q1. As the year developed, the Board also stated to prepare for the FCA ‘Consumer Duty’ (‘The Duty’) regulation, and to plan for futher enhancements to business pactices. As pat of the process, the Board recognised the need to embed a customer-centric culture at all levels, to suppot adapting processes and procedures ‘to do the right thing.’ Whilst the Board and Management were conident that the existing Admial culture was well aligned to suppot this objective, in 2022 the Board asked the business to develop a series of high-level principles for employees to anchor their day-to-day actions to, when dealing with customers. Careful consideation was given to ensure that an appropriate ‘tone from the top’ was agreed upon, both at Admial Group Board and EUI Board. 36 The Executive management team and the Board continued to obseve progress of stategy in anticipation of implementation throughout the year. Admial also continues to explore oppotunities to provide customers with additional, innovative products. In 2022, our international businesses continued to grow, and launched additional products to help more people look after their future. How we monitor the impact of our actions and the strength of our relationship The following metrics are some of the main tools we use to assess the impact of our actions and the strength of our relationship with our customers: • Net Promotor Scores (NPS) scores • Customer satisfaction scores • Complaint ates • Feedback and insight relating to products and sevices from all customer-facing teams • Policy acquisition and renewal ates • Activity levels on the MyAccount Potal • Call volumes, and call answer ates • Ombudsman feedback • Social media Futher information is located on pages 28 to 30 of the Stategic Repot 36 EUI Limited is a fully owned subsidiay of Admial Group Plc. EUI Limited is an insuance intermediay with employees across the UK, India, and Canada Admial Group plc Annual Repot and Accounts 2022 75 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Creating Sustainable Value for our Stakeholders continued ABI throughout the consultation and implementation period and successfully tansitioned its pricing pactices at the stat of the year. Additionally, new Consumer Duty regulation was inalised in 2022 and will come into force in July 2023. To prepare, Admial has put in place the necessay famework to continue to ensure we deliver valued products and sevices for customers in terms of pricing, tansparency, and suppot. We are conident that we create value for customers through the products and sevices we sell. We also consistently review our activities through a Consumer Duty lens and will continue to enhance our monitoring, governance, and management information (MI) requirements in 2023. Satisied customers We regularly measure customer satisfaction across seveal key benchmarks, allowing us to stay close to customers’ needs and understand areas where our sevice fails to meet expectations. With emphasis on creating a more seamless experience, customers that speak to us via webchat can now experience an efotless secure card payment method with the use of Semafone. The new tool opens a channel for customers to tansact and engage with us, improving the customer journey. The use of Semafone also suppots those in our vulneable customer base who may struggle to give card payment information over the phone; having this function on Webchat allows customers to ask for suppot instantly. Fair and tansparent claims outcomes As an insurer, we are committed to providing appropriate claims pactices that deliver fair and just outcomes for customers in a timely manner. Over the last three years, signiicant work has been put in to develop our new claims system: Guidewire Claims Centre (GWCC). The new system provides more tansparent and eicient customer experience; it ofers better data insight and gives customers more choice and lexibility on how they inteact with Admial. GWCC was originally introduced into our Household Claims function in 2021 and then successfully rolled out to Motor Claims in 2022. Simple and clear communication We aim to create simple insuance products which are easily understood and accessible to all. In 2022, we continued to strengthen our digital sevices. For example, we’ve rolled out a new self-install telematics device that customers can link to their Admial app. Through it, customers can easily access feedback on their driving behaviour and see how they can improve. This encouages safer driving on our roads which beneits eveyone, and for customers it improves the customer experience and helps bring their premiums down. Responsible sales We comply with all relevant regulatoy requirements and actively review our pactices to ensure all processes and systems opeate in line with relevant policies. Notable in 2022 was the introduction of the Geneal Insuance Pricing Pactices (GIPP) in the UK. The new pricing rules require that renewing Motor and Home insuance buyers are quoted prices that do not exceed what they would have paid as a new customer. Admial regularly communicated with the FCA and the Our sustainability ambition: We strive to provide great customer experiences Launch of MultiCar on price comparison We made our MultiCar product proposition available via the price comparison channel for the first time this year. We believe this is an exciting oppotunity to grow our popular MultiCover offering as it allows us to give customers a MultiCover price much earlier in their shopping journey. Admial is the first of any insuance company to offer this in the UK. The idea to launch MultiCover online came from one of our internal innovate competitions where colleagues across the business pitch ideas to senior management and make a proposal on how it could work for our customers. The idea was so successful it was picked up by a project team and subsequently put into pactice. We are currently trialling MultiCar on Confused.com and will continue to monitor progress into 2023. This will give us the chance to understand our customer needs and behaviours and if successful we will look to test on other price comparison sites and with other products – watch this space! Admial Group plc Annual Repot and Accounts 2022 76 Stategic Repot Why our people matter to us stategically and how they inluence the opeation of the business We believe that people who like what they do, do it better. We strive to do better evey day because we like what we do, and we want to help more people to look after their future. This attitude enables our test- and-learn culture, suppots opeational excellence, fosters happier and more productive employees, and ultimately shapes better outcomes for our customers and other stakeholders. What matters to our people, and encouages them to maintain a relationship with Admial Our people want a friendly, fun, and productive workplace where they are engaged, and where their views are valued and considered. Hybrid working and health and wellbeing continue to be key priorities for all businesses around the Group. We consider the priorities of our people to be: • Talent acquisition and development, with fair and equal oppotunities available to all • Reward and recognition, including long-term shareholder value (inc. the employee share scheme) • Health and wellbeing, both physically and mentally • The oppotunity to build and maintain a work life balance whilst remining engaged and included by the business • Flexible and remote working, and freedom to provide inputs into working hours and places of work How we engage to conirm what matters to our people Our people are encouaged to engage across multiple channels, vitually and face-to-face. We also engage via: • 1:1s with managers • Polls • Blogs • Chat Logs • Colleague suveys • Employee Consultation Group (ECG) meetings • Feedback schemes such as ‘Ask Milena’ and ‘Have your say’ • Paticipation in the Great Place to Work suvey • Exit inteviews • Grievances • Whistleblowing channels • Friendly Forums + See more on page 81 Board oversight, taining, and escalation The Board receives updates on Diversity and Inclusion, people, and culture which all relect the permanent move to a hybrid working model. The Board also receives updates relating to ECG meetings in the UK and international businesses, Group health and safety and whistleblowing. The Group CEO and CFO host our Staf Geneal Meeting (SGM) (which allows for questions to be aised to them as representatives of the Board), and host numerous forums with our people. Our employee AGM took place in hybrid form during 2022, and feedback suggested that it was a useful format for management to share information with employees, in a fun and engaging way. Additionally, our Non-Executive Directors attend ECG meetings on a rotational basis and repot back to Board. In 2022, the Board Chair and other Non- Executive Directors made vitual and in-person visits to diferent business depatments and overseas locations. What value do we create for our people? • We improved our reward package for employees and responded to the cost-of living crisis + Read more on page 148 • We launched new Admial taining progammes to ensure and encouage our people to engage with our purpose + Read more on page 79 • We upgaded our learning and development scheme, launched a new progamme, Get Discovered, and made LinkedIn Learning available to all colleagues + Read more on page 81, 165 Our People Admial Group plc Annual Repot and Accounts 2022 77 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information • We extended our health initiatives (men and women’s health) and we upgaded our paternity and maternity policies + Read more on page 81 • We continued to encouage our teams to host team building events, suppoted by our Ministy of Fun + Read more on page 10 • We suppoted Purple Light Up – a global movement that celebates and daws attention to the economic contribution of the 386 million disabled employees around the world + Read more below Diversity and Inclusion Admial provides a working environment in which Diversity and Inclusion is embaced, and promotes a comprehensive Diversity and Inclusion approach across the Group. Our Diversity and Inclusion stategy suppots our ability to attact, engage, develop, and retain diverse talent. Employee led working groups include: • Gender Equality – This group is tasked with aising awareness on issues surrounding gender; and to continue to suppot staf and promote an inclusive culture • Ethnicity and Culture – This group suppots us becoming a more ethnically diverse and inclusive company through awareness, discussion, and improving the work environment • Ty Rainbow LGBTQ+ – This team promote a safe and inclusive environment to suppot LGBTQ+ staf and customers, as well as providing a social suppot network • Age – This group focus on understanding the needs of our employees including issues and needs of people at work in various age anges from 16–30, 30–50 and 50+ • Disability – This team promote a safe and healthy environment for all our team members, aise awareness, and suppot inclusion within the community • Social Mobility – This working group aims to ensure that regardless of background, eveyone can fulil their potential and is able to progress their careers Working groups consist of volunteers across the business from a variety of roles and experience. There are around 60 members in total. Each working group meets evey 4–8 weeks. We check that our culture continues to relect suppot for Diversity and Inclusion through seveal feedback mechanisms, including: • Feedback from the Employee Consultation Group • Great Place to Work suvey results • Pulse suvey results • Exit inteviews • An engaging and diverse events calendar Examples of initiatives that reinforce our culture are: • Paticipation and awareness of our ‘#IBelong’ series • Sponsoring Pride (Headline Sponsors for 22 years) • Celebating Black Histoy Month • Promoting ‘Purple Light Up’ and celebating the economic contribution of disabled employees In 2022, Admial was placed 26 out of 850 workplaces in Europe as a Diversity Leader, by the Financial Times, as well as being named 3rd Best Workplace for Women in the UK by the Great Place to Work. Futher information on our Diversity and Inclusion activities can be found on pages 80, 158 Futher information on our awards can be found on page 41 Creating Sustainable Value for our Stakeholders continued Purple Light Up On December the 3rd, Admial and businesses around the world celebated the economic power of disabled people. For the event, we wanted to open a conversation around disability inclusion in the oice and share some of the things we do. Throughout December, we held multiple oice and vitual events. Colleagues at Admial both showcased their lived experiences and shared their perspective, guide dogs for the blind visited our oices, and guests such as Stuat Nixon MBE hosted webinars discussing overcoming adversity. The events were organised by our Disability Forum which was created to improve awareness, discuss ideas, and implement adjustments to improve the workplace for those living with disabilities. 92% answered positively to “I believe Admial Group is a diverse and inclusive employer” Admial Group plc Annual Repot and Accounts 2022 78 Stategic Repot What are the risks and oppotunities that could afect the relationship and, therefore, Admial’s success? Hybrid working provides both risks and oppotunities in respect of our people. Whilst we may now be able to reach diferent pools of talent for critical roles, we pay careful consideation that there could be a risk losing of talent, as geogaphy becomes less of a constaint in a hybrid working world. The protection of Admial’s unique culture is critical to ensuring that we continue to attact and retain talent. How we monitor the impact of our actions and the strength of our relationship As well as monitoring the impact of our actions and the strength of our relationships qualitatively through our engagement mechanisms, we also monitor the following key peformance indicators: • Accolades • Employee feedback • Pay gaps • Health and safety incidents • Culture Dashboard metrics, including: – Satisfaction scores from Great Place to Work suvey – Diversity targets – Taining & development (courses completed) – Attrition – Sickness – Recruitment (e.g., applications per vacancy) Our ambition is to be one of the best places to work in the world To achieve our ambition to be one of the best places to work in the world, we have set the commitment to be in the top 25 Great Places To Work (GPTW) ankings across all of the Group’s respective businesses. In 2022, we achieved this target in almost all opeations where we are anked. 2022 Great Place To Work Ranking UK 4th Admial Canada 4th ConTe 4th Admial Seguros 2nd L’olivier 7th Admial Solutions 38 35th Europe 19th Embedding Admial’s purpose Two years ago, we took the oppotunity to relect on our ‘why’ – why do we exist as a business and what is our purpose as an organisation. Following hundreds of hours of listening to employees and conducting multiple employee workshops, we outlined a new Group purpose statement. In 2022, we have increased colleague’s exposure to our purpose through taining, and decision-making among stakeholder groups. Key successes include: • Exposure to purpose for evey employee via online and oline communications campaigns • Annual Top 10 competition centred around showcasing our purpose in the eveyday • Development of a purpose-led communities and sustainability approach • The launch of a UK course about our purpose • Shareholder communications about purpose in our annual and half-year results Our sustainability ambition: To be one of the best places to work in the world 80% of employees agreed that they understand how their role brings to life Admial Group’s purpose in 2022 37 37 Staf pulse suvey result. 38 Peformance versus other entities is impacted by the much larger pool of companies included in India. More information about how we monitor and assess culture, and talent management can be found on pages 140 to 143 (for culture) and page 166 (for talent management) Admial Group plc Annual Repot and Accounts 2022 79 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Creating Sustainable Value for our Stakeholders continued A diverse and inclusive business We irmly believe that to create a successful working environment, companies must embace Diversity and Inclusion (D&I) across all levels of the business. In Admial, a Diversity and Inclusion Forum, made up of over 200 employees, is in place to drive all our D&I initiatives. The forum consists of six working groups which consider and implement ways we can better suppot a diverse working environment. To drive the conversation at the highest level, Cristina Nestares, CEO of UK Insuance is the appointed D&I executive sponsor. In 2022, colleagues have had access to monthly newsletters and all line managers undewent mandatoy D&I taining. Our international entities completed a maturity assessment which considered multiple elements of D&I. This helped identify our strengths but also areas for improvement. People Sevices (PS) managers and D&I sponsors met regularly to share progress, ideas, and express concerns. New local working groups were introduced in Spain, Italy, and the US, with a focus on making positive changes in their respective entities too. Through these initiatives we are seeing a tansition in the business from a position of awareness, into wider engagement and consolidation. Disabled employees Admial Group’s UK businesses are Disability Conident Employers. This means they are recognised as going the exta mile to make sure disabled people get a fair chance, full and fair consideation to applications for employment made by those with disabilities, having regard to their paticular aptitudes and abilities. Admial has a Disability Forum to help promote inclusivity in the Group for those with a disability. There is also a Workplace Suppot Team to provide suppot for those with physical Diversity patnerships and signatoy commitments disabilities, neurodiversity and shot-term mental health problems. Taining sessions to help better employees understand those with neurodiversity are also available. The Admial Group will suppot any employee who is disabled or has a life-threatening illness and help them to contribute to the Group as long as their health allows. Managers in the Group are sensitive to health concerns and special needs and will not knowingly allow any employee with a disabling or life-threatening illness to sufer from discrimination at work. The Group also provides employees with access to the Employee Assistance Progamme Care First conidential helpline which ofers advice and suppot on a ange of health issues. 92% answered positively to “I believe Admial Group is a diverse and inclusive employer” £3,600 in Admial shares received by around 10,000 employees each year Admial Group plc Annual Repot and Accounts 2022 80 Stategic Repot Health and wellness across our opeations At Admial we have been committed since day one to providing a work environment where people feel comfotable to be themselves and receive the right level of suppot. The Board receives updates on health and safety throughout the year and the Employee Consultation Group (ECG) gives employees a platform to share their views. Within Admial all People Sevices (PS) executives and the Wellbeing & Workplace suppot team are cetiied Mental Health First Aiders. We also ofer access to mindfulness courses, healthy eating and living webinars, and guest speakers talking on a ange of topics such as anxiety and emotional resilience. In 2022, we launched a new mental health and wellbeing stategy to help educate and enable our colleagues. As pat of our stategy, we an events such as Women’s and Men’s Health months focused on driving awareness and understanding of various health issues. We also launched a Wellbeing Representatives Network which encouages face-to- face communication, and gives assistance to those who may be struggling. People Learning and Development The Learning & Development (L&D) depatment is Admial’s cental taining hub and ofers suppot, learning oppotunities and career advice to all employees. In 2022, the L&D depatment launched a new internal Leadership Planning and Skills Development hub. The hub provides guidance, suppot, and skills development oppotunities for employees within Admial. In it, colleagues can build their own personal learning plan which they can then tailor to their speciic development needs. The hub links to a ange of internal and external development courses and progammes with additional resources in the pipeline to be built. At current we have over 17,000 courses, as well as access to LinkedIn Learning for all colleagues. In 2022, we’ve also deepened our understanding of where talent pools may or may not exist across our global opeations and strengthened processes to identify potential talent. To that end, internal communities have been created in targeted business areas to enhance our development networks and develop Admial’s employer value proposition. Recruiting the right people Our recruitment progams are designed to align with stategic business needs. In 2022, in line with Admial 2.0 Group stategy, emphasis was placed on recruiting for Data and Analytics (D&A) roles. Stategies have been put in place to identify where we need to develop or recruit talent, these stategies take into account variables such as, attrition, time to hire, and the demand for skills. Community working groups were then established to design better ways to attact and retain D&A talent. To keep candidates engaged throughout the recruitment process, changes were also made to our onboarding platform. The platform was updated with all the oppotunities Admial ofers in terms of beneits, learning and development, health and wellbeing, and our culture. In addition, a hiring manager potal has been created which provides a centalised place for hiring managers to view their job vacancies, see applications, anonymised CVs, and provide feedback to candidates. These changes are expected to streamline the recruitment process, and in turn improve the oveall recruitment journey. Engaging and communicating with our employees Our culture is built on an environment where employees feel that they are pat of a wider collective, and that their contribution plays a vital role in our continued success. The Admial Employee Consultation Group, or ECG for shot, was implemented in 2019 and gives employees a voice at the highest level of the organisation. Each depatment in the business has an assigned ECG representative, voted for by the employees, to listen to employees’ views and share with the Board and senior managers where they believe Admial is doing well or needs to improve. In 2022, topics discussed included developments around Smat Working, health and wellbeing, and futher conversations on the Group’s remuneation pactices. No topics are considered ‘of-limits’ and employees are encouaged to share their opinions to ensure tansparent and fair conversations can occur. Employee Reward We recognise the previous few years have been challenging for employees mentally, physically, and inancially. As recognition of the dedication our employees have showed and to address the challenges faced due to the cost-of-living crises, we committed to giving employees exta payments in the year. We also opeate our employee share scheme which sees around 10,000 employees receiving an award woth up to £3,600 in Admial shares each year. A wide ange of non-salay beneits covering all employees are also available. This includes suppot for medical appointments, buy-a-book schemes, company suppot for dependent care through coopeation with local childcare facilities, a cycle-to- work scheme, and a wide variety of leave oppotunities such as: Maternity/Paternity leave, Dependent Care leave, Career break leave, Compassionate leave, and Charity leave. Admial Group plc Annual Repot and Accounts 2022 81 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information How we engage to conirm what matters to our patners and suppliers To ensure strong third-paty engagement, there are dedicated processes around the Group to govern end-to-end relationships. Key paties have internal relationship managers responsible for ongoing dialogue, for example with co- and reinsuance patners, and stategic patners. To monitor and suppot the governance of procurement, a software application is used to provide tender management, contact management, supplier management and due diligence under a single platform. This information is repoted to the Admial Risk Management Committee monthly and helps inform our engagement with our suppliers. The Group’s dedicated Regulatoy Relationship teams maintain channels of communication with the FCA and PRA in the UK, and all our international regulated intermediaries and insurers. Board oversight, taining, and escalation The Board receives updates on: • All propotional risk-sharing agreements, including co-insuance and reinsuance contacts • Matters relating to patnerships and oppotunities • Relationships with key patners and procurement, including our payment policies and pactices • Regulatoy, technological and consumer trends • Modern slavey risks in the supply chain The Board takes all updates into account when considering the long-term consequences of its stategies and business plan. The CFO provides updates on the activities related to the renewal of the Group’s co-insuance, reinsuance and quota share contacts, including maintaining the ongoing stategic relationship with Munich Re. Creating Sustainable Value for our Stakeholders continued Why they matter to us stategically and how they inluence the opeation of the business Our patners and suppliers are considered stategically impotant to us either because (i) the supplier is a material outsourcer (ii) the supplier or patner is integal to achieving future stategic goals, (iii) there are paticularly preferential ates or terms in place, or (iv) another factor which makes the relationship hard to replicate or replace. Our stategic patners and suppliers comprise a mix of inancial patners, reinsuance patners, IT hosting, distribution and claims management and claims sevices patners. Therefore, it is crucial that the Group fosters these relationships efectively to mitigate the associated risks in the supply chain. What matters to our patners and suppliers, and encouages them to maintain a relationship with Admial The matters of most impotance to our patners and suppliers are: • Strong ethical patnerships and fair treatment • Receiving great sevice and engagement through our supplier sourcing, and supplier management • Timely payment pactices • Governance of managing risk • Business resilience Our Business: Patners and Suppliers Admial Group plc Annual Repot and Accounts 2022 82 Stategic Repot What value is created by us for them? As pat of the tender process, each supplier completes an extensive due diligence questionnaire to ensure they comply with Group standards. Our procurement team also manages contact renewal, including an updated due diligence assessment and commercial negotiation. The selection of suppliers must follow a documented evaluation process, considering at a minimum the tender submission, the business requirements, the due diligence carried out, commercial and contactual terms. Managing relationships with our patners and suppliers in this way enables us to maintain business resilience and therefore reduce risk, ensures that there is a consistent process and that they are treated fairly and paid promptly. • We launched Pet patnership with veterinarians across the county + Read more on page 32 • We patnered with an Insutech to help customers mitigate leaks in UK Home + Read more on page 3 • Admial Pioneer funded investment in Wagonex + Read more on page 36 What are the risks and oppotunities that could afect the relationships and, therefore, Admial’s success? Patner and supplier risk refers to the degree of risk to the business arising from the potential loss of the supplier or patner, the contact, the criticality of the sevice, the size of the supply market and the complexity to move or switch suppliers. At Admial, each supplier is given a risk score based on these matters, which is regularly repoted to the Risk Management Committee, as outlined above. Some risks in respect of patners and suppliers arise from hosting critical sevices in the cloud. Whilst the migation to the cloud has many opeational and commercial advantages, the reliance on cloud hosting providers such as Microsoft Azure and Google Cloud Platform means that outages afecting those providers could have a signiicant impact on core opeations and present a business interruption risk. The one-to- many nature of cloud sevices means that Admial is usually required to sign up to cloud suppliers’ terms and conditions that limit liability for potential business losses arising from sevice outages. However, this is an industy-wide risk and one that is geneally mitigated by: (i) carying out appropriate due diligence on suppliers to ensure they have efective resiliency; (ii) not over relying on a single cloud hosting provider; and (iii) maintaining appropriate insuance cover to protect the group against business interruption caused by third paty outages. With the geneal exception of cloud suppliers, we also continue to ensure that all suppliers sign up to our terms and conditions that are reviewed and updated in line with regulatoy standards. For cloud suppliers who require us to sign up to their terms and conditions, we require suppliers to include a set of contactual requirements called the “Cloud Minimum Standards”. There were oppotunities to improve the way we manage our patner and supplier relationship risks in 2022. Some of the oppotunities included reviewing our procurement famework applicable to the Group, building additional capabilities to monitor, ate and improve ESG peformance of patners and suppliers, and enhanced supplier risk controls to meet the FCA’s opeational resilience requirements. How we monitor the impact of our actions and the strength of our relationship • Successful renewal of risk-sharing agreements and contacts • Engagement with co-insuance and reinsuance patners • Feedback from stategic suppliers and patners • Compliance and audit activities • Eiciency/savings and decreased risk in procurement activities • Supplier peformance against agreed sevice levels Read more on pages 6, 32 and 36 Admial Group plc Annual Repot and Accounts 2022 83 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Our sustainability ambition: To build successful businesses with opeational resilience Patnership with Pure Stoage Admial patnered with Pure Stoage in 2019, to improve our on-premise data stoage within our data centres. In 2022 the project was completed. Pure stoage helped us improve our peformance across all our core databases, almost doubling the speed of our real-time analytics and emergency ate changes made at shot notice in response to such things as inclement weather. Pure technology has also helped us to reduce the size of our data centre and its carbon footprint by a factor of four – keeping the business on tack to reach our net zero target by 2040. Chris Bevan, Head of Platform Sevices, had the following to say – “With Pure Stoage, ate change calculations are 98% faster, giving customers the best prices and improving our chance of listing in the top 10 on aggregation sites”. Creating Sustainable Value for our Stakeholders continued Sustainable procurement pactices Admial has embedded sustainable business pactices across all the procurement engagements that it conducts. During any tender process, potential suppliers are asked to complete a due diligence questionnaire which includes questions related to societal and environmental factors such as inancial crime, data protection, modern slavey, and environmental accreditation. Suppliers are then assigned a risk score based on these criteria. Risk levels are managed throughout the supplier process and where suppliers have poor credentials, they are disqualiied. That said, we recognise that more can be done in terms of promoting sustainable procurement pactices. We are currently working towards improving technology and automation solutions to make the Group procurement function more eicient. This will ensure that we can continue to efectively assess our supply chain and appropriately consider any rising modern slavey and environmental risks in the future. 2040 We are committed to achieving our net zero target by Admial Group plc Annual Repot and Accounts 2022 84 Stategic Repot Why they matter to us stategically and how they inluence the opeation of the business Shareholder engagement fosters understanding of Admial’s stategy and investment case. It allows us to explain the business and stategic decisions and ationale whilst providing oppotunities for shareholders to comment and challenge business priorities. What matters to our shareholders and encouages them to maintain a relationship with Admial Our stakeholders deem that the key areas of impotance related to our shareholders include: • The inancial peformance of the business, including products and sevices that are it for purpose and provide solid inancial returns • Business stategy and viability of long-term success • Our approach to climate change and the environment • We also recognise the growing impotance of ESG factors in investment decision making How we engage to conirm what matters to our shareholders The Group engages regularly with shareholders through frequent and open dialogue. Our Investor Relations calendar consists of various activities including but not limited to: • Results announcements and presentations • Annual Repot • Roadshows (in person where possible, and remotely) • Conferences • Analyst and Investor phone calls/ presentations • 1:1 and group meetings • IFRS 17 analyst taining session • On-site investor visits • Annual Geneal Meeting • Staf Geneal Meetings • Corpoate Governance shareholder meetings (with Chair and Senior Independent Directors) In 2022, we also futher improved communication through enhanced disclosures and engaging with indices to improve index atings. Board oversight, taining, and escalation The Board receives regular updates on the activities of the Investor Relations team, as well as on meetings held between Board members and/or management and investors. The Board also receives investor feedback (post roadshows/results/conferences) and uses it to shape its approach to corpoate governance, ensuring that any issues or concerns aised are considered and addressed. The Board also receives regular updates on the key elements of ESG. What value is created by us for them? • Clarity and insight into opeations • Sharing timely updates in line with best pactice • Tansparency, so that analysts and shareholders have conidence in the value of the stock/can price fairly • Assuance of management intentions/stategy • Conidence that external views will be shared/ discussed with the management team • In 2022, we held an IFRS 17 event to help investors better understand the impact of the changing accountancy rules • Across the year, we engaged with third-paty agencies to provide feedback on our sustainability repoting and made efots to improve disclosure + Read more on page 91 • Our Chair and Senior Independent Directors held a series of corpoate governance meetings with our largest shareholders • In 2022, we an through a succession plan, to secure our new Chair Our Business: Shareholders Admial Group plc Annual Repot and Accounts 2022 85 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Creating Sustainable Value for our Stakeholders continued What are the risks and oppotunities that could afect the relationship and, therefore, Admial’s success? Our principal risks and uncetainties section outlines the risks and oppotunities that could impact our stategic objectives and afect shareholder’s views of the business. No new principal risks and uncetainties were identiied throughout 2022, and the principal risks and uncetainties that could impact Admial’s relationship with shareholders have remained stable over the same period. How we monitor the impact of our actions and the strength of our relationship • Broker feedback • Analyst feedback • Shareholder feedback • Investor Relations material • Feedback from proxy advisoy irms • AGM voting results • ESG indices • Investor meetings • Roadshow feedback • Rating agency repots Our website contains all Investor Relations material and AGM Voting Results. Regular shareholder engagement Admial’s management team actively engages with the Group’s shareholders to promote open and tansparent dialogue. Issues discussed geneally relate to the Group’s inancial peformance, product and sevice updates, and the long-term stategy of the Group. These engagements provide current and potential investors with insights into Admial’s stategy and are a means by which we receive feedback. The Investor Relations Team oversees engagement with the Group’s shareholders and provides regular updates to the Group Board. The team also organises meetings between Board members and/ or management and investors, including conferences, one to one management meetings, and annual Corpoate Governance meetings with our Board Chair. In 2022, there continued to be a mix of meetings held in person and online with the Group able to continue its regular shareholder engagement. Our sustainability ambition: We seek to build successful businesses with opeational resilience To see how we link risks to our pillars of stategy, please turn to page 114 To see our principal risks and uncetainties, please turn to page 114 Our key financial and non-financial highlights are on page 4 Details of how we engage with ESG indices can be found on page 73 Admial Group plc Annual Repot and Accounts 2022 86 Stategic Repot How we engage to conirm what matters to our communities Our employees drive our community engagement as they are involved in nominating and choosing which initiatives we suppot. A culture of giving and a sense of responsibility for the community is shared across the whole Group. We engage in seveal ways, including: • Colleague volunteering, paticularly our ‘Impact Hours’ scheme • Charity initiatives • Patnerships with recruitment bodies • Patnerships with educational bodies • Sponsorship of various community events • Fundaising • Funding projects through our Community Fund • Funding projects through our Ministy of Giving progamme Board oversight, taining, and escalation The Board receives updates on the key community initiatives across the Group and provides direction on how we can continue to make a long-lasting, positive impact. In 2022, the Board also approved our new Community Outreach progamme. Please turn to page 89 to read more. What value is created by us for them? • We launched the Global Emergency fund + Read more on page 90 • We encouaged all of our employees to ‘Give a Day’ with our long standing volunteering scheme + Read more on page 89 • We sponsored FinTech Wales Foundy Acceleator progamme + Read more on page 15 • We suppoted over 200 organisations and donated over £140k in 2022, via our Community Fund + Read more on page 88 • We developed and streamlined our existing Community Outreach progamme + Read more on page 150 Why they matter to us stategically and how they inluence the opeation of the business Giving back to our communities is an integal pat of our company culture. Our people play a key role in how we engage with our communities, and we work collectively to drive long-term change both inside and outside of the Group. As a large employer across seveal countries, we believe it is our responsibility to provide employment oppotunities for those in the local areas whilst taining and developing our people. We are committed to promoting and recognising diversity both within Admial, and in the communities in which we opeate. What matters to them and encouages them to maintain a relationship with Admial The material issues for our communities geneally relate to suppot and ongoing dialogue, inancial and resource-based contributions, and consistency and integrity relating to our promises. We recognize the following focus areas as being the most impotant to our communities: • Employability • Social mobility • Educational oppotunities • Financial inclusion • Spots, ats, and culture Our Society: Communities * Rebanded to ‘Impact Hours’ in 2022 Admial Group plc Annual Repot and Accounts 2022 87 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Local suppot We recognise that there are organisations that do great work and are vey closely aligned to many of our Group sustainability goals. Examples of organisations that we suppot locally include bodies that champion social mobility and employability, suppot educational oppotunities, promote health and wellbeing, provide help for the homeless and suppot spot, and promote at and culture within various communities. Therefore, during 2022, we made ‘super donations’ to suppot local organisations that work in these areas. Patnership with Jesus College In 2022, we entered the second year of our three- year patnership with the University of Oxford’s Jesus College on their Welsh access initiative. Our suppot enables our Access and Outreach team to develop new access activities, enhance existing progammes and reach more academically gifted young people in the county, who are currently under-represented at Oxford and other leading universities in the UK. This work will include outreach patnerships with seveal Welsh primay and seconday schools, careers and inteviews advice workshops for seconday students and bring additional suppot to the College’s prestigious Seren Summer School progamme and the University of Oxford’s “Oxford Cymru” consotium. What are the risks and oppotunities that could afect the relationship and, therefore, Admial’s success? Admial is known for being a generous patner of community charity initiatives and engaging with our communities provides us oppotunities to give back and actively contribute to society. Over the last 12 months, the Community Stategy has been revised, and focus areas include impact hours, which contribute to teambuilding and colleagues building networks in and outside of the business. The Community Stategy has evolved into having a purpose/ goal that aims to help as many people into jobs as possible. The more focused approach potentially means that the scope of the community projects is narrower. Relationship management with existing charity patners will need to be managed to relect our generous/ positive contributions, communicate our streamlined approach and protect our reputation. You can read more about this on the next page. How we monitor the impact of our actions and the strength of our relationship • Feedback from charities, recruitment, and educational bodies • Feedback from employees • Community feedback • Dialogue with organisations • Feedback from the Welsh Government • Media Coveage • Social Media Over £140k in 2022, via our Community Fund Creating Sustainable Value for our Stakeholders continued Admial Group plc Annual Repot and Accounts 2022 88 Stategic Repot Our Community Stategy Admial has always cared about our impact on the community, and has been involved in many initiatives to invest in our communities in areas where we think we can make a diference, but that also are meaningful to our colleagues. In 2021, we built on this approach to re-deine and add more focus to our Community Stategy, launching our ‘Together for Better’ approach – our commitment to tansforming futures in our local community. Grounded by our Group Purpose, Together for Better is underpinned by three stategic pillars: • Community • Colleagues • Careers This approach will focus primarily on the employment market and getting more people into work. To suppot our stategy, we are working with local and global patners to reduce labour skills gaps and help disadvantaged groups into more sustainable employment. One of our most signiicant patnerships is with Geneation, a non-proit organisation striving to tansform the education system into an employment system. Initially, we will pilot progammes in India and Italy. Geneation Italy will suppot 80–100 paticipants in tech progammes and Geneation India will suppot 550–600 paticipants in progammes across the technology, sevice & sales, and healthcare sectors. Our longstanding Community and Match Fund have also been incorpoated into our wider Community Stategy. For context, through the Community Fund scheme colleagues can apply for a gant to help organisations, community groups and clubs that either they or their direct family are involved in. In 2022, “ I participated in an ‘Impact Hours’ litter pick in Bute Park with my whole team. We had valuable team bonding in a largely virtual team. Doing charity work never felt so ‘Admiral’ singing Tom Jones and reminiscing over past lives in the contact centre, all while performing an invaluable service to the community in Cardiff.” Cellan Lloyd Group Compliance we suppoted over 200 organisations, spending £142K, with the majority of the spend going towards spots and ats clubs. Additionally, if a colleague has aised money for a charity or organisation, they can apply for match funding where the business matches what they aise. We provided a total of £59K to over 70 charities and organisations in 2022. Impact Hours Alongside our work to suppot people into sustainable work, we have long-standing initiatives in place such as Impact Hours (previously Give-A-Day) where our employees can take the equivalent of two working days away to volunteer in their local communities. In 2022, to maximise the efect and use of our Impact Hours, we have encouaged and helped business areas to plan bespoke volunteering initiatives. We have also improved the tacking of volunteer hours and ensured each of our selected charitable patners can provide volunteer oppotunities. Since the re-launch of our volunteer progamme, we have noticed a signiicant increase in teams using their team-building time to volunteer and make positive change in their communities. Our sustainability ambition: We strive to have a positive impact on society Admial Group plc Annual Repot and Accounts 2022 89 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information A few of our Together for Better patnerships Global Emergency Fund Admial’s Global Emergency Fund was set up in 2022 and is dedicated to making fast donations to people and organisations who need it most around the world. Organisations suppoted in 2022 include the Welsh Refugee Council, where our donation has suppoted their employability progamme and helped a total of 150 refugees secure employment in Wales. We have also donated to the British Red Cross to aid their Pakistan Flood appeal, helping over 3,500 people by providing warm clothing during the winter months. In response to the Hurricane Fiona in Canada, $150,000 was donated to charities helping those afected. Much of this was led by our employees who worked tirelessly to suppot communities across Halifax and other badly afected areas, such as Nova Scotia. Over £140K donated via our Community Fund Over £50K donated to over 70 charities and organisations through our Match Fund Over 200 charities suppoted through our Community Fund Creating Sustainable Value for our Stakeholders continued Admial Group plc Annual Repot and Accounts 2022 90 Stategic Repot How we engage to increase awareness and to conirm what matters Colleague-directed activities include: • Regular updates from the Green Team, an internal working group set up to look at green initiatives to minimise the impact of climate change • Internal promotion of Green Week and Eath Day • Engagement with colleagues at employee forums and via CEO updates • Various recycling initiatives across our oices • Quaterly meetings of our Climate Steering Group • Presentations from Group Stategic Risk at CMAD (Senior Managers Stategy Sessions) Board oversight, taining, and escalation The Board regularly receives updates on climate and ESG-related topics, as well as our Responsible Investment Policy, and provides feedback and topics for consideation. During the year, a brieing session was also held on the Task Force on Climate-Related Financial Disclosures (TCFD) for the Audit Committee and the Group Risk Committee to provide clarity on the requirements and their respective responsibilities. Futher details on this can be found on page 97 What value is created by us for the environment? • We enhanced our Climate positive employee engagement progamme + Read more on page 99 • We invested in reforestation investments (Stump Up For Trees and Size of Wales) + Read more on page 94 • In 2022, we made progress towards our net zero targets + Read more on page 93 • During the year, we installed electric vehicle charging points in our oices + Read more on page 94 • We became fully carbon neutal for the third year running + Read more on page 95 Why it matters to us stategically and how it inluences the opeation of the business At Admial, we care deeply about our employees, our customers, and the impact we make on the world. Admial is mindful that it is increasingly impotant to demonstate responsible business behaviour with regards to the environment, not just because all our stakeholders demand it, but because it is the right thing to do: • Our people want to know that they work for a company which is playing its pat in tackling the climate emergency • Our customers want to know that we are not only looking after their propety and possessions, but that we’re looking after their future • Our shareholders and regulators want to know that we are a company which is robust to the challenges and open to the oppotunities that tackling the climate emergency will present • We strive to reduce our environmental impact, including our carbon footprint, and encouage responsible behaviour in our people, customers, and other stakeholders Our Society: Environment Admial Group plc Annual Repot and Accounts 2022 91 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information 2040 We are committed to achieving net zero greenhouse gas emissions by We are committed to achieving net zero in directly controlled opeational emissions by 2030 Read more on page 97 We recognise that environmental disclosures are increasingly requested by investors, shareholders, customers, and other stakeholders. For 2022, Admial made disclosures consistent with the Taskforce on Climate related Disclosures (TCFDs) and against the Streamlined Energy and Carbon Repoting Famework. (SECR). Please turn to page 97 to read more about TCFD, and page 95 for SECR What are the risks and oppotunities that could afect Admial’s impact on the environment and, therefore, Admial’s success? The current focus is on climate change, both the impact of a changing climate on us, as well as our impact on climate change. The former is viewed through the lens of tansition risks (risks arising from a tansition to a low carbon economy), physical risks (risks arising from a changing climate), and liability risks (risks arising from people or businesses seeking compensation for losses they may have sufered from climate change), in the shot, medium, and long-term. More information is included in the ‘stategy’ section of the TCFD disclosure on pages 97 to 111 While the current focus is on carbon footprint, and plans for footprint reduction, in the future, there is likely to be an increasing focus on biodiversity and other aspects of environmental degadation/ regeneation. How we monitor the impact of our actions To monitor the impact of our actions we repot energy and carbon emissions in line with SECR to make carbon repoting more tansparent and to aid the goal of achieving a carbon net zero target. We also align our repoting with the TCFD’s published recommendations concerning governance, risk management, stategy, metrics, and targets. Creating Sustainable Value for our Stakeholders continued Admial Group plc Annual Repot and Accounts 2022 92 Stategic Repot Committed to Net Zero by 2040 Admial Group has formally committed to achieving net zero greenhouse gas emissions by 2040 at the latest, across all three scopes of emissions, and to cut these emissions in half by 2030. A commitment was also made to achieving net zero in opeational emissions by 2030. Alongside this, we are working hard to help our customers make greener and smater choices by becoming a market leading undewriter of electric vehicles and making sure customers can access product features which reduce or ofset their carbon emissions. See page 101 for futher detail on net zero definition Progress against our net zero commitments Our primay efots in 2022 were dedicated towards verifying the group’s scope 1–3 carbon emissions. To date, the measurement and veriication of scope 1 and 2 emissions has been completed, and the focus is now on estimating accuate scope 3 emissions (investments and supply chain), using inance data. In paallel to verifying scope 1–3 emissions, we have stated work to establish Science-Based Target (SBT)-aligned pathways; with the plan to submit these to the SBTi for approval in 2023. To suppot us on this, a three-year progamme of work has been agreed and initiated with Carbon Intelligence. Once SBTs have been set and approved, a credible tansition plan can be devised and implemented. This plan will ensure that Admial meets its intermediate 2030 targets as well as its long-term ambition to be a net-zero business by 2040. Employee engagement on climate change An employee engagement progamme – Climate Positive – was launched in 2022. The progamme aims to aise awareness of climate change, as well as the Group’s response, to promote action, and to encouage ongoing employee involvement. Climate-related content was published in local languages across a variety of channels and formats, and a taining course was released that contributes towards continuous professional development. Employees were also encouaged to volunteer to become Climate Positive allies, tasked with aising awareness of climate change with peers and sharing key messages. Our sustainability ambition: We strive to have a positive impact on society Sustainable equipment use Following the tansition to hybrid working and the need for all employees to use laptops away from the office, much of the equipment employees used before the pandemic was no longer needed. A decommission project was launched across our seven sites in South Wales to remove all unnecessay assets from our oices. Over the course of this project, 16,853 pieces of equipment consisting of desktops, laptops, and monitors were re-sold and recycled, saving approximately 83,729 tonnes woth of equipment from going to landill. By working with environmentally conscious suppliers, we avoided 5,026 tonnes of CO and 1,621 tonnes of fossil fuel emissions going into the atmosphere, as well as 10,103 litres of H 2 O being used. 16,853 pieces of equipment re-sold or recycled Admial Group plc Annual Repot and Accounts 2022 93 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information paty (MSCI ESG Research) to suppot our approach. This data is integated into the Group’s wider investment decision-making process and ensures an appropriate level of ESG management is in place. Minimum aveage ESG scoring requirements are also used and we actively engage with asset managers where any risks are identiied. Suppot for green initiatives In 2022, we suppoted climate action initiatives by purchasing carbon ofsets and donating to reforestation projects in both Wales and abroad. During the year, we ofset 3,454 tonnes of carbon emissions via our patnership with United Purpose, purchasing credits through their gold standard carbon scheme. We donated to Stump Up For Trees (SUFT), a community-based charity focused on broadleaf woodland creation and enhancing the natual biodiversity and ecology of the environment in the Brecon Beacons area of south-east Wales. Our donation will see 1,125 trees planted over the next 12 years, with the trees estimated to continue to remove carbon from the environment for up to 100 years. As well as SUFT, we also suppot the charity Size of Wales. Our funding helps to protect against deforestation through planting and monitoring 37,000 trees via the Bore Forest Project in Kenya. Our suppot also contributes to the local community. Responsible Products Over the past few years, we have developed, redesigned, and expanded our product proposition to make sure we adapt to changes in our society and the environment. The number of electric vehicles (EV) on cover continued to grow strongly in 2022, and is up by over 60% year on year. Times Top for EVs, (a measure of how competitive our pricing is) is positive, and loss atios for electric vehicles are in line with levels exhibited by petrol and diesel vehicles. In addition, Kooalys, a small new venture we launched in Fance, suppots enterprises in their eco-tansition towards green vehicle leets. Through Kooalys, we are gaining a better understanding into changes in mobility and the tansition towards commercial electric vehicle usage. Combined, our approach means we stay close to developing trends and continue to test-and-learn new oppotunities. Responsible Investments Admial’s investment stategy targets Net Zero 39 by 2040 with the aim of achieving real economic carbon emission reductions. We have a responsible investment policy which includes a commitment not to invest in coal and oil sands – in line with the 2015 United Nations Paris Agreement. To reach our Net Zero targets we will focus our investments into irms with Science- Based Targets (SBT) and into inancial instruments which focus on providing climate solutions, such as green bonds. We use external data from a third- 39 Deined by aveage carbon intensity across eligible investments. Where eligible includes all assets outlined in the Net Zero Investment Famework which is endorsed by the UN’s Race to Zero Read more about the positive impact our products have on society in the 2022 Sustainability Repot Creating Sustainable Value for our Stakeholders continued A Admial’s investment potfolio weighted aveage ESG score has an MSCI A ating 37,000 trees planted via the Bore Forest Project in Kenya Admial Group plc Annual Repot and Accounts 2022 94 Stategic Repot Streamlined Energy and Carbon Repoting (SECR) 32% 3,429 tCO 2 e This statement has been prepared in accordance with our regulatoy obligation to repot greenhouse gas (GHG) emissions pursuant to the Companies (Directors’ Repot) and Limited Liability Patnerships (Energy and Carbon Repot) Regulations 2018 which implement the government’s policy on Streamlined Energy and Carbon Repoting (SECR). During the repoting period Januay 2022 to December 2022, our measured Scope 1 and 2 emissions (location- based) totalled 3,429 tCO 2 e. This comprised: FY2021 FY2022 UK Rest of World Total UK Rest of World Total Scope 1 1,839 196 2,035 598 27 625 Scope 2 – location-based 1,768 1,272 3,039 1,549 1,254 2,803 Scope 2 – market-based 25 1,332 1,357 41 1,320 1,361 Total Scope 1 & 2 (Location-Based) 3,607 1,467 5,074 2,147 1,281 3,429 Total Scope 1 & 2 (market-based) 1,865 1,527 3,392 639 1,347 1,986 Scope 1 & 2 intensity per FTE (location-based) 0.5 0.4 0.5 0.3 0.4 0.3 Scope 3 437 619 1,057 315 675 990 In accordance with SECR calculations, the tCO 2 e 2021 data shown for Scope 1, 2 and 3 is estimated and unveriied. In addition, the 2021 has been restated following a review by Carbon Intelligence due to an update in the repoting methodology. For veriied tCO 2 e data, please refer to TCFD table on page 108. Our Scope 1 and 2 emissions have decreased by Scope 1 and 2 emissions (location- based) totalled Oveall, our Scope 1 and 2 emissions have decreased by 32% against last year. This was largely due to improved control in our Building Management Systems in our largest locations and closure of some sites. We purchase 63% of our electricity from renewable sources, meaning our Scope 1 and 2 market based emissions were 1,986 tCO 2 e, a decrease of 41% from last year. The impact of COVID has resulted in working from home becoming “business as usual”, with the oices being kept within statutoy and regulatoy compliance requirements, has natually resulted in a reduction of utility usage and driven a loor space reduction which has increased the energy/utility savings. The building management within the UK sites Newpot, Cardif and Swansea is controlled by Building Management Systems (BMS). These UK sites are being actively monitored for peformance optimisation and time schedule eiciency. The requirement to introduce greater amounts of fresh air into the buildings, which is achieved via the BMS system, has resulted in a marginal increase in utility consumption. Admial Group plc Annual Repot and Accounts 2022 95 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information During this period, we have taken the oppotunity to engage with specialist consultants to review the building opeation and explore decarbonisation measures such as the removal of natual gas in Cardif and the sourcing of alternative solutions. Equipment/plant modernisation is also being planned for the next inancial period/year which includes the upgade of the BMS system in Cardif and replacement or upgading of air-condition plant for more eicient solutions. We continue to engage our staf in energy eiciency campaigns and to explore the use of emerging technology, such as the district heating mains being introduced in Cardif. We have also engaged with consultants to review our options with regards to emerging technologies and fossil fuel alternatives in all our sites. Our Scope 3 emissions are comprised of business tavel, Fuel and Energy-Related Activities not included in Scope 1 or Scope 2 (FERA), waste and water. Our measured Scope 3 emissions totalled 990 tCO 2 e, a decrease of 6% from last year due to fewer estimations and closure of some sites. During the year, our total fuel and electricity consumption totalled 15,216,000 kWh, of which 71% was consumed in the UK. The split between fuel and electricity consumption is displayed below. Methodology We quantify and repot our organisational GHG emissions in alignment with the World Resources Institute’s Greenhouse Gas Protocol Corpoate Accounting and Repoting Standard and in alignment with the Scope 2 Guidance. We consolidate our organisational bounday according to the opeational control approach, which includes all our opeations and sites. The GHG sources that constituted our opeational bounday for the year are: 1 Natual gas and tanspotation fuels (petrol and diesel) Scope 1: • Natual gas combustion • Diesel Vehicle combustion Scope 2: • Purchased electricity – standard • Purchased electricity – renewable Scope 3: • FERA • Waste • Water • Business Tavel Where data is missing, values have been estimated using extapolation of available data or data from the previous year as a proxy. However, in comparison to previous years, more aw data was available and therefore, estimations make up less than 3% of Admial Group’s total emissions. The Scope 2 Guidance requires that we quantify and repot Scope 2 emissions according to two diferent methodologies (“dual repoting”): (i) the location-based method, using aveage emissions factors for the county in which the repoted opeations take place; and (ii) the market-based method, which uses the actual emissions factors of the energy procured. FY2021 FY2022 Energy consumption (kWh) UK Rest of World Total UK Rest of World Total Electricity 8,325,000 4,606,000 12,931,000 7,297,000 4,982,000 12,279,000 Fuels 1 5,033,000 530,000 5,562,000 2,904,000 32,000 2,937,000 Streamlined Energy and Carbon Repoting (SECR) continued Admial Group plc Annual Repot and Accounts 2022 96 Stategic Repot Task Force on Climate-related Financial Disclosures (TCFD) In 2019, Admial began to repot in line with the Task Force on Climate-related Financial Disclosures (TCFD), in order to provide better tansparency around the ways in which climate change will impact the Group now and in the future. Since then, the Group has increased its disclosure to futher align repoting with the TCFD’s published recommendations, considering all-sector and sector- speciic guidance, as well as emerging best pactice. Recognising Admial’s pat in tackling climate change, in 2021 the Group made a commitment to reach net zero across all emissions by 2040, and net zero in opeational emissions by 2030. Since then, as discussed in the “metrics and targets” pillar, the Group has made progress in reducing its emissions. In 2023 Admial intends to submit Science-Based Targets for validation, with the intention of securing veriied targets by the end of 2023, suppoting its ovearching commitments. Admial Group has also continued to address the challenges of climate change in a number of other ways, including completing Carbon Disclosure Project (CDP) disclosure, producing a Sustainable Accounting Standards Board repot, and continuing Compliance with LR 9.8.6R Admial Group plc has complied with the requirements of LR 9.8.6R by including climate-related inancial disclosures consistent with the TCFD recommendations and recommended disclosures. Disclosures can be found on the following pages: Pillar Disclosure Page Governance a. Describe the board’s oversight of climate-related risks and oppotunities b. Describe management’s role in assessing and managing climate-related risks and oppotunities Read more on page 98-99 Stategy a. Describe the climate-related risks and oppotunities the organization has identiied over the shot, medium, and long term b. Describe the impact of climate-related risks and oppotunities on the organization’s businesses, stategy, and inancial planning c. Describe the resilience of the organization’s stategy, taking into consideation diferent climate-related scenarios, including a 2°C or lower scenario Read more on pages 100–106 Risk management a. Describe the organization’s processes for identifying and assessing climate-related risks b. Describe the organization’s processes for managing climate-related risks c. Describe how processes for identifying, assessing, and managing climate-related risks are integated into the organization’s oveall risk management Read more on pages 106–107 Metrics and targets a. Disclose the metrics used by the organization to assess climate-related risks and oppotunities in line with its stategy and risk management process b. Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas (GHG) emissions and the related risks c. Describe the targets used by the organization to manage climate-related risks and oppotunities and peformance against targets Read more on pages 108–111 Futher relevant disclosures are signposted within the TCFD disclosure. its membership of the Institutional Investors Group on Climate Change. On the following pages Admial has made disclosures consistent with 9 out of 11 of the TCFD’s recommendations and recommended disclosures. At present, Admial has not made disclosures consistent with all the TCFD’s recommendations and recommended disclosures within Stategy (b) as, given the large uncetainty around the likelihood and severity of climate-related issues, they do not seve as an explicit input into the inancial planning process, and therefore the impact on inancial peformance and inancial position has not been explicitly assessed. Work will be undetaken during 2023 to consider how Admial Group can better recognise the potential impacts in its inancial planning and accounting activities, to ensure consistency with all recommended disclosures in future climate repoting. Admial has also not set or disclosed clear targets consistent with the cross-industy, climate-related metrics as required by the recommended disclosures within Metrics and Targets (c). During 2023, Admial intends to submit Science-Based Targets for validation, which will include futher consideation of cross-industy, climate-related targets as per Metrics and Targets (c), to ensure consistency with all recommended disclosures in future climate repoting. Futher discussion and information are included in the relevant sections of the repot, and are signposted as such. Admial Group plc Annual Repot and Accounts 2022 97 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Board and Board committees The Admial Group Board, which is responsible for promoting the long-term, sustainable success of the Group, has ultimate oversight of climate change- related risks and oppotunities. It is responsible for understanding the Group’s relationship to climate change – its impact on the environment, as well as the impact of a changing climate on the Group – and considering this in the context of the Group’s stategy and risk management (including policies), in setting the businesses’ peformance objectives, and monitoring peformance. Climate change risks and disclosures are reviewed and discussed at Group Board and at seveal Group Board committees, as recurring agenda items, including the Group Risk Committee (GRC) and Investment Committee. The Admial Group Board approves the Group ORSA Repot, which includes the consideation of climate-related risks and oppotunities alongside examination of the Group’s stategy and business plans, as well as the foward-looking risk and capital assessment of the plan and associated stresses. The Group Board will consider climate-related issues in relation to major capital expenditures, acquisitions, divestitures, and major plans of action (where these occur) by reference to the Group’s stategic ambition, which is aligned with the risks and oppotunities arising from a changing climate. Whilst the Group Board maintains ultimate accountability, the GRC has primay oversight responsibility for climate change risk, as it has delegated authority from the Group Board for overseeing risk management activities. It advises the Group Board on Admial’s principal risks and uncetainties (PR&Us), as well as on emerging risks, and reviews the Group’s management of these risks. Climate change risks are embedded within the BAU risk management approach, which is discussed within the Group Risk Committee section of the Corpoate Governance disclosure (see page 178), and any developments of note are repoted within the Consolidated Risk Repot (CRR). In addition, dedicated agenda items at GRC allow a full update of climate- related activities to be considered, including progress towards goals and targets (e.g., by comparing reductions in opeational GHG emissions versus stated targets). Climate change consideations are also repoted within the annual ORSA Repot, which is reviewed by the GRC prior to Board approval. During 2022 the Board and GRC each received one formal update on climate-related work ongoing around the Group, including progress towards goals and targets, initiatives aligned to three focus areas (opeations and supply chain, investments, and products and sevices), an update on regulatoy developments, as well as information regarding Climate Positive, discussed in the focus box on page 99. The Investment Committee had four updates. The EUI and AECS Boards also received updates during the year. In addition, Boards and committees received multiple additional updates as pat of other presentations (e.g., the Group ORSA Repot, which presented the output of the risk assessment and scenario analysis) or discussions on ESG and sustainability topics. In future, entity Boards and executive management teams will take more direct responsibility for managing climate-related risks and exploiting any oppotunities. Management and management committees Various senior management from across the Group have diferent responsibilities relating to climate change-related issues, and sit on appropriate foa, such as the Sustainability Working Group (SWG) and the Climate Steering Group. The repoting which occurs at each forum allows management to be informed about and to monitor climate-related issues. The Group CEO is the appointed sustainability representative for the Group Board, which includes climate change risk within its remit. The SWG repots directly to the Group CEO. The Group CRO has designated SMCR responsibilities in relation to climate change and is a member of the Climate Steering Group. Governance Task Force on Climate-related Financial Disclosures (TCFD) continued Admial Group plc Annual Repot and Accounts 2022 98 Stategic Repot The Group CFO is responsible for investments, which includes responsible investment and climate change consideations. The CFO is a member of the Climate Steering Group. The Group CEO, Group CRO, and Group CFO, along with the EUI CEO, comprise an executive committee which is appaised of, and provides guidance on, climate-related initiatives across the three focus areas of opeations and supply chain, investments, and products and sevices, as required. The SWG was established in 2020, repoting directly to the Group CEO, and provides updates to the Group Board. It provides oversight and challenge to the Climate Steering Group, which was established in 2021 to provide guidance on the oveall progamme of climate-related work, and to ensure a joined- up approach across all Group functions and Group entities. Keith Davies, Group CRO and SMF accountable for climate change, and Geaint Jones, Group CFO, sit on the Climate Steering Group, which is also attended by representatives from businesses around the Group, and by representatives from Risk, Facilities, Investments, Procurement, and Investor Relations. It meets quaterly and is chaired by the Group Stategic Risk Lead, a member of the Group Risk team. On a day-to-day basis the Group Risk team is responsible for the assessment of climate-related risks and oppotunities. The output of this work is included in the CRR, where applicable, the ORSA Repot, and other regular and ad hoc repots and papers that are shared with the appropriate committees. Group Risk is responsible for dafting and presenting climate-related updates to the Boards and committees shown in page 178, and it also coordinates climate-related work across the Group, encompassing representatives from the three focus areas. It informs management of climate-related issues via the working groups and management meetings also shown in page 178. Climate Positive A Group-wide staf engagement progamme – Climate Positive – was launched in April 2022. The initial progamme lasted six months and aimed to aise awareness of climate change, the Group’s response to the challenge, to promote action, and to encouage ongoing staf involvement. Content was published in local languages across a variety of channels and formats, and a taining course titled “What is the Climate Emergency?” was released that contributes towards continuous professional development. Staf have also been encouaged to volunteer to become Climate Positive allies, tasked with aising awareness of climate change with peers and sharing key messages. In future, Climate Positive will continue to share news with staf, as well as provide a way for staf to help Admial shape its response to the challenges posed by climate change. Read more about our Sustainability Working Group on page 72 Read more about our Climate Steering Group on page 72 Read more about Board leadership and company purpose on page 137 Read more about the Group Risk Committee on page 178 Climate-related governance Boards Admial Group Board Entity Board(s) Management meetings Investment Committee Executive Committee Board Committees Group Risk Committee Group Audit Committee Working groups Sustainability Working Group Climate Steering Group Admial Group plc Annual Repot and Accounts 2022 99 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information reducing its impact on the environment is most clearly seen through its net zero commitments, while the impact of a changing climate on the Group is captured via risk assessment and scenario analysis, which are taken into account when considering the business diversiication and motor evolution pillars of the Group stategy. Climate risk is typically disaggregated into tansition, physical and liability risks. Tansition risks arise from a move towards a low carbon economy, while physical risks arise from climatic changes. They are inversely correlated: physical risks can be mitigated by an aggressive shift to a low carbon economy, increasing tansition risk; aiming for a low level of tansition risk will increase physical risk. Liability risks come from people or businesses seeking compensation for losses they may have sufered from the physical or tansition risks outlined above. While there is the possibility that climate change will introduce new types of risk to the Group, not currently captured within the risk universe, the working hypothesis is that it will primarily impact the Group’s existing PR&Us. The process undetaken to determine which risks and oppotunities could have a material inancial impact on the Group is described in the “risk management” pillar. Admial has deined the following time horizons for climate-related risks and oppotunities: shot- (0–5 years); medium- (5–10 years); and long-term (10+ years). This is shown gaphically in Figure 1. The shot- term time horizon coincides with the business planning horizon, and the medium- and long-term time horizons coincide with the expected useful life of buildings infastructure (depending on the nature of the infastructure). While both tansition risks and physical risks are beginning to cystalise, the worst In 2020 Admial aticulated its purpose as being to “help more people look after their future. Always striving for better, together.” As a result, consideation of the company’s impact on the environment and on people’s futures is integal to Admial’s purpose and, therefore, Admial has set ambitious net zero targets. When considering the impacts from climate change, Admial recognises that there are two components (double materiality): its impact on the environment, most clearly quantiied via greenhouse gas emissions, but also via waste production and water usage; and the impact of a changing climate on the Group, on its revenues, costs, and via other non-inancial risks, quantiied via scenario analysis. Admial’s approach to Shot-term: 0–5 years Detailed ive year inancial projections are produced as pat of the business planning process, using robust assumptions based on current Group structure and business mix. Medium-term: 5–10 years Stategic investments are being made now in order that they provide a material contribution to Group results in the medium-term. Results are inherently subject to more uncetainty, as customer demands, consumer behaviour, and the external opeating environment are all subject to change, not least from the impact from climate change. Long-term: 10+ years Beyond ten years it is possible that the Group will look consideably diferent to the way in which it does today, and will potentially be opeating within a much- changed environment. There is signiicant uncetainty over long-term projections. Figure 1 Time horizons for climate-related risks and oppotunities Stategy Read more about our purpose-led approach on pages 2 to 5 Task Force on Climate-related Financial Disclosures (TCFD) continued Admial Group plc Annual Repot and Accounts 2022 100 Stategic Repot efects from changing weather and climatic patterns may materialise in the medium- and long-term if a smooth tansition to a low carbon economy is not achieved. Liability risks are highly uncetain, in scope and in outcome – the irst cases are currently being brought against oil, gas and energy companies – therefore timing is less cetain. Climate-related efots are aligned to three focus areas – opeations and supply chain, investments, and products and sevices – each of which are potentially exposed to the three components of climate change risk. This is because climate-related risks may impact all of Admial’s business lines, opeations, and investments, and may also impact reinsuance arangements. While there are risks from delayed action, there are also oppotunities from seriously considering the challenges, including the potential to acceleate the Group’s tansformation, to build resilience, to drive innovation in core insuance products, and to gain competitive advantage in new and existing markets. Being a “green” company could help attact and retain talent. To date, climate consideations have not impacted the Group’s approach to acquisitions and divestments (other than that any potential M&A activity should align with the Group’s oveall stategy, which considers the impact from climate change) and have had no impact on access to capital. Climate-related issues have not impacted Admial’s investment in R&D. Three key climate-related risk drivers which may afect Admial are shown in Figure 2. They are a tansition from petrol and diesel vehicles to electric vehicles, a secular reduction in private vehicle use, and an increased incidence and severity of weather events. The impact by timefame, assuming current action/ mitigation, of each key risk driver is shown against the PR&Us expected to be primarily afected, where: • A modeate/minor impact relates to a non-signiicant impact on revenue or proit • A signiicant impact relates to a potential impact on revenue or proit which far exceeds normal month-to-month variance • A major impact relates to a potential impact on revenue or proit in excess of typical annual variance • A critical/catastrophic impact relates to a potential impact on revenue or proit geneally seen no more than once in evey twenty years, or which could ultimately jeopardise business suvivability The potential impact is assessed qualitatively using SME input and is cross-checked versus the scenario outputs. At present, given the large uncetainty around the likelihood and severity of climate-related issues, they do not seve as a formal input into the inancial planning process, and the impact on inancial peformance and inancial position is not formally assessed. Work will be undetaken during 2023 to consider how Admial Group can better recognise the potential impacts in its inancial planning and accounting activities. Admial is a global inancial sevices company, opeating in the UK, Italy, Spain, Fance, Gibaltar and the US, and has oices in Canada and India, which primarily ofers personal insuance lines and personal loans. The most material businesses, currently, are the UK insuance businesses. In future, however, it is expected that the bottom-line contribution from non-UK and non-insuance lines of business will become more material. The current priority is to focus on the potential impact of climate change on the UK insuance lines of business in the shot-term, due to materiality, as can be seen in the approach to scenario analysis. As Admial develops its knowledge and understanding, and builds capabilities and expetise, more focus will be given to the potential impacts on non-UK and non-insuance lines of business in the medium- and long-term, including the quantiication of applicable risks. The current energy crisis has conirmed the appropriateness of Admial’s net zero stategy, in paticular the need to reduce its opeational energy use as far as possible and as quickly as pacticable, and to diversify from fossil fuel sources before permanent removal is considered for any residual emissions. Admial remains committed to using 100% renewable electricity wherever it is available. Net zero Admial follows the Oxford Principles for Net Zero Aligned Carbon Ofsetting (the “Oxford Principles”) deinition of net zero, whereby net zero means substantially reducing emissions and balancing any residual emissions with removals on an ongoing basis. The four principles are: 1. Cut emissions, use high quality ofsets, and regularly revise ofsetting stategy as best pactice evolves 2. Shift to carbon removal ofsetting 3. Shift to long-lived stoage 4. Suppot the development of net zero aligned ofsetting Read more about our stategy on pages 28 to 37 Admial Group plc Annual Repot and Accounts 2022 101 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Climate- related risk TCFD categoy PR&Us primarily afected Description Shot- term 0–5 years Medium- term 5–10 years Long- term 10+ years Tansition from petrol and diesel vehicles to EVs Tansition: policy and legal, technology, market, reputation Reseving risk in UK and International insuance • Changing distribution of risk from new technologies (e.g., will EVs be slower and safer, or silent, more dangerous, and prone to battey ires?) • Introduction of new types of risk which have not been encountered before (e.g., petrol cars do not have battey ires) • Reduction or elimination of some claims-types (e.g., wrong fuel claims) • Unanticipated claims inlation from replacing ‘brown’ technology with ‘green’; old ‘brown’ technology may become more expensive to repair Erosion of competitive advantage in UK car insuance • A move away from petrol and diesel vehicles to alternative fuel vehicles, reducing competitive advantage from pricing expetise, stressing supply chain (including repairer network) and increasing LR • New entants taking market share as petrol and diesel vehicles are replaced by EVs • EV OEMs ofering bundled products and sevices, changing customer acquisition channel Secular reduction in private vehicle use Tansition: policy and legal, technology, market, reputation Reseving risk in UK and international insuance • Changing distribution of risk from emerging technologies (e.g., will a greater propotion of more vulneable road users, from e-scooters etc. lead to more BI and CSI claims?) Erosion of competitive advantage in UK car insuance • A move away from private vehicles to active and public tanspot or car sharing, thus reducing the oveall size of Admial’s primay market Increased incidence and severity of weather events Physical: acute, chronic Reseving risk in UK and international insuance • Change to incidence, extent, location, and clustering of both chronic (high frequency) and acute (high impact) weather and climate-related drivers of insuance claims, potentially difering by geogaphy (e.g., south-eastern US versus UK versus Europe), and afecting the UK household LOB, in paticular, due to materiality Premium risk and catastrophe risk • Aveage annual losses from weather events will likely be higher under future scenarios with higher carbon emissions, in paticular afecting the UK household LOB, due to materiality • Increasing uncetainty about trends in past data and the degree of conidence that can be placed in projections Reduced availability of co-insuance/ reinsuance • Increase in the cost and impotance of reinsuance protection • Increased concentation risk, putting pressure on reinsuance • Reinsuance structures impacted if more events hit reinsuance layers • Possible changes to terms and conditions Failure of geogaphic and/or product expansion • Proitability and/or viability of household, motor, or new product undewriting may be compromised Opeational risk • Increased risk of oice closures and/or damage • Increased levels of health and safety risk during speciic weather events • Increased data risk or reduced availability of core systems (depending on the location of information- related infastructure) • Suppliers may be exposed to similar risks Figure 2 Key climate-related risk drivers which may impact Admial Group Task Force on Climate-related Financial Disclosures (TCFD) continued Admial Group plc Annual Repot and Accounts 2022 102 Stategic Repot Opeations and supply chain Admial’s opeations are exposed to physical and tansition risks. Climate change may increase the frequency and severity of weather events, as well as causing longer-term changes in weather patterns, which could directly impact staf, oices, infastructure, and the broader opeations. Admial may also be exposed to increased capital and opeating expenditures, due to legal or regulatoy requirements designed to reduce greenhouse gas emissions, or due to increasing climate-related expectations from shareholders, customers, staf, or other stakeholders. Admial has taken steps over a number of years to reduce its environmental impact, including initiatives related to energy, water, paper, and waste. Consequently, the veriied opeational carbon footprint 40 is low, and is ofset via the purchase of Gold Standard carbon credits. In 2021, Admial worked with an external paty, Arup Group, to baseline its propety and facilities infastructure in order to understand possible carbon footprint improvements. The identiied stategic initiatives are geneally medium-term commitments, such as mechanical and electrical (M&E) changes to plant and building management systems, which focus on more consideate use of utilities, water, and waste, improving controls of the main M&E plant and associated systems, and end-of-life replacement of M&E plant and machiney where a signiicant carbon reduction can be achieved. The accuacy of data produced throughout the propety potfolio has also been improved. It should be noted that Admial’s purpose-built Tŷ Admial building complies with BREEAM excellent standards and has photovoltaics/ solar panels itted which provide energy directly back into the grid, one example of a climate change mitigation activity. There are also oppotunities based around city centre heating proposals and geothermal technology in some major cities, though these are medium- to long-term in nature. Tactical oppotunities for carbon footprint reduction have already been captured, including propety downsizing to relect oice attendance habits in a post-Covid business environment. Futher detail on progress towards the ambition to be net zero across opeational emissions by 2030 is given in the “metrics and targets” pillar. Admial’s supply chain patners will also, to a greater or lesser extent, be exposed to the same risks from climate change as the Group is. During 2022 Admial has enhanced its due diligence question set to allow it to capture and assess what its supply chain is doing to suppot sustainability ambitions. The change to the questionnaire allows Admial to dynamically tailor questions based on a supplier’s response, allowing Admial to risk assess the response. If a supplier’s response demonstates no policies or procedures, Admial issues an environmental assessment to the supplier to capture futher information, and internal contact owners are expected to develop remediation plans with the supplier, to work towards ahead of receipt of the next annual due diligence questionnaire. Environmental impact of IT hardware refresh progamme Admial has undetaken a refresh progamme of IT hardware and, as pat of the refresh progamme, appointed a supplier to securely dispose of existing assets with a focus on the environmental impact of disposal. Almost 84 tonnes of equipment were processed, including over 16,000 desktop displays, and laptop computers. 7% of the devices were recycled and 93% were reused, representing an estimated 5,000 tCO 2 e in avoided emissions and over 10m litres of water use avoided. 40 For 2020 and 2021 veriication was peformed by Carbon Intelligence, across scope 1 (emissions arising from the combustion of natual gas), scope 2 (emissions arising from purchased electricity), and scope 3 (emissions arising from waste geneated in opeations, business tavel, and water supply and treatment) to a standard limited assuance. For this level of assuance, Carbon Intelligence provides a limited assuance statement asseting that there is no evidence that an emissions repot is not materially correct (a materiality threshold of 5% at the gross organisational level has been applied for this exercise). The veriication assessment was undetaken against World Resources Institute/ World Business Council for Sustainable Development Greenhouse Gas Protocol: A Corpoate Accounting and Repoting Standard, Revised Edition (for scope 1 and 2) and against World Resources Institute/World Business Council for Sustainable Development Greenhouse Gas Protocol: Corpoate Value Chain (Scope 3) (for scope 3) Climate-related oppotunity TCFD categoy Description Shot- term 0–5 years Medium- term 5–10 years Long- term 10+ years Customer switching from petrol and diesel vehicles to EVs and other alternative fuels Products and sevices: ability to diversify business activities, shift in consumer preferences • Increased revenue through demand for lower emissions products, including the potential for new ancillay products and/or value added sevices (e.g., EV home charger cover) • Increased competitive advantage from capitalising on early pricing learnings, enhanced supply chain management (including repairer network), creating a LR advantage to competitors • Reduction or elimination of some claims-types (e.g., wrong fuel claims) Figure 3 Key climate-related oppotunities for Admial Group Impact: Negligible/Minor Modeate Major Tansformative Admial Group plc Annual Repot and Accounts 2022 103 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information To mitigate these risks, ESG consideations have been embedded into the investment approach, and Admial is following the Institutional Investors Group on Climate Change (IIGCC) Net Zero Famework to help guide the decarbonisation of the potfolio. Admial is also increasing its investment in climate solutions, with investments in green bonds and renewable energy infastructure, and has targets to grow the number of counterpaties which have a credible plan to align emissions with a 2°C pathway, for example via Science-Based Targets. Admial Group’s four largest bond mandates, which account for approximately 37% of all investments, have requirements for fund managers to reduce the aveage carbon intensity of the potfolio by 25% by 2025, versus a year-end 2020 baseline, in line with the Group’s oveall net zero target. This covers nearly all the assets which require net zero targets under the Science-Based Targets initiative and the Net Zero Famework from the IIGCC, the balance largely being invested in cash, money market funds, and government bonds. In addition, the mandates exclude coal and tar sands (based on a 10% revenue threshold) and ensure that all energy and mining sectors are either Paris-aligned or are subject to engagement or stewardship activities. By 2025 the potfolios also aim to have 5% green bonds, 35% of the potfolio with Paris-aligned commitments, and a tempeature score under 3.5°C. The introduction of supply chain risk controls in Admial’s contact management system has allowed it to better assess the procurement categoy of environmental risk. The embedding of supply chain risk controls is ongoing, but it allows for increased visibility at the early stages of sourcing and ongoing discussion with the supply chain. Investments Climate change may impact the Group’s investment potfolio via a number of mechanisms. Some of Admial’s investments will be exposed to physical risks, as changing climatic conditions impact businesses, disrupt supply chains, and cause assets to lose value prematurely. Other investments will be exposed to tansition risks, as the move to a low carbon future causes products, sevices, and entire business models to become less attactive or, indeed, obsolete. Some investments may also be exposed to liability risks. Efects may be company-speciic, sector- speciic, or may have an impact on the broader economy and macro environment, for example via reduced economic growth, higher unemployment, or changes in inlation. The main consideation is whether these risks expose Admial to default or spread widening over the holding horizon, which on aveage is approximately three years. While climate change poses a risk to the Group’s investments, the tansition to a low carbon economy should also present investment oppotunities – Admial has already invested in renewable energy infastructure, green bonds, and other corpoate bonds with credible tansition plans. Read more about our environment on pages 13, 38 and 91 to 94 Read more about seeding, launching, and scaling new businesses at Admial Pioneer on page 36 Carbon removal ofsetting According to the Oxford Principles “most ofsets available today are emission reductions, which are necessay but not suicient to achieve net zero in the long run. Carbon removals scrub carbon directly from the atmosphere.” However, consideation must still be given to how carbon is stored, and for how long. Over seveal years Admial has pursued steps to reduce its opeational emissions, for example through eiciency improvements, by purchasing electricity in the UK from 100% renewable sources (since 2015), and by installing solar panels on the Cardif oice. Since 2019 Admial has ofset its remaining opeational emissions (scope 1, 2 and patial scope 3) via the purchase of Gold Standard carbon ofsets. Admial does not consider these purchases to be “emissions reductions”, ather, following the Oxford Principles, they are considered “ofsets”. In addition, Admial suppots high-quality forestation projects which provide carbon sequestation, in Wales and abroad, via charities Stump Up for Trees and Size of Wales. Task Force on Climate-related Financial Disclosures (TCFD) continued Admial Group plc Annual Repot and Accounts 2022 104 Stategic Repot The NGFS “hot house world – current policies” scenario assumes that no action is taken on climate change so that global tempeature levels continue to increase, reaching in excess of 3°C above pre- industrial levels by 2050. This scenario has been interpreted as resulting in increased incidents of extreme weather events, impacting the UK household, car, and van books. Speciically, it has been assumed that a UK catastrophe inland lood event occurs each year. For both scenarios it is assumed that excess of loss reinsuance recoveries would opeate. The scenarios peformed highlight the developing nature of climate scenario modelling, and give comfot that the Group’s business model and stategy should remain resilient to potential climate-related impacts. The conclusions of scenario analysis are that climate change presents a stategic risk to Admial over the long-term and may require management and mitigation in the shot- and medium-term. The risks presented by a tansition to a low-carbon economy are potentially signiicant in the shot-term, assuming no mitigating activities. However, Admial’s stategy focuses on initiatives which should mitigate this risk, and therefore is it considered that Admial’s activities are aligned to a well- below 2°C world. In such as tansition scenario, the stategic focus will be to acceleate the motor evolution and business diversiication pillars of the Group’s stategy. Physical risks may have the greatest potential impact on the Group’s household insuance business in the long-term – in such a hot house world the focus will be on ensuring robustness of the core business via pricing discipline and appropriate reseving. The scenario modelling results are highly reliant on a ange of assumptions, some of which are considered vey unlikely to materialise. Management and mitigating actions (e.g., annual repricing of insuance policies, greater or diferent use of reinsuance, changes to asset allocation in the investment potfolio) are also not considered. The output of this scenario analysis has been used in discussions about future stategic direction, including the relative attactiveness of diferent products and markets. Scenario testing While qualitative assessments of the impact from climate change are useful, it is also impotant to quantify the impact where possible. Stress and scenario testing is conducted as pat of the annual ORSA process to understand the robustness of the Group’s business model and stategy to the impact of various risks. In addition to the standard ORSA scenarios, two climate change scenarios were peformed this year, scenarios from the Network for Greening the Financial System (NGFS) 41 and EIOPA’s 2022 climate change scenario. This builds on Admial’s irst exploatoy exercise in modelling climate change scenarios in the 2021 ORSA, which was based on the BoE’s Climate Biennial Exploatoy Scenario (CBES). The two scenarios examined are “disorderly – delayed tansition” and “hot house world – current policies”. Note that these externally designed scenarios are examined using their relevant and applicable components for calibation based on Admial’s exposure. Their calibation has been modiied and adapted based on Admial’s materiality, to understand the associated implications on assets and on liabilities from tansition risk (car book) and physical risk (primarily household book). As with the other ORSA stress and scenario tests, the period modelled is 2022- 2024 – the current focus is on shot-term impact, as inherent uncetainty as well as developing approaches to assessment mean there is less conidence in medium-term and long-term impacts. As modelling capabilities are futher developed, there will be increasing focus on medium- and long-term assessments. The NGFS “disorderly – delayed tansition” scenario assumes that the implementation of policies needed to drive the tansition to net zero is delayed until 2030, and is then more sudden and disorderly, resulting in material shot-term macroeconomic disruption. Under this scenario, global warming is limited to an increase of 1.8°C by 2050. This scenario has been applied to Admial by exploring the tansition risks from climate change relating to the tansition of the UK motor book from petrol/diesel vehicles to EVs, afecting the proitability of the business. The key assumptions underlying this scenario are mispricing of EV risks by 15% and some additional ire and large losses related to EVs. 41 NGFS Scenarios Potal, Data & Resources, NGFS Admial Group plc Annual Repot and Accounts 2022 105 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Emerging Risks are identiied, assessed, and managed via an internally developed famework, fully integated into the ERMF, which evaluates the potential impact to Admial via existing PR&Us or via new risks. This methodology has been extended, utilising external suppot, to individually assess the potential impact of climate-related risk drivers – tansition, physical and liability risks – across three distinct timefames (0–5 years, 5–10 years, and 10+ years). Risk management Read more about Electric Vehicle trends on page 94 Products and sevices The efects of climate change will be felt across all lines of business, by all products and sevices, and will play a pat in deciding what future business oppotunities to pursue. The efects will require a response across the value chain, from pricing to undewriting, and from claims management to product design. The most obvious impact from climate change will be the physical risk to the household lines of business. Climate change is causing sea levels to rise and is also causing more frequent and heavier ainfall, increasing the risk of looding. Changes in weather patterns may also increase the incidence and severity of storm and freeze events, as well as hailstorms and subsidence. Together these indicate that an increase in the volume and value of household claims is likely. Physical risks may also cause opeational issues: in Februay three storms – Dudley, Eunice, and Fanklin – hit the UK in quick succession, causing a large increase in the number of new claims, however a surge plan was executed which saw the wider business help with FNOL communications which allowed household staf to focus on vulneable customers. Since launching the UK household business in 2012, Admial has sought to control its exposure to lood risk by developing an understanding of the risk at a ganular geogaphical level, which has been coupled with a consevative appetite for undewriting such risk. By paticipating in the Flood Re scheme Admial can undewrite propeties which are outside of its acceptable lood criteria by ceding the lood risk to Flood Re, while still ofering customers protection via undewriting all other perils. Risk modelling is continually updated and improved, while perils- based pricing allows for interrogation of speciic concentations of risks. Physical risks may also impact the motor insuance books, for example via increasing frequency of hail events, or via increasing severity of US hurricane seasons afecting the US business. Admial is also exposed to tansition risk, most clearly via the motor insuance books. Any move to reduce aggregate greenhouse gas emissions could see a conceted move away from taditional models of tanspot reliant on private petrol and diesel vehicles, to a model of integated and active tanspot, reliant on electric and alternatively fuelled vehicles, both privately owned and shared, and public tanspot. Indeed, sales of new petrol and diesel vehicles will be banned in the UK from 2030. The loans business may also be afected in the longer-term as reducing demand for petrol and diesel vehicles may see residual values fall, a risk factor to which Admial is exposed via PCP loans. There might, however, be an ofsetting increase in demand for loans to fund EV purchases or to fund “green” home improvements. Task Force on Climate-related Financial Disclosures (TCFD) continued Aligned to the third pillar of the Group’s stategy, “evolution of motor”, Admial has a strong electric vehicle ofering, which will help counteact the expected long-term decline in the number of petrol and diesel vehicles on the road. The ofering, which is continuously being developed and expanded, is discussed futher on page 94. In order to realise the oppotunities of the Group’s second stategic pillar – “diversiication” – Admial launched Pioneer to explore and invest in new ventures and emerging consumer needs. This will help counteact any long-term move away from private vehicle ownership, including private electric vehicles, to more integated tanspot solutions. Pioneer is discussed futher on page 36. Taken together, these areas of work will help suppot Admial in the tansition to a low-carbon economy. Admial Group plc Annual Repot and Accounts 2022 106 Stategic Repot Identiication There is no one deinitive source for climate change risks: diferent geogaphical regions, diferent industries, and diferent companies will have difering expectations of the impacts that they will face in the future. Therefore, Admial Group’s identiication of the way that climate change risks may impact the business, and any resulting oppotunities, follows a multi-stage process which attempts to incorpoate internal viewpoints and forecasts (e.g., from depatmental expetise, insight from working groups, committees, and boards) with those from external sources, both insuance-speciic and more broadly. The assessment is peformed at the level of tansition, physical and liability risks, however microeconomic and macroeconomic tansmissions channels – the causal chains linking climate risk drivers to the opeational and inancial risks faced (as per the Bank for International Settlements) – speciically applicable to each business line are also considered. This allows the potential impact from climate change on all current and potential future lines of business, on opeations and investments, as well as oppotunities, to be identiied. Existing and emerging regulatoy requirements related to climate change are considered. Assessment approach Given the highly uncetain nature of climate change risks – the tansmission mechanism of the risks, the magnitude of their impact, the cetainty of their impact, the efect of their impact, and the timing of that impact – they do not sit natually in standard risk measurement and management processes. Instead, a hybrid approach, which comprises both qualitative and quantitative approaches, must be utilised. Climate change risks, and any resulting oppotunities, are initially evaluated qualitatively. A risk matrix approach is employed, whereby the potential impact of the risk (scored between minor and catastrophic) is considered alongside the likelihood of impact (scored between are and almost cetain) in the shot-, medium- and long-term. Where appropriate a quantitative approach to analysis and evaluation is also taken, informed by the qualitative assessment: seveal scenarios were included as pat of the stress and scenario testing section of the Group’s ORSA submission. Key risks and oppotunities are discussed above in the “stategy” pillar. Management and mitigation Admial uses industy-standard lood and catastrophe models to understand its underlying risk and hence what amount of risk is accepted, what amount of risk is mitigated, and the reinsuance protection deemed appropriate for risk tansfer. Admial’s approach to pricing is the key tool for managing/mitigating climate-related risks but, given its commercial sensitivity, the approach is not disclosed. As the assessment methodology is based on the existing Emerging Risk assessment methodology, integation into the ERMF is staightfoward. Therefore, climate change risks and oppotunities are repoted to the GRC via the CRR, and annually as pat of the Group’s ORSA Repot submission. They are also repoted on to the Group Board, management committees, and to subsidiay Boards and committees. This monitoring and repoting ensures that the highest level of company management is aware of the risks and oppotunities, can account for them in future business planning and stategy setting, and can devise management actions to mitigate their efects or to capture any resulting oppotunities. As described in above, the key risks faced by Admial are not currently assessed to be severe or critical/ catastrophic. The primay approaches for risk mitigation are: execution of stategy for mitigation of tansition risks; and disciplined pricing, assessment of impact by peril, and regular assessment of the reseving approach as mitigation for physical risks. Extensive use of co-insuance and reinsuance is the primay approach for tansfer of physical risks. The Regulatoy Compliance team, pat of Group Compliance, monitors and reviews publications and pronouncements from various regulators, supevisors, and tansnational bodies, including but not limited to the FCA, the PRA, the Bank of England, and EIOPA. Summaries are distributed to relevant stakeholders as and when material is published, a monthly round-up is distributed more broadly across the Group, and a representative from the Regulatoy Compliance team is a member of the Climate Steering Group. Read more about Principal Risks And Uncetainties on pages 114 to 121 Read more about Emerging Risks on page 121 Admial Group plc Annual Repot and Accounts 2022 107 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Table 1 Veriied 45 Group greenhouse gas emissions (ton CO 2 e) Scope 2021 2020 2019 Scope 1 1,149 1,121 1,364 Scope 2 (market-based) 1,189 1,798 1,262 44 Scope 3 (patial) 96 535 1,945 Total 2,434 3,454 4,572 YoY reduction (scope 1 and 2) –20% +11% YoY reduction (scope 1, 2 and patial scope 3) –30% –24% 42 As per Greenhouse Gas Protocol deinitions, scope 1 emissions are direct emissions from owned or controlled sources (natual gas, fugitives, company cars), scope 2 emissions are indirect emissions from the geneation of purchased energy. Limited scope 3 emissions cover business tavel, water, waste, and distribution losses for purchased electricity. Veriication for this limited scope was decided upon as these are the emissions more directly in Admial’s control 43 Note that 2019 carbon footprint was veriied by Carbon Trust. 44 Note that scope 2 emissions increased in 2020 (versus 2019) due to more accuate data capture from non-UK entities. 2019 relied more heavily on estimation for non-UK entities 45 2021 and 2020 data has been veriied by Carbon Intelligence; 2019 data has been veriied by Carbon Trust to physical risks is not considered to be material or relevant, given that most of Admial’s business is based on shot-term (typically annual) agreements, and does not tie in exposure to the medium- or long-term efects of climate change. Note that veriication of Admial’s scope 3 emissions is near inalised, and then work will begin to set Science-Based Targets, which will complement the Group’s oveall net zero ambitions, for example by providing shot-term GHG emissions reductions targets. It is intended to submit Science-Based Targets for veriication in 2023. Climate-related metrics have not yet been integated into remuneation policy, however work to address this is being considered and is linked to the setting of Science-Based Targets. Admial does not make use of an internal carbon price. Opeations Admial recognises that its opeations are contributing to climate change, and the Group take its responsibility for reducing this impact seriously. Therefore, as discussed above, Admial has pursued steps to reduce its opeational emissions and, since the baseline year of 2019, has ofset its remaining scope 1, 2 and patial scope 3 emissions 42 . However, Admial also recognises that ofsetting emissions is not enough, and therefore is working hard to reduce the absolute level of its opeational emissions: in 2021 the Group’s scope 1, 2 and patial scope 3 emissions, as veriied by Carbon Intelligence, were 2,434 tCO 2 e, an improvement of 30% versus 2020 and 47% versus 2019 43 . Scope 1 and 2 emissions have reduced due to building closures and consideate building use (e.g., reduction in utilities use), though scope 1 emissions increased in 2021 as compared to 2020 due to increased gas usage, due to colder weather, and two refrigeant leaks, related to air conditioning systems. Scope 3 emissions reductions are largely related to a decrease in business tavel. Good progress has been made in 2022 regarding the collection, veriication, and repoting of data, for example by focusing on own collection of data ather than relying on landlords, automating data collection where possible, and working closely with fund managers. Metrics relevant to opeations, investments, and products and sevices are discussed and/or disclosed in the following sections, however numerical values which may be considered commercially sensitive are not included. Metrics for tacking oppotunities are largely the same as metrics for tacking risks as, for example, the risks and oppotunities from a move to EVs come from the success or failure in capturing proitable business in this developing market. Other cross-industy climate-related metrics which are not disclosed are not considered to be material and/or relevant. For example, the amount and extent of business activities vulneable to tansition risks or Metrics and targets Read more about Our Society – Environment on page 91 Task Force on Climate-related Financial Disclosures (TCFD) continued Admial Group plc Annual Repot and Accounts 2022 108 Stategic Repot Investments As a inancial sevices company, the majority of Admial’s emissions are likely to be categoy 15 emissions (pat of scope 3) from the investment potfolio. Therefore, when the Group set its ambitious net zero targets, it was impeative to include these emissions in the emissions reduction targets. Admial has therefore committed to achieving a reduction in investment-related greenhouse gas emissions of 25% by 2025, and of 50% by 2030, reaching net zero greenhouse gas emissions by 2040 at the latest – aligned to the oveall target. To ensure that these targets are met, Admial has developed an investment proposal to align its corpoate bond mandates to the Paris Agreement, following the Net Zero Investment Famework, which is a pactical blueprint for achieving net zero emissions by 2050, and which has been endorsed by the UN’s Race to Zero campaign. The proposal has seveal features including reducing emissions through time and increasing investment in climate solutions. There will not be blanket divestment rules, but instead Admial’s investment managers are expected to be engaging with companies which could, as last resot, possibly lead to divestment and reinvestment in less carbon-intensive names through time. Seveal challenges should be noted: sourcing reliable and consistent data; avoiding unintentional consequences such as high concentation in cetain sectors or investments; and reliably determining the expected risk and return impact of such a stategy. However, in order to guide and review progress towards oveall targets, a number of metrics are tacked, some of which are shown in Table 2. Investment metrics are calculated by identifying in-scope non-cash assets and applying MSCI ESG data on a per security basis. Various metrics are subsequently calculated at a whole potfolio level. Table 2 Climate-related investment metrics Metric 2022 2021 Weighted aveage carbon intensity 69 tCO 2 e/$m sales 46 71 tCO 2 e/$m sales 47 Investment in holdings with conirmed SBTs £485m £422m % Allocated to coal and oil sands 0% 0% Investment in Green bonds £100m £74m 46 55% potfolio coveage. 61 tCO 2 e/$m sales for benchmark. Note that potfolio coveage has dropped as compared to 2021 (see footnote 47) due to an increasing allocation to non-covered assets such as government bonds and private debt 47 67% potfolio coveage. 83 tCO 2 e/$m sales for benchmark GHG emissions are quantiied in alignment with the World Resources Institute’s Greenhouse Gas Protocol Corpoate Accounting and Repoting Standard and are discussed futher in the SECR section of the annual repot on page 95. Unveriied emissions data, including for 2022, as well as a description of the methodology used to estimate metrics if data is missing, is also included. Admial is a inancial sevices company, and therefore it has a low opeational footprint when compared to its complete carbon footprint, including the supply chain and investment potfolio. This is even more likely to be the case given the efots made over the past decade to improve the eiciency of its buildings and to reduce its energy consumption. This is why, in order to make a meaningful diference in the global efot to tackle climate change, it is impotant to include all emissions in the Group’s net zero ambitions, including all scope 3 emissions. Admial Group has formally committed to ambitious net zero targets, committing to achieving net zero greenhouse gas emissions by 2040 at the latest, across all three scopes of emissions, and to cut these emissions in half by 2030. A commitment was also made to achieving net zero in opeational emissions by 2030. There is a high level of alignment between Admial Group’s announced targets and the ABI’s climate change roadmap, published in July 2021: intermediate targets of a 50% reduction in emissions by 2030 are aligned, both cover all scopes of emissions, however Admial is targeting net zero by 2040, ten years ahead of the ABI’s roadmap. Futher opeational metrics are discussed in the Streamlined Energy and Carbon Repoting disclosure, found on pages 95 to 96. Read more about SECR disclosure on pages 95–96 Admial Group plc Annual Repot and Accounts 2022 109 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Tansition risks The move away from petrol and diesel vehicles is the most obvious tansition risk faced by the Group, and is one which presents a stategic challenge to us. Consideable efots have been made to mitigate the risk of a tansition to electric vehicles (EVs) and alternatively fuelled vehicles (AFVs), both via new and existing businesses, which have invested in developing and testing new products and product features to meet developing customer requirements. The tansition to a low carbon economy may see an erosion of Admial’s taditional competitive advantages in pricing and claims handling, as petrol and diesel cars are replaced with EVs and AFVs. Conversely, this tansition could present an oppotunity for Admial to build competitive advantages in these areas. Admial monitors market-wide metrics, which are repoted on monthly in management packs and discussed at relevant foa, such as the propotion of new vehicle registations which are EVs or AFVs, as well as internal metrics capturing the attactiveness and competitiveness of the EV proposition, the claims experience, and the customer experience more broadly (e.g., Times Top, market share, loss atio – all of which would be considered commercially sensitive). This is done to ensure that the Group is developing adequate capabilities in these new technologies. Admial’s purpose is to “help more people look after their future. Always striving for better, together.” By developing products and sevices which not only help mitigate the worst efects of climate change, but also help suppot a tansition to a low carbon future, Admial is doing just that. Products and sevices As discussed above, the efects of climate change may impact all of Admial’s business lines. Physical risks, which may be managed via risk selection and reinsuance protection, might be more prominent in Admial’s household businesses. Tansition risks may be felt more keenly in the motor businesses, though the “diversiication” pillar of the Group’s stategy is designed to mitigate this impact, in paticular the creation of Pioneer in 2020 to focus on new business oppotunities. Physical risks Admial is exposed to both acute and chronic physical risks, however in the shot- to medium-term the most impactful risk is likely to be increasingly severe and frequent windstorms, loods, and freeze events. To mitigate and manage these risks Admial takes a lexible and proactive approach to risk selection and pricing, ensuring that written business is within risk appetite, and that projected loss atios and combined atios lead to proitability over the cycle. As a UK insurer, Admial takes pat in the Flood Re scheme, which is designed to allow insurers to ofer more afordable insuance for homes built before 2009 in areas most at risk of looding. The volume and value of policies ceded to Flood Re is monitored on an ongoing basis. Admial also utilises quota share reinsuance arangements extensively, including both catastrophe and aggregate cover for household lines. These are in place to provide protection against an accumulation of claims associated with a weather catastrophe event. Admial tacks a number of climate-related metrics, such as modelled burn cost per peril and number and value of weather-event-related claims, in order to assess its exposure to climate-related risks however, in the main, these would be considered to be commercially sensitive. Admial is able to disclose the metrics shown in Table 3, as per the Sustainability Accounting Standards Board standard. Read more about Electric Vehicle trends on page 94 Task Force on Climate-related Financial Disclosures (TCFD) continued Admial Group plc Annual Repot and Accounts 2022 110 Stategic Repot Table 3 Physical risk metrics Description Metric Probable Maximum Loss (PML) of insured products from weather related natual catastrophes • Admial utilises various methods and evaluations to make undewriting and reinsuance decisions that manage the Group’s exposure to catastrophic events. Across the Group’s insuance book, the main weather-related risks exist in relation to Admial’s UK Household book, as well as the US Motor book • Admial’s Household excess of loss reinsuance provides catastrophe cover with a limit that is consideably higher than the estimated 1-in-200 loss. As of Januay 2023, this was estimated to be £470–510 million from loods and storms for the UK Household Insuance business. Admial’s excess of loss deductible is £50 million, and the 70% quota share leads to a net event loss of £15 million • In relation to Admial’s UK Car Insuance business, the 1-in-200 estimated possible loss as of December 2022 was £90–115 million. Admial currently has £80 million of cover from the motor excess of loss reinsuance and a futher £5 million from the propety excess of loss reinsuance. Therefore, after the £12 million deductible, Admial is covered up to a £97 million single event • In relation to the US Motor Insuance business, the 1-in-200 estimated possible loss as of August 2022 was $17–20 million. The US business has $21.5 million of cover from the Motor excess of loss reinsuance. Therefore, after the $3.5 million deductible, the US business is covered up to a $25 million single event Total amount of monetay losses attributable to insuance pay-outs from (1) modelled natual catastrophes and (2) non-modelled natual catastrophes, by type of event and geogaphic segment (net and gross of reinsuance) Admial Group does not sepaately identify losses by modelled and non-modelled catastrophes. However, the table below provides some details on the weather-related losses following natual catastrophes in relation to the UK Household book, which represents the main weather-related risk from across the Group’s opeations. The table covers propety catastrophe losses above £5.0m across 2018–2022. Period Perils Paid (£m) Incurred (£m) 2018 Freeze, lood, and storm 10.4 10.4 2019 Flood and storm 0 0 2020 Flood and storm 0 0 2021 Flood and storm 5.3 5.0–6.0 2022 Freeze, lood, and storm 8.0 20.0–30.0 Read more about Our Society – Environment on page 91 Admial Group plc Annual Repot and Accounts 2022 111 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information The Board of Directors conirms that during the year under review, it has acted to promote the long- term success of the Company for the beneit of shareholders, whilst having due regard to the matters set out in section 172(1)(a) to () of the Companies Act 2006, being: (a) the likely consequences of any decision in the long-term (b) the interests of the Company’s employees (c) the need to foster the Company’s business relationships with suppliers, customers, and others (d) the impact of the Company’s opeations on the community and the environment (e) the desiability of the Company maintaining a reputation for high standards of business conduct. () the need to act fairly between members of the Company During 2022, the Board reviewed and reairmed that of the six stakeholder groups, (customers, people, suppliers and patners, shareholders, community, and the environment), each continued to be stategically impotant to the long-term success of the Group’s opeations, the stakeholders maintain unchanged from the group wide stakeholder materiality exercise as detailed in the 2021 Annual Repot. As pat of the 2022 review, the Board considered the current approach to corpoate governance and engagement in relation to the interests of each of its stakeholders. S.172 factor Relevant disclosure Page Consequences of decisions in the long term Principal decisions Board appointments Board activity during the year Diferent stakeholder sections 148 to 152 130 to 135 138 – 139 68 – 94 In the interests of employees Principal decisions Employee stakeholder section including employment engagement, communication Employee Consultation Group Non-Financial Information Statement Diversity Hybrid Working 148 to 152 77 to 81 145 – 147 113 78 – 80 28, 78, 93, 129 and 142 The need to foster business relationships with suppliers, customers, and others Principal decisions Stakeholder sections Consumer Duty 148 to 153 68 – 94 75, 75, 119 The impact of the Company’s opeations on the community and environment Principal decisions Stakeholder sections TCFD disclosures Sustainability 148 to 153 68 to 94 97 to 111 38 – 39 Maintaining a reputation for high standards of business conduct Principal decisions Awards Stakeholder sections Culture Group Minimum Standards Diversity & inclusion Health and Wellness Conduct risk Whistleblowing Chief Executive statement 148 to 152 79 68 to 94 10, 70, 77 – 81 178 78, 80, 159 – 160 81 120 144 20 – 23 Fairness between members Principal decisions 148 to 152 Section 172 Statement In prepaation for the review, discussions were held with the internal relationship owners within Admial Group, on our key information feeds, existing engagement methods, feedback processes and the activities and plans for the year. A Board agenda planner set out the matters to be considered by the Board during the year, and this was subsequently reviewed and updated at each Board meeting in 2022. Board papers during the year were accompanied by a sepaate document outlining which stakeholders could be afected or impacted by the paper, along with an explanation of how stakeholder interests had been considered prior to the aising of the matter at the Board meeting. The accompanying papers also shared the likely consequence of any Board decision on each stakeholder group identiied, and how the impact on stakeholders could be monitored. Examples of how stakeholder engagement and section 172(1) matters have inluenced Board discussion and decision making during the year can be found in the principal/ non-routine/ signiicant decisions in 2022 on pages 148 to 152. The below table sets out where key disclosures in respect of each of the section 172(1) matters can be found: Admial Group plc Annual Repot and Accounts 2022 112 Stategic Repot Non-Financial Information Statement Group policies The below policies can be located here on our website www.admialgroup.co.uk Geneal Standards of Conduct Our Geneal Standards of Conduct outline the conduct standards that all colleagues must adhere to regardless of their role. Health and Safety Our Health and Safety Policy outlines our commitment to ensuring the health and safety of staf and anyone afected by our business activities, and our commitment to providing a safe environment for those attending our premises. Diversity and Dignity at Work Our Equality, Diversity and Dignity at Work Policy outlines that Admial is committed to ensuring that any type of discrimination is not accepted. This policy outlines the standards of behaviour that are expected from all members of employees, to ensure that eveyone at Admial is treated with dignity and respect. This policy explains that all managers should be alet to potential discrimination and haassment and actively prevent them from occurring, communicate this policy to all employees, and be responsive and suppotive to anyone who makes a complaint. Procurement and Outsourcing Our Group Procurement and Outsourcing Policy conirms that all employees who engage in procurement activity are expected to enhance and protect the standing of the business, maintain the highest standard of integrity in all business relationships, promote the eadication of unethical business pactices, and ensure full compliance with laws and regulations. Anti-Bribey Our Anti-Bribey Policy strictly prohibits the solicitation or acceptance of any bribe, to or from any person or company, by an individual employee, Board member, agent or other person or body on Admial’s behalf, in order to gain any commercial, contactual, or regulatoy advantage for Admial in an unethical way or to gain any personal advantage for the individual or anyone connected with the individual. Gifts and Gatuities Our Gifts and Gatuities Policy recognises that sometimes customers, suppliers or business associates ofer gifts or gatuities to staf and conirms that all such gifts must be made and received openly and fairly. Whistleblowing Our Whistleblowing Policy encouages and enables employees to aise any concerns they have about serious malpactice or wrongdoing. The policy is designed to ensure that an employee can aise their concerns without fear of victimisation, subsequent discrimination, disadvantage, or dismissal. This policy details internal and external repoting lines for any employee concerns. Financial Crime Our Financial Crime Policy ensures that robust systems and controls are in place to detect, prevent and deter inancial crime across the Group and ensures we remain compliant with applicable laws and regulations in our opeational jurisdictions. All areas of inancial crime are captured by this policy, including money laundering, market abuse & insider tading, sanctions regime, modern slavey, tax evasion and Bribey & Corruption. Modern Slavey Our Anti-Slavey, Exploitation and Human Taicking Policy conirms Admial’s zero toleance approach to modern slavey, outlines our ongoing commitment to eliminating unethical working pactices, and provides guidance to employees on repoting any problems identiied at work or in the community. We release an annual Modern Slavey Statement in line with the Modern Slavey Act 2015. Tax Our Tax Stategy Policy documents our approach to taxation. The policy conirms that the Group’s primay objective is to be compliant with all tax legislation requirements in all the territories in which we opeate. The non-inancial repoting requirements contained in sections 414CA and 414CB of the Companies Act 2006 are addressed within this section by means of cross reference, to indicate where they are located within the stategic narative and to avoid duplication. Sustainability 38 Our Approach to Sustainability 10 Culture and Values 78 Employees Diversity and Inclusion 87 Community Engagement 94 Responsible Investments Climate disclosure 97 Task Force on Climate-related Financial Disclosures 95 Streamlined Energy and Carbon Repoting Governance 114 Risk 136 Governance Our business 6 Business Model 28 Stategy 11 Financial Stability 40 Key Peformance Indicators Admial Group plc Annual Repot and Accounts 2022 113 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Principal Risks and Uncetainties The Board, with suppot from the Group Risk Committee and the Group Risk function, undetakes a regular and robust assessment of the principal and emerging risks facing the Group alongside engaging with the management team on the Group Stategy. These risks have been summarised as those which would threaten its business model, future peformance, liquidity and solvency. The table overleaf sets out the principal risks which Admial has identiied through its Enterprise Risk Management Famework (ERMF). The impact of those risks and actions taken to mitigate them are explained below. This section also includes a description of Admial’s approach to identify, manage and govern emerging risks. Risk Appetite: The Admial Group risk stategy contains stategic risk statements for the relevant risks which help deliver the Group’s business objectives. The Group risk appetite is owned and approved by the Admial Group Board. The responsibility for the Group risk appetite is delegated to the Group Risk Committee which reviews all components prior to Board approval and monitors the peformance of the business against the approved Group risk appetite through the consolidated risk repot. Principal risks (A–K) Insuance Risk: A Reseving risk in the UK and international insuance B Premium risk and catastrophe risk C Reduced availability of co-insuance and reinsuance arangements D Potential diminution of other revenue Group Risk: E Erosion of competitive advantage in UK car insuance F Failure of geogaphic and/or product expansion G Reliance on UK price comparison distribution channel Credit Risk: H Credit risk Market Risk: I Market risk Opeational Risk: J Legal and regulatoy risk K Opeational risk 1 Admial 2.0: Increase speed of delivey on customer needs, continuing to upgade UW capabilities and opeational excellence. 2 Business Diversiication: Increase customer engagement and business resilience, enriching our proposition beyond motor. 3 Motor Evolution: Evolve our proposition for changes in mobility. Unsurprisingly, given external events, the risk proile of the Group has changed since 2021. Opeational risk has reduced, as the Group becomes more familiar with opeating in the post-Covid-19 business environment, however many other PR&U are trending up, driven by unprecedented levels of inlation, supply chain challenges, and economic and market turmoil. This trend of increasing risk is anticipated to continue into 2023 due to continued uncetainty. Principal risks and uncetainties relect the main risks faced by the company in achieving its stategic objectives. Our stategic objectives have been listed below with the links to our stategy noted against each principal risk and uncetainty (for more information on the stategy refer to pages 28–37. Alongside these three pillars there are two suppoting stategies covering the customer and the Group culture which are cental to eveything the Group does. Identification of risks Admial Group plc Annual Repot and Accounts 2022 114 Stategic Repot Reseving risk in the UK and international insuance Possible impact on our stategic initiatives 1 2 Risk Admial is exposed to reseving risk through its undewriting of motor, household and other insuance policies. Claims reseves in the Financial Statements may prove inadequate to cover the ultimate cost of claims which are by nature uncetain. This is a paticular risk for motor insuance liabilities, where the amount payable for bodily injuy claims (paticularly large claims) can change signiicantly during the lifetime of the claim as a result of external risks such as changes in Ogden ates (expected in 2024), impacts of increased levels of Periodical Payment Orders (PPOs) and claims inlation. Impact During this period, increased uncetainty in forecasting both the level and duation of the impact of higher inlation ates on claims reseves may lead to adverse run-of and higher claims costs than projected. PPO claims are capital intensive owing to increased uncetainty of the cost of signiicant claims over a longer term. Mitigating Factors The Group continues to reseve consevatively, setting claims reseves in the Financial Statements well above actuarial best estimates to create a margin held to allow for unforeseen adverse development. Best estimate reseves are estimated both internally and externally by independent actuaries. For vey large claims Admial purchases excess of loss reinsuance, which mitigates a potion of the loss. Regular reviews of both settled and potential PPO cases are undetaken by the Claims and Actuarial teams, with independent actuarial analysis provided as pat of the external reseving process. Admial’s investment stategy is the result of a structured, disciplined and tansparent investment process. Long-dated inlation linked assets are held to patly hedge the risks associated with PPO claims. Premium risk and catastrophe risk Possible impact on our stategic initiatives 1 2 3 Risk The Group is exposed to the risk that inappropriate premiums are charged for its insuance products leading to either insuicient premiums to cover claims cost or uncompetitive ates leading to reduced business volumes. This risk is increased during periods of high inlation leading to greater market uncetainty. The risk of increased claim costs and/or reduced business volumes could be driven by potential economic , social, environmental, regulatoy or political change such as the Russia-Ukaine conlict, impacting supply chains or new entants to the market. Admial is exposed to the risk of higher losses than anticipated due to the occurrence of manmade catastrophes or natual weather events, potentially increased in frequency and severity due to climate change. Acute physical climate risks include changes in the frequency of both large catastrophe events and severe weather events, where trends are diicult to identify, and which have large claims costs associated with them. Impact Higher claims costs, reduced business volumes and/or higher loss atios, resulting in reduced proits or undewriting losses. A large lood or windstorm, causing extensive propety damage (both motor and household) to a signiicant propotion of the potfolio, could lead to a larger than anticipated total claims cost. Mitigating Factors There are a number of aspects which contribute to Admial’s strong UK undewriting results, including: • Experienced and focused senior management and teams in key business areas including pricing and claims management • Highly data-driven and analytical approach to the regular monitoring of claims and undewriting peformance • Capability to identify and resolve underpeformance promptly through changes to key peformance drivers, paticularly pricing • Continuous appaisal of and investment in employees, systems and processes • Monitoring the impact arising from climate change risks, covering both physical and tansitional risks, as well as other Emerging Risks which may impact premium or catastrophe drivers Admial purchases excess of loss reinsuance, which is designed to mitigate the impact of vey large individual or catastrophe event claims. A B Insuance Risk Admial Group plc Annual Repot and Accounts 2022 115 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Reduced availability of co-insuance and reinsuance arangements Possible impact on our stategic initiatives 1 2 3 Risk Admial uses propotional co-insuance and reinsuance across its insuance businesses to reduce its own capital needs (and to increase the return on the capital it does hold) and to mitigate the cost and risk of establishing new opeations. There is a risk that suppot will not be available or that it will be available at an uneconomical price in the future if the results and/or future prospects of either the UK businesses or (more realistically) one or more of the less well-established opeations are not satisfactoy to the co- and/or reinsurers. Climate change could lead to system-level shifts in conditions in the natual environment. A higher frequency and severity of extreme weather events, as well as increased chronic physical risks, could increase the cost of reinsuance protection for insurers. Climate change could impact reinsuance structures if more events are hitting reinsuance layers, potentially leading to changes in terms and conditions or premiums. Impact A potential need to aise additional capital to suppot an increased undewriting share. Return on capital might reduce compared to current levels. Mitigating Factors Admial mitigates the risk to its reinsuance arangements by ensuring that it has a diverse ange of inancially secure patners. Admial continues to enjoy a long-term relationship with a number of diferent reinsurers, some of which are amongst the world’s largest. These long-term arangements are in place throughout the UK and International businesses. Potential diminution of other revenue Possible impact on our stategic initiatives 1 2 3 Risk Admial earns other revenue from a potfolio of products and sevices in addition to the core insuance products. The level of this revenue could diminish due to: political, regulatoy, legal, social/customer behaviour, stategic, market or economic changes. Impact Lower proits from business opeations and lower return on capital. Mitigating Factors Admial continuously assesses the value to its customer of the products it ofers and makes changes to ensure the products continue to meet customer needs and ofer good value. Admial seeks to minimise reliance on any single source by earning revenue from a ange of products. This would mitigate the impact of regulatoy or market changes, or changes in consumer behaviour, which might afect a paticular product or income stream. Admial works closely with its regulators and other key industy bodies to understand potential developments. C D Principal Risks and Uncetainties continued Admial Group plc Annual Repot and Accounts 2022 116 Stategic Repot Erosion of competitive advantage in UK car insuance Possible impact on our stategic initiatives 1 2 3 Risk Admial typically maintains a signiicant combined atio advantage over the UK market. This advantage and/or the level of undewriting proit (and associated proit commission) could be eroded. This risk could be exacerbated by: unfavouable loss or expense atio results, irational competitor pricing, new technologies used within the insuance market and/or regulatoy market intevention. It may arise from new or existing competitors, or outcomes from legal or regulatoy change such as the FCA’s pricing pactices. Impact A worse UK car Insuance result and lower return on capital employed. A sustained and uncorrected erosion of competitive advantage could afect the ability of Admial to maintain its reinsuance arangements, which might in turn require Admial to hold more capital. Mitigating Factors Admial’s focus remains on the wide ange of factors that contribute to Admial’s combined atio outpeformance of the UK Motor market. Some are set out earlier in the Stategic Repot, but other factors include: • A tack record of innovation and ability to react quickly to market conditions and developments • A focus on maintaining a low-cost infastructure and eicient acquisition costs • An experienced and focused management team • A robust pricing discipline to ensure prudent behaviour to ty and protect our competitive advantage • A strong Admial band and customer orientated culture to attact and retain customers Failure of geogaphic and/or product expansion Possible impact on our stategic initiatives 1 2 3 Risk In line with the Group’s diversiication stategy, Admial continues to develop its other UK insuance businesses, non-insuance businesses such as Admial Money, and its international businesses. Admial Pioneer is the vehicle for the development and launching of new products and sevices, other than those already covered by existing established Group businesses. One or more of the opeations could fail to become a sustainable, proitable long-term business. Product expansion into new areas could lead to unproitable business, could increase regulatoy risk, and may introduce new risks into the Group. Growth in developing businesses could exceed the scale of infastructure of the opeation. Impact Higher than planned losses (and potentially closure costs) and distaction of key management. A collective failure of these businesses would threaten Admial’s objective to diversify its earnings by expanding into new markets and products, though any single failure of product or geogaphy is likely to be toleable. The UK car business, which continues to peform strongly, is largely unafected by this risk. Mitigating Factors Admial’s approach to expansion and product development remains consevative, applying the test-and-learn philosophy that has proven successful for previous opeations. International insuance businesses have geneally executed cautious launch stategies and are usually backed by propotional reinsuance suppot which provides substantial mitigation against stat-up losses in the early years. The Directors are mindful of management stretch and regularly assess the suitability of the infastructure and management structure in place for Admial’s new UK and international opeations, alongside oversight and challenge from appropriate boards and committees. The Group has established a suiciently large and diverse potfolio in order to mitigate the risk of failure of individual new opeations. E F Group Risk Admial Group plc Annual Repot and Accounts 2022 117 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Reliance on UK comparison distribution channel Possible impact on our stategic initiatives 1 2 3 Risk Admial is dependent on the four main UK comparison websites as an impotant source of new business and growth. Growth in this distribution channel could slow, cease or reverse, or Admial could lose one or more of the websites as a source of customers. Impact A potentially material reduction in UK insuance new business volumes, in paticular for UK Motor. However, a more competitive market might beneit the insuance businesses through lower acquisition costs. Mitigating Factors Admial contributes materially to the revenues of all four major UK comparison businesses, and has a strong band presence, and therefore it is not considered probable that a material source of new business would be lost. Admial continues to grow its MultiCover and MultiCar products which promotes retention. It also has a direct ofering to new and existing customers, with continuing investment made to improve its online/digital ofering. Credit risk Possible impact on our stategic initiatives 1 2 Risk Admial is primarily exposed to credit risk in the form of: (a) reinsuance counterpaty credit risk; or (b) banking counterpaty credit risk or (c) credit risk of investments. One or more counterpaties could sufer signiicant losses leading to a credit default, while a downgade of investments could erode the value. Admial Money exposes the Group to credit risk in relation to customer defaults on its unsecured personal loan and car inance business. Impact The impact of a major credit event could be losses and reduced capital, dependent on its nature and severity. Admial would also need to ensure that it continues to have suicient liquid assets to meet its claims and other liabilities as they fell due. Increased defaults could impact future proitably and lending capabilities. Mitigating Factors Admial only conducts business with reinsurers of appropriate inancial strength. In addition, major reinsuance contacts are opeated on a funds withheld basis, which substantially reduces credit risk, as Admial holds the cash received as collateal. Admial continuously monitors the credit quality of our counterpaties within Board approved limits, adjusting its credit rules and pricing accordingly. Credit risk of investments is managed through diversiication and appointing high-quality third-paty asset managers. Limits on counterpaties and cetain credit atings ensure that credit risk is managed within risk appetite, and produces a high quality credit potfolio. The Group invests in a ange of liquidity funds which hold a wide ange of shot duation, high quality securities, and in ixed income funds holding primarily investment gade assets. Cash balances and deposits are placed only with highly ated counterpaties. Most long-term investments are held in Government bonds to futher mitigate the exposure to credit risk. Admial considers counterpaty exposure frequently and in signiicant detail, and has in place appropriate triggers and limits to mitigate exposure to individual investment counterpaties. Admial Money’s credit risk appetite is set to ensure that the risk taken is commensuate to the expected returns whilst also considering customer afordability. Admial Money continuously monitors its criteria for new business and the peformance of its potfolio. G H Principal Risks and Uncetainties continued Credit Risk Admial Group plc Annual Repot and Accounts 2022 118 Stategic Repot Market risk Possible impact on our stategic initiatives 1 Risk Market risk arises as a result of movement in interest ates, credit spreads and foreign exchange ates. Impact Market volatility (notably signiicant changes in risk free interest ates or material increases in credit spreads) can adversely impact the value of the Group’s assets. The Group’s solvency can also be adversely impacted due to an increased regulatoy valuation of claims liabilities, in paticular in relation to longer-dated potential PPO claims. Continued growth of the Group’s businesses outside the UK has altered the exposure to net assets and liabilities in currencies other than pounds sterling, increasing the Group’s exposure to Euros and Dollars in paticular. Mitigating Factors The investment stategy focuses on presevation of the amount invested, low volatility of returns and strong liquidity. The majority of the potfolio is invested in high quality ixed income and other debt securities, and money market funds and other similar funds in order to achieve these objectives. To note Admial does not invest in commercial propety. The Group’s mitigation for interest ate risk resulting from long duation PPO liabilities includes reinsuance cover and a continuing focus on investment stategies. This includes asset/liability matching, consideation of hedging options for these liabilities, including of cetain risks associated with PPO claims. Relative to the size of the Group, exposure to non- sterling currency remains relatively small. Legal and regulatoy risk Possible impact on our stategic initiatives 1 2 3 Risk Legal and regulatoy risk may arise where Admial fails to fully comply with legal or regulatoy requirements and/or changes in an accuate, timely manner. Examples include compliance with the FCA’s new Consumer Duty. This risk may also arise where previous industy and/or Admial regulatoy or legal compliance standards are revisited with negative consequences, applied retrospectively, for the industy and/or the Group. As Admial opeates globally, across business lines and products, it is exposed to a number of difering legal jurisdictions and regulators. Failing to meet increasing expectations from regulators, legislators, and shareholders around climate change and the environment could potentially lead to exposure to legal and regulatoy risk. In the longer term, the impact from not meeting increasing expectations could be serious. Impact Exposure to regulatoy intevention, censure and/or enforcement action through ines and other sanctions. Mitigating Factors Ongoing monitoring of the Group’s compliance with current and proposed requirements and inteaction with regulators by Executive Management and the Board. Assuance is gained through external reviews and benchmarking exercises ensuring Admial is compliant with legal and regulatoy requirements. Strong project governance is a key control in managing regulatoy change. I J Market Risk Opeational Risk Admial Group plc Annual Repot and Accounts 2022 119 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Opeational risk Possible impact on our stategic initiatives 1 2 3 Risk Opeational risk arises within all areas of the business. The principal categories of opeational risk for Admial are: conduct risk; physical security risk; technology risk; information security/cyber risk; business continuity and opeational resilience; process risk; change risk; people risk; data governance risk; and, outsourcing and procurement risk. Impact Potential customer detriment and/or potential regulatoy censure/enforcement and/or reputational damage as a result of Admial’s action or inaction. Admial being unable to sevice its customers or making poor business decisions due to lack of system availability, data integrity and/or data conidentiality. The risk of reductions in earnings and/or value, through inancial or reputational loss, from inadequate or failed internal and outsourced projects, processes and systems, or from people related, hybrid working or external events. Risk to Admial occurs through the losses that could materialise if the internal control famework managing business processes fails. Mitigating Factors Admial opeates a three lines of defence model, and internal controls are in place and are monitored to mitigate risks. The control famework is regularly reviewed, and the internal audit function has an agreed cycle of testing of the adequacy and efectiveness of controls. Speciic opeational risks are mitigated by: • Monitoring, managing and repoting on customer outcomes in order to mitigate customer detriment • Regular Executive Management and Board review of the efectiveness of the Group’s IT capability • Continuing investment in Information Security in order to mitigate Information Security risks, including evolving Cyber risk. Including the embedding of improved KRI’s for Cyber/Information Security risks • Staing a major incident team within IT which is tasked with maintaining system availability, with business continuity and disaster recovey plans in place which are regularly tested, alongside completion of an opeational resilience work stream • Backing up data to allow for its recovey in the event of corruption • Employing enhanced project governance and oversight of new systems implementations, with external specialist review and assuance where required • Attacting, retaining and motivating quality employees to deliver superior customer sevice and to achieve business objectives • Employing targeted recruitment and identifying potential leaders through internal development, talent management and retention processes for the purposes of succession planning • An ongoing commitment to Diversity and Inclusion. • Monitoring outsourced and ofshore activities through ongoing supplier relationship and peformance management, and with regular due diligence reviews • Stategic reviews are periodically undetaken to align procurement and outsourcing arangements with our wider business stategy and also in response to ongoing macroeconomic challenges Admial also purchases a ange of insuance covers to mitigate the impact of a number of other opeational risks. K Principal Risks and Uncetainties continued Admial Group plc Annual Repot and Accounts 2022 120 Stategic Repot Emerging risks The management of emerging risks is a key element of Admial’s stategic risk management, and emerging risks and oppotunities continued to be reviewed throughout 2022. Admial Group identiies and monitors emerging risks, issues which may be potentially signiicant, but may not be fully foreseen, assessed or allowed for in insuance terms and conditions, pricing, reseving or capital setting, or stategic and business decisions. By their vey nature, emerging risks are many and varied, with a high degree of uncetainty around the likelihood of occurrence, severity and/or timing. The broad analysis of a wide ange of emerging risks and oppotunities may lead to a change in stategy, management behaviour, ways of working or risk management and in turn, to a stronger and more robust business which better delivers on its commitments to customers, employees, and other stakeholders. Emerging risks are identiied via horizon scanning. This involves an extensive liteature review, consultations with internal working groups, and inteviews with internal stakeholders, subject matter expets, and external specialists. Emerging risks are assessed using an internally-developed famework, which includes qualitative and quantitative analysis to gade each emerging risk on a scale designed to be compaable across entities and compatible with management of opeationalised risks. Evaluation of the potential impact to Admial includes consideation of how the risk may inteact with existing Principal Risks and Uncetainties (PR&Us), as well as any new risks that could arise. It also covers the precautionay deployment of management actions and mitigating controls. Admial’s Emerging Risk Radar captures an assessment of potential impact and time to cystallisation for emerging risks. It categorises each risk into four broad risk segments: (a) social, political & economic, (b) legal & regulatoy, (c) technology and (d) environmental. Plotting emerging risks in this way can shed light on the macro trends with common drivers and efects. Repoting on emerging risks and oppotunities is provided to the GRC and relevant Boards, is incorpoated into the Group ORSA Repot, and is discussed with the senior management and entity risk teams. Admial Group plc Annual Repot and Accounts 2022 121 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information In accordance with provision 31 of the 2018 UK Corpoate Governance Code, the Directors have assessed the prospects of the Company over a three-year period, having referenced the Group’s Own Risk and Solvency Assessment (ORSA), risk stategy, risk appetite, principal risks and uncetainties, key risk drivers, and ongoing risk management activities. As per provision 31, Admial considers three years to be a period of assessment over which it has a reasonable degree of conidence. Although the Group reviews inancial projections that extend beyond the three-year time horizon covering the years up to 2027, Admial considers that there is an inherent risk and uncetainty in projecting beyond this three-year period, as the degree of cetainty in the impact of internal and external developments reduces greatly due to the nature of Admial’s primay business (one-year insuance policies). However, these inancial projections contain no information which would cause diferent conclusions to be reached over the long- term viability of the Group. At least annually, the Group produces an ORSA repot, which is the main source of evidence used by the Board to assess viability. The ORSA repot sets out a detailed consideation of the principal risks and uncetainties facing the Group and considers current and projected levels of solvency and liquidity over a 12-month to three-year period. In addition to the three-year period of assessment suppoted by the ORSA, the Board utilises other relevant repoting, some of which is longer term in nature. Notably these include ive-year inancial projections reviewed twice a year, three-year solvency projections reviewed at least twice a year, and a one- year inancial budget for the fothcoming 12 months approved on an annual basis. Quantitative and qualitative assessments of risks are peformed as pat of the ORSA process, assessing these risks over the three-year capital planning time horizon. This foward-looking approach relects the alignment of the inancial and business planning process and the solvency assessment, referred to within Admial as the capital plan. This makes sure that Admial is appropriately capitalised at a ixed point in time as well as over the future planning time horizon, given Admial’s principal risks and uncetainties and a plausible ange of potential stressed conditions. The capital plan is a key consideation for Group and Subsidiay Boards in assessing and approving the business stategy, business / inancial plan and key business decisions. Viability Statement The quantitative assessment considers how the regulatoy capital requirements, economic capital needs, own funds and solvency position of the Group are projected to change over the three-year horizon, with a requirement to maintain a solvency atio above the approved capital risk appetite bufer throughout the projection. The assessment includes a series of sensitivity, stress and scenario tests (S&STs) and reverse stress tests (RSTs) that are examined and quantiied to understand the potential impact on the Group’s solvency, liquidity and proitability, as pat of the ORSA process. In addition to these Group tests, there are also entity-speciic scenarios, considered of lower materiality to the Group, that are peformed by each subsidiay insuance entity as pat of their ORSA processes. The results of the stress tests form pat of the process to set the Group’s capital risk appetite, which seeks to hold a bufer on top of the Group’s regulatoy capital requirement that is suicient to protect its regulatoy capital position against a ange of signiicant but plausible potential shocks and stresses. Key stategic decisions, including the setting of dividend payments, consider the solvency impact against the Board-approved capital risk appetite of 130%, which is a key criterion for the Board in assessing viability. Refer to the Stategic Repot (page 64) for information on sensitivities to the repoted 2022 solvency atio position. To assess the robustness of the Group to the impact of various risks, 15 S&STs and two RSTs have been quantiied to understand the potential impact on the Group’s solvency atio. In 2022 a ange of scenarios have been peformed from the capital planning process along with scenarios related to PRA’s IST 2022 natual catastrophe and cyber / opeational risk scenarios, and insuance, market risk and inlation stresses. The results indicate that for most of the stresses, Admial has suicient capital to withstand the extreme scenarios. The 130% bufer is breached for two scenarios (extreme inlation and macroeconomic shock) although the solvency atios still lie comfotably above the 100% minimum solvency atio. For these scenarios Admial also has seveal management actions that it could call on to alleviate capital pressures and improve the solvency atio to bring it above the 130% bufer. A third exception is an extreme RST, combining severe and extreme insuance (reseve/premium) and market risk scenario combinations. In the absence of management actions this would result in a breach of the 100% minimum solvency atio but, as is the intention of the RST, it is considered to be an extremely remote outcome, being well excess of a 1-in-200-year event. Admial Group plc Annual Repot and Accounts 2022 122 Stategic Repot Risk management is an essential pat of Admial’s opeations, and successful risk taking is key to the Group achieving its business objectives. Risk management is therefore a key consideation when setting the Group’s stategy, managing peformance, and rewarding success. The current risks that are faced by the Group are captured in the Risk Universe, with the most notable risks captured in the Group’s principal risks and uncetainties (page 114) 48 . In addition to these principal risks and uncetainties, the Group also considers a ange of emerging risks that could impact the Group to vaying degrees in the future, but which are not yet fully understood, including those related to climate change (page 121). The Admial Group Risk Stategy is considered and approved by the Board. The stategy is directly linked to the business plan and seeks to ensure that all risks are managed efectively to allow the Group to meet its stategic aims (pages 28–37). Suppoting this is the Admial Group Risk Management Policy, which sets out Admial’s approach to risk management, as well as the governance of risk management across the Group. This approach ensures that there is appropriate oversight of the Group’s risk proile, and that the Group remains within risk appetite in all its opeations. While each of Admial’s principal risks and uncetainties could have potentially impacted the Group’s peformance, during 2022 the following key risk drivers were seen to be of notable impotance: Covid-19, changing economic outlook, technology, cyber and opeational resilience, geopolitical instability, and climate change. Changing Economic Outlook: Admial has reviewed and continues to monitor the Group’s solvency and liquidity positions in response to market volatility and wider economic uncetainty, considering factors such as increases in inlation, the wider impact of supply chain disruption, surging energy prices and the pressures on individual household inances leading to a “cost of living crisis” in many countries. Some of the current trends in risks most impacted by the changing economic outlook are highlighted below: • Premium Risk and Catastrophe Risk: Global uncetainties, supply chain pressures and increasing vehicle repair and replacement costs have all contributed to claims inlation. Similarly, labour shotages and cost of living concerns will contribute to wage inlation impacting large bodily injuy claims. In most insuance markets, motor claims frequency has increased but is still noticeably below pre pandemic levels. Admial continues to manage these challenges with a disciplined, long-term approach to pricing and growth, with a focus on building the business for the long-term. The business continues to maintain a prudent reseving approach to claims • Credit Risk: The increase in cost of living may lead to an increased number of customers being unable to meet their loan repayments or insuance premiums. The EUI processes for payment holidays to direct debit payers was established during the Covid-19 lockdowns and remains in place for inancially vulneable customers. Within Admial Money, afordability assessments for new loans have been adjusted to ensure that customers are resilient to ongoing inlation. The loans potfolio has been stress tested and the results indicate a strong potfolio within risk appetite • Reseve Risk: The Group has a prudent approach to reseving, which helps to minimise the impact of inlation and help build strong, resilient businesses for the long-term. Provision has been made for the impact of inlation on unsettled Bodily Injuy (BI) claims, for which cost of care is the primay driver of cost, ensuring that reseves capture excess inlation, for all heads of damage, but paticularly for wage inlation over the aveage time it takes for BI claims to settle. This continues to be reviewed, with best-estimates of these impacts being relected in the reseves recognised as at the balance sheet date • Opeational Risk: During 2022, GRC have continued to review the impacts and level of opeational risk as focus turned to adapting to the “post-Covid-19 business environment”. The labour market remains diicult with strong competition to attact candidates at all levels. The trial and introduction of lexible working conditions, increased staf retention risks in the UK, the potential erosion of the competitive advantage of Admial’s culture and the return to more “normalised” driving patterns have all been considered in their impact on both opeational peformance and customer outcome risks. The GRC received repots of actions such as a reduction in working hours for UK staf and an increase in holiday allowance being implemented to address some of these impacts. Monitoring and repoting is in place on the impact of attaction and retention levels as well as levels of sickness and absences, following the improvements made to the staf beneits package 48 Please also see note 6 to the inancial statements which sets out the Group’s objectives, policies and procedures for managing inancial assets and liabilities Admial Group plc Annual Repot and Accounts 2022 123 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Covid-19: Group committees have continued to monitor the ongoing impact of Covid-19 and challenge Admial’s response, including oversight of the return to the oice, in line with all applicable local and national guidance. Throughout the pandemic the GRC sought to ensure appropriate action was taken to manage the impact to Admial’s principal risks and uncetainties: prioritising staf health and safety, maintenance of the strong Admial culture, Admial’s ability to continue to provide high quality customer sevice and inancial resilience. • Key actions undetaken by the GRC in this regard include review and challenge of potential impacts to Admial Group’s solvency and liquidity including inancial stress testing and updates on Covid-19 related regulatoy inteactions Geopolitical Instability: The Russian invasion of Ukaine and an escalation of geopolitical tensions led to a review of potential exposure across the Group’s PR&Us. From a solvency perspective the impact has been assessed as immaterial at this time, and monitoring of geopolitical tensions is ongoing. • Market Risk: The initial investment spread shock was of brief duation and there was vey limited indirect exposure across the investment potfolio. Market risks are reviewed by the investments team and asset managers to ensure Admial is adequately positioned in this apidly changing environment • Insuance Risk: The risk of reduced availability of co-insuance/reinsuance arangements remains heightened due to tensions between Russia-Ukaine and an anticipated Ogden change in 2024, however monitoring is being undetaken to adequately react to any scenario Cyber and Opeational Resilience: Admial’s continual focus on data, technology, and digital has driven increasing adoption of cloud technologies. • Increased monitoring of Technology and Information Security Risks commenced during 2022 through additional KRIs and regular standing repots and updates from the Group Technology and Information Security Risk Team. Updates on cyber crisis planning were provided to committees and monitoring will continue on progress and response planning activities • The cyber security progamme in the European insuance businesses continues to make progress in reducing their information security risk, in line with the Group’s Cyber Security Famework. In the UK, an Opeational Resilience progamme was completed at the end of March 2022 in line with regulatoy requirements. Work will continue speciically focussed upon the identiied Impotant Business Sevices Climate change: Admial remains committed to recognising and understanding the threats and oppotunities posed by climate change to the Group, as well as to mitigate its impact on the environment. Climate-related risks can impact on all of Admial’s business lines, opeations, investments, and reinsuance arangements. Admial Group recognises that while there are risks from delayed action, there are also oppotunities from considering the challenges, including the potential to acceleate the Group’s tansformation, to build resilience, and to gain competitive advantage in new and existing markets. As pat of this work there is an ongoing Group focus on: • Ensuring full compliance with existing and emerging regulatoy and disclosure requirements • Researching climate-change trends and assessing the risks and oppotunities arising from climate change • Incorpoating climate-related risk drivers into business-as-usual risk management, such as enhancing Admial’s climate scenario testing capabilities • Continuing efots to futher reduce the Group’s carbon footprint Admial Group’s stategy linked to climate change is discussed in more detail in the Task Force on Climate- Related Financial Disclosures disclosure (page 97). Based on the results of this analysis, the Directors have a reasonable expectation that the Group will be able to continue in opeation and meet its liabilities as they fall due, for the period up to and including December 2025. Stategic Repot Approval The stategic Repot is approved for issue by the Board of Directors, and signed on behalf of the Board: Milena Mondini de Focatiis Group Chief Executive Officer 7th of March 2023 Viability Statement continued Admial Group plc Annual Repot and Accounts 2022 124 Stategic Repot Contents 126 Governance at a glance 128 Introduction to Governance 130 Board of Directors 136 Governance Repot 158 Nomination and Governance committee 171 Audit Committee Repot 178 Group Risk Committee Repot 183 Remuneation Committee Repot 186 Remuneation at a Glance 187 Directors’ Remuneation Policy 196 Annual Repot on Remuneation 210 Directors’ Repot Corpoate Governance Adding value. Delivering difference. For our communities 125 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Governance at a glance “ This year’s external evaluation found that this is a strong Board that is reflective and supportive of the Admiral culture.” Annette Cout Group Chair of the Nomination and Governance Committee 2 Executive 9 Non-executive Executive/Non-Executive Directors Total Board Director skills 40s 18.2% 50s 27.2% 60s 45.5% 70s 9.1% Age diversity 8 Independent 3 Non-Independent Total Board Independence “ Admiral is only one of 5 FTSE100 companies where each of the board positions of Chair, SID and CEO are held by women.” Annette Cout Group Chair of the Nomination and Governance Committee Find futher detail on page 130 11 Finance 10 Risk 8 Insurance 11 Executive/Strategic Leadership 5 Marketing/Retail 8 M&A 10 City 8 International 8 Tech/Digital/Data 8 Operations 6 Entrepreneurial 3 Loans 7 Small / Medium Enterprise 11 Remuneration/People 7 ESG/Sustainability 126 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 “ The Board remains satisfied that it has the appropriate balance of skills, experience, independence and knowledge.” Annette Cout Group Chair of the Nomination and Governance Committee 10 White British or other White (including minority white groups) 1 Asian /Asian British Board Ethnicity >9 years 6-9 years Annette Court 10y 9m Jean Park 8y 11m Justine Roberts 6y 6m Andy Crossley 4y 10m Mike Brierley 4y 3m Karen Green 4y 0m JP Rangaswarmi 2y 8m Evelyn Bourke 1y 8m Bill Roberts 1y 6m 3-6 years <3 years * Jean Park stepped down from the Board in January 2023 5 Men 6 Women Non-Executive Director tenureBoard gender diversity Board composition and succession planning Non-Executive tenure and independence Balance of skills, knowledge and experience Annual Board evaluation and individual Director appaisals Time commitment and external appointments Board diversity 8 British 3 Non-British Board Nationality 127 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 “ With the background of an uncertain world, Admiral remains focused on building our strengths.” Annette Cout Group Chair of the Nomination and Governance Committee Introduction from the Chair Dear Shareholder, On behalf of the Board, I am pleased to present the Group’s Governance Repot for the inancial year ended 31 December 2022. This repot sets out our approach to efective corpoate governance and outlines key areas of focus of the board and its activities undetaken during the year as we continue to drive long-term value for all our stakeholders. Backdrop With the background of a world coming out of a pandemic, moving to a world of hybrid working with uncetainty and vey high claims inlation alongside a cost-of-living crisis, Admial remains focused on building on our strengths: a strong workplace culture, diversity and inclusion, succession planning and climate change repoting. The Board continues to keep abreast of the changing corpoate governance landscape (such as the BEIS audit and corpoate governance reforms) and is committed to ensuring that it provides efective leadership by ensuing that good governance principles and pactices are adhered to across the Group. Board changes and succession planning In Januay 2022 the Board approved that Bill Robets was appointed as a member of Nomination and Governance Committee. Due to Jean Park’s tempoay leave of absence which was efective from Februay 2022, upon the recommendation of the Committee, the Board approved that Justine Robets be appointed as the Interim Senior Independent Director (“SID”) and Andy Crossley be appointed as the Interim Group Risk Committee Chair with efect from Februay 2022 and Karen Green was appointed as a member of the Risk Committee on 1 June 2022. Justine played an impotant role in 2022 in leading the Chair succession process as my extended tenure as Board Chair comes to an end at the AGM in April 2023. Jean Park retired from the Board in Januay 2023 and, in her place, the Board approved the appointment of Justine Robets as permanent SID and as a permanent member of the Remuneation Committee. Refer to the repot of the Nomination and Governance Committee for futher information. Introduction to Governance Futher details of the respective selection processes are set out on pages 159 to 170 Futher details on our succession planning is set out on page 128 Futher details on our explanations in respect of non-compliance with Provisions 19 of the Code are on page 136 128 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 Purpose, Culture and the impact of COVID-19 As repoted in our 2020 annual repot, the Board approved a revised Group purpose statement in Januay 2021. The Board is cognisant that it has the ultimate responsibility for ensuring that Admial has an appropriate company culture that aligns with the Group purpose and considers its impact on all of its stakeholders. Culture continues to be a topic closely monitored by management and the Board, following the workforce spending an extended time working from home following the pandemic. The Board received updates during the year on the proposals to introduce a more permanent hybrid working model across the Group and how this might impact Admial’s culture. Futher information on the Group’s purpose and how its culture is monitored and assessed by the Board is outlined on pages 72 to 78 of the Stategic Repot and pages 148 to 152 of this repot, respectively. For futher detail see Our Customers section pages 74 to 76 Stakeholder engagement During the year, the Board revisited its Stakeholder Map and reairmed the key stakeholder groups, as well as the various mechanisms used to engage and communicate with each. Consideation was also given to how Admial stakeholders’ views were taken into account in decision making in accordance with the Board’s duties under s.172 of the Companies Act 2006. Information on how the Directors discharge this duty, as well as an update on the work of the Employee Consultation Groups (ECGs), is contained within the stakeholder sections on page 145 of the Governance repot. ESG The Board increased its oversight of environmental, social and governance factors in 2022, with climate change, and diversity and inclusion being areas of increasing focus. Not only did the Board receive multiple updates on progress to increase disclosures on ESG matters, but the Audit and Risk Committees also increased their respective oversight of the Taskforce for Climate-related Financial Disclosures (TCFD) and SASB disclosures. The Remuneation Committee also considered proposals during the year to link ESG metrics to reward. Futher information on TCFD and climate change can be found on page 97. The Nomination and Governance Committee and the Board considered updates on diversity and inclusion during the year, including revised targets to demonstate Admial’s commitment to continue to be a diverse and inclusive employer. Futher information about the Board’s oversight of diversity and inclusion at Admial is included in the Nomination and Committee Repot on page 158 and pages 78 and 80 of the Stategic Repot. Read more in our Nomination committee repot on page 158 Board efectiveness At the end of the year, the Board and all of its Committees were evaluated externally by Bvalco Ltd on their own peformance to ensure that they continued to opeate efectively and to provide an oppotunity to make any improvements in 2023. The outcome of the review also fed into the Board’s objectives which were set for 2023. A summay of the outcome of the externally facilitated Board evaluation including information on the Board’s objectives are on pages 169–170. Annette Cout Group Chair 7 March 2023 129 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Board of Directors Our diverse Board has a breadth of skills and experience of adding value and delivering difference. Board skills matrix Finance Insuance Marketing/Retail City Technology/Digital/Data Entrepreneurial Remuneation/People Risk Executive/Stategic Leadership M&A International Opeations Loans ESG/Sustainability Committee Membership Audit Committee member Remuneation Committee member Group Risk Committee member Nomination and Governance Committee member C Committee Chair Senior Independent Director Annette Cout Chair Current appointments • Non-Executive Director, Chair of the Remuneation Committee and member of the Audit and Risk Committee at Sage Group Plc • Chair of WH Smith Plc • Member of Streetgames.org Business Advisoy Board • Business Mentor Background and experience CEO of Europe Geneal Insuance for Zurich Financial Sevices and a member of the Group Executive Committee from 2007–2010. Former CEO of Direct Line Group (formerly RBS Insuance) and member of the RBS Group Executive Management Committee. Previously a member on the Board of the Association of British Insurers (ABI). Appointed Appointed to the Board on 23 March 2012, appointed to Chair on 26 April 2017 with sevice ending 27 April 2023. Contributions and reasons for appointment As Chair, Annette effectively leads the Board, and is responsible for setting its agenda and monitoring its effectiveness. Annette demonstates significant commitment to the role and with a background in financial sevices and technology, and expetise in mentoring leaders, she contributes both stategically and pactically to all areas of Board related decision making. Annette is also Chair of the Nomination and Governance Committee a role she devotes herself to fully and contributes effectively offering challenge and guidance. Annette was appointed as Board Chair in April 2017, having spent 5 years as a Non-Executive Director of the Board. Annette reached her nine-year tenure as Non-Executive Director on the Board in March 2021. Annette will not be seeking re-election at the April AGM and she will be stepping down from her role as Chair. Skills C 130 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 Milena Mondini de Focatiis Chief Executive Oicer Current appointments • Mentor for A-Road, Growth Capital • Admial Insuance Company Limited member (an Admial Group subsidiay) Background and experience Milena joined Admial in 2007 and was appointed CEO in Januay 2021. She has been a member of the leadership team throughout her time at Admial, has extensive experience of the Group’s opeations and has attended and actively contributed at Board meetings as an obsever since 2011. Her previous roles included being Head of UK and European Insuance and CEO of ConTe.it, Admial’s Italian insuance business which she founded in 2008. Before joining Admial, Milena worked as a consultant for Bain & Co and Accenture. She holds an MBA from INSEAD and a degree in Telecommunication Engineering from Universitá degli Studi di Napoli Federico II. Appointed Appointed to the Board in August 2020 and became CEO on 1 Januay 2021. Contributions and reasons for appointment Milena leads a vey strong and experienced management team and is an effective CEO who continues to build an even stronger Admial for the future. Skills Geaint Jones Chief Financial Oicer Current appointments • Admial Financial Sevices Limited Board member (an Admial Group subsidiay) • Admial Insuance (Gibaltar) Limited Board member (an Admial Group subsidiay) • Admial Insuance Company Limited Board member (an Admial Group subsidiay) • Co-opted member of the Finance and Audit Committee of the Wales Millennium Centre Background and experience Geaint joined Admial in 2002 and held seveal senior finance positions including Head of Finance, before being promoted to Deputy CFO in Januay 2012 and CFO in August 2014. Geaint is responsible for finance, investments and investor relations. A Fellow of the Institute of Chatered Accountants in England and Wales, Geaint spent the early pat of his career as an external auditor at Ernst & Young and KPMG. Appointed Appointed in 2014. Contributions and reasons for appointment Geaint has worked for Admial for approaching 20 years and has been Group CFO for nearly 8 years. He has a deep understanding of the Group’s businesses and stategy, which, together with his significant financial and accounting experience and broad ange of skills and commercial expetise, makes him a valuable contributor both to the Board and the wider Group. Geaint is also able to use his financial and accounting experience to provide insight into the Group’s financial repoting and risk management repoting processes. Skills 131 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Board of Directors continued Mike Brierley Non-Executive Director Current appointments • Chair of Admial Financial Sevices Limited (Admial Money) (an Admial Group subsidiay) • Non-Executive Director of Alpha Bank London Limited • Director and Trustee of the Rose Theatre Trust Background and experience Mike was CFO of Metro Bank Plc between 2009 and 2018, helping lead the business from stat-up to listing on the FTSE. He spent seven years at Capital One Europe in various roles including CFO Europe, CFO UK and Chief Risk Officer Europe. He has also seved as CFO for Royal Trust Bank, Financial Controller at Industrial Bank of Japan (London Banch), Director Business Risk at Barclaycard and was co-founder and Deputy Managing Director and CFO of Genta Limited. Mike is a Fellow of the Institute of Chatered Accountants in England and Wales. Appointed Appointed in 2018. Contributions and reasons for appointment Mike brings a depth of knowledge from working at senior levels across multiple financial sevices sectors, jurisdictions and markets. As a result of his extensive financial and commercial experience, Mike is able to contribute effectively as a non-executive director, and in his role as a member of the Audit and Remuneation Committees. Through his recent and relevant financial experience, he is able to effectively challenge management on the financial repoting and internal control matters that come before the Audit Committee. Mike demonstates full commitment to the responsibilities that go with his Board and Committee roles and offers appropriate challenge and guidance in respect of the matters considered in these forums. Skills Karen Green Non-Executive Director Current appointments • Non-Executive Director, Senior Independent Director and Chair of the Sustainability Committee of Phoenix Group Holdings Plc • Non-Executive Director and Chair of the Risk Committee of Asta Managing Agency Ltd • Council Member and Chair of the Investment Committee Lloyd’s of London • Non-Executive Director and Interim Risk and Audit Committee Chair (efective 1 Januay 2023) of Miller Insuance Sevices LLP • Advisor role at Cytoa Limited Background and experience Karen Green is the former CEO of Aspen UK, comprising the principal UK insuance and reinsuance companies of Aspen Insuance Holdings (2010 to 2017). Other senior Aspen positions included Group Head of Stategy, Corpoate Development, Office of the Group CEO and she was a member of the Group Executive Committee for 12 years. Prior to that, she held various corpoate finance, M&A and private equity roles at GE Capital Europe and Stonepoint Capital having stated her career in investment banking at Baring Brothers and Schroders. Appointed Appointed in 2018. Contributions and reasons for appointment Karen has substantial financial sevices experience and has a deep understanding of insuance and reinsuance, having seved in senior executive roles in these sectors, including as CEO of an insuance business. Karen also has a strong background in stategic planning and corpoate development and the relevant financial and industy expetise to be Chair of the Audit Committee. She demonstates the commitment required to discharge effectively the responsibilities attached to this role and to challenge management on the Group’s financial repoting and risk management processes in paticular. Skills C 132 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 Justine Robets, CBE Non-Executive Director Interim Senior Independent Director Current appointments • CEO & Founder, Mumsnet.com & Gansnet.com • Non-Executive Director of The Open Data Institute • Non-Executive Director of Boring Money Background and experience Justine founded Mumsnet in 2000 and is responsible for creation, stategic direction and oveall leadership. In May 2011, Justine founded Gansnet, a sister site to Mumsnet, for the over-50s. Before that Justine was a freelance football and cricket journalist for the Times and Daily Telegaph, after working for Warbugs and Deutsche Bank as an economist, stategist and head of South African Equities in New York. Appointed Appointed in 2016. Contributions and reasons for appointment As CEO of the successful Mumsnet and Gansnet bands, Justine has strong digital and customer experience insights that she is able to bring to the Board decision making process. Justine also has a strong background in driving change through digital capabilities and brings a fresh and insightful perspective to the matters for consideation by the Board. Justine is also an effective member of the Nomination and Governance Committee and demonstates full commitment to the role as well as peforming the role of Interim Senior Independent Director. Skills Jean Park Non-Executive Director Senior Independent Director Current appointments • (The Company announced on 22 Februay 2022 that Jean Park, Non-Executive Director, took a tempoay medical leave of absence and returned to her role in the second half of 2022) Background and experience Jean was Group Chief Risk Officer at the Phoenix Group from 2009 until June 2013, during which time she held responsibility for the Group’s relationship with the regulator and founded the Board Risk Committee. Previously, she was Risk Management Director of the Insuance and Investments division of Lloyds TSB and, before that, Head of Compliance and Audit at Scottish Widows. Jean is a Member of the Institute of Chatered Accountants of Scotland. Appointed Appointed in 2014. Contributions and reasons for appointment Jean is an experienced non-executive board member with extensive understanding of risk management and corpoate governance. This knowledge and experience has been acquired through a variety of senior executive and subsequent NED roles with Admial and other financial sevices companies and qualifies her for Group Board membership and for her roles as Chair of the Group Risk Committee and Senior Independent Director. Jean continues to demonstate full commitment to both these roles and, in addition, her membership of the Group Remuneation Committee and Nomination and Governance Committee. Skills C 133 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Board of Directors continued Board of Directors Andy Crossley Non-Executive Director Current appointments • Chair of EUI Limited (an Admial Group subsidiay) • Non-Executive Director, member of Remuneation • Risk Committee and Chair of Audit Committee at Vitality Health Ltd and Senior Independent Director of Vitality Life Ltd • Director of Vitality Corpoate Sevices Ltd Background and experience Andy was CFO at Domestic & Geneal Group from 2014 to 2017. He spent 14 years at Prudential Plc from 2000 as Director, Group Finance; Group Chief Risk Officer; and CFO and Deputy Chief Executive of Prudential UK. He previously held senior manager roles at Legal & Geneal Group Plc, where he was Group Financial Controller, and Lloyds Bank Plc. Andy is a Fellow of the Institute of Chatered Accountants in England and Wales. Appointed Appointed in 2018. Contributions and reasons for appointment Andy has held a variety of senior roles relating to financial planning, stategy and risk across UK financial sevices. He has a wealth of accounting and financial experience and provides progressive insights to the matters that come before the Board. Andy is a valuable contributor to the Board and as a member of the Audit Committee and the Group Risk Committee (of which he is Interim Chair). Through his recent and relevant financial experience, he is able to effectively challenge management on the financial repoting matters that come before the Audit Committee. Skills Jayapakasa Rangaswami Non-Executive Director Current appointments • Non-Executive Director of Allfunds Bank SA • Non-Executive Director of Allfunds Group Plc • Non-Executive Director of Daily Mail and Geneal Trust Plc (DMGT) (now delisted) • Non-Executive Director of National Bank of Greece S.A. • Non-Executive Director of EMIS Group Plc • Member, Board of Trustees, Cumberland Lodge • Member, Board of Trustees, Web Science Trust Background and experience Jayapakasa Rangaswami (JP) has a wealth of large-scale IT opeational experience gained through his roles as Chief Information Officer (CIO) with Dresdner Kleinwot (2001 to 2006) and Managing Director/Chief Scientist at BT Group (2006 to 2010). JP has also been Chief Scientist with Salesforce (a US cloud-based software company) (2010 to 2014) and was Chief Data Officer (CDO) and Group Head of Innovation with Deutsche Bank (2015 to 2018). He has opeated in financial sevices for over 10 years and understands the challenges of working in a regulated environment. JP is also a former global CIO of the Year as well as European Innovator of the Year. Appointed Appointed 29 April 2020. Contributions and reasons for appointment JP brings a wide ange of IT skills and digital experience which helps to complement and enhance the existing skills around the Board table. He has opeated in financial sevices for over 10 years and understands the challenges of working in a regulated environment. He is also able to effectively contribute to the Board debate and demonstates full commitment to the role. JP is also a member of the Group Risk Committee, a role for which he has the relevant experience and capability. Skills C 134 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 Evelyn Bourke Non-Executive Director Current appointments • Non-Executive Director, Chair of the Audit Committee and member of the Nomination Committee at Marks and Spencer Group Plc • Non-Executive Director, Chair of the Audit Committee, member of the Risk Committee and Sustainability Committee Bank of Ireland Group Plc • Non-Executive Director, Senior Independent Director, member of Audit Committee and Risk and Compliance Committee at AJ Bell Plc • Charity Board Trustee of Ireland Fund for Great Britain Background and experience Evelyn was Bupa Group’s CFO between 2012 and 2016, before becoming Bupa’s Group Chief Executive Officer from 2016 to 2020. Evelyn has held seveal senior leadership roles during her career including Chief Commercial Officer at Friends Life UK (2011 – 2012), CFO at Friends Provident (2009 – 2010), CFO at Standard Life Assuance (2006 – 2008), and CEO at Chase de Vere (2004). Appointed Appointed on 30 April 2021. Contributions and reasons for appointment Evelyn brings valuable geneal management, finance and stategy experience from life and health insuance, internationally. She complements and enhances the ange of skills currently on the Board. Evelyn has held seveal leadership positions in financial sevices organisations and has the appropriate skills, knowledge and experience to peform her roles as Non-Executive Director and Chair of the Remuneation Committee. Skills Bill Robets Non-Executive Director Current appointments • Advisor at Hi Marley • Non-Executive Director Elephant Insuance Company, incorpoated in Virginia, USA Background and experience Bill Robets has a wealth of insuance, undewriting and marketing experience gained during his time at US insurer, GEICO, which he joined in 1984. Whilst at GEICO, Bill held seveal Executive appointments, including COO and President and CEO for all GEICO Insuance Companies, a position he held from 2018 until he was promoted to Vice Chair, GEICO Insuance Companies in 2020. Bill held this role until he retired from GEICO in December 2020. Appointed Appointed on 11 June 2021. Contributions and reasons for appointment Bill brings valuable insuance experience and insight on the US insuance market having held seveal senior Executive positions with US insurer, GEICO. Bill contributes and challenges effectively on the matters that come before the Board. His extensive US insuance experience and insight is of specific value to the Group’s US businesses as they seek to continue to develop and grow. Bill does not currently have any other Executive or Non-Executive Director commitments that would impact the time commitment requirements for his Admial Non-Executive Director role and member of the Nomination and Governance Committee and has capacity to fulfil the duties and responsibilities for these roles. Skills C 135 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Governance Repot Compliance with the UK Corpoate Governance Code Implementing best pactice corpoate governance contributes to the successful delivey of stategy and is, therefore, impotant to the Board. An efective corpoate governance famework helps the Board and management to deliver the stategy within the scope of the relevant legal and regulatoy landscapes. It ensures, amongst other things, that: • The Board is composed in an appropriately balanced way which promotes diversity and enables it to opeate efectively. Having appropriate divisions of responsibility between Executive and Non-Executive roles provides external challenge to the internal view. Similarly, diversity on the Board and at a senior management level avoids groupthink and ofers diferent perspectives • The Board and management maintain two-way relationships with the Group’s key stakeholders. The Board should act in a way which promotes the success of the Company for the beneit of its shareholders, but it should also have regard to its other key stakeholders when making decisions. It is impotant that two- way engagement is maintained to enable key stakeholders to provide input to the Group’s actions • The Group has a clear purpose and stategy, and that Admial’s culture aligns to it. Messaging and tone from the top are crucial and should be consistent so that eveyone is clear about the goal and, therefore, works towards the same thing • Remuneation is propotionate and suppots long-term success, therefore, geneating the right behaviours and outcomes This year, the Annual Repot has been structured to better help the reader cross-reference the following key sections of the UK Corpoate Governance Code 2018 (Code), with the explanations of the Company’s application of the Code principles and compliance with its provisions falling under the respective sections: • Board leadership and Company purpose (from page 137) • Division of responsibilities (from page 153) • Composition, succession and evaluation (from page 157) • Audit, risk and internal control (from page 171) The mechanisms described throughout the Governance Repot are intended to demonstate how the Group’s corpoate governance famework contributes to the delivey of the stategy. Provisions: Statement of Compliance The Group complied with the provisions of the Code except for provision 19, for which there are explanations below. Explanations: Provision 19 of the Code states that ‘The chair should not be in post beyond nine years from the date of their irst appointment to the board.’ Annette Cout was appointed as Board Chair in April 2017, having spent ive years as a Non-Executive Director of the Board. Annette reached her nine-year tenure as Non-Executive Director on the Board in March 2021. As repoted in the Annual Repots for the three prior periods, in 2019, the Board considered and agreed, having consulted shareholders, that she should remain in post as Board Chair for up to three years beyond March 2021, with the expectation that she would seve two years, subject to annual approval by the shareholders. This represents a depature from the Code for the 2022 inancial year. Provision 19 of the Code goes on to state that ‘To facilitate efective succession planning and the development of a diverse board, this period can be extended for a limited time, paticularly in those cases where the chair was an existing non-executive director on appointment.’ A Chair recruitment process began in May 2022 to ind a successor for Annette as she intends to step down as Chair of the Board at the AGM in April 2023 and therefore she will not be seeking re-election. Annette’s re-election was suppoted by shareholders at the previous AGM on 28 April 2022 (93.1% votes in favour) and that her 2022 peformance review, led by the SID, concluded that she continued to peform efectively as Board Chair, continued to exercise objective judgement and promoted constructive challenge amongst Board members. The 2022 Board evaluation also concluded that the Board continued to function well, under the leadership of Annette. In addition, the Board’s composition has continued to be refreshed during 2022 with the appointment of the new Chair. Jean Park assumed the role of SID on 1 Januay 2022, however due to a tempoay medical leave of absence, Justine Robet was appointed the interim SID and, together with the suppot of the Board commenced the search for a Board Chair successor during 2022. 136 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 Board leadership and Company purpose Compliance with the Code Principles UK Code Principle Description References Principle A A successful company is led by an efective and entrepreneurial Board, whose role is to promote the long-term sustainable success of the company, geneating value for shareholders and contributing to wider society. • Role of the Board on page 154. • Stakeholder sections in the Stategic Repot: – Customers on pages 74 to 76 – People on pages 77 to 81 – Patners and suppliers on pages 82 to 84 – Shareholders on pages 85 to 86 – Communities on pages 87 to 90 – Environment on pages 91 to 94 • Board evaluation on page 167 Principle B The Board should establish the company’s purpose, values and stategy, and satisfy itself that these and its culture are aligned. All directors must act with integrity, lead by example and promote the desired culture. • Purpose, values and stategy on pages 6 to 8 and 28 to 37 of the Stategic Repot • Monitoring and assessing culture on pages 141 – 142 • Role of the Board on page 154 Principle C The Board should ensure that the necessay resources are in place for the company to meet its objectives and measure peformance against them. The board should also establish a famework of prudent and efective controls, which enable risk to be assessed and managed. • Going concern in the Directors’ Repot on page 210 • Role of the Board on page 154 • Board evaluation on page 167 • Internal audit in the Audit Committee Repot on page 173 • Risk management and internal control systems in the Risk Committee Repot on page 174 Principle D In order for the company to meet its responsibilities to shareholders and stakeholders, the board should ensure efective engagement with, and encouage paticipation from, these paties. • Stakeholder engagement on pages 74 to 94 • Stakeholder sections in the Stategic Repot: – Customers on pages 74 to 76 – People on pages 77 to 81 – Patners and suppliers on pages 82 to 84 – Shareholders on pages 85 to 86 – Communities on pages 87 to 90 Principle E The Board should ensure that workforce policies and pactices are consistent with the company’s values and suppot its long-term sustainable success. The workforce should be able to aise any matters of concern. • Culture on page 140 • Whistleblowing on page 144 • Whistleblowing in the Audit Committee Repot on page 177 137 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Governance Repot continued Meetings and attendance Directors are expected to attend all meetings of the Board and the Committees on which they seve and to devote suicient time to the Group to peform their duties. Where Directors are unable to attend meetings, they receive papers for that meeting, giving them the oppotunity to aise any issues with the Chair in advance of the meeting. The number of scheduled Board meetings and Committee meetings, of which they are a member, attended by each Director during 2022 is provided in the table overleaf. In addition to the seven scheduled Board meetings held during the year, the following additional meetings were held: • In November 2022, one meeting was held to review the new Chair candidate position. Our current Chair, Annette was not involved in the new Chair process. The Board also delegated authority to a Board Sub-Committee on three occasions during the year to review and approve inal dafts of announcements and proposals, which had already been considered by the Board or its Committees, on behalf of the Board. The Board met in person for all seven of its meetings held during the year, including its stategy meeting (and October Board) which was held over three days in the UK. Board meetings Board Sub Committee Meetings Audit Committee Meetings Risk Committee meetings Nomination and Governance Committee meetings Remuneation Committee meetings Total Meetings Held 7 5 * 11 11 9 9 Annette Cout (Chair) 7/7 4/5 2 – – 9/9 – Milena Mondini de Focatiis (Chief Executive Oicer) 7/7 4/5 3 – – – – Geaint Jones (Chief Financial Oicer) 7/7 5/5 – – – – Karen Green 7/7 5/5 11/11 5/5 8 – – Jean Park 4/7 1 1/2 1 – 5/11 1 7/9 1 4/9 1 Justine Robets 7/7 1/2 4 – – 9/9 – Andy Crossley 7/7 1/2 5 11/11 11/11 – – Michael Brierley 7/7 2/2 * 11/11 – – 8/9 10 Jayapakasa (JP) Rangaswami 7/7 1/2 6 – 11/11 – – Evelyn Bourke 7/7 1/2 7 – – – 9/9 Bill Robets 7/7 2/2 * – – 9/9 9 – 1 Jean Park was unable to attend three Board meetings on 1/2 March 2022, 27/28 April 2022 and 15/16 June 2022; one ad-hoc Board meeting on 21 Februay 2022, two Risk Committee meetings on 7 April and 21 June 2022 and four ad hoc meetings on 16 Februay 2022, 4 May 2022, 17 May 2022 and 29 July 2022; two Nomination and Governance Committee meetings on 28 April 2022 and 16 June 2022 and one ad hoc meeting on 11 Februay 2022 and four Remuneation Committee meetings on 28 Februay 2022, 7 June 2022, 4 August 2022 and 12 September and one ad hoc meeting on 15 March 2022 due to a tempoay medical leave of absence 2 Annette Cout did not attend the ad-hoc Board meeting on 30 November 2022 as this meeting was pat of the new Chair recruitment process 3 Milena Mondini was unable to attend one ad hoc meeting of the Board called at shot notice on 21 Februay 2022 following a Nomination & Governance meeting which urgently had to make recommendations following news of Jean’s medical leave of absence 4 Justine Robets was unable to attend one ad hoc meeting of the Board called at shot notice on 21 Februay 2022 following a Nomination & Governance meeting who urgently had to make recommendations following news of Jean’s medical leave of absence 5 Andy Crossley was unable to attend one ad hoc meeting of the Board called at shot notice on 30 November 2022 6 JP Rangaswami was unable to attend one ad hoc meeting of the Board called at shot notice 21 Februay 2022 following a Nomination & Governance meeting who urgently had to make recommendations following news of Jean’s medical leave of absence 7 Evelyn Bourke was unable to attend one ad hoc meeting of the Board called at shot notice 21 Februay 2022 following a Nomination & Governance meeting who urgently had to make recommendations following news of Jean’s medical leave of absence 8 Karen Green was appointed as a member of the Risk Committee on 1 June 2022 9 Bill Robets was appointed as a member of Nomination and Governance Committee on 21 Januay 2022 10 Michael Brierley was unable to attend one ad hoc meeting of the Remuneation Committee called at shot notice on 27 October 2022 * The following ad-hoc Board meetings were delegated to the following members only: 2 March, 4 April & 9 August Annette Cout, Milena Mondini, Karen Green and Geaint Jones 138 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 Principal areas of focus for the Board in 2022 Governance • Progress made against the indings arising from the 2021 internal Board evaluation • Diversity and inclusion • Directors’ duties • Group succession planning and talent management • Matters reseved for the Board and the Committees’ respective terms of reference • BEIS audit and governance reform consultation • New Chair recruitment Stakeholders • Updates from the Chair of the UK Employee Consultation Group (ECG) • Updates from the Head of International Insuance on the overseas ECG • Update on culture and people, including Great Place to Work (GPTW) results • Updates on diversity and inclusion • Updates from Investor Relations • Sustainability approach and the delivey against key pledges • Stakeholder map and respective stakeholder updates throughout the year, including engagement mechanisms • Regulatoy relationships • Reinsuance arangements • Group health and safety, wellbeing and impact of remote-working • Suppliers and patners, including prompt payment pactices • Overseeing the review of the Group Reward Stategy Stategy • Review of Group purpose • Stategy deep dives throughout the year from each Group business • Financial Conduct Authority (FCA) pricing remedies for the UK geneal insuance market • Band, technology and digital progamme updates • Group Stategy Review at the stategy-focused meeting in October, which considered product diversiication, Admial 2.0 and motor evolution, as well as updates from each Group subsidiay business on their individual stategies Regulatoy/risk updates • Admial Internal Model Application Process (AIM) updates • Own Risk and Solvency Assessment Repot (ORSA) review • The Prudential Regulatoy Authority (PRA) attended the December 2022 Board meeting • Modern slavey risks in the supply chain • Assessment of key external risk factors and lessons learned from Covid • Cyber risk updates and crisis management education, including lessons learned Opeational peformance • Impact of the Covid pandemic • Hybrid working updates • IFRS 17 Insuance Contacts taining and inancial impact assessment • Regular tading updates from the Group’s subsidiay businesses • Group inancial peformance and position • The Group’s Five-Year Plan • Dividend consideations Principal areas of focus for the Board for 2023 • Ensure smooth tansition process and suppot to the new Chair • Ensure that there is a robust selection process for the new Group Risk Committee Chair and other NED roles identiied to be required • Continuing focus on executive team succession planning • Ensure diversity and inclusion objectives are embedded • Suppot the continuous development of Admial’s core competencies • Ensure customers continue to be at the front and centre of new and incremental changes to improve our sevice to customers • Oversee the Group’s diversiication stategy. • Oversee embedding of the Group’s agreed Sustainability stategy and ensure that it becomes integal to the Group’s stategy and culture • Monitor progress against key pledges for Climate Change and community, and key metrics. Submit Science Based Targets to SBTi for approval • Continue to deepen the Board’s understanding of external risk factors • Provide steering and oversight for capital management, reinsuance and clear action plan to achieve successful internal model application process • Oversee the roll-out and evolution of the Group reward stategy 139 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Governance Repot continued Culture • It remains impotant that Admial’s culture evolves and adapts as the business environment changes, but it is even more critical that those pats of our culture that have been our competitive advantage and a key driver of our success to date are iercely protected, especially in continuing periods of change Aligning our culture with our purpose, values, stategy, policies and pactices • Our culture is strongly aligned to our new Group purpose to ‘Help more people to look after their future. Always striving for better, together’. Providing customers with great products and sevices, whilst caring for our people and other impotant stakeholders is key to what we do • Although our Group purpose was renewed in Januay 2022, our unique workplace culture continues to be reinforced by our Four Pillars of Culture: The Four Pillars are built into the fabric of our taining, communication, policies and the way we do business. During the year, the Board received assuance from management that the Group purpose had been embedded within the opeational process and policies and that there continued to be alignment with its rewards and incentives. The Board recognised that there was evidence of the Group purpose and values having been embedded in the Group’s policies and pactices and requested that futher information on the oveall embedding of the Group’s purpose be provided in early 2023. Futher information on: • What makes Admial a fun place to work can be found in the Stategic Repot on page 10 • Communication with our people can be found in the Stategic Repot on page 81 • Our approach to diversity and inclusion can be found in the Stategic Repot on pages 78 to 80 and the Group Nomination and Governance Committee Repot on page 158 • The Group’s approach to investing in and rewarding its workforce can be found in the Annual Repot on Remuneation on page 196 Guiding and promoting culture (See more about hybrid/ remote/Smat Working on page 28) Our Directors have a responsibility to act with integrity, lead by example and promote the desired culture. They do so through their eveyday inteactions, and we also ensure that any policies which apply to the Non-Executive Directors are consistent with the equivalent policies for the workforce. There are many initiatives which promote Admial’s unique culture, some of which include: • A compensation and promotion structure based on meritocacy. • Star lunches where colleagues are recognised for their peformance and are invited to attend a lunch with a senior manager • Group Top 10 competition in which all depatments compete in a highly contested Group-wide competition to present to a panel of senior managers on a diferent subject each year in order to be awarded the best depatment • Cofee Morning Away Day (CMAD) an annual ofsite for senior management • Annual Manager Awards • Local reward and recognition progammes • High ive feedback progammes where colleagues can submit feedback on colleagues across depatments who have given great sevice • Ministy of Fun. Futher information can be found on page 10 of the Company Oveview Fun We want our people to look foward to coming to work, celebate who they are, and feel happy and suppoted enough to give that little bit exta. Communication We encouage efective and tansparent communication at all levels. This is aided by accessible management and oppotunities to encouage feedback across the Group. Equality We work hard to promote a sense of fairness and equality. Eveyone has the oppotunity to succeed, backed by groups suppoting diversity, inclusion and social mobility. Recognition and reward A job well done should be appropriately rewarded. At the heat of this pillar is our share ownership scheme, which rewards success with a stake in the Company. 140 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 • Health and wellbeing initiatives introduced during Covid to encouage employees to speak up if they needed suppot, a weekly health and wellbeing bulletin, yoga classes, webinars, at classes, amongst many other things • Taining/career development • Diversity and inclusion working groups and initiatives • Putting health and safety irst, paticularly in respect of the return to oice consideations • New employee induction workshops on Business and Culture at Admial see page 143 • Return to in-person team days Monitoring and assessing culture People and culture scorecard During 2022, work was progressed to update the culture scorecard. The scorecard continues to undergo a period of evolution but provides a good view of the key people and culture metrics in order to help management and the Board’s assessments of the oveall health of the Group’s culture. It also suppots the identiication of any trends in the evolution of the Group’s workforce and culture, including any associated risks which could impact the execution and suppot of the Group’s stategy. The Group continues to view the following people and culture metrics that are derived from the annual GPTW suvey and Admial’s regular internal pulse suveys as the lead indicators for people and culture at Admial. The GPTW suvey is an external suvey which collates anonymised question responses to provide an oveall result, as well as depatmental results. GPTW Trust Index: The Trust Index comprises 60 questions from the GPTW suvey, that are stable over time, benchmarked against the Best Companies in each market, and highly representative of the oveall people sentiment of a positive culture. 2022: 84% 2021: 86% GPTW Engagement Index: The Engagement Index is a speciic measure comprising nine questions from the GPTW suvey relating to willingness to go the exta mile, intention to stay with the business and likelihood of being an employer band promoter. It is also benchmarked and stable over time and has a proven correlation with business peformance. According to the GPTW institute research, the drivers that are most correlated to higher engagement scores are: (i) teamwork, (ii) career development, (iii) values and ethics, (iv) empowerment and accountability, and (v) innovation. 2022: 82% 2021: 84% GPTW Culture Index: The Culture Index is a speciic measure comprising of eight questions from the GPTW suvey relating to employee perception of the workplace as friendly, fun and welcoming. 2022: 89% 2021: 90% Pulse suveys Pulse suveys are undetaken four times a year and ask the same questions of our people to enable management to tack any trends. 86% of our people feel they are well suppoted by their manager 86% of our people think we are truly customer focused 88% of our people think that impotant knowledge and information is shared with them by their manager 92% of our people believe Admial Group is a diverse and inclusive employer * Q3 2022 pulse suvey results Other people metrics Headcount, gender balance, absence, attrition, recruitment. 141 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Governance Repot continued Scores continue to be vey high across the Group, resulting in each Group entity being anked among the Best Places to Work in their respective local markets. This demonstates the strength and impact of the Admial culture. Admial is anked as the 19th Best Workplace in Europe by Great Place to Work. Pulse suvey results in 2022 demonstated that people at Admial continued to feel well suppoted by their managers, the majority enjoyed working from home and communication was scored highly. Some examples of action taken following comments aised within the pulse suveys are outlined in the Our People section on pages 77 to 81 of the Stategic Repot. The Board received an update on the People and Culture Scorecard metrics during the year, including updates on the impact of remote working on Admial’s culture and how this risk would evolve as the Group moved to a hybrid working model. Management recognised at that time that there were seveal metrics which needed to be closely monitored as a result of the culture risks associated with a move to a more permanent model of hybrid working, including engagement, absence and attrition trends, paticularly as these metrics had increased back to pre- Covid levels in the UK, and recruitment, noting that improvements were needed to enhance the Group’s critical capabilities in areas such as technology and analytics. The Board also challenged how futher insights could be gained by tweaking some of the metrics and noted that the fun aspect of Admial’s culture was impotant to Admial people. Futher information on the Group’s tansition to hybrid working can be found in the Stategic Repot on page 28. Other tools In addition to employee paticipation in regular monthly suveys and the annual GPTW suvey, there are seveal other mechanisms used by the Group and the Board to monitor and assess culture. For example, culture audits conducted by the internal audit function; ‘Meet the Manager’ meetings; the ‘Ask Milena’ scheme; regular online manager chats; ECG meetings; mandatoy taining completion ates; health and safety data; whistleblowing and grievances; and customer net promoter score (NPS). All are felt to be valuable methods of capturing the mood of our people and to gauge the health of our culture. The Board Committees also help the Board monitor and assess culture through their respective responsibilities, some examples of which are highlighted below. Audit Committee – Whistleblowing, Internal Audit, Group Minimum Standards. Risk Committee – Risk events that would impact remuneation from a malus and clawback perspective, inancial crime and misconduct risks. Remuneation Committee – Workforce remuneation policies and assesses their alignment with culture and stategy, risk events repoted to it by the Risk Committee under the malus and clawback famework. Nomination & Governance Committee – Diversity and inclusion stategy and policies and progress against targets to ensure alignment with the Group’s stategy and values, and succession and talent management. As well as receiving updates on the Group’s culture at Board meetings, the Non-Executive Directors utilise other mechanisms to assess and monitor culture, such as attending meetings of the UK ECG and Subsidiay Boards and peforming site visits across the diferent entities within the Group, where possible, which enable the Non-Executive Directors to gauge the culture for themselves during their discussions with a cross-section of colleagues. In 2022, The Board Chair visited L’olivier oices in Paris and Lille, the Admial Seguros oice in Seville, the Admial Europe Compañía de Seguros S.A.U. (AECS) Board meeting in Rome with the ConTe management team and employees, Elephant oice in Richmond and was accompanied by some of the Non-Executive Directors on those visits. 142 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 Onboarding of new employees in a remote environment and protecting our culture Following the initial national Covid lockdowns, Admial introduced a new element to its induction for those joining remotely who had secured roles within the suppot functions of the business, who othewise would not have had the four-week induction that our customer-facing colleagues complete, in order to safeguard its unique culture. The business and culture induction is a six hour progamme covering the basics of our core values, culture and purpose and includes the following modules: Module 1 Welcome to Admial • How Admial built its business back in 1993 to become a FTSE 100 company • What bands we use to sell our product • Admial’s purpose statement Module 2 Building our Business • Admial Group’s business model • Admial’s goals for 2022 Module 3 Introduction to the Insuance Industy • The basics of the UK insuance market • Understanding the governing bodies within UK insuance • Principles of insuance Module 4 Learning about Admial’s Products & Sevices • Our products and sevices • Reviewing our online websites and conducting customer research Module 5 Upholding Our Culture at Admial • How evey employee can uphold Admial’s unique culture moving into the future • Admial’s four pillars of culture Module 6 Personal Development at Admial • How Admial can look after your future through taining and development • Registering for Admial’s internal talent bank Module 7 Award Winning Culture & Core Competencies • How to implement Admial’s core competencies into your role • Admial’s corpoate responsibility repot 143 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Whistleblowing The Board has in place arangements by which employees can aise concerns in conidence and, if necessay, anonymously. During the year, the Board received an update on the Group’s whistleblowing arangements from the management team. The Audit Committee, chaired by the Group’s Whistleblowing Champion, Karen Green, was satisied that the update was propotionate for independent investigation of the matters aised and suppoted an ethical business culture where colleagues felt safe aising concerns. In addition, and on an exceptions basis, the Board is updated in respect of repots arising from matters that have been aised by our people under the Whistleblowing Policy. The Audit Committee receives more regular updates in respect of whistleblowing matters. Please see page 177 for futher information. Stakeholder engagement During the year, the Board has continued to focus on ensuring efective engagement with its stakeholders and that their interests are taken into account in its decision-making. Detailed information is set out in the Stategic Repot on page 112 outlining how the Board has discharged its duties under s172(1) of the Companies Act, including futher information on the ECG, which constitutes a formal workforce advisoy panel under the Code. Communication and inteaction with shareholders remain vey impotant and engagement with them occurs on a regular basis. Open and frequent dialogue with investors enables them to fully understand the Group’s stategy, objectives and governance. The Investor Relations team has day-to-day primay responsibility for managing communications with institutional shareholders through a combination of brieings to analysts and institutional shareholders, both at the half-year and full-year results and on other occasions such as roadshows and conferences. Meetings, brieings and conferences with investors have taken place both in-person and vitually. The Capital Markets Day on IFRS 17 was held on 28 November 2022. In addition, the Chair, interim Senior Independent Director (SID) and Group CEO held meetings during the year with major shareholders to understand their views on governance and peformance against stategy and repoted to the Board on any signiicant issues aised with them. This is supplemented by feedback to the Board on meetings between management and investors. The Investor Relations team also regularly produces a repot on their activities in the previous quater which is circulated to the Board for their consideation. The Repot contains an analysis of share price peformance; a summay of analyst repots received during the month and of meetings that have been held with investors and analysts; together with details of any signiicant changes to the shareholders’ register. The SID has speciic responsibility to be available to investors who have any issues or concerns, and in cases where contact with the Chair, Chief Executive Oicer and Chief Financial Oicer has either failed to resolve their concerns, or where such contact is inappropriate. No such concerns have been aised in the year under review. All shareholders are invited to attend the Company’s Annual Geneal Meeting (AGM) in person. The 2022 AGM went ahead with the required quorum and the Board and Shareholders were invited to attend in person. Shareholders were able to vote on the impotant customay annual business and encouaged to submit questions to the Board in advance of the AGM. The Chairs of the Audit, Remuneation, Nomination and Governance, and Group Risk Committees usually attend the AGM along with the other Directors and are available to answer shareholders’ questions on the activities of the Committees they chair. Shareholders are also invited to ask questions during the meeting and have an oppotunity to meet with Directors after the formal business of the meeting has been concluded, or in advance, if there are restrictions in place on public gatherings. Details of proxy voting by shareholders, including votes withheld, are made available on request and are placed on the Company’s website following the meeting. The Group maintains a corpoate website (www.admialgroup.co.uk) containing a wide ange of information of interest to institutional and private investors. The major shareholders of the Company are listed in the Directors’ Repot on page 210. The regular channels of communication with both the FCA and PRA that existed throughout the year were supplemented by the regulators being invited to attend Board meetings in 2022. The PRA attended the Board remotely in December 2022, which gave the Board an oppotunity to hear directly their views. The Board is also kept up to date with the regular communications between the AIGL Board and the Gibaltar Financial Sevices Commission as well as contact between the Group’s other insuance subsidiaries and respective regulators. Governance Repot continued 144 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 Employee Consultation Group Purpose The Board recognises the impotance of engaging with its workforce and does so through a combination of informal and formal channels. To ensure a two-way communication platform and an efective means by which the views of the workforce can be heard, the Board established a UK Employee Consultation Group (ECG) in 2019 with the aim of enhancing and formalising its pre-existing employee engagement arangements. For the purposes of Provision 5 of the UK Corpoate Governance Code, the ECG is a formal workforce advisoy panel. Membership and attendance Membership of the UK ECG comprises elected colleague representatives and the remit of the ECG is to act as a forum for employee consultation, gathering colleague opinion and fostering a safe environment to aise matters of interest and geneate ideas. There is a democatic member election process and members are provided with an induction to ensure that there is clarity about the role and remit of the ECG, as well as their role as members. Non-Executive Directors are invited to attend ECG meetings on a rotational basis and repot back to the Board on matters discussed, as well as actions agreed at the ECG meeting. Taking this approach ensures that each of the Non-Executive Directors can engage with the workforce directly and hear irst-hand the issues and matters that are afecting the workforce. To ensure that the meetings remain a two-way mechanism, Non-Executive Directors are also asked to comment on any insights from the ECG meetings at the following Board meeting and the Chair of the UK ECG is regularly invited to attend Board meetings to repot on matters discussed by the ECG and any areas of concern. Minutes of the ECG meetings are also published on the intanet for all employees to view. Non-Executive Directors also provide an update at ECG meetings on recent matters discussed by the Board. Agenda topics inluenced by our people and upcoming Board agenda Meet and discuss views of our people on topics and rotating NED shares Board insights Feedback from the Board provided by the ECG Chair Summay of meeting provided to Board by ECG Chair 145 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Summay of meetings provided to Board by ECG Chair There were four ECG meetings during 2022 with a ange of topics discussed, including themes of pay and reward, the cost of living, and Smat Working. Presentations on the following topics were also given to the ECG before they were discussed by the Board: Meeting Presentations and topics discussed Outcome / impact April 2022 Customer Outcomes The ECG was updated on Admial’s approach to delivering excellent customer sevice and delivering fair outcomes. Community Stategy Focus was given to developing new initiatives such as the employability progam and adapting the existing approach to volunteering. Pay, beneits and cost of living suppot The ECG were updated on the remuneation package review and discussed how Admial could suppot its staf regarding the increase in energy costs. June 2022 Pet Insuance Colleagues were excited about the launch of Pet Insuance and Admial’s commitment to ofering a diverse ange of products. Staf were pleased to hear about the promotion of new roles across Pet and its positive impact on business growth. Climate Change The ECG debated how staf could make a positive contribution towards carbon footprint reduction projects and how to promote them to all employees across the business. Pay / Beneits and Return to Oice Staf discussed making job role advetisements more tansparent and the impotance on health and wellbeing for the return to the oice. Staf gave positive feedback on the announcement of a new reward package. October 2022 ECG Periodic Review The Board was presented with a periodic review of the eicacy and makeup of the ECG. A feedback session was also held with representatives across the business. The review set out seveal recommendations including more engaging methods of communication such as drop-in sessions and video updates to help promote awareness of the ECG. December 2022 UK Insuance Stategy The ECG discussed the impact of price increases and claims inlation. The ECG received an update on structual changes within the digital and opeations teams. The Board continues to believe that, whilst recognising that the mechanism will evolve over time, the opeation of the ECG has been and continues to be an efective means of engaging with the workforce, to help the Board understand the matters that concern the workforce and their speciic interests, whilst having regard to these in the decisions that are made at Board level. The Board will ensure that the ECG continues to develop as an efective, formal workforce advisoy panel and that regular inteaction between the Board and the ECG is maintained. During 2022, a new Chair of the ECG was appointed following the retirement of the inaugual Chair, Stuat Morgan who was also Group Head of Talent. Alan Pateield-Smith, the UK Chief Technology Oicer, was appointed in April 2022. Following Alan’s appointment, employees were invited to join the Group via a nomination and voting process, and applicants were decided upon by colleagues. The growing ECG forum remains focused on impotant issues such as remuneation, peformance management and appaisal processes, ideas to improve engagement, moale, attrition and absence, proposals to suppot mental health and wellbeing, staf suvey results, and improving diversity. Governance Repot continued 146 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 International Employee Consultation Group (IECG) During 2022, an International Employee Consultation Group was formalised, under the direction of Costantino Moretti, Head of International Insuance. This year, four IECG meetings took place in person across the international oices of ConTe, L’olivier, Admial Seguros and Elephant alongside the Admial Europe Compania de Seguros (AECS) Board meetings. The meetings were attended by candidates chosen on a voluntay basis, with an agenda created to incorpoate employee interests, questions and proposals. Entity/Meeting Topics discussed Outcome / impact ConTe/ June 2022 Communication relating to tansformation Employees provided positive feedback on the communication received regarding tansformation plans, paticularly relating to product and channel tansformation. What worked well in 2022 Attendees agreed that increased engagement via team meetings and updates helped employees feel better connected and aligned. What could be improved/ lessons learnt in 2022 New hires commented that remote onboarding was sometimes a diicult and slow process and suggested that onboarding was more eicient and personal when face- to-face. L’olivier/ November 2022 Staf engagement and sense of belonging Attendees discussed the impact of remote working on culture and recognised that it was sometimes more challenging to engage employees remotely. The meeting suggested new tools and pactices to get employees more involved. New trends Employees presented their thoughts on the 4-day workweek. Tansition to Agile Employees outlined the impacts of the tansition to Agile upon their teams. Progress in Diversity and Inclusion Employees celebated Admial’s commitment to D&I, and the success of female representation. Admial Seguros/ September 2022 Scaled Agile tansformation Employees discussed the success of the agile tansformation, and the enthusiasm for change. Inlation Members discussed worries about inlation and highlighted how salay adjustments could help employees. Admial Culture Employees shared thoughts on how they felt Admial culture was evolving. Test & Learn Culture Members discussed how teams are encouaged to follow a test and learn culture. Elephant/ August 2022 Diversity and Inclusion Employees highlighted that geneally, they feel actions on gender diversity are well addressed, and that improvements relating to ethnicity and acial diversity are improving and remain a focus area. 147 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Governance Repot continued s172 Principal Decisions Customer People Society Business Our distinctive culture and focus on ‘The Team, The Team, The Team’ has always been a poweful source of competitive advantage. Admial takes great pride in looking after colleagues and helping them to look after their future. We aim to suppot our employees with competitive reward structures, in addition to health and wellbeing pactices. Against the backdrop of a challenging macroeconomic environment in 2022, management recognised that employees were becoming increasingly impacted by an unprecedented cost of living crisis. As a result, our People Sevices depatment engaged in seveal feedback and engagement activities to discover how the business could understand and respond to growing pressures faced by employees. Activities undetaken included competitor benchmarking, collecting feedback from suveys 1 and noting recommendations from employee consultation groups in the UK and international oices. In July 2022, the management team presented seveal insights gained from internal data relating attrition ates and cost modelling to the EUI Board, along with a set of recommendations to revise the employee value proposition considering the cost-of- living crisis. In October 2022, the Group Board received feedback from the UK Employee Consultation Group (ECG) relating to how Admial could suppot employees with the rising cost of energy. The International Employee Consultation Group (IECG) also shared how employees at Admial Seguros were concerned about the impact of inlation on salaries. The Group Board discussed additional compensation measures that would futher align the employee value proposition with Group purpose: ‘Help more people to look after their future. Always striving for better together.’ 1 Great Place to Work Suvey, and Pulse Suveys Principal Decision #1 Cost of Living Response 148 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 Diversiication by being less dependent on a paticular business sector or geogaphy is one of the key pillars that underpins the Group’s stategy. The stategy is reviewed and refreshed by the Board annually to ensure the Group acceleates on priority areas and, if necessay, launches new products that are aligned to the diversiication objectives, and which are designed to ensure sustainable future growth for the Group. As a customer centric organisation, we also seek to create products that provide more people with good inancial sevices products. At the Group Board Stategy sessions in October 2022, the Group Board considered and approved the Group’s refreshed diversiication stategy and its alignment with the Group purpose: ‘Help more people to look after their future. Always striving for better together.’ As pat of the stategy session, the Group Board considered the Group’s long-term stategy of continuing to focus on customer needs and fully understanding what customers wanted so that products could be built to meet their needs and to enable the Group to maintain competitive advantage in the long term. The Board focused not only on the market share of existing products, but also on expanding across diferent markets, diferent jurisdictions, diversifying distribution channels and launching diferent products to achieve ‘true diversiication’ outside of insuance. Throughout the year, the management team considered how additional payments would afect Admial’s stakeholders, including the inancial impact on group proit and possible challenges from shareholders. Ultimately the business considered threats of attrition and recruitment challenges and concluded that an adequate response to the cost-of-living crisis was consistent with and suppotive of the Group’s long-term success. July • A series of measures to respond to the cost-of-living crisis were presented to the EUI Board September • Admial increased stating salaries for all UK based employees, whilst increasing the minimum annual salay for full time employees. Holiday allocations and entitlements were also increased • Plans for salay adjustments in the international oices were also dafted following an AECS Board meeting and feedback from employees October, November, December • Cost of living payments were implemented in the UK • Standard working hours were revised and shotened without reducing salaries, with a package of changes equating to a 10% salay increase for many in the UK • Similar salay adjustments and bonuses were implemented for colleagues working in Italy, Fance and Spain October • Admial Group Board discussed inancial measures to futher suppot employees and heard from the Employee Consultation Groups Timeline Principal Decision #2 Group Diversification Stategy 149 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Governance Repot continued In 2022, our Corpoate Social Responsibility (CSR) team undetook seveal feedback and engagement activities with key stakeholders to better understand the scope and impacts of our charitable and volunteering propositions. The indings recognised many strengths of the approach, but also noted that an ovearching objective was hard to identify and communicate, and that the ability to measure impacts was relatively weak. To represent the perspectives of all stakeholders potentially impacted by changes to our long-standing community approach, indings and recommendations were circulated with the following groups for consideation and comments: • Employee Consultation Group – Colleagues representing UK business areas • Social Mobility Forum – Colleagues covering all UK entities • People Sevices International – Human resources colleagues from across the Group’s international businesses • Admial Leaders Ofsite (ALO) – A group of our most senior leaders including our International CEOs • Admial Business Club – Senior managers from across UK entities • International Insuance Group – Senior international leaders across the Group Consequently, a proposal for the revised Community Outreach progam evolved, with an ovearching purpose of ‘helping as many people into jobs as possible’ and was presented to the Group Board in October 2022. The proposal included volunteering targets presented as ‘impact hours’, that would not only suppot communities, but also contribute to teambuilding and colleagues building networks in and outside of the business. The proposal also outlined plans to help suppot thousands of people into employment each year. In November 2022, the EUI Board considered the proposal in the context of it being of beneit to the communities in which we opeate. Management agreed that the approach would allow Admial to demonstate a clearer set of community objectives, with metrics to repot against. The Community stategy was considered aligned with the Group Purpose of ‘Helping more people look after their future. Always striving for better, together.’ For 2023, Admial has a robust long term community plan, with peformance metrics that can be shared both internally, and externally. As the stategy is embedded across the Group, the CSR team will closely monitor patnerships and investments, the volume of people we can impact and suppot into employment, colleague engagement, and the number of hours spent volunteering in our communities. The Group Board will continue to monitor the targets set as pat of the new community stategy to ensure that the stategy continues to provide measuable value and suppot to the communities in which we opeate. In suppot of the Group’s diversiication stategy, the Board considered the launch of an enhanced Pet insuance product in the UK which was intended to capitalise on the materiality of the oveall Pet insuance market, and which was to be ofered to customers at a competitive price with a simpliied, digitised claims process for both customers and vets alike. The Board has been updated in paallel on the progress of the launch of Pet insuance in Italy which was launched in 2021 with continued progress during 2022. The Board also reviewed the launch of loan products in Italy during 2022 in the context of whether they were aligned with the diversiication goals that had been set by the Board. In December 2022, the Group Board had a deep dive on the progress of the Group’s Diversiication stategy and outline of the ambition for 2023. The Board challenged management on the progress of the stategy and the progress of the diversiication products that had been launched and were satisied that they were aligned with the Group’s stategy to capitalise on the Admial band, the existing motor book and core competencies to acceleate diversiication and increase customer lifetime value. The deep dive assured the Board that the Group diversiication stategy remains focused on the core elements of sevice and value, to suppot better customer experiences. Principal Decision #3 Changes to our Community Outreach Progamme Giving back to our communities is an integal pat of our company culture. Our people play a key role in how we engage with our communities, and we work collectively to drive long-term change in the various communities in which the Group opeates. Admial is known for being a generous patner of community charity initiatives and has historically suppoted many causes, both inancially and in terms of people resource. Our people have a voice in decisions made, and the freedom to volunteer two days of their time a year, fully paid, at any community initiative or charity impotant to them. We believe that doing good helps colleagues to feel good and aligns with our purpose ‘always striving for better, together.’ 150 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 FCA remedies The FCA published a Policy Statement on 28 May 2021 which implemented a package of remedies to address the issues identiied in its geneal insuance pricing pactices market study inal repot. The FCA introduced a ‘pricing remedy’, which means irms must now ofer a renewal price to a consumer that is no greater than the equivalent new business price ofered to a new customer; enhancements to product governance; rules to ofer a ange of accessible and easy options for consumers who want to cancel auto renewal contacts and repoting requirements for home and motor insuance markets. The pricing remedy applies to irms opeating in the home and motor insuance markets, with an implementation date of 1st Januay 2022. From 1 Januay 2022, if the pricing remedy is not implemented, irms will be expected to remediate and redress any customers afected. The Group Board received an update in Januay 2022 conirming that the business had met the regulatoy deadlines, and the new auto-renewal options were introduced successfully in late December 2021. Signiicant work has been undetaken to optimise the auto-renewal process across the customer journey to mitigate any impact on retention and improve the customer experience. The business provides customers with the ability to opt out during the quote journey and prior to the conclusion of a sale. Principal Decision #4 Regulatoy Decisions IFRS 17/FCA Remedies IFRS 17 In May 2017, the International Accounting Standards Board issued a new standard for insuance contacts, IFRS 17, efective from 1 Januay 2023. IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insuance contacts and requires companies to measure insuance contacts using updated estimates and assumptions that relect the timing of cash lows and any uncetainty relating to insuance contacts. The requirements will provide tansparent repoting about a company’s inancial position and risk. The new standards apply to the Group and its insuance subsidiaries in the UK and Gibaltar. During 2022, the Group Board and all impacted subsidiaries approved the business tansition plans for the new standard and progress on its implementation has been monitored closely by the Group and subsidiay Audit Committees throughout 2022. The Board welcomes the new repoting standard and the oppotunity to provide enhanced disclosures in respect of claims reseves. The Group Board will repot under IFRS 17 for the irst time at Admial’s 2023 interim results, in August 2023. In November 2022, a presentation was delivered to analysts and investors to outline repoting changes. The presentation was delivered by the Director of Group Finance & Chief Actuay and IFRS 17 Accounting Lead and attended by over 20 market paticipants, who had the oppotunity to ask about the impact on Group stategy, solvency, dividend policy and cash geneation. A successful implementation is anticipated in Q1 2023. Futher details can be found in Audit Committee Repot on page 171 151 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Principal Decision #5 New Chair Appointment As a result of Annette stepping down as Chair of the Board following the AGM in April 2023, the Board needed to identify, select and appoint a new Chair. Justine Robets, as interim Senior Interim Director (SID) following Jean Park’s medical leave of absence, led the Chair succession process on behalf of the Nomination and Governance Committee (“Committee”). The Committee was responsible for nominating and recommending a candidate for consideation and approval in principle by the Board, subject to regulatoy approval, and to contactual terms being agreed between the candidate and Admial. Heidrick & Struggles (H&S), an external search irm, was retained to suppot the search and Chair selection process. In May and June 2022, H&S engaged with the Board, the senior management team and the co-founders of Admial to seek input on the role requirement and proile. These meetings were conducted in person and vitually and, on the basis of the conversations that took place, a role speciication was approved. H&S conducted a comprehensive market wide search and identiied 40 potential candidates who were felt to have a potential good it with the role speciication and with Admial in geneal. Six candidates met with members of the Committee and other senior management including in-person meetings with the CEO. Following meetings with the full Board and a series of presentations from the inal shot listed candidates, Mike Rogers was identiied as the preferred candiate. The recommendation of Mike to be appointed as Chair of the Board was based on Mike’s wide business, insuance and inancial sevices knowledge and experience and someone who would make a strong stategic impact on the future of Admial. The Board’s preliminay decision on 8 December 2022 was to accept the Committee’s recommendation to appoint Mike as Chair of the Board subject to regulatoy approval and to agreement of contactual terms between Mike and Admial. The Board inally approved and announced Mike’s appointment on 31 Januay 2023 and Mike will join the Board as a non-executive Director and Chair with efect from the conclusion of this year’s AGM on 27 April subject to regulatoy and shareholder approval. Read more in our Nomination and Governance Committee Repot on page 158 for detailed explanation of the process Governance Repot continued 152 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 Division of responsibilities Compliance with the Code Principles UK Code Principle Description References Principle F The Chair leads the Board and is responsible for its oveall efectiveness in directing the company. They should demonstate objective judgement throughout their tenure and promote a culture of openness and debate. In addition, the Chair facilitates constructive Board relations and the efective contribution of all non-executive directors, and ensures that directors receive accuate, timely and clear information. • Role of the Chair on page 159 • Code explanation for Provision 19 on page 136 • Individual Director evaluation on page 169 • Board evaluation on pages 167 to 169 • Information lows to and from the Board on page 155 Principle G The Board should include an appropriate combination of executive and non-executive (and in paticular, independent non-executive) directors, such that no one individual or small group of individuals dominates the Board’s decision-making. There should be a clear division of responsibilities between the leadership of the Board and the executive leadership of the company’s business. • Board composition and succession planning on page 167 • Code explanation for Provision 19 on page 136 • Board evaluation on pages 167 to 169 • Board roles and responsibilities on page 154 Principle H Non-executive directors should have suicient time to meet their responsibilities. They should provide constructive challenge, stategic guidance, ofer specialist advice and hold management to account • Time commitment and external appointments on page 163 • Board biogaphies (for external commitments) on pages 130 to 135 • Board evaluation on pages 167 to 169 Principle I The Board, suppoted by the company secretay, should ensure that it has the policies, processes, information, time and resources it needs in order to function efectively and eiciently. • Information lows to and from the Board on page 155 • Board evaluation on pages 167 to 169 Group Board Executive Management Audit Committee Nomination & Governance Risk Committee Remuneation committee 153 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Board roles and responsibilities The Chair is primarily responsible for leading the Board, setting its agenda, promoting a culture of openness and debate and monitoring its efectiveness. The Chair is suppoted by the SID, who acts as a sounding board and seves as an intermediay for the other Directors if required. Neither are involved in the day-to-day management of the Group. Save for the matters reseved for the Board, the Chief Executive Oicer (with the suppot of the Executive Directors and the senior executives) is responsible for proposing the stategy to be adopted by the Group, running the business in accordance with the stategy agreed by the Board and implementing Board decisions. It is the Non-Executive Directors’ role to provide constructive challenge, stategic guidance, ofer their respective specialist advice and hold management to account. The Board has approved a statement that sets out the clear division of responsibilities between the Chair, Chief Executive Oicer and SID. This and matters reseved for decision by the Board are reviewed annually. Role of the Board The Board is responsible for promoting the long-term, sustainable success of the Group, geneating value for shareholders and contributing to the wider society and its shareholders. The Board is the principal decision-making forum for the Group, providing entrepreneurial leadership, both directly and through its Committees, and delegating authority to the Executive team. The Board has determined the Group’s purpose which represents its values and stategy and is satisied that it is aligned with the culture of the Group. Pat of the Board’s role is to promote the Group’s culture and, in paticular, ensure that its uniqueness is safeguarded in such times of change. The Board is responsible for organising and directing the afairs of the Group in a manner that geneates and preseves value over the long term. Through the strong governance famework that it has in place, the Board is able to deliver on its stategy of providing strong sustainable inancial and opeational peformance. The Board is also accountable for ensuring that in carying out its duties, the Group’s legal and regulatoy obligations are being met; and for ensuring that it opeates within appropriate risk paameters. The Group’s UK-regulated entities are accountable to the Financial Conduct Authority (FCA) and the Prudential Regulatoy Authority (PRA) for ensuring compliance with the Group’s UK regulatoy obligations and that dealings with the FCA and PRA are handled in a constructive, co-opeative and tansparent manner. Similar provisions apply in respect of the Group’s international businesses with regard to the relevant regulatoy authorities, such as the Gibaltar Financial Sevices Commission and Dirección Geneal de Seguros y Fondos de Pensiones in Spain. Chair Senior Independent Director Chief Executive Oicer • Runs the Board and sets its agenda, with an emphasis on stategic issues • Ensures the Board has efective decision-making processes, demonstating objective judgement and applying suicient challenge to proposals • Facilitates constructive Board relations, including efective contribution from Non-Executive Directors • Ensures the Board has an appropriate balance of skills, knowledge, experience and diversity • Leads the induction and development plans for new and existing Board members • Communicates with major shareholders and ensures the Board understands their views • Ensures the Board receives accuate, timely and clear information • Leads the annual Board evaluation • Suppots the Chair in the delivey of their objectives • Acts as a sounding board for the Chair and seves as an intermediay for the other Directors • Available to shareholders if they have concerns that cannot be resolved through the normal channels • Works with the Chair and other Directors/ shareholders to resolve signiicant issues where necessay • Leads the annual peformance evaluation of the Chair • Leads the Chair appointment process • Runs the Group’s business and delivers its commercial objectives • Proposes and develops the Group’s stategy, in close consultation with the Group’s senior management, the Chair and the Board • Implements the decisions of the Board and its Committees • Ensures opeational policies and pactices drive appropriate behaviour, in line with the Group’s culture • Leads the communication progamme with key stakeholders, including employees • Ensures management provides the Board with appropriate information and necessay resources Governance Repot continued 154 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 Matters reseved to the Board The Board has adopted a formal schedule of matters reseved for the Board’s consideation. This is monitored by the Company Secretay and reviewed by the Board on an annual basis. Speciic matters reseved to the Board include the approval of: • The Group’s long-term objectives and corpoate stategy. • Opeating and capital budgets, inancial results, and any signiicant changes to accounting pactices or policies • The Group’s capital structure • Results and inancial repoting • The system of internal control and risk management. • The Group’s oveall risk appetite • Changes to the structure, size and composition of the Board, including new appointments • Succession plans for the Board and senior management. • Dividend policy and proposals for dividend payments • Major acquisitions, disposals, and other tansactions outside delegated limits • The annual review of its own peformance and that of its Board Committees • Annual review of selected Group policies • The review of the Group’s oveall corpoate governance arangements Board Committees The Board has delegated authority to seveal permanent Committees to deal with matters in accordance with written Terms of Reference. The principal Committees of the Board – Audit, Remuneation, Risk, and Nomination and Governance all comply with the requirements of the Code, except where non- compliance has been explained on page 136 of this repot. All Committees are chaired by an independent Non-Executive Director, except the Nomination and Governance Committee, which is chaired by the Chair of the Board, and comprise a majority of independent Non-Executive Directors. In accordance with the UK Code, all members of the Audit Committee are independent Non-Executive Directors. Appointments to the Committees are made on the recommendation of the Nomination and Governance Committee and are for a period of up to three years, which may be extended for two futher three-year periods, provided the Director remains independent. The Committees are constituted with written Terms of Reference that are reviewed annually to ensure that they remain appropriate and relect any changes in good pactice and governance. These Terms of Reference are available on request from the Company Secretay and can also be found on the Company’s website: www.admialgroup.co.uk. Directors are fully informed of all Committee matters by the Committee Chairs repoting on the proceedings of their Committee at the subsequent Board meeting. Copies of Committee minutes are also distributed to the Board. Committees are authorised to obtain outside legal or other independent professional advice if they consider it necessay. The Chair of each Committee attends the Annual Geneal Meeting to respond to any shareholder questions that might be aised on the Committee’s activities. An evaluation of the peformance of each Committee against the duties set out in each Terms of Reference is carried out annually. Group conlicts of interest In compliance with the requirements of the Companies Act 2006 regarding Directors’ duties in relation to conlicts of interest, the Group’s Aticles of Association allow the Board to authorise potential conlicts of interest that may arise and to impose such limits as it thinks it. The Group has a Conlicts of Interest Policy which deals with conlicts of interest, and this was reviewed and approved by the Board in October 2022. The Policy sets out the process and procedure by which the Board manages potential conlicts of interest that may arise at Board level, within Board Committees, and within the Group’s Subsidiay Boards. Following this review, the Board concluded that the process continued to opeate efectively. In addition, each Board member is asked to complete, annually, a conlicts of interest questionnaire that sets out any situation in which they, or their connected persons, have, or could have, a direct or indirect interest that could conlict with the interests of the Company. Any current directorships that they, or their connected persons hold, any advisoy roles or trusteeships held, together with any companies in which they hold more than 1% of the issued share capital are also disclosed. Information lows to and from the Board Agendas and papers Agendas and papers are circulated to the Board electronically in a secure manner in prepaation for Board and Committee meetings. The Board agenda is structured by the Chair in consultation with the Company Secretay and Chief Executive Oicer. An annual schedule of agenda items is reviewed and updated at each meeting to ensure that items are considered at the appropriate point in the inancial and regulatoy cycle. Meetings are structured so as to allow for consideation and debate of all matters. Routine Board papers are supplemented by information speciically requested by the Directors from time to time. At each scheduled meeting, the Board receives updates from the Chief Executive Oicer and Chief Financial Oicer as to the inancial and opeational peformance of the Group and any speciic developments of which the Board should be aware. In addition, there is an update provided at each Board on the matters discussed and considered at each of the Group’s principal subsidiay Board meetings. Additional meetings are called when required and there is contact between meetings, where necessay, to progress the Group’s business. 155 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Attendees The CEO of UK Insuance (Cristina Nestares) together with the Chief Risk Oicer (James Armstrong until Februay 2022, Sue Gilbet Interim Chief Risk Oicer from Februay 2022 until October 2022 and Keith Davies Chief Risk Oicer from October 2022) are invited to attend evey Board meeting and regular Board dinners, when these can take place. During 2022, the Head of International Insuance (Costantino Moretti) and the CEO of Admial Money (Scott Cargill) have been invited to attend material topics of debate at the Board meetings. This has proved an efective means of ensuring that senior managers below Board level have exposure to and gain experience of the opeation of the Board. Dynamics All Board and Committee meetings during the year were held in an open atmosphere conducive to robust and constructive challenge and debate. All Directors have, therefore, been able to bring independent judgement to bear on issues such as stategy, risk management, peformance, and resources. Cross-Committee membership As shown on pages 130 to 135, Committee membership is composed in a way that ensures that there is cross-committee membership, which allows items of impotance to be lagged from Committee to Committee in a timely manner. This complements the Committee brieings that the Board receives on the key points of discussion following each Committee. Advice All the Directors have access to the advice and sevices of the Company Secretay. He has responsibility for ensuring that Board procedures are followed and for advising the Board, through the Chair, on governance matters. The Company Secretay provides updates to the Board on regulatoy and corpoate governance issues, new legislation, and Directors’ duties and obligations. The appointment and removal of the Company Secretay is one of the matters reseved for the Board. Dan Caunt replaced Mark Waters as Group Company Secretay on 1 May 2022. The Directors are also given access to independent professional advice at the Group’s expense, should they deem it necessay to cary out their responsibilities. Other information lows The Board Chair made in-person visits to various pats of the business during 2022. The Non-Executive Directors were invited to join her on the in-person visits. Futher information on those visits is included on page 142. As referenced within the commentay on culture on page 140, the Non-Executive Directors are invited to attend ECG meetings and paticipate in the two-way engagement with our colleagues. Futher information about this engagement mechanism is outlined on page 145 of the Stategic Repot. The Non-Executive Directors and the Chair met in-person during the year without the Executive Directors being present, including before each Board meeting. Management teams were invited to join the Board for dinner on six occasions which gives the oppotunity for informal inteaction between Directors and management. The Chair has continued to hold one-to-one meetings with members of the Group’s senior management team either on a vitual basis or in-person. Taining and professional development On appointment, Directors take pat in a comprehensive induction progamme whereby they receive inancial and opeational information about the Group; details concerning their responsibilities and duties; as well as an introduction to the Group’s governance, regulatoy and control environment. This induction is usually supplemented by visits to the Group’s head oice in Cardif and cetain overseas oices, and meetings with members of the senior management team and their depatments either on a vitual basis or in-person. The Non-Executive Director induction progamme has continued to be adapted in 2022. Development and taining of Directors is an ongoing process and is considered through the year. The Directors are regularly updated on the Group’s business; legal matters concerning their role and duties; the competitive environments in which the Group opeates; and any other signiicant changes afecting the Group and the industy of which it is a pat. During the year, the Board received deep dive updates, brieings and taining on the following topics: Admial Internal model (AIM), introductoy Board Taining on Key Capital Modelling Principles, summay on Market Abuse Regulations, IFRS 17, Group cyber risk education sessions (including a Cyber Simulation exercise), Group cyber risk crisis management, amongst seveal business deep dives. Governance Repot continued 156 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 Composition, succession and evaluation Compliance with the Code Principles UK Code Principle Description References Principle J Appointments to the Board should be subject to formal, rigorous and tansparent procedure, and an efective succession plan should be maintained for Board and senior management. Both appointments and succession plans should be based on merit and objective criteria and, within this context, should promote diversity of gender, social and ethnic backgrounds, cognitive and personal strengths. • Succession planning on page 128 Principle K The Board and its committees should have a combination of skills, experience and knowledge. Consideation should be given to the length of sevice of the Board as a whole and membership regularly refreshed. • Board composition and succession planning: – Balance of skills, knowledge and experience on page 163 – Non-Executive Director tenure and independence on page 162 • Annual re-election on page 161 • Taining and professional development on page 156 • Induction on page 160 Principle L Annual evaluation of the Board should consider its composition, diversity and how efectively members work together to achieve objectives. Individual evaluation should demonstate whether each Director continues to contribute efectively. • Board evaluation on pages 167 to 169 • Individual Director evaluation on page 169 • Board Committee evaluations: – Nomination & Governance Committee on page 158 – Audit Committee on page 171 – Risk Committee on page 178 – Remuneation Committee on page 183 157 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Nomination and Governance Committee “ We also continue to take what we do well and what we learn to new markets and new products, both in the UK and abroad.” Annette Cout Chair of the Nomination and Governance Committee Committee members Focus area Attendance Annette Cout (Chair) 9/9 Jean Park 7/9 Justine Robets 9/9 William (Bill) Robets 9/9 (Jean retired from the Board and all of her committee memberships on 20 Januay 2023) Dear Shareholder, This pat of the repot highlights the role that the Nomination and Governance Committee plays in monitoring the current and evolving Board’s composition, ensuring that there is a balance of skill, experience and knowledge, as well as diversity in the broadest sense, and oversight of the Group’s governance arangements. The Committee also looked at ensuring that the Group’s policy on diversity and inclusion, was being applied to the gender and ethnicity balance of the Group’s senior management and their direct repots and that this was being taken into account for succession planning. The annual review of the Committee’s own efectiveness took place towards the end of 2022 by an external company Bvalco Ltd, and the Committee concluded, oveall, that it remained efective but noted some areas for improvement in 2023. These are outlined later within this repot. In line with the requirements of Solvency II, the Senior Insuance Manager Regime, and in accordance with the Group’s Senior Managers & Cetiication Regime Policy, I have also carried out the process of assessment for the Group CEO, Group Non- Executive Directors, and the Chairs of the Group’s material, regulated subsidiaries (EUI Limited, Admial Insuance Company Limited and Admial Insuance (Gibaltar) Limited, Able Insuance Sevices Limited, Elephant Insuance Company and AECS) to ensure they meet the requirements in terms of qualiications, capability, honesty and integrity for 2022. Annette Cout Chair of the Nomination and Governance Committee 7 March 2023 9 meetings in 2022 158 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 How the Committee opeates Membership Membership of the Committee at the year-end was Annette Cout (Chair), Jean Park and Justine Robets and Bill Robets. Bill Robets was appointed a member of the Committee from 1 Januay 2022. Justine Robets, Jean Park and Bill Robets are independent Non-Executive members of the Committee, in accordance with the Code which requires that the majority of members should be independent Non-Executive Directors. Jean Park took a tempoay medical leave of absence which was efective from Februay 2022. Jean returned to Board duties in early August 2022 including as a member of the Committee. Attendance at meetings The Company Secretay acts as Secretay to the Committee. Other individuals, such as the Chief Executive Oicer, the Group Head of People Experience and representatives of diferent pats of the Group, may be invited to attend all or pat of any meeting, as and when appropriate. Meetings held The Committee meets at least twice per year and at such other times as the Chair may require. In 2022, there were six scheduled meetings, but the Committee met formally on nine occasions, as well as informally on seveal other occasions to meet with individuals identiied as possible Chair and other candidates to join the Board. The Committee Chair played no pat in the Chair recruitment or inteview process, this was led by the interim Senior Independent Director. The Committee Chair agrees the meetings and agendas for each meeting, which are linked to an agenda planner covering the responsibilities of the Committee. Four Committee meetings in 2022 were held in-person and ive were held remotely. Details of member attendance at the Committee meetings held during the year are outlined on page 138. How the Committee keeps up to date The Committee is kept up to date regularly on proposed appointments and governance changes across the Group, as well as key developments in the corpoate governance landscape. The Terms of Reference of the Committee include all the relevant matters under the Code and are reviewed annually by the Committee. Role and responsibilities of the Committee and key activities in 2022 The Committee reviews the leadership and succession needs of the Board and ensures appropriate procedures are in place for nominating, taining and evaluating Directors. A description of its responsibilities and the activity it has focused on during the year is outlined under the following headings. Appointments during 2022 Appointments to the Board are the responsibility of the Board as a whole, acting on the advice and recommendations of the Nomination and Governance Committee. The Nomination and Governance Committee seeks to balance the retirement and recruitment of Non-Executive Directors ahead of their replacement so as to avoid a dislocation of Board process by losing experience and skills. The Board is mindful of the need to promote diversity in appointments to the Group Board and across the rest of the Group. Appointments are made on merit and against objective criteria, having due regard to the beneits of diversity, with a view to ensuring the Board has the appropriate mix of personality, skills, and experience. The policy on Board appointments involves the Committee developing an appropriate speciication that identiies the required skills and experience for the role and, in most instances, engaging external recruitment consultants, to lead the recruitment process and identify suitable candidates. Inteviews of the shotlisted candidates are held with the Chair and members of the Committee. After consideation by the Committee, a recommendation is made to the Board to appoint the preferred candidate. The Committee is satisied that this constitutes a formal, rigorous and tansparent process for the appointment of new Directors to the Group Board and its subsidiaries, embacing a full evaluation of the skills, knowledge and experience required of Directors. As a result of Annette stepping down as Chair at the AGM in April 2023, the Board needed to identify, select and appoint a new Chair. Justine Robets, as interim Senior Interim Director (“SID”) following Jean Park’s medical leave of absence, led the Chair succession process on behalf of the Committee. The Committee was responsible for nominating and recommending a candidate for consideation and approval in principle by the Board, subject to regulatoy approval, and to contactual terms being agreed between the candidate and Admial. Heidrick & Struggles (H&S), an external search irm, was retained to suppot the search and Chair selection process. In May and June 2022, H&S engaged with the Chair, the Board, the senior management team and the co-founders of Admial to seek input on the role requirement and proile. These meetings were conducted in person and vitually and, on the basis of the conversations that took place, a role speciication was dafted, circulated, debated and approved. Key elements of the brief included: experience of retail inancial sevices (a background gained in geneal insuance was viewed as helpful but not essential); senior executive leadership experience, ideally in a listed company; prior experience as a non-executive director, prefeably as a Chair, SID or committee chair. H&S conducted a comprehensive market wide search and identiied 40 potential candidates who were felt to have a potential good it with the role speciication and with Admial in geneal. Working with the Committee, H&S prioritised 25 candidates to approach. Following this process, H&S inteviewed eight individual candidates, in July and August 2022. Of these, six candidates were recommended by H&S to meet with members of the Committee and preliminay meetings took place in September 2022 with member of the Committee and other senior management including in-person meetings with the CEO. H&S dafted detailed candidate repots for each of the candidates presented which included an assessment of skills against the agreed role speciication. Three candidates were invited to make 159 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 inal presentations to the full Admial Board in November 2022. In paallel H&S obtained full external references in respect of the external candidates. The Board met on 30 November 2022 following the presentations specially to discuss the presentations and to debate the relative merits of each of the inal three candidates and to review the references provided. The Committee futher met on 8 December where Mike Rogers emerged as the preferred candidate. The recommendation of Mike to be appointed as Chair of the Board was based on Mike’s wide business, insuance and inancial sevices knowledge and on him being someone who would make a strong stategic impact on the future of Admial. Mike has over 30 years of international inancial sevices experience and was Group Chief Executive Oice of insurer LV= from 2006 until 2016 and oversaw its tansformation into a signiicant player in the geneal insuance and life and pensions markets. Prior to that, Mike worked at Barclays Bank for 20 years and held a number of senior roles including Managing Director of UK Retail Banking and Managing Director of Small Business Banking. On top of this, Mike has 10 years of chair and other non-executive director experience from a number of other high-proile organisations. Mike was previously a non-executive director of the Association of British Insurers. The Board’s preliminay decision on 8 December 2022 was to accept the Committee’s recommendation to appoint Mike Rogers as Chair of the Board subject to regulatoy approval and to agreement of contactual terms with Admial. The Board inally approved and announced Mike’s appointment on 31 Januay 2023 and Mike will join the Board as a non-executive Director and Chair with efect from the conclusion of this year’s AGM on 27 April subject to regulatoy and shareholder approval. Mike is currently also Chair of Experian plc, the global information sevices company, and Aegon UK, a pensions, investments and insuance provider. He is also an Independent Non-Executive Director at NatWest Group plc, Chair of its Group Sustainable Banking Committee and member of its Group Peformance and Remuneation Committee. Natwest Group plc has announced that Mike will be stepping down as an Independent Non-Executive Director on 25 April 2023. Futher, Aegon UK had conirmed that Mike will be stepping down as Chair and Non-Executive Director of its Board at the end of September 2023. Mike will continue as Chair of Experian alongside his role as Chair of Admial Group. Induction Upon appointment, Non-Executive Directors embark on a comprehensive induction progamme, comprising common elements for all Non-Executive Directors, as well as elements tailored to the individual depending on their role, skills, knowledge and experience. The induction covers topics such as the role of a Non-Executive Director and their responsibilities, the workings of the Board and the Group’s Subsidiay Boards, and the Company’s opeations. Non-Executive Directors are provided with a suite of background reading before induction sessions are aranged with individuals from each of the Group businesses, again, depending on the induction needs. Ongoing professional development needs of newly appointed Non-Executive Directors are then monitored via annual individual Director evaluations and the Committee’s oversight of the Non-Executive Director skills matrix. Other Board Committee changes and term extensions in 2022 The Board, on the recommendation of the Nomination and Governance Committee, agreed to the following proposals during the year: • Bill Robets was appointed as a member of Nomination and Governance Committee on 21 Januay 2022 • Due to Jean Park’s tempoay medical leave of absence which was efective from 22 Februay 2022, the following interim appointments were agreed: – The appointment of Justine Robets as Interim SID efective from 22 Februay 2022 – The appointment of Andy Crossley as Interim Risk Committee Chair Director efective from 22 Februay 2022 – The appointment of JP Rangaswami as an Interim member of the Remuneation Committee “ Diversity and the variety of perspectives that it brings has been proven in studies to increase innovation and creativity, and, as a result, improves performance.” Annette Cout Chair of the Nomination and Governance Committee Nomination and Governance Committee continued 160 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 • The appointment of Karen Green as a permanent member of the Risk Committee which was efective from 1 June 2022 • Jean Park retired from the Board including all of her committee memberships on 20 Januay 2023 • The appointment of Justine Robets as permanent SID which was efective from 31 Januay 2023 • The appointment of Justine Robets as a permanent member of the Remuneation Committee which was efective from 31 Januay 2023 Due to Jean Park’s tempoay leave of absence which was efective from Februay 2022 the Committee considered candidates from a Non-Executive Director tenure perspective, the qualities required to successfully peform the role of the SID, as well as the SID responsibilities, paticularly in light of the fact that the SID would need to lead the Board on the appointment of a new Group Board Chair during 2022. Subsequently, the Board, upon the recommendation of the Committee, approved that Justine Robets be appointed as the Interim SID and Andy Crossley be appointed as the Interim Group Risk Committee Chair with efect from Februay 2022. The SID appointment was made on the basis that, Justine had a strong sense of Admial’s culture which would be helpful during the Board Chair succession process. The Group Risk Chair appointment was made on the basis that Andy, who has been a member of the Group Risk Committee since 2020, had extensive experience in insuance risk and inance. Jean returned to Board duties in early August 2022 including as a member of the Committee, the Group Risk Committee and the Remuneation Committee. Jean retired from the Board including all of her committee memberships on 20 Januay 2023. Subsequently, the Board, upon recommendation of the Committee, approved that Justine Robets be appointed as SID on a permanent basis with efect from 31 Januay 2023. In addition to Justine’s above stated strong sense of Admial’s culture, the Board agreed with the Committee that Justine had successfully run a thorough and robust Chair succession process during 2022 and is therefore highly qualiied for the role of SID. Futher, Justine has signiicant people and remuneation experience as a result of her role as CEO and founder of Mumsnet since 2000 and is therefore a strong candidate to join the Remuneation Committee. Annual re-election As set out in the Group’s Aticles of Association, all Directors should retire and ofer themselves for re-election at each AGM, in accordance with the UK Corpoate Governance Code and the Company’s current pactice. Therefore, all Directors apat from the Chair Annette Cout will be submitting themselves for election or re-election by shareholders at the fothcoming AGM. The Board is satisied that all are properly qualiied for their election or re-election by vitue of their skills and experience and their contribution to the Board and its Committees. Futher details of why each Director’s contribution is, and continues to be, impotant to the Company’s long-term sustainable success is provided within the notes to the Notice of the 2023 Annual Geneal Meeting. Board composition & succession planning Non-Executive tenure & independence Balance of skills, knowledge and experience Annual Board evaluation & individual Director appaisals Time commitment and external appointments Board diversity 161 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Composition As at 31 December 2022, the Board comprised eleven Directors: the Chair (who was independent on appointment), two Executive Directors, and eight independent Non-Executive Directors. The Committee carefully considers the independence, composition and balance of skills and knowledge of the Board. As a result, the Group continues to monitor the need to refresh Board and Committee membership in an orderly manner so as to maintain the continuity of Board process and the strength of personal inteaction which underlies the efectiveness of the Board. Non-Executive Director tenure and independence The gaph below details the length of sevice of the Chair and each of the current Non-Executive Directors, illustates the balance of experience and fresh perspectives, as well as the independence of each of the Non-Executive Directors. Independent Non-Executive Directors are currently appointed for ixed periods of three years, subject to election by shareholders. The initial three-year period may be extended for two futher three-year periods subject to re-election by shareholders. Their letters of appointment may be inspected at the Company’s registered oice or can be obtained on request from the Company Secretay. Jean Park and Justine Robets both undetook the SID role for the year (and Justine Robets undetaking the role on an interim basis from Februay 2022 to Januay 2023 while Jean took a period of medical leave of absence). The Board was satisied that Jean had the requisite knowledge and experience gained through her Board positions. Jean Park as Chair of the Risk Committee, her membership of the Nomination and Governance Committee and her prior experience as SID for FTSE 250 company, Muray Income Trust. As stated above, the Board was satisied that Justine Robets had the requisite knowledge and experience to undetake the role of SID on an interim basis while Jean was on (and returned from) medical leave and approved Justine’s succession in the permanent SID role following Jean’s retirement in Januay 2023. The Board, having given thorough consideation to the matter, considers the eight Non-Executive Directors to be independent and is not aware of any relationships or circumstances, other than the above, which are likely to afect, or could appear to afect, the judgement of any of them. An explanation for the Group Board Chair’s extended term beyond the nine years recommended by the Code are provided on page 136. Board tenure “ The Directors have a broad range of skills and experience and can bring independent judgement to bear on issues of strategy, performance, risk management, resources and standards of conduct which are integral to the success of the Group.” >9 years 6-9 years Annette Court Jean Park Justine Roberts Andy Crossley Mike Brierley Karen Green JP Rangaswarmi Evelyn Bourke Bill Roberts 3-6 years <3 years 10y 9m 8y 11m 6y 6m 4y 10m 4y 3m 4y 0m 2y 8m 1y 8m 1y 6m * In accordance with the Code ** Provision 19 of the Code relating to the tenure of the Chair was not complied with during the year. An explanation of non-compliance is located on page 136 Nomination and Governance Committee continued 162 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 Balance of skills, knowledge and experience The Committee regularly reviews the Board skills matrix, paticularly in the context of succession planning and skills that are potentially lost at the end of a Director’s tenure on the Board. The current matrix is outlined below and an explanation regarding how it feeds into succession planning follows later in this repot. The Directors have a broad ange of skills and experience and can bring independent judgement to bear on issues of stategy, peformance, risk management, resources and standards of conduct which are integal to the success of the Group. Time commitment and external appointments As well as considering the demands of a Director’s time upon appointment, any subsequent external appointments of Non- Executive Directors and Executive Directors require prior approval of the Committee and the Board. The Committee also reviews the time commitment required of Non-Executive Directors at least annually to consider whether the guidance on time commitment of cetain roles needs to be extended due to market or responsibility changes. Alongside this, a review of the external commitments of Non-Executive Directors is peformed. The most recent review concluded that the independent Non-Executive Directors have suicient time available to peform their duties. Oveall assessment of composition The Board remains satisied that it has the appropriate balance of skills, experience, independence and knowledge of the Group to enable it and its Committees to discharge their duties and responsibilities efectively, as required by the Code. In addition, the Directors are aware of their legal duties to act in a way they consider, in good faith, will be most likely to promote the success of the Company for its shareholders, as well as considering the interests of other stakeholders. Futher details of how the Board fulils its duty in this regard are outlined on pages 74 to 94. Board and senior management diversity and inclusion The Listing Rules and Disclosure Guidance and Tansparency Rules have been amended to include new disclosure requirements for listed companies for inancial years stating on or after 1 April 2022. The FCA is, however, encouaging voluntay compliance for those companies with inancial years beginning on or after 1 Januay 2022. The board diversity targets (which are substantially in-line with the targets set by the FTSE Women Leader’s Review and the Parker Review) are: at least 40% of the board are women; at least one of the senior board positions (Chair, SID, CEO and CFO) is held by a woman; and at least one member of the board is from a minority ethnic background. As set out below, the Committee is content that Admial meets the targets set out in the Listing Rules and Disclosure Guidance and Tansparency Rules 9.8.6(9)(a). 11 Finance 10 Risk 8 Insurance 11 Executive/Strategic Leadership 5 Marketing/Retail 8 M&A 10 City 8 International 8 Tech/Digital/Data 8 Operations 6 Entrepreneurial 3 Loans 7 Small / Medium Enterprise 11 Remuneration/People 7 ESG/Sustainability Total Board Director skills 163 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Gender diversity Diversity and the variety of perspectives that it brings has been proven in studies to increase innovation and creativity, and, as a result, improves peformance. It also has other positive impacts, such as providing greater awareness, widens the talent pool and challenges the views or pactices that have become embedded over time. Admial’s stategy depends on all of these things, which are enhanced by diversity, and suppots our goals. Total Board Director skills During the year, the Committee reviewed the Group Board Diversity and Inclusion Policy and discussed the appropriateness of the measuable targets to increase diversity and inclusion at Group Board, Subsidiay Board and senior management level. The Committee seeks to ensure that a clear recruitment stategy for Board appointments is in place and is aligned to this policy. Measures that are covered under the Policy, including progress updates against each, include: (i) Having one member of the senior executive team who is responsible and accountable for gender diversity and inclusion at Group level. Cristina Nestares (EUI CEO) is the accountable executive for gender diversity. (ii) Setting internal targets for gender diversity in senior management. Progress against the Group’s target of 40% of women in senior management by 2023 is detailed below. (iii) Publishing progress annually against these targets in repots on the Group’s website. Progress updates on the Group’s progress against the HM Treasuy’s Women in Finance Chater commitments are provided on an annual basis on the Group’s corpoate website. (iv) Linking the pay of the CEO to the progress made against these internal targets on gender diversity. In 2021, the Remuneation Committee considered and approved a proposal to link the progress against the Women in Finance target within the non-inancial peformance measures of the EUI CEO, Cristina Nestares. Futher information on this is contained within the Remuneation Committee Repot on page 183. The Group has continued to exceed the target set by both Lord Davies in his repot: Women on Boards, and the Hampton Alexander Review (that builds on the Davies Review) which encouaged FTSE 350 companies to achieve at least 33% women on Boards. Women on the Admial Group Plc Board represented 55% of its 11 director membership as at 31 December 2022, compared with 50% on 31 December 2021. Futher, Admial is only one of 5 FTSE100 companies where each of the board positions of Chair, SID and CEO are held by women. Oicial data published by the FTSE Women Leaders (succeeding the Women on Boards Repot and Hampton Alexander Review) issued in Februay 2023 repoted that the percentage of women on FTSE 100 Boards was 40.2% improving from 39.1% in 2022, which demonstates the good progress Admial has made compared with the aveage of the FTSE 100. The data also highlights that the combination of women in the Chair, CEO and SID roles is still not common, demonstating Admial’s continued strong suppot of the progression of women in leadership roles. 5 Men 6 Women 10 White British or other White (including minority white groups) 1 Asian/Asian British 40s 18.2% 50s 27.2% 60s 45.5% 70s 9.1% >9 years 6–9 years 3–6 years <3 years Board gender diversity Board Ethnicity Age diversity (by backet) Non-Executive Director tenure Nomination and Governance Committee continued 8 British 3 Non-British Board Nationality 164 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 As a result of the continued progress to balance gender diversity at Group Board level and to align with the Women in Finance Chater’s aim of increasing female representation at the UK senior executive level to 40% by the end of 2023, the Committee approved a proposal to increase the annual target from a minimum of 33% women to 40%. The aim is to achieve this level of gender diversity at an aggregate level across the Subsidiay Boards too. As at 31 December 2022, women represented 38% of all of the Subsidiay Boards compared to 29% as at 31 December 2021, while improvements have been made in 2022 there is futher work to improve gender diversity at this level. During the year, the Committee reviewed the gender balance of those in senior management and their direct repots and considered the initiatives that have been proposed to focus on improving gender balance. The FTSE Women Leaders (formerly Hampton-Alexander Review) target of 33% female representation within senior management has been achieved across the Group, with females representing 44% of our Senior Executives and 35% of their direct repots. Ethnic diversity The Board continues to monitor the requirements of the Parker Review’s repot on ethnic diversity in the context of the composition of its Group and Subsidiay Boards, the initiatives that are being implemented to increase diversity and discuss how measures to develop a diverse pipeline of talent as regards to Board appointments could be developed and monitored. The Group Board includes one Board member from an ethnic minority, which meets one of the Parker Review’s key recommendations for FTSE 100 companies as well as Listing Rules and Disclosure Guidance and Tansparency Rule 9.8.6(9)(a). Futher information on how the Group is developing candidates for the pipeline is outlined in the sections below and in the Stategic Repot on pages 77 to 79. The Group remains strongly suppotive of the principle of boardroom diversity, of which gender and ethnicity are impotant, but not the only, aspects. What is impotant is diversity of thought, experience and approach and each new appointment must complement what already exists at the Board table. Ethnic diversity amongst senior management and the wider workforce is something that Admial has increased its focus on in 2022. However, the Committee recognises that the workforce is not always comfotable with voluntarily sharing such personal information. There have been initiatives to encouage more people to make such voluntay disclosures, in respect of other diversity questions, and this has been discussed by the Employee Consultation Group during the year. Activity to improve diversity in the talent pipeline UK • Admial appointed Senior Management Sponsors for all diversity and inclusion working groups. • Admial achieved 45% female representation at executive level, in line with its commitment to the Women in Finance pledge. • Admial was placed 3rd in the UK’s Best Workplaces for Women award in 2022. • Admial’s recruitment stategy aims at increasing candidates from an ethnic background and women onto shotlists for leadership roles • Strengthening our patnerships aimed at increasing female representation, we have joined with Women in Data, a movement and force for change in the realm of data science and analytics • Admial has continued our patnership with PricewaterhouseCoopers’ #TechSheCan, aimed at developing internship and work experience progammes • Admial has paired with Code First Girls (“CFG”), in respect of which our funding will enable 495 places on an 8-week progamme to learn the fundamentals of coding and web development. In addition, we will also pay the fees for 40 paticipants to complete a nanodegree, which is the equivalent of a Data Science degree. The degree takes 14 weeks to complete, and on completion of the progamme, CFG will work with their network of employers across UK (e.g KFC, BlackRock, Natwest etc.) to seek to secure employment for gaduates • Admial has achieved Disability Conident Leader status • Admial has signed seveal pledges such as the Menopause Pledge, Endometriosis Friendly Employer, Neurodiversity Friendly Employer and continued our commitment to the Race at Work Chater by signing up to their extended initiatives • Admial was the headline sponsors of Pride Cymru for the 22nd consecutive year • Admial achieved Top 75 employers with the Social Mobility Foundation Group • Admial launched its Get Discovered progamme aimed at developing talented women within Admial to become the leaders of tomorrow • Admial has planned to launch a “reverse mentoring” scheme. We will ask people to apply for this, then we will tain them as mentors. The successful applicants and all paticipating senior top executives will beneit from this new scheme • Admial will launch two “Employee Resource Groups”, one focused on gender and one on ethnicity, to create a strong group network of people, selected from our staf, with the aim of designing and delivering internal initiatives to ofer equal oppotunities to our underrepresented groups of people • Admial will launch a progam designed to develop employees from an ethnic background, in patnership with McKinsey. We are designing a talent and development progam to nuture talent across Admial, focusing on inding talented employees from an ethnic background at diferent levels into leadership roles • Admial has designed Group D&I employer banding in order to increase our external reputation as diversity 165 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 leader in the market and attact new diverse talent in the recruitment pipeline • Admial is ofering taining to all of our D&I sponsors and human resources managers on how to better work together as a team to deliver meaningful D&I outcomes. The Board and senior management recognise that longer-term remote working brought about by the Covid pandemic could make it more diicult to identify discrimination and suppot those that may be impacted. Admial is committed to adapt to the new environment and ensure that it provides an equal workplace for all our people. The Group remains committed to providing equal oppotunities, eliminating discrimination, and encouaging diversity amongst its employees both in the UK and overseas. A breakdown of the gender of Directors and senior employees at the end of the inancial year together with details of the Group’s Equality, Diversity and Dignity at Work Policy are set out in the Stategic Repot on pages 113 and 127. Succession planning The Committee is responsible for ensuring that plans are in place for orderly succession for appointments to the Board and also reviews the succession plans for Executive Directors and other key senior management positions. Non-Executive Directors Non-Executive Director succession planning is split into shot, medium and longer term horizons to ensure that all eventualities, as far as possible, are planned for. Horizon: Emergency cover Description: There are emergency succession plans to ensure that there is suicient cover or a plan in place for key roles of the Board, namely, the Chair, the SID, Committee Chairs and, in turn, Committee members if a Committee Chair’s absence is longer than expected. These plans take account of any requirements under the respective Committee’s Terms of Reference, as well as any Code requirements. Horizon: Medium term (3–6 year tenure) Description: The Committee’s medium-term succession planning involves considering the replacement of Non-Executive Directors over time to refresh the Board. The Committee considers (i) each Director’s period of tenure and aims to have staggered depature dates, (ii) the skills and experience gaps that will be created as each Director’s tenure comes to an end, and (iii) the diversity gaps that might also become present. Horizon: Longer term (6–9 year tenure) Description: The Committee’s longer-term succession planning involves the consideation of the skills, experience, and diversity that the Board will need over the longer term, taking into account the Group’s stategy and the main trends and factors that are likely to afect the Group’s long-term success. The regular review of these succession plans provides an oppotunity for the Committee to discuss the insights provided by the data in order to inform the desired mix of skills, experience and diversity that the Board needs now and in the future, in the context of the Group’s stategic objectives. The Committee will this year be stating a search for new Non- Executive Directors with the appropriate skills and experience to succeed the Chair and the Group Risk Committee Chair. In doing so, the Committee will consider the skills, experience and diversity gaps that could materialise with the depature of the present Chair and Group Risk Committee Chair. Executive Directors and senior management Responsibility for making senior management appointments rests with the Chief Executive Oicer and talent management continues to be a key area of focus for the Committee to ensure that there is a diverse pipeline of talent for senior management and potentially Executive Director succession. During the year, the Committee considered progress to improve talent management and succession planning within the Group. This was in response to the review in 2020 which identiied seveal improvements that needed to be made to Admial’s succession planning to improve the talent pipeline. Efective internal talent management ensures that Admial’s unique culture is preseved as far as possible. The Committee received an update in 2022 on the new succession famework which is now used across the Group. It has encouaged more structured thinking about oppotunities across depatments and internationally, even in circumstances where this is a well embedded pactice already within Admial. Discussions on success proiles have also helped to visualise how success will look in the future for the critical senior management roles, whilst also providing future talent with visibility on what future development might look like for them. Other pats of the oveall succession planning process continue to be embedded with the introduction of better: • Scoping and anticipating future critical capabilities • Success proiling • Identiication of career aspiations • Assessment • Development plans (noting that some Group entities are more matured than others) • Collective analytics Nomination and Governance Committee continued 166 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 Board Evaluation Progress with 2021 Board Evaluation recommendations Having last carried out an external Board evaluation in 2019 in accordance with the Code requirement that FTSE 350 companies should cary out an externally facilitated evaluation of the Board at least evey three years, the 2021 Board evaluation process was again facilitated internally with use of a questionnaire developed by Independent Audit, who has no other connection with the Group or its Directors. The results of the evaluation were discussed at the Januay 2022 Board and showed a Board that appeared to be functioning well with some identiied oppotunities for improvement. The recommendations from the Board evaluation fed into the Board’s agreed objectives for 2022 and were detailed in the 2021 annual repot as “principal areas of focus for the Board in 2022”. At the June 2022 Board, the Board received a six-month update on progress against agreed areas for focus as set out in the evaluation repot and as against the agreed 2022 Board Objectives. Oveall, this year’s review of succession planning concluded that there was a healthy pipeline of talent across the Group, with no immediate risk in respect of leadership continuity, and the right level of talent to execute our ‘internally grown leaders’ stategy. However, it also concluded that some critical functions in the UK fell shot on gender diversity, as well as some international entities, such as Spain. This gap represents a risk to the achievement of our commitment and ambition on gender diversity at senior management level and so this will be closely monitored by the Committee in 2023. In addition, futher work will be undetaken to improve the ethnic diversity of entities located in geogaphies where such diversity should be better represented, which will also be overseen by the Committee in 2023. The Committee remains satisied that efective succession plans for Directors and senior management are in place to ensure the continued ability of the Group to implement stategy and compete efectively in the markets in which it opeates. Governance The Committee also regularly reviews the Group’s governance arangements, including any changes to the Subsidiay or Committee structure, as well as oversight of the regulatoy applications made under the Senior Managers Regime. Committee Efectiveness Review The 2022 Committee’s annual review was conducted by an external company Bvalco Limited. Each Committee member was inteviewed and asked a set of questions designed to provide objective assessment of the Committee’s peformance, including its efectiveness in monitoring Board composition, considering Executive and Non-Executive succession, overseeing talent management, succession planning and developing directors’ knowledge. The Committee discussed the results of the review at its meeting in Januay 2023 and concluded that, oveall, the Committee remained efective. Areas of focus and improvement for the Committee in 2023 were identiied and in paticular, the pat of the nomination committees work on succession, the Committee should in future canvas the executives on their views of the skills and expetise that would be helpful to strengthen the Board. 2020 Internal Board Evaluation 2019 External Board Evaluation 2021 Internal Board Evaluation 2022 External Board Evaluation 167 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 The following progress was made during 2022 in respect of the key indings from the 2021 review: Agreed areas of focus for 2022 Progress update Ensure that there is a robust selection process for the new Group Board Chair, Group Risk Committee Chair and SID Refer to page 159 of this section and Principal Decisions on page 148. Continuing focus on executive team succession planning During the year, the Board approved the appointment of Keith Davies as Admial’s new Chief Risk Oicer following a robust recruitment process. The Board and the Committee received Group Succession Planning and Talent Development updates throughout 2022. Ensure diversity and inclusion objectives are embedded During the year, the Board received a diversity update highlighting the Group’s ambition to have 40% of women in senior positions by 2025 at Group level and representation of ethnic minorities at senior levels consistent with representation of the whole workforce. The Board has been updated on Admial’s submissions in respect of the FTSE Women Leaders and the Parker Review. Suppot the continuous development of Admial’s core competencies The Board agreed an objective for 2022 to “Defend and suppot continuous development of Admial historical advantages” in paticular relating to culture, technical/undewriting leadership and cost eiciency. The Board received regular updates conirming that each of these areas had received substantial attention and made good progress. Assess market implementation of the FCA’s market study on geneal insuance pricing and ensure Admial delivers a strong response Refer to Principal Decisions. Ensure customers continue to be at the front and centre of new propositions and incremental change The Board has been updated on customer related issues at each Board in 2022 from the perspective of all Group entities and businesses. “The Customer, the Customer, the Customer” remains a core pat of Admial’s philosophy and Board updates throughout the year relect this. Oversee the Group’s diversiication stategy Refer to Principal Decisions. Monitor the development and execution of Admial’s sustainability approach and the delivey against key pledges During the year, the Board has increased the number of updates and sessions held on ESG matters, receiving updates on the embedding of the new Group Purpose (approved at the beginning of 2021), the Group’s sustainability stategy, response to climate change, stakeholder engagement, progress to meet diversity and inclusion targets, and the responsible investment stategy, amongst other things. The October Board update on sustainability provided the Board with detailed analysis on the 2022 progress against Admial’s stated nine sustainability targets. The Board noted that good progress had been made. Continue to deepen the Board’s understanding of external risk factors During the year, the Board also increased the updates and sessions received on information security and cyber risk, BEIS Reforms, IFRS17, geneal technology updates and received an update on the Admial cyber risk event playbook. In October 2022, the Board undetook a cyber crisis simulation session facilitated by an expet, external supplier. The lessons learned from the cyber crisis simulation helped management to reine the cyber risk event playbook. Provide steering and oversight for capital management, reinsuance and the internal model application process During the year, the Board received regular updates and taining sessions relating to the Admial internal model process. Good progress was made during the year noting that the application process will continue to be progressed and reined in 2023. Oversee the roll-out and evolution of the Group reward stategy The Board was regularly updated on progress against the Group Reward Stategy. The Board was futher updated on the Group’s plans to improve reward and in respect of the Group’s plans to help staf though the “cost of living crisis”. Refer to Principal Decisions. Nomination and Governance Committee continued 168 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 2022 Board Evaluation Having last carried out an external Board evaluation in 2019 in accordance with the Code requirement that FTSE 350 companies should cary out an externally facilitated evaluation of the Board at least evey three years, the 2022 Board evaluation process was facilitated externally by Bvalco Ltd, which has no other connection with the Group or its Directors. Each Board member and standing attendee was inteviewed and asked a set of questions to evaluate the Board’s peformance and dynamics in 2022. The themes and questions considered by all Board members and regular Board attendees in November 2022 were: • Strengths and Value • Purpose and Stategy • Board Dynamics and Culture • Risk • Succession and composition/skills • Peformance and development • Frequency of meetings, Board information and agendas • Commitments outside of the Boardroom • The Chair • The new Chair • The CEO • What do you value about your fellow Board directors • Committee Chairs • Impact and Value • Three most impotant areas for next 12 – 18 months The results of the evaluation were discussed at the Januay 2023 Board meeting and showed a Board and Committees that appeared to be functioning well, with some identiied oppotunities for improvement. Bvalco’s oveall impression is that this is a strong Board and one that is relective and suppotive of the Admial culture. The majority of those inteviewed felt it was an open, inclusive and paticipative Board committed to the success of Admial. It is also a Board with good humour. Eveything that Bvalco obseved and heard during their review demonstated a commitment to the success of Admial and the wellbeing of its staf. There were key areas where Bvalco made recommendations to the Board and Committees in order to continuously and progressively improve how it works. There is a summay table of recommendations set out below. In making the recommendations, Bvalco wished to re-emphasise their oveall conclusion that the Admial Board is a strong board, and the recommendations set out in the repot are made against this background. The recommendations set out below have fed into the Board’s agreed objectives for 2023 and are detailed under the “principal areas of focus for the Board in 2023” on page 139. 2022 Board Committee Efectiveness Reviews Futher information on each of the Board Committee’s evaluations conducted externally by Bvalco Limited of their own peformance can be found within the respective other Board Committee repots. Individual Director Evaluation The peformance of the Chief Financial Oicer is appaised annually by the Chief Executive Oicer, to whom he repots. The Chair, taking into account the views of the other Directors, reviews the peformance of the Chief Executive Oicer. The Chair also carries out the peformance assessments of each of the Non- Executive Directors. Each of the Directors were determined to have continued to efectively contribute to the work of the Board in 2022. The peformance of the Chair is reviewed by the Board led by the SID. Following the latest review, the SID considered and discussed with the Chair the comments and feedback that had been received from the Directors as pat of the Chair’s evaluation questionnaire and was able to conirm that the peformance of the Chair continues to be efective. In addition, Bvalco Limited repoted that all those inteviewed as pat of the external evaluation were unanimous in their paise for Annette. Bvalco was positive in their assessment of all aspects of how Annette chairs the Board. Bvalco concluded that “this is a well Chaired Board.” 169 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Outcomes and areas of focus for 2023 Decision making fameworks The Board and management to review the oveall famework that the Board uses to make key decisions. At the same time, management will review how information is presented to the Board in a way which assists and feeds into the oveall decision- making famework. Review how the balance of Board agenda time is split between stategy versus governance/regulatoy matters The Board should review the balance of time spent at board meetings between governance/regulatoy matters and stategic/business matters. The Board suppoted by the Legal and Company Secretarial team to consider if any governance and regulatoy matters could be delegated to relevant Board Committees, Board Sub-Committees or Subsidiay Boards. Stategy development Build on the acknowledged success of stategy days. The Board should discuss and agree additional conventions for the stategy days to ensure the Board has suicient early involvement in contributing to the development of proposals. This should include the addition of formal ‘wash-up’ sessions and ‘action lists’ with agreed milestone dates. Foward plan of metrics and milestones The Board should discuss and agree with management improved metrics and milestones to enable the Board to better measure stategy implementation.. Ovearching approach to ESG The Board to consider the value of establishing an ovearching and coordinated approach to ESG initiatives. Improving hybrid meetings The Board and Company Secretarial team shall continue to look at ways of improving hybrid meeting arangements, looking at techniques for mitigating the risk that remote paticipants are unable to contribute fully to Board and Committee meetings. Company Secretay The Company Secretarial team should take steps to remind those presenting papers to the Board or a Committee that they follow properly the guidelines as to form, content and paper submission deadlines. This should include proper completion of the paper’s standardised front sheet, avoiding the unnecessay usage of technical language and developing conventions for assisting the non-technical reader. Nomination and Governance Committee continued 170 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 Audit Committee Repot “ I am pleased to set out in this report an update on the main activities of the Committee in 2022.” Karen Green Chair of the Audit Committee Committee members Focus area Attendance Karen Green (Chair) 11/11 Andy Crossley 11/11 Mike Brierley 11/11 11 meetings in 2022 Audit, risk and internal control Compliance with the Code Principles UK Code Principle Description References Principle M The Board should establish formal and tansparent policies and procedures to ensure the independence and efectiveness of internal and external audit functions and satisfy itself on the integrity of inancial and narative statements. • Roles and Responsibilities on page 173 • Non-audit fees on page 177 • Efectiveness of external audit process on page 177 • Efectiveness of internal audit on page 174 • Directors’ responsibilities and responsibility statement in the Directors’ Repot on page 213 • Principal risks and uncetainties within the Stategic Repot on pages 114 to 121 Principle N The Board should present a fair, balanced and understandable assessment of the company’s position and prospects. • Repoting, accountability and audit within the Directors’ Repot on page 212 Principle O The Board should establish procedures to manage risk, oversee the internal control famework, and determine the nature and extent of the principal risks the company is willing to take in order to achieve its long-term stategic objectives. • Role of internal audit and associated processes on page 174 • Principal risks within the Stategic Repot on pages 114 to 121 • Repoting, accountability and audit within the Directors’ Repot on page 212 171 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Dear Shareholder I am pleased to set out in this repot an update on the main activities of the Committee in 2022. Areas of Focus in the Repoting Period The Committee considered the economic backdrop facing the Group and gave paticular consideation to current UK inlationay pressures and the impact on the key accounting and actuarial judgements made by management in relation to the valuation of claims reseves and credit loss provisions, as well as the potential impact on going concern and viability assumptions. The Committee also continued to consider the ongoing impact of the Covid pandemic on the Group’s inancial repoting and disclosures, along with the continued efectiveness of the Group’s key internal controls in a hybrid working environment. Signiicant inancial repoting issues The setting of insuance claims reseves in accordance with the Group’s agreed reseving methodology is a key accounting judgement in the Group’s Financial Statements as set out in Note 3 to the Financial Statements), and the Committee continues to place consideable focus on this area. The Committee challenged the key reseving assumptions and judgements, movements, emerging trends and analysis of uncetainties underlying the analysis of outstanding claims for the UK Car Insuance business proposed by management alongside that of the Group’s external independent actuarial advisers. In 2022, this included the impact of inlation on the claims reseves as set out in more detail below, future scenarios for the Ogden discount ate and post-pandemic trends of claims frequency and severity. It also focused on management’s assessment of the level of uncetainty inherent in the claims reseves and the changes in this assessment from prior periods. The Committee also received repots on the claims reseving processes peformed for insuance businesses other than UK Car and recommended to the Board the aggregate claims reseves for inclusion in the Group’s Financial Statements. In addition to claims reseving, the Committee spent time reviewing management’s suppot for a number of other signiicant inancial repoting matters including the expected credit loss provision held in relation to the Loans receivable balance held by the Group’s loans business Admial Money, other potential provisions and contingent liabilities, and the results of impairment testing peformed in relation to the Group parent company’s investments in Group subsidiaries. IFRS 17 (Insuance Contacts) implementation Ahead of the 1 Januay 2023 implementation date for IFRS 17 (Insuance Contacts), the Committee placed signiicant focus during the year on monitoring progress of the Group’s IFRS 17 progamme, reviewing and challenging key judgements and accounting consideations, the Group’s tansition balance sheet as at 1 Januay 2022, as well as the inancial statement disclosures on the impact of the new standard required by IAS 8 (Accounting Policies, Changes in Accounting Estimates and Errors) and related accounting disclosures. Corpoate governance and repoting changes The Committee was kept abreast of the Group’s engagement with the Depatment for Business, Energy & Industrial Stategy (BEIS) consultation on ‘Restoring trust in audit and corpoate governance: proposals on reforms’ during 2022 including the Financial Repoting Council’s daft proposal for a minimum standard for audit committees, and will continue to monitor developments in this area. The Committee also oversaw, in conjunction with the Group’s Risk Committee, the Group’s progress in futher aligning repoting with the Taskforce for Climate-related Financial Disclosures (TCFD) published recommendations. The Committee received a brieing from the Group’s external auditor on TCFD regulation and trends in the market. Internal controls The Committee has continued to review the efectiveness of the internal control systems across the Group, including areas of potential weakness highlighted through audit and other assuance repots. I hope you ind the above summay, and the more detailed repot, both useful and informative. Karen Green Chair of the Audit Committee 7 March 2023 Audit Committee Repot continued 172 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 How the Committee opeates Membership Membership of the Committee at the end of the year was: Karen Green (Chair), Andy Crossley and Mike Brierley. Two of the Committee’s members are Fellows of the Institute of Chatered Accountants in England and Wales. Given the insuance and inancial sevices experience of the members of the Committee, the Board considers that they have a broad ange of skills, experience and knowledge of the insuance sector, which represents the principal market in which the Group opeates, and also the area of consumer lending in which the Group has a growing business, such that they are able to efectively analyse, challenge and debate the issues that fall within the Committee’s remit. The Board is satisied that the Committee as a whole has competence relevant to the sectors in which the Group opeates and futher considers that a number of its members have recent and relevant inancial experience. Attendance at meetings The Company Secretay acts as Secretay to the Committee. The Group Chief Financial Oicer, Group Chief Risk Oicer, Director of Group Finance & Chief Actuay and Group Head of Internal Audit routinely attend all Committee meetings (other than cetain private sessions). Other individuals, such as the Chair of the Board, Chief Executive Oicer, Head of Compliance, and representatives of diferent pats of the Group, may be invited to attend all or pat of any meeting as and when appropriate. The external auditor was invited to attend all of the Committee’s meetings held in 2022, except in respect of those agenda items when its own peformance, reappointment and fees were reviewed and discussed, or where any other conlict was identiied. Meetings held The Committee meets at least six times per year and has an agenda planner linked to events in the Company’s inancial calendar and other signiicant issues that arise throughout the year, which fall for consideation by the Committee under its remit. The Committee Chair agrees the meetings and agendas for each meeting. There were eight scheduled Committee meetings held during the year (with two of these meetings focused on reseving matters in conjunction with the half year and full year repoting). Three additional meetings were held during the year, primarily focused on the tansition to IFRS 17 and year-end repoting related matters. Details of member attendance at the Committee meetings held during the year are outlined on page 171. How the Committee keeps up to date The Committee is kept up to date with changes to Accounting Standards and relevant developments in inancial repoting, company law, and the various regulatoy fameworks through presentations from the Group’s external auditor, Group Chief Financial Oicer, Group Chief Actuay and Group Company Secretay. In addition, members attend relevant seminars and conferences provided by external bodies. The Committee also receives tailored brieings from management and the Group’s external auditors from time to time. Topics included the Task Force for Climate-related Financial Disclosures (TCFD) and IFRS 17 implementation in 2022. The Terms of Reference of the Audit Committee include all the matters required under the Code and are reviewed annually by the Committee. The Chair of the Audit Committee meets with the Group Head of Internal Audit, Group Chief Financial Oicer, Director of Group Finance and Chief Actuay, Head of Reseving, the external auditor and UK Head of People Sevices (who has oveall responsibility for coordinating the Group’s whistleblowing arangements) on a regular basis. The Committee also held (i) two private meetings with the Group Head of Internal Audit, (ii) one private meeting with the Chief Financial Oicer, and (iii) two private meetings with the external auditor during the year. Role and responsibilities of the Committee The Audit Committee’s primay responsibilities are to: Financial repoting • Monitor the integrity of the Group’s Financial Statements and any formal announcement relating to the Group’s inancial peformance, including the Group’s Solvency and Financial Condition Repot, reviewing any signiicant inancial repoting judgements which they contain, including that of the Group’s Going Concern status • Provide advice (where requested by the Board) on whether the Annual Repot and Accounts, taken as a whole, is fair, balanced and understandable, and provides the information necessay for shareholders to assess the Group’s position and peformance, business model and stategy • Oversee the Group Risk Committee’s work on climate-related inancial disclosures under TCFD Internal controls and internal audit • Keep under review the efectiveness of the Company’s internal inancial controls, internal control and risk management systems • Monitor and assess the role and efectiveness of the Group’s internal audit functions in the context of the Group’s oveall internal control and risk management systems 173 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 External audit • Make recommendations to the Board, to be put to shareholders for their approval at the AGM, in relation to the appointment, reappointment and removal of the Group’s external auditor • Approve the remuneation and terms of engagement of the Group’s external auditor • Review and monitor the Group external auditor’s independence and objectivity, and the efectiveness of the audit process, taking into consideation relevant UK professional and regulatoy requirements • Review the policy on the engagement of the Group external auditor to provide non-audit sevices, ensuring that there is prior approval of non-audit sevices, considering the impact this may have on independence and taking into account the relevant ethical guidance in this regard Other • Oversee the Group’s procedures for handling allegations from whistleblowers • Repot to the Board on how it has discharged its responsibilities Summay of key activities during 2022 During the year the Committee reviewed the following: Financial repoting • The Group Annual Repot and interim results announcement, including key accounting judgements and disclosures • Parent company Financial Statements (both annual and interim), and related key accounting judgements and disclosures, including impairment testing of the parent company’s investments in subsidiaries • Repots from the Chair of the Group Risk Committee on the principal risks faced by the Group and the work undetaken by the Group Risk Committee to ensure risk is appropriately managed • Repots from the Chair of the Admial Insuance Company Limited (AICL) and Admial Insuance (Gibaltar) Limited (AIGL) Audit Committees on the Financial Statements for AICL and AIGL, including key accounting judgements and disclosures • The Group Solvency and Financial Condition Repot, including disclosures speciic to AICL and AIGL • Presentations from the Group’s actuarial reseving team and independent external actuarial expets to assist the Committee in concluding on the adequacy of the Group’s IFRS reseves and Solvency II technical provisions • Information suppoting the Group’s Going Concern assumption • Repots prepared by management demonstating risk tansfer within reinsuance contacts in line with the requirements of IFRS 4 (Insuance Contacts) • Updates from the Group’s loans business on the IFRS 9 (Financial Instruments) expected credit loss provision • Repots assessing the accounting and disclosure impacts of risk events arising across the Group • The inancial statement disclosures on the impact of the new standard required by IAS 8 (Accounting Policies, Changes in Accounting Estimates and Errors) (futher detail on the Committee’s work in relation to IFRS 17 is set out below) • The Group’s disclosures relating to climate risk, including those disclosures required by the TCFD, and received a brieing from the external auditor on regulatoy developments in climate- related disclosure requirements Internal audit and internal controls • Repots from the internal audit functions within the Group on the efectiveness of the Group’s risk management and internal control procedures and progress against the 2022 Audit Plan, approval of changes requested to the 2022 Plan and the Audit Plan for 2023 including resourcing levels, details of key audit indings, and actions taken by management to manage and reduce the impact of the risks identiied • Peformance and efectiveness of the Internal Audit function • A summay of the key indings from all repots from Internal Audit, including management responses to the conclusions set out in the repots • Repots on the controls in place, including signiicant breaches or incidents, across the Group and its overseas subsidiaries • European insuance internal audit updates, including an update from the Chair of the European Audit Committee (of the Group’s subsidiay Admial Europe Compañía de Seguros, S.A., (AECS) which undewrites the Group’s European insuance businesses) on the activities of that Committee • US insuance internal audit updates, including an update from the Chair of the Audit Committee of the Group’s US subsidiay Elephant, on the activities of that Committee • Repots on the output of the assessment of adherence to and embedding of the Group Minimum Control Standards’ famework • Repots on the various improvements undeway to the Group’s control environment including an assessment of the Group’s IT access control management External audit • Repots from the external auditor highlighting system and control recommendations, key accounting and audit issues and conclusions on the half year and full year repoting • Conirmation of the external auditor’s independence • Repots from Deloitte, the external auditor, on their proposed audit scope and plan • Proposed external audit fee and the drivers of the year-on- year increase Audit Committee Repot continued 174 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 Other • Updates on tax matters, including the Group Tax Stategy which was recommended to the Board for approval and is available at www.admialgroup.co.uk • Progress updates on the BEIS consultation relating to audit and corpoate governance reforms, including updates received from the external auditor • The efectiveness of the Group’s Whistleblowing Policy, which sets out the arangements for aising and handling allegations from whistleblowers, and receiving regular repots on instances of whistleblowing that have been aised • The Committee’s terms of reference • The Committee’s efectiveness • Meetings held with the external auditors, the Group Head of Internal Audit, and the Chief Financial Oicer, respectively, without management being present Signiicant issues considered by the Committee After discussion with both management and the external auditor, the Audit Committee determined that the key risks of misstatement of the Group’s Financial Statements, as in prior years, related to the valuation of gross insuance claims reseves. Two additional key audit matters were also identiied. Given the economic backdrop referenced above, a signiicant risk was agreed in relation to inlation assumptions applied to UK motor bodily injuy claims reseves given the long-tail nature of the claims and the current higher inlationay environment. Secondly, given the 1 Januay 2023 implementation date for IFRS 17, a key audit matter was also highlighted in respect of the 2022 year end IAS 8 (Accounting Policies, Changes in Accounting Estimates and Errors) disclosures setting out the impact of IFRS 17 on the Group These signiicant issues were discussed with management during the year and with the external auditor at the time the Committee reviewed and agreed the external auditor’s Group audit plan, when the external auditor reviewed the interim Financial Statements in August 2022 and also at the conclusion of the external audit of these full year Financial Statements. Valuation of gross insuance claims reseves The Committee continued to spend signiicant time reviewing and challenging the approach, methodology and key assumptions adopted by management in setting reseves for insuance liabilities in the Financial Statements to ensure consistency with the Group’s stated reseving approach to set reseves at a prudent level. In this context, the Committee challenged management on the impotant judgements and assumptions used in estimating outstanding claims. Futher information is set out in more detail in the critical accounting estimates section of Note 3 to the Financial Statements. As in previous periods, the Committee held meetings speciically focused on reseving, receiving presentations on UK Car Insuance reseves from the internal actuarial reseving and inance teams, as well as the independent external actuarial advisors. At these meetings management provided futher information on the projected best estimate gross claims reseves, as well as the margin to be held above best estimate in the Financial Statements and were challenged by the Committee as to their adequacy and the consistency of the level of prudence with prior periods. The Committee reviewed and discussed the efects of inlationay pressures on claims reseves in relation to both damage and bodily injuy claims. In addition, the continuing impact of Covid on both claims frequency and claims severity as well as changes in claims settlement patterns were considered, as well as scenarios in relation to the future Ogden ate. The Committee also reviewed management’s assessment of the level of uncetainty inherent in the claims reseves and changes to that assessment from previous periods. The Committee also received updates from the Group’s external auditor, Deloitte, on its work in relation to this signiicant audit risk. This included reviewing management’s actuarial data quality assessments, best estimate reseve projections and the margin included above best estimate, as well as suppot for management’s qualitative and quantitative suppot for gross claims reseves included in the Financial Statements. Based on this work, the auditor was satisied that the inancial statement reseves remain appropriate and consistent with the Group’s accounting policy. The Committee also received repots on the reseving processes for the Group’s insuance businesses other than UK Car Insuance. Whilst acknowledging that the setting of reseves for claims which will settle in the future is a complex and judgemental area and having had the oppotunity to challenge management’s proposal in respect of both best estimate reseves and margin held above best estimate to cover unforeseen deterioations in the best estimate, the Committee is comfotable that an appropriate process has been followed, and that there has been suicient scrutiny, challenge and debate to give conidence that the reseving levels set provide an appropriate margin above best estimate. Inlation assumptions applied within valuation of UK motor bodily injuy claims reseves The Committee placed focus during the year on reviewing and challenging the approach, data inputs, methodology and key assumptions adopted by management in determining an allowance for excess inlation on bodily injuy claims, included in gross claims reseves. Whilst acknowledging that ultimate outcome is highly uncetain, the Committee had the oppotunity to challenge management’s judgements in respect of selected projections of inlation, in paticular future wage inlation as well as the elements of bodily injuy claims that will be subject to this excess inlation. The Committee concluded that the data and underlying methodology used in calculating excess inlation was reasonable, and in line with market pactice and that the inlation assumptions adopted were appropriate. 175 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Other inancial repoting issues IFRS 9 provision for expected credit losses During the year, the Committee has continued to review and challenge the IFRS 9 provision for expected credit loss arising through the Group’s loans business, Admial Money. Areas of focus included the potential impact of UK inlationay pressures and the increase in UK market interest ates on default experience, the assessment of circumstances indicating a signiicant increase in credit risk and underlying foward-looking economic assumptions. Futher information on the provision and key assumptions are found in Note 3 to the Financial Statements. On the basis of the work peformed and having had the oppotunity to challenge management’s proposal in respect of the provision for expected credit losses, the Committee was comfotable that an appropriate process has been followed, noting the enhancements made to the provisioning methodology, and that there has been suicient scrutiny and challenge to give conidence that the provision has been set in line with the IFRS 9 requirements and included appropriate allowance for uncetainties arising from the current macro-economic environment. Misstatements No material unadjusted audit diferences were repoted by the external auditor. The Committee conirms that it is satisied that the auditor has fulilled its responsibilities with diligence and appropriate professional scepticism. After reviewing the presentations and repots from management and consulting, where necessay, with the auditor, the Committee is satisied that the Financial Statements appropriately address the critical judgements and key sources of estimation uncetainty (both in respect to the amounts repoted and the disclosures). The Committee is also satisied that the signiicant assumptions used for determining the value of assets and liabilities have been appropriately scrutinised, challenged and are suiciently robust. IFRS 17 implementation IFRS 17 is a new insuance accounting standard that came into efect from 1 Januay 2023. Given the fundamental changes to the Group’s Financial Statements and systems and processes that will be required because of the new standard, the Committee has continued to dedicate a signiicant amount of time to understanding and assessing the impact of the standard on the Group’s inancial repoting process and the progress of implementation of chosen software solutions. Through the year the Committee received the following updates: • Regular updates as to the progamme status, including progress against plans for individual workstreams and other issues such as resourcing levels • The Group’s tansition balance sheet as at 1 Januay 2022, including the work of the external auditor Deloitte in respect of the tansition • The policy on judgements and materiality • Repots setting out management’s assessment of key technical accounting matters and accounting policy choices, including the status of the work of the external auditor Deloitte in respect of those technical issues • Updates as to the status of the software solution for IFRS 17 and the dependencies with other inance tansformation projects, including the implementation of new geneal ledger systems in seveal of the Group’s businesses • The inancial statement disclosures on the impact of the new standard required by IAS 8 (Accounting Policies, Changes in Accounting Estimates and Errors) • Updates from the Group’s external auditor on their audit of the Group’s IFRS 17 work and IFRS 17 developments in the market geneally The Committee also reviewed the presentation to the Group’s analyst and investor community on the likely impact of IFRS 17. External audit External auditor appointment The Group last completed an audit tender during 2020/21 when, following the completion of a tansparent and independent audit tender process, Deloitte LLP were recommended to shareholders as the Group’s auditor at the Annual Geneal Meeting (AGM) in April 2021 and a resolution was passed to that efect. The Committee conirms it is in compliance with the provisions of the Statutoy Audit Sevices for Large Companies Market Investigation Order 2014. On the recommendation of the Committee, the Board approved that Deloitte should be recommended to shareholders for re-appointment as the Group’s auditors at the 2022 AGM. A resolution to that efect will be proposed at the AGM. Audit fee During 2022, the Committee reviewed and approved the audit fee proposal for the 2022 year end Group audit. The agreed fee for the audit and other assuance related sevices for 2022 is £2.76 million (2021: £2.25 million), with the increase relecting inlation in line with market increases and the audit work peformed to date in relation to the Group’s implementation of IFRS 17 (Insuance Contacts) and the extended requirements for ESEF (European Single Electronic Format). The Committee approved the fee increase having discussed with the auditor the ationale for the proposal. Safeguarding the external auditor’s independence and objectivity The Committee reviewed and approved its policy on non-audit sevices in Februay 2022 and was satisied that it continued to align with current regulatoy guidance. Under the policy, the Group’s statutoy auditor will only be engaged to cary out non-audit sevices in exceptional circumstances or where there is a regulatoy request, and where agreed by the Committee. This is to ensure that the independence and objectivity of the external auditor is safeguarded. Pursuant to the policy and unless required by law or regulation, any non-audit sevices will: a) be subject to atiication by the Committee, if the cost does not exceed £15,000, or be subject Audit Committee Repot continued 176 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 to prior approval from the Committee where the cost exceeds £15,000 or such costs in the aggregate exceed £30,000 and b) in aggregate and where applicable, shall not cost more than 70% of the aveage statutoy audit fee for the past three inancial years. In considering whether to approve such non-audit sevices, the Committee shall consider whether: • It is probable that an objective, reasonable and informed third paty would conclude that the understanding of the Group obtained by the auditor for the audit of the Financial Statements is relevant to the sevice • The nature of the sevice would compromise auditor independence The Committee will continue to monitor regulatoy developments in this area to ensure that its policy on non-audit fees adheres to current guidance. Efectiveness of the external audit process The Committee undetakes an annual review to assess the independence and objectivity of the external auditor and the efectiveness of the audit process, taking into consideation relevant professional and regulatoy requirements, the progress achieved against the agreed audit plan, and the competence with which the auditor handled the key accounting and audit judgements. As pat of its review, the Committee considered, among other things, the following: the output of a questionnaire completed by all Committee members and relevant members of the Group’s Finance and Internal Audit functions and the indings of the FRC Audit Quality Reviews (AQR) published in July 2022. Following this review, the Committee concluded that the external auditor, Deloitte LLP, remained independent and that the external audit process remained efective. Internal audit The Group Head of Internal Audit attended all Audit Committee meetings and provided a ange of presentations and papers to the Committee, through which the Committee monitored the efectiveness of the Group’s material internal controls, including inancial, opeational and compliance controls on behalf of the Board. The Group Head of Internal Audit also carries out an annual review of the efectiveness of the Group’s systems of internal control and risk management and repots on the outcome of this review to the Committee. In Februay 2023, the Group Head of Internal Audit repoted an adequate level of assuance in relation to the Group’s arangements for risk management, control infastructure, governance and faud prevention controls. The Committee reviewed and approved the Group Internal Audit Policy, which includes the Group Internal Audit Terms of Reference setting out the role; objectives; repoting lines and accountability; authority; independence; and objectivity of the Internal Audit function. The Committee also monitored and discussed the evolution and development of the Internal Audit function, and considered the role, competence and efectiveness of each internal audit function across the Group. The Group Head of Internal Audit continues to have responsibility to ensure the quality of the internal audit activities in the Group’s overseas locations. The Chairs of the European and US Audit Committees each attended a meeting to provide an update on their respective activities. Members of the Committee also receive all issued audit repots, enabling them to challenge the repots’ content, including the ating, and related recommendations. The Committee approves the internal audit plan at the stat of each calendar year whilst the efectiveness and workload of the Internal Audit functions and the adequacy of available resources are monitored throughout the year. The European opeations in Spain, Italy and Fance have a dedicated internal audit team and the US business also has its own locally based team. All repots are evaluated by the Group Head of Internal Audit to ensure the quality and efectiveness of the repoted indings, and a summay of the key indings of each completed audit is provided to the Committee as pat of the Group Head of Internal Audit’s regular Committee update. In addition, the UK internal audit function carries out high-level governance reviews of all foreign opeations, assessing the internal control fameworks and system of risk management. Committee efectiveness review The 2022 Committee efectiveness review was conducted by an external company, Bvalco Limited. As pat of the review, each Committee member was inteviewed and asked a series of questions designed to provide objective assessment of the Committee’s peformance, including its efectiveness in monitoring internal and external audit. The Committee discussed the results of the review at its meeting in early Februay 2023 and concluded that the Committee continued to opeate efectively and the evaluators highlighted good discussions on technically involved matters and eicient decision-making. There were some areas identiied for futher improvement, such as continued focus on the timeliness of the circulation of papers in advance of meetings. Whistleblowing On behalf of the Board, the Committee considered and reviewed the Group’s whistleblowing policy and received quaterly updates on the use and efectiveness of the policy, whistleblowing metrics and the instances of whistleblowing that had been aised across the Group during the year. During the year, the Committee concluded that the Group’s current whistleblowing arangements were an appropriate means by which employees could aise concerns in conidence and anonymously. 177 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Group Risk Committee Repot Statement from Andy Crossley Interim Chair of the Group Risk Committee “The Group Board is of the view that the Group’s risk management and internal control systems have operated effectively during the year.” Andy Crossley Interim Chair of the Group Risk Committee Committee members Focus area Attendance Andy Crossley (Interim Chair) 11/11 Jayapakasa (JP) Rangaswami 11/11 Cristina Nestares 10/11 Karen Green 5/5 Jean Park 5/11 The Committee held ive scheduled meetings, with a futher six additional meetings taking place. 9 meetings in 2022 11 meetings in 2022 Dear Shareholder, As Interim Chair of the Group Risk Committee, I am pleased to present the Committee’s repot for 2022. The Committee has received updates on each of the Group businesses as pat of the Group’s Enterprise Risk Management Famework (‘ERMF’). Developments considered by the Committee throughout the year included: • Admial’s risk stategy and approach to risk management including regular reviews of the Group’s risk stategy and risk appetite; consideation of a refreshed suite of Key Risk Indicators; and oversight of the management of material notable risk events • Ongoing risk assessment and monitoring of the impact of inlation, market volatility, Covid-19 and economic outlook on capital and liquidity risks across the Admial Group • Oversight of work required to ensure Admial is prepared to meet the challenges of climate change • Developments linked to the launch of new products and the monitoring of plans to develop existing products • Oversight of Admial’s Technology and Information Security work, including improvements in controls throughout the Group • The continuing development of the Admial Internal Model Risk stategy and approach to risk management: During the year the Committee reviewed and proposed the Group risk stategy and appetite to the Admial Group Board (hereafter ‘the Board’) for approval. The Committee approved a refresh of the suite of Key Risk Indicators with associated triggers and limits, relecting the updates to the Group Risk Appetite. The on-going focus on monitoring and repoting customer outcome risks continues with the Committee reviewing the Group Conduct Risk Famework (aligned with the ERMF). The Committee also reviewed the Group Minimum Standards which continue to be enhanced and embedded. The Committee has spent time on key risks that afect the Group as well as reviewing the management and outcomes of notable risk events repoted during the year. 178 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 Group Risk Committee Repot continued Capital Management: The Committee has reviewed the Group’s proposed dividend level, capital plan and capital bufer in line with the Capital Policy. The review considered seveal sensitivities, stress tests and scenarios tests, including assessing the uncetainty around inlation impacts. The Group continues to make use of Undetaking Speciic Paameters (USPs) for AIGL and the Volatility Adjustment (VA) across its UK insuance entities. Solvency and Liquidity: The Committee has reviewed and continues to monitor the Group’s solvency and liquidity positions in response to market volatility and wider economic uncetainty, considering factors such as increases in inlation, the wider impact of supply chain disruption, and the pressures on individual household inances. Economic Uncetainty: The Committee has reviewed and considered developments in the external environment throughout this year. The combination of extaordinay factors such as the Russian invasion of Ukaine, supply chain disruption, inlation levels, interest ate increases and political instability have been the subject of a number frequent of stress tests. In the UK insuance market, the impact of whiplash reform and introduction of the FCA’s Geneal Insuance Pricing Pactices have also been reviewed. Covid-19: The impact of Covid-19 on Admial’s PR&Us, as well as the steps taken to appropriately manage these risks, continues to be overseen by the GRC, including oversight of the return to the oice, in line with all applicable local and national guidance. Climate change: The Committee has received regular updates on the work being undetaken relating to climate change to ensure that Admial is meeting current requirements and is appropriately preparing to meet future challenges. These updates include commentay on risk management, investments, ongoing climate- related-stategic developments, and the changes that may be necessay for compliance with emerging regulatoy requirements. This is futher described in the Viability Statement (page 122), and additional information on Admial’s approach to climate change can be found in disclosures related to the Task Force on Climate-Related Financial Disclosures famework (page 97). New product developments and existing product escalation: As a result of the Committee’s oversight of individual Group entities, combined with the oversight aforded by the Group’s project governance famework, the Committee has considered and challenged updates relating to material projects and change progammes within the Group, including those designed to develop new products, and those that will develop and acceleate existing products. Technology and Information Security: The level of oversight of Technology Risks including opeational resilience has increased over the year with the recruitment of additional resources in these areas and with the embedding of improved KRIs for Technology and Cyber/Information Security risks. The cyber security progamme of work in the European Insuance businesses is close to completion, with a number of areas strengthened around cyber security and business resilience. The GRC has received regular updates on these topics including the future technology stategy. Progress of Admial Internal Model (AIM): The project team has continued to provide status updates against key milestones at each Group Risk Committee and Board meeting during 2022. The model enhancement stage is ongoing and expected to conclude in the irst half of 2023. The Board will oversee an end- to-end process of reviewing the enhanced model output across two year-ends, suppoted by robust independent validation before entering a regulatoy pre-application process. Andy Crossley Interim Chair of the Group Risk Committee 7 March 2023 179 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Duties and Responsibilities of the Group Risk Committee The duties and responsibilities of the Committee are set out in the Committee’s Terms of Reference, and were reviewed and approved by the Admial Group Board. The responsibilities of the Committee are: • Overseeing the development, implementation and maintenance of the Group’s oveall Risk Management Famework and ensuring that it is in line with emerging regulatoy, corpoate governance and best pactice guidelines • Considering and recommending to the Board for approval the Group’s risk appetite, as well as ongoing monitoring and review of the Group’s risk exposures • Monitoring the Group’s prudential risk exposure, which includes ensuring that the Group’s capital resources and liquidity proile are appropriate to its needs, whilst meeting minimum regulatoy requirements, including overseeing and challenging the design and execution of the Group’s stress and scenario testing • Reviewing the Group’s proposed interim and inal dividend payments • Reviewing the annual Group ORSA Repot and any required interim ORSA Repots, with recommendations being provided to the Board for approval • Reviewing and approving the Solvency II Actuarial Function Repots on Reinsuance and Undewriting each year. • Reviewing the Group’s progress towards approval of the Group’s internal capital model • Monitoring the adequacy and efectiveness of the Group’s Risk and Compliance functions • Approving the annual plans and resourcing for the Group Risk and Compliance functions which include reviewing regulatoy developments and any planned meetings between the PRA and FCA and the business • Reviewing any signiicant risk issues that have a material impact on the customers of the business and / or concern the regulator • Ensuring the adequacy and efectiveness of the Group’s systems and controls for the prevention of inancial crime, and data protection systems and controls • Reviewing the Group’s compliance with Solvency II • Considering the annual process for the review and appaisal of adherence to Group Minimum Standards • Reviewing compliance with Group policies, including the Group’s Reinsuance Policy, Group ORSA Policy, and Group Undewriting Policy • Reviewing the proposed risk-based adjustments to remuneation for senior managers and making subsequent recommendations for approval to the Group Remuneation Committee, as well as providing feedback on the Directors Remuneation Policy, and commenting on remuneation metrics to help ensure there is no conlict with risk management objectives • Reviewing repots from the Group Risk, Group Compliance, Group Data Protection and Privacy, and Group Internal Audit functions • Formally repoting to the Group Audit Committee to facilitate their recommendation of the Annual Repot and Accounts to the Board on the following key areas and disclosures; principal risks and uncetainties, risk management and internal control, viability, risks associated with material tansactions and/or stategic proposals, and the Taskforce on Climate-Related Financial Disclosures The Committee Chair repots formally to the Board on the Committee’s proceedings after each meeting, on all matters within its duties and responsibilities, as set out in previously circulated minutes to the Board. The Committee Chair also repots on the activities of the Committee in a formal written repot that is submitted to and discussed by the Board annually. The work of the Committee is suppoted by more detailed work undetaken by subsidiay Boards and/or executive Risk Management Committees in each of the Group’s opeational entities. At each meeting, the Risk Management Committees consider notable: movements in the opeation’s risk proile; risk events; and emerging risks. Risk Management Committees also assess and monitor regulatoy issues, ensuring that their resolution and the actions taken are appropriately recorded. The Risk Management Committees receive regular information on Conduct Risk, such as complaint handling repots and other related management information. The Group Risk Management function reviews and collates information from across the Group for consideation by the Committee. In addition, to ensure that the Committee is opeating efectively, it conducts a periodic review of its peformance (in 2022, this review was peformed externally by Bvalco) and at least annually reviews its constitution and terms of reference (last reviewed in November 2022). Any changes it considers necessay are recommended to the Group Board for approval. As pat of the Committee’s 2022 annual review, peformed by Bvalco, each Committee member undetook an inteview designed to provide objective assessment of the Committee’s peformance, including its efectiveness. The Committee discussed the results of the review at its meeting in Februay 2023 and concluded that, oveall, the Committee remained efective. An area of focus and improvement for the Committee in 2023 was identiied as ensuring that efective summaries highlighting major points, results, conclusions or recommendations are presented to suppot more complex Risk Committee material. Group Risk Committee Repot continued 180 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 Summay of Key Group Risk Committee Activities in 2022 During the year the Committee: • Reviewed the Group’s updated Risk Stategy, Risk Appetite and associated triggers and limits in the context of the Group’s agreed stategic objectives • Received and challenged regular updates related to Covid-19, including: impact on the Group’s principal risks and uncetainties; staf health and wellbeing; return to oice plans; IT and information security updates; and the impact to subsidiaries within the Group • Recommended the “2022 Group ORSA Repot” and ORSA Policy for Board approval prior to submission of the repot to the regulator • Reviewed the Group’s proposed dividend level, capital plan and capital bufer in line with the Capital Policy • Reviewed the Group’s regulatoy capital add-on application as pat of Solvency II capital requirements • Received regular monitoring repots on customer outcome risk and reviewed updates to the Group Minimum Standards and Policy Famework • Received in-depth updates of individual Group entities, including Admial Europe Compañia De Seguros (AECS), EUI, Admial Money (AFSL), Elephant and Able • Considered in-depth analysis of a number of the Group’s most signiicant risk areas, via stress and scenario testing and reverse stress testing • Considered the adequacy of risk mitigation measures and contingency plans including a review of the Group’s reinsuance provisions • Dedicated a signiicant amount of time to the development of the Admial internal model, receiving regular updates on the progress of the project and providing challenge to key project work streams, in paticular the model validation • Received regular updates on climate change-related initiatives, including continued progress to reduce scope 1 and 2 emissions, progress to validating scope 3 emissions, and updates on staf involvement • Received regular risk monitoring repots on peformance of Key Risk Indicators within the oveall risk management famework. • Received updates on the impact of notable risk events throughout 2022 • Received regular updates in relation to key progammes of work including IFRS 17, Neo, Guidewire Upgade and PCI Agentless Payments, as pat of the Group’s enhanced project governance famework • Considered the annual renewal of the Group’s corpoate insuance coveage Principal risks and uncetainties The Board of Directors conirms that it has peformed a robust assessment of the Group’s principal and emerging risks. These risks, along with explanations of how they are being managed and mitigated, are included in the Stategic Repot, page 114. Information on how key risk drivers have impacted on the Group’s principal risks has been included within the Viability Statement, page 122. Risk management and internal control systems The system of risk management and internal control over Admial’s insuance, opeational, market, credit and group risk is designed to manage ather than eliminate the risk of failure to achieve business objectives and breaches of risk appetites. Futhermore, risk management can only provide reasonable and not absolute assuance against material misstatement or loss. The Group Board is ultimately responsible for the Group’s system of risk management and internal control and the Audit Committee has reviewed the efectiveness of this system (a summay of Audit Committee duties and responsibilities, as well as key Audit Committee activities in 2022 is available on page 171). The Group Board is of the view: that there is an ongoing process for identifying, evaluating and managing the Group’s risks and internal controls; that it has been in place for the year ended 31 December 2022 and that it has opeated efectively; and that, up to the date of approval of the Annual Repot and Accounts, it is regularly reviewed by the Group Board and accords with the internal control guidance for Directors provided in the 2018 UK Corpoate Governance Code. The Group Board conirms that it has peformed a robust assessment of the Group’s principal and emerging risks. These risks, along with explanations of how they are being managed and mitigated, are included in the Stategic Repot on page 114, with key risk drivers impacting Admial’s principal risks and uncetainties being futher discussed in the Viability Statement on page 122. The Group Board is responsible for determining the nature and extent of the principal risks it is willing to take in achieving its stategic objectives. This assessment suppots the Group Board in monitoring the integrity of the Group’s repoted Financial Statements. The Group Board meets at least seven times a year to discuss the direction of the Group and to provide oversight of the Group’s risk management and internal control systems. The Group Board has delegated the development, implementation and maintenance of the Group’s oveall risk management famework to the Group Risk Committee (GRC). The GRC repots on its activities to the Group Board and the GAC, suppoting the 181 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 oveall assuance provided by the GAC that the Group’s internal control, risk management and compliance systems continue to opeate efectively. The Group Board has delegated to the GAC the review of the adequacy and efectiveness of the Company’s internal inancial controls, and internal control and risk management systems. The Group opeates a “three lines of defence” approach to Risk and Internal Control. 1st Line of Defence: The Group Board recognises that the day-to- day responsibility for implementing policies for risk identiication, assessment and management lies with the senior management, whose opeational decisions must take into account risk and how it can be controlled efectively. 2nd Line of Defence: The “second line of defence” is led by the Group Chief Risk Oicer and comprises the Corpoate Governance functions and Committees that are in place to provide oversight of the efective opeation of the internal control famework. The Corpoate Governance functions facilitate the oversight and opeation of the Group Policy Famework and Group Minimum Standards, covering risk management and controls for all notable risks to the Group. The Corpoate Governance functions peform second line reviews, including reviews of the capital modelling and business planning processes to suppot the Group Board’s assessment of the Group’s on-going viability. Regular reviews of all risks are undetaken in conjunction with senior management, with the results of these reviews recorded in risk registers and repoted to the appropriate governance forums and Boards. 3rd Line of Defence: The “third line of defence” comprises the independent assuance provided by the GAC and the Group Internal Audit function. Internal Audit undetakes a progamme of risk-based audits covering all aspects of both the irst and second lines of defence. The indings from these audits are repoted to all three lines, i.e. Management, the Executive and oversight Committees, and the GAC. The Subsidiay Boards, GRC, and entity Risk Committees receive repots setting out key peformance and risk indicators and consider possible control issues brought to their attention by early warning mechanisms that are embedded within the opeational units. They, together with the GAC, also receive regular repots from the Internal Audit function, which include recommendations for improvement of the control and opeational environments. The Chair of the GRC provides a written repot to the Group Board of the activities carried out by the Committee on an annual basis (a summay of GRC duties and responsibilities, as well as key GRC activities in 2022 is available on pages 178 to 182). In addition, the Group Board receives repots from the Chair of the GAC as to its activities, together with copies of the minutes from Subsidiay Board meetings, the GRC and the GAC. The GAC’s ability to provide assuance to the Group Board depends on the provision of periodic and independent conirmation, primarily by Group Internal Audit, that the controls established by Management are opeating efectively and where necessay provides a high-level challenge to the steps being taken by the GRC to implement the risk management stategy. Group Risk Committee Repot continued 182 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 Remuneation Committee Repot “For Admiral, like many other companies, 2022 has been a challenging year when it comes to pay for our people affected by the rising cost of living. The Committee have been focused on how we support all the people who work for Admiral..” Evelyn Bourke Chair of the Remuneation Committee Committee members Focus area Attendance Evelyn Bourke (Chair) 9/9 Jean Park 4/9 Mike Brierley 8/9 1 1 Michael Brierley was unable to attend one ad hoc meeting of the Remuneation Committee called at shot notice on 27 October 2022 Dear Shareholder, On behalf of the Remuneation Committee, I am delighted to present the Director’s Remuneation Repot for the year ended 31 December 2022. I would like to thank shareholders for suppoting Admial’s Annual Repot on Remuneation at the April 2022 AGM with a vote of 97.31%. I look foward to welcoming you at our AGM in 2023 and to your continued suppot for this year’s remuneation resolution. 2022 Business Context 2022 has been another turbulent year where we have needed to be agile in adapting to fast developing circumstances to arrive at the right outcomes quickly, but robustly for all our stakeholders. As Milena has made clear in her statement this year, while we haven’t been immune to external conditions, we continued to deliver the right products and sevice to our customers, and in return we have grown our customer base to 9.28 million, while delivering proits of £469 million. This is a solid peformance in uncetain times. We have been able to deliver this peformance because we reacted quickly to the changing market conditions. We needed to show agility to suppot the people who work for Admial and whose dedication and hard work make our business successful. During 2022 we have taken steps to ensure our people are suppoted through the cost-of-living challenge. 9 meetings in 2022 183 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Remuneation Committee Repot continued Pay across the Group – Suppoting our people We recognised the exta squeeze many of our people felt. The increases in energy prices, rising inlation, and geneal cost of living pressures have been on eveyone’s minds during 2022. Our colleagues have always been at the heat of our business, so we automatically sought to suppot them through this diicult time. Our response was tailored by population and to the situation in countries where we have opeations to ensure we delivered the right solutions. During 2022 we provided cost-of-living suppot payments to help with rising costs, paticularly over the winter months. These payments are on top of additional salay increases awarded to a signiicant number of colleagues as pat of our ongoing review of how we reward colleagues at Admial. We also provided suppot to colleagues in a less direct way though free car parking and discounts in the oice restauants. Finally, we have reminded our people of the suppot that is always available to them, but which may be even more relevant at the moment such as discounts on the weekly supermarket shop, motgage review sevices as well as free debt advice and life event loans. Remuneation for 2022 Taking into account the approved remuneation structure and Admial’s business peformance, the Committee made the following decisions during 2022: 2020–22 Discretionay Free Shares Scheme (DFSS) Based on our peformance for the period 2020–2022, 59.24% and 59.21% of the DFSS award ganted in 2020 will vest to Milena Mondini de Focatiis and Geaint Jones, respectively. The 2020 DFSS awards were ganted during the pandemic, a period when the shares price were lower in many companies. The awards ganted under the DFSS are a ixed number of shares. As such the awards ganted to Milena Mondini de Focatiis and Geaint Jones in 2020 were not impacted by the change in the share price. However, as always, the Committee have given thorough consideation to the outcomes to satisfy themselves that it is relective of the oveall peformance of the Group. The full details of the vesting outcomes are on page 199. 2022 DFSS Bonus Milena Mondini de Focatiis and Geaint Jones will receive a DFSS bonus of £399,085 and £260,516 respectively. This bonus is equivalent to dividends which would have been paid during the year on all outstanding DFSS and salay shares awarded, but not yet vested, plus a 6.48% adjustment for peformance against a scorecard of Non-Financial Metrics. In addition, the DFSS bonus was subject to a potential downward adjustment to take into account any risk events which were considered to have a material customer, regulatoy or inancial impact. For this year there were no such risk adjustments. The full details of the DFSS bonus calculations are on page 200. 2022 DFSS Award On 26th September 2022, Milena Mondini de Focatiis was ganted an award of 90,000 shares and Geaint Jones was ganted an award of 52,500 shares under the DFSS. Using the share price on the date of the gant of £21.21, this is the equivalent to £1,908,900 or 267% of Milena’s base salay and £1,113,525 or 267% of Geaint’s base salay respectively. The awards will vest based on: • EPS – 26.67% weighting • TSR vs. FTSE 350 (excluding investment companies) – 26.67% weighting • RoE – 26.67% weighting, and • the aveage outcomes of the scorecards of Non-Financial Metrics used to assess DFSS bonus adjustments over the peformance period – 20% weighting There will also be the potential for downwards adjustment subject to an assessment which will take account of risk events which are considered to have a material customer, regulatoy or inancial impact over the course of the peformance period. Futher details can be found on page 201. 2022 DFSS Financial Measures review One of the key changes to the way we have implemented remuneation during 2022 is a review of the peformance ange for the inancial measures that apply to the 2022 DFSS which covers the peformance period from 2022 to 2024. The inancial peformance anges for the inancial peformance measures are set at the point of each gant of the awards. The gants are usually made in the autumn. Over seveal years the measures and the peformance anges have been largely unchanged from one year to the next. However, in 2022 the Remuneation Committee has reviewed the peformance anges that apply to awards ganted on 26th September 2022 and approved a change. This impacts approximately 4,000 people in the Group, including Milena and Geaint as Group CEO and Group CFO. The Remuneation Committee believe it is appropriate to make the changes to the peformance anges in 2022 to relect both the unique opeating environment experienced during the pandemic and to ensure they relect the growth stategy of the Group. Without this change it is extremely likely that the vesting outcome would be nil which would undermine the reward and retention elements of the scheme for both the company and paticipants. In summay, the Earnings Per Share (EPS) peformance ange has been set on an absolute EPS outcome ather than growth because the pandemic resulted in exceptional EPS outcomes in 2020 and 2021 that make an EPS growth measure unachievable, 2021 would be the basis year for any growth. The Return On Equity (ROE) peformance ange has been set to relect the current growth and diversiication stategy and business mix. The Total Shareholder Return (TSR) target remains unchanged from previous schemes. 184 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 Admial has always focused on building a long-term sustainable business and has adopted a lexible approach to optimise outcomes in the medium term so as to maintain a focus on creating long term value. We believe this approach is a key factor in our success. In making these adjustments the Remuneation Committee continue to suppot this approach, while seeking to ensure that the DFSS will continue to act as an incentive for all the paticipants and align them to delivering strong results for all our stakeholders. We engaged with our major shareholders, who were geneally vey suppotive of the changes. Full detail of the change to the 2022 DFSS inancial targets can be found in the Annual Repot on Remuneation on page 200. 2023 remuneation arangements Executive Director remuneation arangements for 2023 will continue to be in line with the 2021 Remuneation Policy. Milena Mondini de Focatiis’ salay was increased by 3.00% to £737,326 and Geaint Jones’s salay was increased by 4.00% to £433,472, efective from 1 Januay 2023. These increases are below the proposed base pay changes across the wider Group for 2023. We anticipate the aveage increase to be in the order of 5% as we continue to suppot our people through the impact of the highly inlationay environment. It is anticipated that Milena Mondini de Focatiis will be ganted an award of 90,000 shares and Geaint Jones will be ganted an award of 52,500 shares under the DFSS for 2023. The Committee will review these awards prior to the September gant date to ensure the quantum remains appropriate. The Committee reviewed the metrics that will apply to DFSS and DFSS bonus awards for 2023. Futher details are shown on page 200. In paticular, the Committee considered the use of Environmental, Social and Governance (‘ESG’) measures. For 2023, DFSS and DFSS bonus awards will be subject to peformance anges based on diversity in senior management and across the Group. We plan to include targets for climate impact when we have completed the validation of our scope 3 emissions, and once Science-Based Targets have been set. The Committee will keep this under close review during 2023. In addition to the Executive Director arangements for 2023 the Committee has agreed the package for the incoming Group Chair, details of which can be found on page 205. Composition of the Remuneation Committee As mentioned elsewhere in the Annual Repot, Jean Park retired from the Board and all her committee memberships in Januay 2023. I would like to thank her for her invaluable contribution to the Committee and wish her all the vey best for the future. I would like to extend my thanks to JP Rangaswami for his insightful contribution as Interim Member of the Remuneation Committee over the course of 2022. As Justine Robets has recently joined the Remuneation Committee, I would like to extend a warm welcome to her, and I am sure her people and remuneation expetise will be highly valuable to the Committee. Looking ahead Our Directors’ Remuneation Policy, approved by shareholders at the 2021 AGM for a period of three years, is nearing its end and is scheduled for renewal and shareholder vote at the 2024 AGM. The Committee will consider how the policy and its implementation will need to evolve to ensure the continued alignment to our stategy and purpose. Simplicity and tansparency will be key areas of focus for the review. We will complete this review during 2023 and will undetake a consultation with our regulators and largest shareholders to understand their perspectives on any changes and will take careful consideation of feedback received before inalising the proposals. The Annual Repot on Remuneation (subject to an advisoy vote) will be put to our shareholders at the AGM in 2023. We hope that you vote in favour of the repot. I am available to discuss our Remuneation Policy and Annual Repot on Remuneation with shareholders. Evelyn Bourke Chair of the Remuneation Committee 7 March 2023 185 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Remuneation at a Glance 10-year TSR peformance: Admial vs. FTSE100 and FTSE350 indices Growth in the value of a hypothetical £100 holding over ten years to 31 December 2022 What did our Executive Directors earn in 2022? • Pension, beneits and SIP includes 2022 pension contribution of £15,000, and £15,000 for the CEO and CFO, respectively • DFSS bonus of £399,085 and £260,516 for the CEO and CFO, including an adjustment for peformance against scorecards of non-inancial measures • DFSS value for the CEO and CFO relates to 59.24% and 59.21% of their 2020 DFSS awards vesting, respectively Earnings per share (pence) 124.3p (2021: 212.2p) Full year dividend per share (pence) 112p (2021: 187p) Return on equity (%) 35% (2021: 56%) 1 year TSR -26% “ I would like to thank shareholders for supporting Annual Report on Remuneration at the April 2022 AGM with a vote of 97.31 % .” Evelyn Bourke Chair of the Remuneation Committee How did we peform during 2022? £1,016,647 £537,942 £260,516 £399,085 £19,069 £19,069 £715,850 £416,800 CEO CFO Pension, benefits & SIPSalary DFSS Bonus DFSS Shares Admiral FTSE 100 FTSE 350 £500 £400 £300 £200 £100 £0 Dec 12 Dec 13 Dec 14 Dec 15 Dec 17 Dec 18 Dec 19 Dec 20 Dec 21 Dec 22 Dec 16 186 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 Director’s Remuneation Policy Compliance Statement This Remuneation Repot has been prepared according to the requirements of the Companies Act 2006 (the Act), Regulation 11 and Schedule 8 of the Large and Medium-Sized Companies and Groups (Accounts and Repots) (Amendment) Regulations 2018, the Companies (Directors’ Remuneation Policy and Directors’ Remuneation Repot) Regulations 2019 and other relevant requirements of the FCA Listing Rules. In addition, the Board has adopted the principles of good corpoate governance set out in the UK Corpoate Governance Code (the Code) and the guidelines issued by its leading shareholders and bodies such as ISS, the Investment Association, and the Pensions and Lifetime Savings Association. Unless othewise stated, information contained within this Remuneation Repot is unaudited. The following Remuneation Policy (the “2021 Policy”) was approved by a 98.6% shareholder vote and therefore came into efect from the April 2021 AGM. There have been no changes to the Remuneation Policy since the 2021 AGM. Compliance with the Code Principles UK Code Principle Description References Principle P Remuneation policies and pactices should be designed to suppot stategy and promote long- term sustainable success. Executive remuneation should be aligned to company purpose and values and be clearly linked to the successful delivey of the company’s long-term stategy. • Key Principles on page 187 • Executive Director Remuneation Policy on page 187 • Remuneation outcomes for 2022 on page 199 • Implementation of remuneation policy for 2023 on page 196 Principle Q A formal and tansparent procedure for developing policy on executive remuneation and determining director and senior management remuneation should be established. No director should be involved in deciding their own remuneation outcome. • Executive Director Remuneation Policy on page 187 • Incentive outcomes on page 199 • Remuneation Committee oveview on page 183 Principle R Directors should exercise independent judgement and discretion when authorising remuneation outcomes, taking account of company and individual peformance, and wider circumstances. • Remuneation outcomes for 2022 on page 199 • Remuneation Committee oveview on page 183 Key Principles of Admial Remuneation Arangements The Group is committed to the primay objective of maximising shareholder value over time in a way that also promotes efective risk management and excellent customer outcomes ensuring that there is a strong link between peformance and reward. This is relected in the Group’s stated Remuneation Policy of paying competitive, peformance-linked and shareholder-aligned total remuneation packages comprising basic salaries coupled with paticipation in peformance-based share schemes to geneate competitive total reward packages for superior peformance. The Board is satisied that this Policy continues to meet the objectives of attacting and retaining high quality executives across the Group. This policy will be reviewed in 2023 as pat of the usual three year review and will be put to a shareholder vote at the 2024 AGM. The Committee reviews the remuneation famework and packages of the Executive Directors and senior managers and recognises the need to ensure that the Remuneation Policy is irmly linked to the Group’s stategy, including its risk management approach. In setting the Policy and making remuneation decisions, the Committee takes into account pay and conditions elsewhere in the Group. The main principles underlying the Remuneation Policy are: • Competitive total package – the Group aims to deliver total remuneation packages that are market-competitive, taking into account the role, job size, responsibility, and the individual’s peformance and efectiveness. Prevailing market and economic conditions and developments in governance are also considered, as are geneal salay levels throughout the organisation • Signiicantly share-based – our base salaries are typically targeted towards the lower end of market but are combined with meaningful annual share awards that vest on long-term peformance to ensure strong alignment with shareholders and the long- term interests of the Group. Executives are also encouaged to build up signiicant shareholdings in the Group to strengthen shareholder alignment • Long-term perspective – a signiicant pat of senior executives’ remuneation is based on the achievement of appropriate but stretching peformance anges that suppot the delivey of the Group’s stategy and shareholder value. The extended peformance and vesting horizons promote a long-term perspective that is appropriate to the insuance sector 187 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Director’s Remuneation Policy continued • Efective risk management – incentives are designed to ensure they do not encouage excessive risk-taking. They are aligned with the delivey of positive customer outcomes and reinforce the Group’s risk policy • Open and honest culture – the Group has a strong culture of focussing on collective success, whilst still recognising individual contribution to the Group’s peformance, and this is relected in our remuneation structure across the business, and • Tansparency for stakeholders – the remuneation structure is designed to be easy to understand, and all aspects are clear to employees and openly communicated to employees, shareholders, and regulators Remuneation Policy table This table describes the key components of the remuneation arangements for Executive Directors. Purpose and link to stategy Opeation Oppotunity and peformance metrics Base Salay To attact and retain talent by setting base salaries at levels appropriate for the business. Salaries are reviewed annually or following a signiicant change in responsibilities. Salay levels/increases take account of: • Scope and responsibility of the position • Individual peformance and efectiveness, and experience of the individual in the role • Aveage increase awarded across the Group Any salay increases are applied in line with the outcome of the review. In respect of existing Executive Directors, it is anticipated that increases in cash salay will not normally exceed the increase for the geneal employee population over the term of this Policy. More signiicant increases may be awarded in cetain circumstances including, but not limited to: where there has been a signiicant increase in role size or complexity, to apply salay progression for a newly appointed Executive Director, or where the Executive Director’s salay has fallen signiicantly behind market. Where increases are awarded in excess of that for the geneal employee population, the Committee will provide the ationale in the relevant year’s Annual Repot on Remuneation. Pension To provide retirement beneits. The Group opeates a Personal Pension Plan, a Deined Contribution Scheme. This is available to all employees following completion of their probationay period. In the UK, the Group matches employee contributions up to a maximum of 6% of base salay subject to an oveall maximum employer contribution of £15,000 or provides the equivalent value in cash. Base salay is the only element of remuneation that is pensionable. The pension provision and rules are the same for Executive Directors and the main body of staf. Other Beneits To provide competitive beneits. Includes (but not limited to): • Death in sevice scheme • Private medical cover • Permanent health insuance • Relocation, at the Committee’s discretion All beneits are non-pensionable Beneits may vay by role. None of the existing Executive Directors received total taxable beneits exceeding 5% of base salay during the most recent inancial year, and it is not anticipated that the cost of beneits provided will exceed this level over the term of this Policy. The Committee retains the discretion to approve a higher cost in exceptional circumstances (e.g., relocation), or in circumstances driven by factors outside the Company’s control (e.g., material increases in healthcare insuance premiums). 188 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 Purpose and link to stategy Opeation Oppotunity and peformance metrics Discretionay Free Share Scheme (DFSS) To motivate and reward longer term peformance, aid long term retention of key executive talent, use capital eiciently, grow proits sustainably and futher strengthen the alignment of the interests of shareholders and staf. Executive Directors may be ganted awards annually at the discretion of the Committee. Awards may be in the form of nil or nominal priced options or conditional shares. Awards are normally ganted on an annual basis and vest after a minimum of three years subject to Group peformance and continued employment. A two-year holding period applies to vested awards, during which time Executive Directors may not sell the vested awards except to cover tax liabilities. Awards are subject to a potential downwards adjustment based on an assessment to take into account of risk events which are considered to have a material customer, regulatoy or inancial impact over the course of the peformance period. Awards are subject to malus and clawback provisions, i.e., fofeiture or reduction of unvested awards and recovey of vested awards. Events which may lead to the application of malus and clawback are set out in the Group’s Malus and Clawback Famework and include material inancial misstatement, responsibility for conduct which results in signiicant losses, material failure of risk management, misconduct, reputational damage and corpoate failure. The Remuneation Committee has discretion to adjust the formulaic vesting outcome to ensure the inal outcome is a fair and true relection of underlying business peformance, both inancial and non-inancial. Maximum oppotunity: A maximum face value on award of 500% of base salay applies. Threshold peformance will result in vesting of up to 25% of the maximum award. DFSS shares are ganted as a ixed number of shares (subject to the quantum limits of the plan, as described above). The number ganted is reviewed and may be adjusted by the Committee, for example, if there has been a signiicant change in share price. Vesting of DFSS awards is subject to the Group’s peformance over a three-year peformance period. The peformance measures may include EPS growth, ROE, relative TSR and a scorecard of Non-Financial metrics selected by the Committee. Details of the measures, weightings and peformance anges used for speciic DFSS gants are included in the relevant year’s Annual Repot on Remuneation. The DFSS bonus To futher align incentive structures with shareholder interests through the delivey of dividend equivalent bonuses. To incentivise shareholder value creation and eicient use of capital, management paticipates in a bonus scheme which directly links their awards to dividends paid to shareholders. Bonus is calculated to be equivalent to dividends that would have been payable during the year on all outstanding DFSS shares awarded but not vested. The DFSS bonus is subject to a +/- 20% adjustment based on peformance against targets based on a set of stategic, customer and other non-inancial metrics. Whilst the bonus may be adjusted upwards or downwards by up to 20% in any given year, it is not anticipated that the adjustment will increase the Executive Directors’ remuneation on aveage over the long term. The DFSS bonus is subject to the Group’s Malus and Clawback Famework. Maximum oppotunity: sum equal to the dividends payable during the year on awarded but unvested DFSS shares, subject also to a possible 20% upwards or downwards adjustment based on peformance against a scorecard of non-inancial metrics. No bonus is payable unless dividends are payable on Admial shares. 189 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Purpose and link to stategy Opeation Oppotunity and peformance metrics Approved Free Share Incentive Plan (SIP) To encouage share ownership across all employees, using HMRC approved schemes for eligible UK employees. All eligible UK employees paticipate in the SIP after completing a minimum 12 months’ sevice. Gants are made twice a year based on the results of each half year and vest after three years subject to continued employment. The SIP is an all-employee scheme and Executive Directors paticipate on the same terms as other employees. The acquisition of shares is therefore not subject to the satisfaction of a peformance target. Maximum oppotunity is in line with HMRC limits. In-employment shareholding requirement To align interests of Executive Directors with shareholders. Guideline to be met within ive years of the later of the introduction of the guidelines and an Executive Director’s appointment. 400% of base salay. Post-termination shareholding requirement To futher align the interests of Executive Directors with shareholders and encouage a focus on long-term sustainable peformance Shareholding required to be maintained at the in-employment requirement (or number of shares held at time of termination, if lower) for a period of two years post termination. 400% of base salay (or number of shares held at time of termination, if lower). The Committee is satisied that the above Remuneation Policy is in the best interests of shareholders and does not promote excessive risk-taking. The Committee retains discretion to make changes required to satisfy legal or regulatoy requirements and other non- signiicant changes to the Remuneation Policy without reveting to shareholders. Notes to the Remuneation Policy table Payments from Existing Awards Executive Directors are eligible to receive payment from any award made prior to the approval and implementation of the 2021 Remuneation Policy. This includes all outstanding awards under the previous 2015 and 2018 Remuneation Policies, or any awards made prior to appointment to the Board. Details of any such payments will be set out in the Annual Repot on Remuneation as they arise. Selection of Peformance Measures Vesting under the DFSS is linked to the following inancial measures: EPS, ROE, and relative TSR. EPS has been selected as a peformance measure as the Committee feels it is a strong indicator of both long-term shareholder return and the underlying inancial peformance of the business. It is tansparent and highly visible to executives. ROE has been selected as the Committee believes that a returns metric reinforces the focus on capital eiciency and delivey of strong returns for our shareholders, thereby futher strengthening the alignment of incentives with Admial’s stategy. Relative TSR vs. the FTSE 350 (excluding investment companies) has been selected to relect value creation for Admial’s shareholders as compared to the geneal market. Since the 2019 award, vesting of DFSS awards is also linked to non-inancial measures which may include stategic, customer and other measures. The Committee believes that the additional emphasis on these measures reinforces Admial’s focus on our customers and on other non-inancial Group priorities, whilst also more clearly demonstating alignment of Group remuneation pactices with the requirements of Solvency II. The speciic peformance measures and their respective weightings in respect of each DFSS award may vay to relect the stategic priorities at the time of the award. Peformance anges are set taking into account the Company’s stategic priorities and the economic environment in which the Company opeates. The Committee believes that the peformance anges set are stretching and motivational, and that maximum outcomes are available only for outstanding peformance. Director’s Remuneation Policy continued 190 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 Remuneation Policy for Other Employees The Company’s approach to annual salay reviews is consistent across the Group, with consideation given to the role size, complexity, experience required, individual peformance and pay levels in compaable companies. In geneal, the Remuneation Policy which applies to other senior executives is consistent with that for Executive Directors. Remuneation is typically linked to Company and individual peformance in a way that reinforces shareholder value creation. Around 4,000 employees from across the Group, including the Executive Directors, paticipate in the DFSS. The Committee determines DFSS awards for those executives within its remit and on an aggregate basis for all other paticipants in the DFSS. For the Executive Directors, all DFSS share awards are subject to peformance conditions. For other senior managers and employees, a propotion of awards (anging from half to two-thirds) are subject to peformance, with peformance conditions either in line with those described above or set based on key peformance drivers of the individual’s relevant business unit, and the remainder has no peformance conditions attached other than the requirement that the recipient remains an employee of the Group at the date of vesting. Award sizes vay by organisational level and an assessment of both inancial and non-inancial individual and business unit peformance. All holders of DFSS awards receive the DFSS bonus, with the bonus for a number of senior managers being adjusted for peformance against a scorecard of customer and other non-inancial metrics. The Company opeates a personal pension scheme which is available to all employees once they have completed their probationay period. For all employees, including the Executive Directors, the Company matches the employee contribution up to a maximum of 6% of salay, subject to an oveall maximum of £15,000 or provides the equivalent value in cash. All UK employees who have seved a minimum tenure at Admial are eligible to paticipate in the SIP on the same terms. Most overseas employees receive an equivalent award to the UK SIP awards and these awards have no peformance measures attached. Sevice Contacts and Leaver/Change of Control Provisions The Company’s Policy is to limit payments upon termination of employment to pre-established contactual arangements. In the event that the employment of an Executive Director is terminated, any compensation payable will be determined in accordance with the terms of the sevice contact between the Company and the employee, as well as the rules of any incentive plans. Under normal circumstances, Executive Directors are entitled to receive termination payments in lieu of notice based on base salay and compensation for loss of beneits. The Company has the ability to pay such sums in instalments. The notice period for all Executive Directors is one year. Executive Director Date of appointment Contact duation Geaint Jones 13 August 2014 Rolling contact, 12-month notice period Milena Mondini de Focatiis 11 August 2020 Rolling contact, 12-month notice period 191 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 There is no provision in the Executive Directors’ contacts for compensation to be payable on early termination of their contact over and above the notice period element. The Executive Directors’ sevice contacts are available to view at the Company’s registered oice. When considering termination payments, the Committee reviews all potential incentive outcomes to ensure they are fair to both shareholders and paticipants. The table below summarises how the awards under the DFSS and DFSS bonus scheme are typically treated in speciic circumstances, with the inal treatment remaining subject to the Committee’s discretion: Plan Scenario Treatment of awards Timing of vesting DFSS Resignation. Awards lapse under most circumstances e.g., dismissal for cause or resignation. n/a Death, injuy or disability, redundancy, retirement, or any other reasons the Committee may determine. Any unvested award will be pro-ated for time with reference to the propotion of the vesting period remaining at termination, and peformance, unless the Committee determines othewise. Normal vesting date. Change of control. Unless the Committee determines othewise, any unvested award will be pro-ated for time with reference to the propotion of the vesting period remaining at change of control, and extent to which the Committee determines that the peformance conditions have been met or are likely to be met at the point of change of control. Immediately. DFSS bonus Resignation n/a n/a Death, injuy or disability, redundancy, retirement, or any other reasons the Committee may determine. Not payable after the event. n/a Change of control. Not payable after the event. n/a Salay shares (CFO only, awards under 2018 Policy) Resignation. Awards lapse under most circumstances e.g., dismissal for cause or resignation. n/a Death, injuy or disability, redundancy, retirement or any other reasons the Committee may determine. Any unvested award will be pro-ated for time with reference to the propotion of the vesting period remaining at termination, unless the Committee determines othewise. Normal vesting date, with Committee discretion to acceleate. Change of control. Unless the Committee determines othewise, any unvested award will be pro-ated for time with reference to the propotion of the vesting period remaining at the point of change of control. Immediately. For all leavers (with the exception of in the event of termination for cause), in respect of vested DFSS and vested salay share awards that are still subject to a holding period, awards will normally be released in full at the end of the holding period, though the Committee has discretion to determine othewise, taking into account the circumstances at the time. Director’s Remuneation Policy continued 192 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 Non-Executive Directors The Company has entered into letters of appointment with its Non-Executive Directors (NEDs). Summay details of terms and notice periods are included below. NED Term Initial date of appointment Commencement of current contact Notice period Annette Cout 3 years 21 March 2012 26 April 2020 Three months Jean Park 3 years 17 Januay 2014 17 Januay 2020 One month Justine Robets 3 years 17 June 2016 17 June 2019 One month Andy Crossley 3 years 27 Februay 2018 27 Februay 2021 One month Michael Brierley 3 years 05 October 2018 05 October 2021 One month Karen Green 3 years 14 December 2018 14 December 2021 One month Jayapakasa Rangaswami 3 years 29 April 2020 29 April 2020 One month Evelyn Bourke 3 years 30 April 2021 30 April 2021 One month Bill Robets 3 years 11 June 2021 11 June 2021 One month The NEDs are not eligible to paticipate in the SIP, DFSS or DFSS bonus scheme and do not receive any pension contributions. Details of the 2021 Policy on NED fees are set out in the table below: Purpose and link to stategy Opeation Oppotunity and peformance metrics To attact and retain NEDs of the highest calibre with experience relevant to the Company Fees are reviewed annually. The Group Chair fee is determined by the Committee after consultation with the Executive Directors. The NED fees are determined by the Group Chair together with the Executive Directors. Additional fees are payable for acting as Senior Independent Director or as Chair or member of a Board Committee and may be payable as appropriate in relation to other additional responsibilities (e.g., attending meetings overseas). Fees are paid in a mix of cash and Company shares for the Company Chair, and in cash for other Non- Executive Directors. The Board retains discretion to vay the mix or determine that fees are paid entirely in cash or Company shares. Fee levels are set by reference to NED fees at companies of a similar size and complexity. In the event that there is a material misalignment with the market or a change in the complexity, responsibility or time commitment required to fulil a NED role, the Board has discretion to make an appropriate adjustment to the fee level. The maximum aggregate annual fee for NEDs is capped at the limit provided for in the Company’s Aticles of Association. 193 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Pay-for-Peformance: Scenario Analysis The following chats provide an estimate of the potential future reward oppotunities for the Executive Directors, and the potential split between the diferent elements of pay under four diferent peformance scenarios: ‘Minimum’, ‘On-target’, ‘Maximum’ and ‘Maximum with share price growth’. As described above, Admial’s DFSS bonus is directly aligned with dividends received by our shareholders, with an adjustment for peformance on a selection of non-inancial measures. Whilst the Executive Directors’ inal DFSS bonus outcome may be adjusted upwards or downwards for these measures by up to 20% in any given year, it is anticipated that the aveage adjustment over the long term will be close to 0%. 65% 47% 25% 13% 61% 70% 35% 25% 28% 19% 63% 46% 25% 37% 27% 15% 27% 60% 10% 20% 11% 69% DFSS Bonus Fixed remuneration DFSS Minimum Minimum On-target On-targetMaximum MaximumMaximum with share price growth Maximum with share price growth Geraint Jones CFO Milena Mondini de Focatiis On appointment as CEO £0 £4,000,000 £3,000,000 £2,000,000 £1,000,000 Pay-for-Peformance: Scenario Analysis The value of DFSS awards is calculated based on the aveage share price in the last three months of 2022 £20.19 and the number of DFSS shares awarded in 2023 (90,000 and 52,500 shares respectively). Component ‘Minimum’ ‘On-target’ ‘Maximum’ ‘Maximum with share price growth’ Base salay Annual cash salay for 2023 Pension £15,000 annual contribution for CEO and CFO Beneits Taxable value of annual beneits provided in 2022 DFSS • 0% vesting • 25% aveage vesting • 100% vesting • 100% vesting plus 50% share price appreciation DFSS bonus Based on the DFSS bonus paid in respect of 2022 Director’s Remuneation Policy continued 194 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 Approach to Remuneation Relating to New Executive Director Appointments External Appointments When appointing a new Executive Director, the Committee may make use of any of the existing components of remuneation as set out in the Policy Table. The Committee’s policy is to set the remuneation package for a new Executive Director in accordance with the approved Remuneation Policy at the time of the appointment. In determining the appropriate remuneation for a new Executive Director, the Committee will consider all relevant factors to ensure that arangements are in the best interests of the Company and its shareholders. Where an individual is appointed on an initial base salay that is below market, any shotfall may be managed with phased increases over a period of time, subject to the individual’s peformance and development in the role. This may result in above-aveage salay increases during this period. The Committee may also make an award in respect of a new Executive Director appointment to ‘buy out’ incentive arangements fofeited on leaving a previous employer. In doing so, the Committee will consider relevant factors including any peformance conditions attached to the fofeited awards and the likelihood of those conditions being met to ensure that the value of the buy-out award is no greater than the fair value of the awards it replaces. The Committee may also avail itself of Listing Rule 9.4.2 R if appropriate in respect of buy-out incentive arangements (i.e., if the terms of paticipation for the prospective Executive Director are similar to all, or substantially all employees who paticipate in the plan, then approval by ordinay resolution of the shareholders of the listed company in geneal meeting is not required). Internal Appointments Remuneation for new Executive Directors appointed by way of internal promotion will similarly be determined in line with the Policy for external appointees, as detailed above. Where an individual has contactual commitments made prior to their promotion to the Board, the Company will continue to honour these arangements. Incentive oppotunities for below-Board employees are typically no higher than for Executive Directors, but measures may vay if necessay. Other Directorships Executive Directors are permitted to accept appointments as Non-Executive Directors of companies with prior approval of the Group Board. Approval will be given only where the appointment does not present a conlict of interest with the Group’s activities, and where the wider exposure gained will be beneicial to the development of the individual. Consideations of Conditions Elsewhere in the Group The Committee considers the pay and employment conditions elsewhere in the Group when determining remuneation for Executive Directors. Consideations of Shareholder Views When determining remuneation, the Committee takes into account best pactice guidelines issued by institutional shareholder bodies. The Committee is open to feedback from shareholders on the Remuneation Policy and will continue to monitor trends and developments in corpoate governance and market pactice to ensure the remuneation structure for our Executive Directors remains appropriate. Consideations of Regulatoy Requirements The Committee regularly reviews the Remuneation Policy and structure in the context of Solvency II remuneation guidance, and EBA, PRA, and FCA expectations regarding the supevision of insuance irms. The Chief Risk Oicer periodically attends Committee meetings as pat of this process and provides suppot to the Committee in understanding any risk-related implications of remuneation decisions. Whilst the Remuneation Policy includes seveal features which help ensure compliance with current regulatoy guidance, the Committee reseves the discretion to adjust the Remuneation Policy, and its execution, to take into account any developments in such regulatoy guidance. 195 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Annual Repot on Remuneation This section of the repot provides details of how Admial’s Remuneation Policy was implemented in 2022 and how the Remuneation Committee intends to implement the proposed Remuneation Policy in 2023 (subject to shareholder approval). Remuneation Committee Membership in 2022 The Board sets the Group’s Remuneation Policy and, through the authority delegated to it by the Board, the Committee is responsible for making recommendations to the Board on the implementation of the Remuneation Policy. Its remit includes recommending the remuneation of the Group Board Chair and the Executive Directors; approving the remuneation of senior management; and determining the composition of and awards made under the peformance-related incentive schemes. At the end of 2022 the Committee comprised Evelyn Bourke, Jayapakasa Rangaswami , Jean Park and Michael Brierley. The Committee met 8 times during the year. The Group Chair, CEO, CFO and CRO are invited to meetings where the Committee considers it appropriate to obtain their advice on Group stategy and peformance and senior executive pay stategy. No director is involved in deciding their own remuneation outcome. The members of the Committee do not have any personal inancial interests (other than shareholdings), or any conlicts, that relate to the business of the Committee. The Committee members do not have any day-to-day involvement in the running of the Group. Committee activities During the year ended 31 December 2022, in addition to its regular activities, the Committee also: • Reviewed the stategic, customer and ESG metrics introduced for adjusting of variable pay of Executive Directors • Reviewed the implementation of non-inancial peformance measures for a broader employee population in the UK Insuance Business • Reviewed the peformance anges for the inancial measures for the 2022 DFSS and the associated engagement with shareholders, and • Reviewed the design of annual incentives as pat of on-going work on the Group’s reward stategy As mentioned in the Governance Repot, during the year ended 31 December 2022, the Committee also peformed its regular activities: • Reviewed the DFSS vesting and bonus arangements for Executive Directors, senior management and relevant staf (Material Risk Takers) covered under Solvency II • Reviewed workforce remuneation, including alignment of the Group’s current remuneation structure with the Living Wage • Reviewed Admial’s Gender Pay Gap repoting statistics • Reviewed risk events and their impact on variable pay; • Undetook an evaluation of the Committee’s peformance during the year • Reviewed the Committee’s terms of reference • Reviewed the Group’s Malus and Clawback Famework, and • Reviewed external remuneation trends and market conditions Remuneation topics were discussed with employees at the Employee Consultation Group (ECG), which met four times over the year. Key themes discussed at the ECG were: pay in the context of the cost-of-living crisis; the use of shares in employee remuneation packages; weekly working hours; and the level of company-matched pension contributions. In Februay 2023, the Chair of the Remuneation Committee and Group Head of Reward met with the ECG to speciically discuss the remuneation of the Executive Directors. The following topics were discussed: the approach to Reward at Admial; a summay of the rules and regulations Admial is subject to; the current arangements for the Executive Directors; and the alignment of Executive Director remuneation with the rest of the company. There was time allotted to listen to feedback and to answer any questions from the ECG, during which the members of the ECG had questions on how the reward package and pay increases for Executive Directors are determined. The chair of the remuneation committee wrote to the major shareholders about the changes to the 2022 DFSS peformance anges and had meetings with a number of shareholders. Details are provided on page 202. Committee Efectiveness Review For 2022, the Committee Efectiveness Review was undetaken externally by Bvalco. The repot obseved that the Remuneation Committee is an efective and well run forum, with potentially sensitive issues being dealt with eiciently, following considered and constructive exchanges of views. Discussion was active and open. Various potential courses of action were considered resulting in next steps being agreed. Where debate on a question was not closed, additional information was requested. There were also constructive suggestions regarding how some matters may be dealt with in a more timely manner and that an update to the annual timetable is required. The Committee discussed the results of the review at its meeting in Februay 2023 and noted the content of the review. Advisors to the Committee During the year, in order to enable the Committee to reach informed decisions, advice on market data and trends was obtained from independent consultants Willis Towers Watson (WTW). WTW repoted directly to the Committee Chair and are signatories to and abide by the Code of Conduct for Remuneation Consultants (which can be found at www.remuneationconsultantsgroup.com). WTW also provided advice to the Company in relation to capital modelling and pricing. The fees paid to Willis Towers Watson in respect of work carried out in relation to the Committee in 2022 (based on time and materials) totalled £109,774. The Committee undetakes due diligence periodically to ensure that advisors remain independent of the Company and that the advice provided is impatial and objective. The Committee is satisied that the advice provided by Willis Towers Watson is independent. 196 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 Summay of Shareholder Voting at the 2022 AGM The table below shows the results of the advisoy vote on the 2021 Annual Repot on Remuneation. For Against Total votes cast Abstentions Annual Repot on Remuneation Total number of votes 228,106,529 6,306,229 234,412,758 3,952 % of votes cast 97.31% 2.69% Total Single Figure of Remuneation for Executive Directors (audited) The table below sets out the total single igure remuneation received by each Executive Director for the years ended 31 December 2022 and 31 December 2021: Executive Director 1. Base salay 2. Beneits 3. Pension Total ixed pay 4. SIP 5. DFSS 6. DFSS bonus Total variable pay Total remuneation Milena Mondini de Focatiis 2022 £715,850 £480 £15,000 £731,330 £3,589 £1,016,647 £399,085 £1,419,321 £2,153,151 8 2021 £695,000 £454 £15,643 7 £711,097 £3,601 £713,644 £653,849 £1,371,094 £2,082,191 Geaint Jones 2022 £416,800 £480 £15,000 £432,280 £3,589 £537,942 £260,516 £802,047 £1,234,327 2021 £404,660 £454 £15,000 £420,114 £3,601 £842,327 £471,763 £1,317,691 £1,737,805 The igures have been calculated as follows: 1 Base salay: amount earned for the year. 2 Beneits: the taxable value of annual beneits received in the year. 3 Pension: the value of the Company’s contribution during the year. 4 SIP: the face value at gant. 5 DFSS: the value at vesting of shares vesting on peformance over the three-year periods ending 31 December 2022 and 31 December 2021. For the 2022 igures, given that vesting occurs after the 2022 Directors’ Remuneation Repot is inalised, the igures are based on the aveage share price in the last three months of 2022 of £20.19. The 2021 igures have been trued up based on the actual share price on vesting of £20.11. For 2022, unfavouable movements of £145,523 and £191,304 are included in the DFSS value, attributable to a decrease in the share price over the vesting period for Milena Mondini de Focatiis and Geaint Jones, respectively. For 2021, a decrease of £31,583 and £37,279 of the DFSS value is attributable to share price depreciation over the vesting period, for Milena Mondini de Focatiis and Geaint Jones, respectively. 6 DFSS bonus: the bonus is equivalent to dividends that were paid in respect of the peformance year on all outstanding DFSS shares awarded but not yet vested. The bonus is paid in two tanches annually: i) in respect of H1 2022: a bonus of £301,011 was paid to Milena Mondini de Focatiis, based on 265,000 unvested shares, a scorecard outcome of 108.18% and the interim dividend of 105p per share; and a bonus of £176,063 was paid to Geaint Jones based on 155,000 unvested shares and a scorecard outcome of 108.18% and the interim dividend of 105p per share. ii) in respect of H2 2022, due for payment in May 2023: a bonus of £98,074 is due to Milena Mondini de Focatiis, based on 180,000 unvested shares, a scorecard outcome of 104.78% and the inal dividend of 52p per share; and a bonus of £84,453 is due to Geaint Jones based on 155,000 unvested shares and a scorecard outcome of 104.78% and the inal dividend of 52p per share. The payments in respect of H2 2022 are subject to completion of internal governance procedures. 7 It is an oddity of the calculation basis that the pension contribution in respect of 2021 appears to exceed the policy. Milena’s pension arangements for April 2020 to March 2021 and April 2021 to March 2022 are £15,000, respectively, which is in line with the policy. 8 Milena Mondini de Focatiis received an Anniversay award of £2,500 during 2022 which is included in the total remuneation number. Anniversay payments are made to all colleagues who reach signiicant milestones in their employment with the Group. 197 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Annual Repot on Remuneation continued Total Single Figure of Remuneation for Non-Executive Directors (audited) The table below sets out the total single igure remuneation received by each NED for the years ended 31 December 2021 and 31 December 2020. Total fees 2022 2021 Director Fees Taxable beneits 10,11 Fees Taxable beneits 10 Annette Cout 1 £346,084 £3,281 £336,004 £228 Karen Green 2 £103,750 £1,525 £88,000 £692 Jean Park 3 £153,000 £220 £118,000 £498 Justine Robets 4 £87,875 £1,326 £70,000 £368 Andy Crossley 5,6 £170,667 £3,197 £130,200 £1,367 Michael Brierley 5 £140,000 £1,710 £132,600 £45 Jayapakasa Rangaswami 7 £93,583 £997 £71,777 £206 Evelyn Bourke 8 £95,000 £2,860 £54,717 £316 Bill Robets 9 £75,000 £10,169 £35,947 £0 1 The 2022 fee for Annette Cout is £346,084 (a cash fee of £242,259 and a share fee of £103,825) 2 Karen Green was appointed to the Group Risk Committee efective 1 June 2022 3 Jean Park’s fees for 2022 include additional fees relating to her position as Chair of the Group Risk Committee and is in recognition of the increased time commitment required of her as a consequence of Solvency II regulations and the Admial Internal 4 Justine Robets was appointed as interim Senior Independent Director efective 21 Februay 2022 5 The fees for Andy Crossley and Michael Brierley include additional fees in relation to their positions as Chairman of the EUI Limited Board of Directors and Admial Financial Sevices Limited Board of Directors, respectively 6 Andy Crossley was appointed interim Chair of the Group Risk Committee efective 21 Februay 2022. An administative error has meant that Andy was paid an additional £1,633.70 in fees in respect of 2022. This has been corrected and will relect in his 2023 fees 7 Jayapaska Rangaswami was appointed to the Group Remuneation Committee efective 21 Februay 2022 8 Evelyn Bourke was appointed as an independent Non-Executive Director and member of the Remuneation Committee on 30 April 2021. She was subsequently appointed as Chair of the Remuneation Committee on 1 September 2021 9 Bill Robets was appointed as an independent Non-Executive Director on 11 June 2021. He was appointed to the Nomination and Governance Committee on 21 Januay 2022. An administative error has meant that Bill was paid an additional £291.67 in fees in respect of 2022. This has been corrected and will relect in his 2023 fees 10 Taxable beneits represent those expense reimbursements relating to tavel, accommodation and subsistence in connection with the attendance at Board, Subsidiay and Committee meetings during the year, which are deemed by HMRC to be taxable. The amounts in the table are ‘grossed-up’ to include the UK tax paid by the Company on behalf of the Non-Executive Directors. Non-taxable expense reimbursements have not been included in the table 11 The NED taxable beneits for 2022 have returned to normal pre-pandemic levels Incentive Outcomes for Financial Year to 31 December 2022 (audited) DFSS Awards Vesting on Peformance to 31 December 2022 On 24 April 2020, Milena Mondini de Focatiis was ganted an award under the DFSS of 85,000 shares with a value at the date of award of £1,961,800 (based on a gant date share price of £23.08). On 24 September 2020, Geaint Jones was ganted an award under the DFSS of 45,000 shares with a value at the date of award of £1,231,650 (based on a gant date share price of £27.37). Vesting of the award was based 80% on the achievement of inancial peformance measures and 20% on a scorecard of non- inancial measures. Financial peformance outcomes The peformance measures applicable to these awards are, EPS growth vs. LIBOR, TSR vs. FTSE 350 (excluding investment companies), and ROE, weighted equally and all measured over the three-year period 1 Januay 2020 to 31 December 2022. Over this period, the returns to our shareholders were strong, with TSR just shy of the upper quatile versus FTSE350 companies and with ROE of 46.8%. This is in contast to EPS growth which was below the LIBOR index for the period. The combination of these shareholder returns and EPS growth contributed to a vesting level of 56.5 percent for the inancial measures. The Committee reviewed this vesting outcome and concluded that it was appropriate. 198 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 The table below details the Company’s peformance against the peformance ange. Peformance ange Actual outturn Vesting Contribution (% of maximum)Peformance measure Threshold Maximum Vesting schedule EPS growth vs. LIBOR Growth in line with LIBOR Growth of 36 points (equivalent to 10% p.a.) in excess of LIBOR 10% for achieving threshold with staight line relationship to 100% for maximum peformance Underpeformed LIBOR by 15.92pts 0% TSR vs. FTSE 350 (excluding investment companies) Median Upper quatile 25% for median, with staight line relationship to 100% for upper quatile 71st percentile 89.9% Return on Equity (ROE) 25% 55% 25% for achieving threshold with staight line relationship to 100% for maximum peformance 46.8% 79.6% Vesting 56.5% Non-inancial peformance outcomes The individual vesting contribution in relation to the non-inancial measures for Milena Mondini de Focatiis and Geaint Jones are set out in the table below. These aggregated to an oveall ating across the 3 years of 70.20% and 70.05% respectively and have a weighted outcome of 14.04% and 14.01%, respectively. Futher details of the scoring for 2022 can be seen on page 200. Oveall Vesting The combined vesting outcomes for Milena Mondini de Focatiis and Geaint Jones can be seen in the below table. Award Weighting Peformance outcomes Vesting (% of maximum) DFSS Vesting Component Milena Mondini de Focatiis Geaint Jones Milena Mondini de Focatiis Geaint Jones Milena Mondini de Focatiis Geaint Jones Financial peformance measures: EPS growth vs. LIBOR, TSR vs. FTSE 350 (excluding investment companies) and Return on Equity (ROE) 80.00% 56.50% 45.20% Non-inancial peformance measures 20.00% 70.20% 70.05% 14.04% 14.01% Total 100.00% 59.24% 59.21% The Committee reviewed the vesting outcomes and concluded that they were appropriate, and that no adjustments were required. Based on peformance and scorecard outcomes the total amount that will vest to Milena Mondini de Focatiis in April 2023 will therefore be 59.24% (i.e., 50,354 shares), and the total amount that will vest to Geaint Jones in September 2023 will be 59.21% (i.e., 26,644 shares), subject to their continued employment on the vesting date. Although the 2020 DFSS awards were ganted during the pandemic, a period when the shares price were lower in many companies, the awards ganted under the DFSS are based on a ixed number of shares. The awards ganted to Milena Mondini de Focatiis and Geaint Jones in 2020 were not impacted by the change in the share price. The Committee have given thorough consideation to the outcomes to satisfy themselves that it is relective of the oveall peformance of the Group. Vested DFSS awards are subject to clawback provisions. Events which may lead to the application of clawback are set out in the Group’s Malus and Clawback Famework and include material inancial misstatement, responsibility for conduct which results in signiicant losses, material failure of risk management, misconduct, reputational damage or corpoate failure. 199 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 DFSS bonus in Respect of 2022 In line with the Remuneation Policy, the Group paid a bonus to all holders of DFSS shares in 2022, which was equivalent to the dividend payable on all outstanding DFSS shares awarded but not yet vested. The 2022 Bonus for Executive Directors also includes a potential +/- 20% adjustment to the DFSS bonus based on peformance of a set of non-inancial peformance metrics, which for 2022 was grouped into three categories: Stategy, customer and ESG. For the customer and ESG stategic pillars, relevant quantitative data was used to assess peformance and an outcome was determined. For the stategy, the board members derived a collective view on the progress against the stategic priorities. Details of the measures used in the scorecard and outcomes are summarised in the table below: Outcomes (% out weighting for each categoy) Categoy Metrics Target Max H1 H2 Stategy Oveall scoring from the board on scorecard of measures around: • Progress towards Admial 2.0 • Diversiication – existing non-motor product development (both top line and KPIs), in paticular Household and Loans • Diversiication – development of new products • Progress towards deining motor mobility stategy 16.50% 33.00% 24.75% Customer Customer Feedback (NPS) 8.50% 17.00% 12.48% 11.42% Customer Outcomes (CRMI) 8.50% 17.00% 12.78% 5.33% ESG People (Trust Index) 9.00% 18.00% 9.00% Diversity & Inclusion (Female representation at Senior level) 3.75% 7.50% 6.00% Inclusion (Inclusion suvey results) 3.75% 7.50% 5.44% Total 50.00% 100.00% 70.45% 61.94% Oveall scorecard multiplier 100.00% 120.00% 108.18% 104.78% Stategic outcomes have been assessed by the Board as 75% of maximum on the basis of strong progress towards Admial 2.0 and Diversiication, with positive peformance in UK Household and Admial Money in paticular. Progress towards deining motor mobility stategy continues apace. Customer outcomes are taken as a weighted aveage across the Group on the basis of customer headcount. CRMI data measuring customer outcomes tailed of in H2, with complaints data relecting pressure in the claims area for the UK Insuance business, which had a signiicant downwards impact on the oveall outcome for the half as it is weighted at c.75%. Customer Feedback outcomes were geneally strong over the year, with outcomes for each entity anging from 50–100% of maximum, with outcomes concentated between 60 and 70% of maximum. The Trust Index outcome of 84% was 2% lower than the benchmark of 86%, resulting in achievement of 50% of maximum. Inclusion suvey results were geneally at the benchmark, with one question exceeding, resulting in an outcome of 72.50% of maximum. The year-end igures for females in senior leadership roles was 37.20% across the Group, which resulted in an outcome of 80.00% of maximum. The oveall outcome of the scorecard was assessed to be a 108.18% multiplier to the DFSS bonus paid for H1 2022 and a 104.78% multiplier to the DFSS bonus for H2 2022 (to be paid in 2023) for Milena Mondini de Focatiis and Geaint Jones. In addition, the Executive Directors’ DFSS bonus is subject to a futher risk adjustment (downwards only) to take into account of risk events which are considered to have a material customer, regulatoy or inancial impact. During the year, and in addition to the above, the Committee took into account relevant trigger events as pat of the established risk adjustment process, and determined it was not appropriate to apply a downwards adjustment on that basis. DFSS bonus payments are subject to malus and clawback provisions. Annual Repot on Remuneation continued 200 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 Scheme Interests Ganted in 2022 (audited) DFSS On 26th September 2022, Milena Mondini de Focatiis was ganted an award of 90,000 shares and Geaint Jones was ganted an award of 52,500 shares under the DFSS. This is the equivalent to £1,908,900 or 267% of Milena’s base salay and £1,113,525 or 267% of Geaint’s cash salay respectively (based on share price of £21.21). The three-year period over which peformance will be measured is 1 Januay 2022 to 31 December 2024. The award is eligible to vest on the third anniversay of the date of gant i.e., September 2025, subject to peformance and to continued employment. Vested awards will be subject to an additional two-year post-vest holding period. The award will vest on EPS, TSR vs. FTSE 350 (excluding investment companies), ROE and a scorecard of stategic, customer and other non-inancial measures, inclusive of customer outcomes, customer feedback, ESG, stategic measures and people metrics. There will also be the potential for downwards adjustment subject to an assessment to take into account of risk events which are considered to have a material customer, regulatoy or inancial impact over the course of the peformance period. The peformance conditions are summarised in the table below. Peformance ange VestingPeformance measure Weighting Threshold Maximum EPS 26.67% 120p 150p 25% for reaching threshold, rising to 100% at maximum peformance TSR vs. FTSE 350 (excluding investment companies) 26.67% Median Top Quatile 25% for median, with staight line relationship to 100% for upper quatile Return on Equity (ROE) 26.67% 20% 40% 25% for reaching threshold, rising to 75% for reaching stretch at 30% ROE, rising to 100% at maximum peformance Scorecard non-inancial measures 20% Vesting of between 0% and 100% of this element is based on the aggregate outcomes of the scorecards used to determine the DFSS bonus adjustments over the 3-year peformance period. Futher details of the aggregation of these scorecards will be provided upon vesting DFSS awards are subject to malus and clawback provisions, which are set out in the Group’s Malus and Clawback Famework, as outlined in page 189. 201 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Setting the 2022 DFSS Financial Measures The inancial measures, including the peformance anges which informs the scheme vesting are usually set prior to the ganting of awards in the autumn each year. While not a documented policy, in the past we have often rolled the inancial measures, including the peformance anges, from one year to the next. This approach has worked historically, but the unusual opeating environment of the pandemic, coupled with the current business phase and our plans for growth, has led the Remuneation Committee to review the peformance anges for 2022 to 2024. Earnings Per Share The assessment of peformance against our previous EPS measure compares one ixed point at the stat of the peformance period with another ixed point at the end of the peformance period, with a threshold to maximum ange based on growth in EPS over the period of the plan. In the 2022 DFSS this would mean comparing the end of 2021 with the end of 2024. Due to exceptional proitability in the 2021 inancial year, the previous approach would result in peformance ange which would be vey diicult to achieve. As such we have changed from a peformance ange based on growth against the 2021 proit to a ange based on absolute EPS over the peformance period. In setting the new peformance ange, the Committee have considered the extent to which our people, including the directors, have beneited from the exceptional levels of inancial peformance in prior years. It is evident that they have not beneited from the full outpeformance due to outcomes being in excess of the maximum vesting level. For example, EPS in the 2018 scheme which vested in 2021 was 51.3% against a maximum of 36%, meaning 15.3% was not rewarded. In the most recent scheme, which vested earlier this year, EPS was 45.8% against the 36% maximum, resulting in 9.8% not counting towards the reward. Return On Equity The impact of exceptional peformance during the pandemic also impacts the ROE, resulting in a compaatively more challenging target to achieve. In addition, the Group’s stategic approach to pursue growth through, amongst other things diversiication into new products and markets, may impact future ROE. Hence, the peformance ange for ROE has been set by reference to our stategic intent and the opeating environment. Total Shareholder Return TSR is assessed on relative peformance and so is not so obviously impacted by historic over-peformance or the opeating environment, and as such we do not intend to make changes to either the measure or the peformance ange at this point. Shareholder Engagement Changing the peformance anges is not a step that the Committee took lightly. In doing so the committee ensured there was good engagement with shareholders. UBS Brokers were engaged throughout the process of setting the new peformance anges, attending a Remuneation Committee meeting and advising the Committee and management through the target setting process. Following internal approval, letters were sent to our largest shareholders explaining the case for change and ofering them the oppotunity to speak with us regarding the change. Four meetings with external shareholders were undetaken. The feedback which was provided was geneally positive and suppotive of the changes, however, for the purpose of balance, it must be noted that in one meeting there was negative feedback for the proposal. SIP In March 2022, Milena Mondini de Focatiis and Geaint Jones were ganted awards under the SIP of 72 shares with a face value of £1,786.32, which will mature on 11 March 2025, subject to continued employment. In August 2022 Milena Mondini de Focatiis and Geaint Jones were ganted awards under the SIP of 81 shares with a face value of £1,802.25, which will mature on 24 August 2025, subject to continued employment. Exit Payments (audited) No exit payments were made to an Executive Director during the year. Payments to Past Directors (audited) Following stepping down from the role of CEO on 31 December 2020, David Stevens has continued as an adviser to the Group in a pat- time capacity, with a salay of £70,033 per annum. He also sits as a Non-Executive Director on the Board of Admial Financial Sevices Limited for which he receives no fee. Annual Repot on Remuneation continued 202 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 Implementation of Remuneation Policy for 2023 Executive Directors Salay, Pension and Beneits Salaries for the Executive Directors in 2023 have been determined in line with the Remuneation Policy. Milena Mondini de Focatiis’ salay was increased by 3.00% to £737,326 efective 1 Januay 2023 and Geaint Jones’ salay was increased by 4.00% to £433,472 efective 1 Januay 2023. Due consideation was given to ensure these increases are below the proposed increases for employees across the Group for 2023. The aveage pay review in 2023 is expected to be 5% as we continue to suppot our people through the impact of the cost of living challenges. The Executive Directors will continue to paticipate in the Group Personal Pension Plan on a consistent basis with other employees, where employee contributions are matched up to a maximum 6% of base salay with a cap on the maximum employer contribution of £15,000 per annum. The Company will ofer individuals a choice between pension contributions and cash in lieu. Both Executive Directors will continue to receive beneits in line with the Policy. DFSS The Committee intends to make awards under the DFSS to Milena Mondini de Focatiis and Geaint Jones in September 2023 of 90,000 and 52,500 shares, respectively. The Committee will conirm the size for each of the 2023 DFSS awards closer to the award date. In determining whether the award size should difer from the above number of shares, the Committee will consider any large share price change over the prior year, and in paticular whether this is due to external factors out of management control. The actual 2023 DFSS awards will be disclosed in the 2023 Annual Repot on Remuneation. It is currently anticipated that the vesting of 2023 DFSS awards for Milena Mondini de Focatiis and Geaint Jones will continue to be assessed across the three-year peformance period using an 80% peformance weighting on EPS, TSR vs. FTSE 350 (excluding investment companies) and ROE, and a 20% weighting on a scorecard of stategic, customer and other non-inancial metrics. The committee will conirm the conditions and peformance anges for the 2023 DFSS award in quater one of 2023 and will disclose them in the 2023 Annual Repot on Remuneation. It has been an aim of the Committee to include carbon emissions targets as pat of the NFM scorecard to suppot the delivey of the Group’s net zero targets. Good progress has been made in 2022 on verifying the Group’s scope 3 emissions. This process is nearly complete after which targets will be decided on. The Committee is mindful of the potential impact of the fothcoming change to the IFRS 17 accounting standard on the Group’s repoted inancial results. At this stage the nature and degree of any such impact has not been conirmed. For DFSS awards which will staddle the change in accounting standard, the Committee intends to set targets on the current basis. However, it will keep these under review and apply its discretion to ensure that the peformance anges remain no more or less stretching than originally anticipated as a result of the accounting change. There will be the potential for downwards adjustment subject to an assessment to take account of risk events which are considered to have a material customer, regulatoy or inancial impact over the course of the peformance period. DFSS bonus As in prior years, Milena Mondini de Focatiis and Geaint Jones will be eligible to receive DFSS bonus in 2023. The bonus is calculated to be equivalent to dividends that would have been payable during the year on all outstanding DFSS shares and any salay shares awarded but not vested. The DFSS bonus will include a +/- 20% adjustment based on peformance against a set of non-inancial peformance metrics. The details of the metrics and any adjustment applied will be provided in the 2023 Annual Repot on Remuneation. 203 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 The table below summarises the stategic, customer, ESG and other non-inancial metrics which will apply to 2023 DFSS bonus. There will also be the potential for downwards adjustment subject to an assessment to take into account of risk events which are considered to have a material customer, regulatoy or inancial impact over the course of the peformance period. Stategic Pillar Measures Weighting % Customer – 34% Customer outcomes (CRMI) 17% Customer feedback (NPS) 17% Stategy – 33% Oveall scoring from the board on scorecard of measures around: • Progress towards Admial 2.0 (data and analytics goal) • Diversiication – existing non-motor product development (both top line and KPIs), in paticular Household and Loans • Diversiication – development of new products • Progress towards deining motor mobility stategy 33% ESG – 33% Great Place to Work Trust Index 18% Diversity 15% Chair and Non-Executive Directors Fees for the Board Chair and other Non-Executive Directors were reviewed in Januay 2023 having previously been last reviewed in 2022. Increases were made, efective 1 Januay 2023, to relect the increased time commitment of these roles. Measures 2022 fee (p.a.) 2021 fee (p.a.) Chair 1 £356,467 £346,084 NED base fee £70,000 £70,000 Additional fee for chairing: • Audit Committee £25,000 £25,000 • Group Risk Committee 2 £43,000 £43,000 • Remuneation Committee £25,000 £25,000 • Nomination and Governance Committee £10,000 £10,000 Additional fee for membership of: • Audit Committee £15,000 £15,000 • Group Risk Committee £15,000 £15,000 • Remuneation Committee £12,000 £10,000 • Nomination and Governance Committee 3 £8,000 £5,000 Additional fee for being Senior Independent Director £17,000 £15,000 1 The 2023 fee for the incumbent Board Chair increased by 3% from £346,084 to £356,467 and comprises a cash fee of £249,527 and a share fee of £106,940 with which the Chair is required under a Share Agreement entered into with the Group to use the net proceeds in two equal instalments to purchase Group shares after the Group’s Full Year Results and Half Year Results are announced each year. Annette Cout will step down from her duties as Chair after the AGM on 27 April 2023. These arangements are to be pro-ated in line with time seved. The Board Chair does not receive any additional fees (e.g., for committee membership) as these are included in the oveall Chair fee, for example as shown in footnote 3 below 2 The fee payable for 2023 for Chairing the Group Risk Committee continues to include an additional fee of in recognition of the increased time commitment required because of the Admial Internal Model process. It comprises a base fee of £25,000 and an additional fee of £18,000 3 To the extent that the Group Board Chair continues to chair the Nomination and Governance Committee, no exta fee will be paid over and above the oveall Group Board Chair fee Annual Repot on Remuneation continued 204 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 New Group Chair It was announced on 31st Januay 2023 that Mike Rogers is to be appointed as Admial Group Chair subject to regulatoy approval and his appointment’s approval at the Admial AGM. His fee will be £375,000, and upon appointment Mike is required to purchase shares, which he is to retain for his tenure. As pat of his remuneation arangements, Mike is expected to reach a shareholding of 150% of his annual fee within three years of appointment. CEO pay atio The table below sets out the pay atios for the CEO for the periods ended 31 December 2021 and 31 December 2022. Year Method Lower quatile Median Upper quatile 2022 Option A 80:1 69:1 45:1 2021 95:1 81:1 50:1 The lower quatile, median and upper quatile employees were determined using calculation methodology A which involved calculating the actual full-time equivalent remuneation for all UK employees for 2022. From this analysis, three employees were then identiied as representing the 25th, 50th and 75th percentile of the UK employee population. Admial chose this method as it is the preferred approach of the government and that of investor bodies and Admial had the systems in place to undetake this method. It is also consistent with the approach used to calculate the atios for 2018 to 2021. The Committee has considered the pay data for the three employees identiied and believes that it fairly relects pay at the relevant quatiles amongst our UK workforce. The three individuals identiied were full time employees during the year. None received an exceptional incentive award which would othewise inlate their pay igures. No adjustments or assumptions were made by the Committee with the total remuneation of these employees calculated in accordance with the methodology used to calculate the single igure of the CEO. It should be noted that the lower quatile employees were in receipt of DFSS bonus and/or DFSS vesting in the year. The employee pay levels for 2022 are detailed below: CEO P25 (lower quatile) P50 (median) P75 (upper quatile) Salay £715,850 £21,451 £26,500 £38,000 Total Remuneation 1 £2,153,151 £26,775 £31,144 £47,648 1 The single igure of remuneation for the CEO includes actual salay and pension costs paid during 2022, in line with The Companies (Miscellaneous Repoting) regulations 2018. For other employees, salay and pension costs are included on an FTE basis, in line with the legislation. While the basis of calculation difers between CEO and other employees, management considers this a fair comparison of remuneation The pay atio has fallen over the course of 2022. This is largely due to the fall in share price between repoting periods, which has impacted the CEO numbers more propotionately due to the higher percentage of share-based variable pay in the CEO pay mix compared to the wider workforce. A signiicant propotion of the Milena Mondini de Focatiis’ remuneation is dependent on the company’s peformance and therefore it may vay more materially, resulting in movements in the CEO pay atio from year to year moving fowards. However, the reward policies and structures applying to the CEO are broadly aligned with those of the wider workforce and therefore consistent peformance is likely to lead to a broadly consistent CEO pay atio. Relative Impotance of Spend on Pay The table below shows the percentage change in dividends and total employee remuneation spend from the inancial year ended 31 December 2021 to the inancial year ended 31 December 2022. 2022 £m 2021 £m % change Distribution to shareholders 465 816 -43% Employee remuneation 532 500 6% The Directors are proposing a inal dividend for the year ended 31 December 2022 of 52 pence per share bringing the total dividend for 2022 to 157 pence per share (2021: 279 pence per share). 205 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Pay for Peformance The following gaph sets out a comparison of Total Shareholder Return (TSR) for Admial Group plc shares with that of the FTSE 100 and FTSE 350 indices, of which the Company is a constituent, over the ten-year period to 31 December 2022. The Directors consider these to be the most appropriate indices against which the Company should be compared. TSR is deined as the percentage change over the period, assuming reinvestment of income. 10 year TSR peformance: Admial vs. FTSE100 and FTSE350 indices Growth in the value of a hypothetical £100 holding over the 10 years to 31 December 2022 Dec 12 Dec 13 Dec 14 Dec 15 Dec 17 Dec 18 Dec 19 Dec 20 Dec 21 Dec 22Dec 16 Admiral FTSE 100 FTSE 350 £500 £400 £300 £200 £100 £0 CEO 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Incumbent Heny Engelhardt Heny Engelhardt Heny Engelhardt Heny Engelhardt 1 David Stevens 2 David Stevens David Stevens David Stevens David Stevens Milena Mondini de Focatiis 5 Milena Mondini de Focatiis CEO single igure of remuneation £387,546 £393,260 £397,688 £148,776 £246,023 £395,019 £403,662 £413,724 £421,285 £2,082,191 4 £2,153,151 DFSS vesting outcome (% of maximum) n/a n/a n/a n/a n/a n/a n/a n/a n/a 98.57% 59.24% 6 CFO 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Incumbent Kevin Chidwick Kevin Chidwick Geaint Jones 3 Geaint Jones Geaint Jones Geaint Jones Geaint Jones Geaint Jones Geaint Jones Geaint Jones Geaint Jones CFO single igure of remuneation £1,444,443 £1,204,164 £363,551 £539,704 £599,139 £1,184,445 £1,461,813 £1,773,303 £2,329,513 £1,737,805 4 £1,234,327 DFSS vesting outcome (% of maximum) 100% 70% 85% 69% 50% and 0% 74.20% 87.60% 88.8% 98.5% 93.08% 59.21% 6 1 Heny Engelhardt stepped down from the Board on 13 May 2016. His 2016 remuneation includes salay and beneits in respect of his sevice as CEO 2 David Stevens was appointed as the CEO on 13 May 2016. His 2016 remuneation includes salay, pension and beneits in respect of his sevice as CEO 3 Geaint Jones was appointed to the Board as CFO on 13 August 2014. His 2014 remuneation includes salay, pension and beneits in respect of his sevice as CFO, his full year DFSS and his full year DFSS bonus 4 This igure has been trued up since the 2021 repot for the value of the 2019 DFSS based on the actual share price on vest of £20.11 5 Milena Mondini De Focatiis was appointed as the CEO on 1 Januay 2021. Her 2021 remuneation includes salay, pension and beneits in respect of her sevice as CEO 6 59.24% of Milena Mondini De Focatiis’ and 59.21% Geaint Jones’ 2020 DFSS award will vest in April 2023 and September 2023, respectively, subject to their continued employment on the vesting date There are no annual bonus outcomes to repot in the table as the Admial DFSS bonus is not structured as a taditional annual bonus scheme and consequently a vesting outcome (as a percentage of max) is meaningless. Annual Repot on Remuneation continued 206 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 Annual change of each director’s pay compared to the annual change in aveage employee pay The following table summarises the annual percentage change of each director’s remuneation compared to the annual percentage change of the aveage remuneation of the company’s employees, calculated on a full-time equivalent basis. Financial year-ended 31 December 2022 2022 (% change) Percentage change in director’s remuneation Base salay/ fees Taxable beneits DFSS bonus Executive Directors Milena Mondini de Focatiis 3.00% 5.73% -38.96% Geaint Jones 3.00% 5.73% -44.78% Non-Executive Directors Annette Cout 3.00% 1,399.04% N/A Evelyn Bourke 73.62% 805.06% N/A Karen Green 17.90% 120.387% N/A Jean Park 29.66% -55.82% N/A Jayapakasa Rangaswami 30.38% 383.98% N/A Justine Robets 25.54% 260.33% N/A Andy Crossley 31.08% 133.87% N/A Michael Brierley 5.58% 3,700.00% N/A Bill Robets 108.64% n/a N/A Percentage change in employees’ remuneation 9.32% 8.52% N/A The percentage increases for the Non-Executive Director taxable beneits relate to expenses for tavel, accommodation and subsistence in relation to business needs, which compare 2021 which tavel to meetings was minimal, and 2022 where more normal in-person activity has been undetaken in a return to pre-pandemic levels. Geneally, NED fees have increased in line with additional responsibilities and time commitments undetaken over the course of the year, and in the case of Evelyn Bourke and Bill Robets are relective of pat-year fees for 2021 vs. full year fees for 2022. The percentage change in employee base pay is a view across the whole group, but it should be noted that a large percentage value of these increases has geneally been concentated in colleagues at the lower end of the pay spectrum. Dilution The Company currently uses newly issued shares to fund the DFSS, SIP and salay shares. The Company has controls in place to ensure that shares awarded under the incentive schemes opeated by the Company within any rolling ten-year period do not exceed 10% of the number of ordinay shares in the capital of the Company in issue at the time of each award. It is currently anticipated that a combination of attrition and actual vesting will result in dilution of less than 10%. As required by the rules of our share schemes, the Company will in any event ensure that the actual dilution level does not exceed 10% in any rolling ten-year period by funding of any vested (and future) share scheme awards as appropriate with market-purchased shares. 207 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Interests held by Directors (audited) The Company has adopted Executive Director shareholding guidelines whereby all Executive Directors are required to acquire and retain a beneicial shareholding in the Company equal to at least 400% of base salay (excluding salay shares, where applicable), which can be built up over a period of ive years from the later of the introduction of the guidelines and the individual’s date of appointment. Both Executive Directors meet the shareholding requirement. As at 31 December 2022, the Directors held the following interests: Director Shares held Shareholding requirement (% of 2022 salay) Current shareholding (% of 2022 salay) Requirement met? 4 Beneicially owned outright 6 Subject to continued employment only Subject to peformance conditions Milena Mondini de Focatiis 5 97,062 1 50,354 3 180,000 400% >400% Yes Geaint Jones 127,566 1 31,644 2 105,000 400% >400% Yes Annette Cout 14,760 Evelyn Bourke 7,459 Jean Park 4,000 Jayapakasa Rangaswami 0 Justine Robets 0 Andy Crossley 4,984 Michael Brierley 4,104 Karen Green 0 Bill Robets 8,860 1 Total includes SIP shares both matured and awarded. 2 Total relects shares from the 2020 DFSS award (peformance test has been applied, and award is due to vest in September 2023) and salay shares awarded in 2020 3 Total relects shares from the 2020 DFSS award (peformance test has been applied, and award is due to vest in April 2023) 4 The inal column in the above table relates to meeting the current Remuneation Policy requirement of 400% of salay, based on a share price of £21.37 at closing on 31st December 2022 5 Milena Mondini de Focatiis has 5 years from her appointment as Executive Director (11 August 2020) to meet the guideline 6 There have been no changes in the Directors’ holdings in the share capital of the Company, as set out in the table above, between 31 December 2022 and the date of this Repot There have been no changes to Directors’ shareholdings since 31 December 2022. None of the Directors had an interest in the shares of any subsidiay undetaking of the Company or in any signiicant contacts of the Group. Annual Repot on Remuneation continued 208 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 Executive Directors’ Interests in Shares under the DFSS and SIP and salay share awards (audited) Type At stat of year Awarded during year Vested/ matured during year At end of year Price at award (£) Value at award date (£) Value at 31 Dec 2022 or maturity (£) Date of Award Final vesting/ maturity date Milena Mondini de Focatiis DFSS 36,000 – 35,487 – £21.00 £756,000 £713,644 26/09/2019 26/09/2022 DFSS 85,000 – – 85,000 £23.08 £1,961,800 £1,816,450 24/04/2020 24/04/2023 DFSS 90,000 – – 90,000 £34.52 £3,106,800 £1,923,300 23/09/2021 23/09/2024 DFSS 90,000 – 90,000 £21.21 £1,908,900 £1,923,300 22/09/2022 22/09/2025 SIP 84 – 84 – £21.46 £1,803 £2,181 18/03/2019 18/03/2022 SIP 83 – 83 – £21.45 £1,780 £1,792 30/08/2019 30/08/2022 SIP 88 – – 88 £20.58 £1,811 £1,881 13/03/2020 13/03/2023 SIP 68 – – 68 £26.40 £1,795 £1,453 02/09/2020 02/09/2023 SIP 61 – – 61 £29.44 £1,796 £1,304 12/03/2021 12/03/2024 SIP 50 – – 50 £36.11 £1,806 £1,069 01/09/2021 01/09/2024 SIP – 72 – 72 £24.81 £1,786.32 £1,539 11/03/2022 11/03/2025 SIP – 81 – 81 £22.25 £1,802.25 £1,731 24/08/2022 24/08/2025 Geaint Jones DFSS 45,000 – 41,886 – £21.00 £945,000 £842,327 26/09/2019 26/09/2022 DFSS 45,000 – – 45,000 £27.37 £1,231,650 £961,650 24/09/2020 24/09/2023 DFSS 52,500 – – 52,500 £34.52 £1,812,300 £1,121,925 23/09/2021 23/09/2024 DFSS – 52,500 – 52,500 £21.21 £1,113,525 £1,121,925 22/09/2022 22/09/2025 Salay Shares 2,500 – 2,500 – £21.46 £53,650 £64,925 18/03/2019 18/03/2022 Salay Shares 2,500 – 2,500 – £21.45 £53,625 £53,975 30/08/2019 30/08/2022 Salay Shares 2,500 – – 2,500 £20.58 £51,450 £53,425 13/03/2020 13/03/2023 Salay Shares 2,500 – – 2,500 £26.40 £66,000 £53,425 02/09/2020 02/09/2023 SIP 84 – 84 – £21.46 £1,803 £2,181 18/03/2019 18/03/2022 SIP 83 – 83 – £21.45 £1,780 £1,792 30/08/2019 30/08/2022 SIP 88 – – 88 £20.58 £1,811 £1,881 13/03/2020 13/03/2023 SIP 68 – – 68 £26.40 £1,795 £1,453 02/09/2020 02/09/2023 SIP 61 – – 61 £29.44 £1,796 £1,304 12/03/2021 12/03/2024 SIP 50 – – 50 £36.11 £1,806 £1,069 01/09/2021 01/09/2024 SIP – 72 – 72 £24.81 £1,786 £1,539 11/03/2022 11/03/2025 SIP – 81 – 81 £22.25 £1,802 £1,731 24/08/2022 24/08/2025 1 The value at maturity relates only to shares vested. 2 For SIP and Salay Shares, the price at award relects the aveage closing share price over the ive days prior to the award date The closing price of Admial shares on 31 December 2022 was £21.37 per share. By order of the Board, Evelyn Bourke Chair of the Remuneation Committee 7 March 2023 209 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Directors’ Repot The Directors present their Annual Repot and the audited Financial Statements for the year ended 31 December 2022. Information included in the Stategic Repot As permitted by legislation, some of the matters required to be included in the Directors’ Repot have instead been included in the Stategic Repot as the Board considers them to be of stategic impotance. Speciically, these are: Disclosure Page reference Future business developments Pages 28 to 37 Greenhouse gas emissions, energy consumption and energy eiciency action Pages 92 and 96 Employment of disabled persons (as deined by the Disability Discrimination Act 1995) Page 80 Engagement with colleagues Pages 77 to 81 Engagement with suppliers, customers and others in a business relationship with the Company Pages 74 to 76 and 82 to 84 Disclosure of information under Listing Rule 9.8.4 Sub-section of Listing Rule 9.8.4 Detail Page reference 1 Interest capitalised by the Group – 7 Allotment of shares for cash pursuant to Group employee share schemes Page 285 12, 13 Shareholder waiver of dividend Page 211 Group results and dividends The proit for the year, after tax but before dividends, amounted to £371.8 million (2021: £996.7 million). The Directors declared and paid dividends of £658.3 million during 2022 (2021: £720.9 million). Refer to note 12b for futher details. The Directors have proposed a inal dividend of £155 million (52.0 pence per share). Subject to shareholders’ approval at the 2023 Annual Geneal Meeting (AGM), the inal dividend will be paid on 2 June 2023 to shareholders on the register at the close of business on 5 May 2023. Futher information on the Groups’ dividend policy is located in note 12e and on page 26 of the Stategic Repot. Research and development Details of costs incurred in respect of research and development can be found in note 9 on page 271. Political donations No political donations were made during the year. Interest capitalised No interest was capitalised by the Group during the year. Signiicant contacts of material interest to shareholders The Group considers its co-insuance and reinsuance contacts to be signiicant and of material interest to shareholders. A number of the Group’s contactual arangements with reinsurers include features that, in cetain scenarios, allow for reinsurers to recover losses incurred to date. The oveall impact of such scenarios would not lead to an oveall net economic outlow from the Group. No other contactual arangements are considered to be signiicant to the running of the Group’s business. Financial instruments The objectives and policies for managing risks in relation to inancial instruments held by the Group are set out in note 6 to the Financial Statements. Directors and their interests The present Directors of the Company are shown on pages 130 to 135 of this Repot, whilst Directors’ interests in the share capital of the Company are set out in the Remuneation Repot on page 208. A list of Directors in the inancial period to 31 December 2022 is shown on page 130. Going concern Under Provision 30 of the 2018 UK Corpoate Governance Code, the Board conirms that it considers the Going Concern basis of accounting appropriate. In considering this requirement, the Directors have taken into account the factors below. In paticular, as pat of this assessment the Board considered updated projections of peformance and proitability a number of times throughout the year, with some key highlights including: • The Group’s proit projections, including: – Changes in premium ates and projected policy volumes across the Group’s insuance businesses, including the impact of the UK FCA geneal insuance pricing reform which came into efect at the stat of 2022 – The impacts of the current elevated inlationay environment on the cost of settling claims across all of the Group’s insuance businesses – The return of motor claims frequency towards pre- pandemic levels – Projected trends in other revenue geneated by the Group’s insuance businesses from fees and the sale of ancillay products – Projected contributions to proit from businesses other than the UK Car insuance business – Expected trends in unemployment and inlation in the context of credit risks and the growth of the Group’s Loans business – Assessment of wider market risk and investment peformance given the market volatility in H2 2022 210 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 • The Group’s solvency position, which has been closely monitored through periods of market volatility. The Group continues to maintain a strong solvency position above target levels • The adequacy of the Group’s liquidity position after considering all of the factors noted above • The results of business plan scenarios and stress tests on the projected proitability, solvency and liquidity positions including the impact of severe downside scenarios that assume severe adverse economic, credit and tading stresses • The regulatoy environment, focusing on regulatoy guidance issued by the FCA and the PRA in the UK and ongoing communications between management and regulators • A review of the Company’s principal risks and uncetainties and≈the assessment of emerging risks Following consideation of the above, the Directors have reasonable expectation that the Group has adequate resources to continue in opeation for the foreseeable future, a period of not less than 12 months from the date of this Repot, and that it is therefore appropriate to adopt the going concern basis in preparing the Financial Statements. Futher information is shown in the viability statement on page 122. Share Capital, AGM and related matters Major Shareholders Other than as stated below, as far as the Company is aware, there are no persons with signiicant direct or indirect holdings in the Company. Information provided to the Company pursuant to the FCA’s Disclosure and Tansparency Rules (DTRs) is published on a Regulatoy Information Sevice and on the Company’s website. The Company received notiications in accordance with the FCA’s DTRs of the following notiiable interests in the voting rights in the Company’s issued share capital: As at 31 December 2022 Number of Shares % Heny Engelhardt & Diane Briere de I’Isle 24,605,472 8.1% Mawer Investment Management Ltd. 21,727,558 7.2% BlackRock Inc. 17,243,242 5.7% Moondance Foundation 14,400,000 4.8% Vanguard Group Holdings 12,560,052 4.1% FMR LLC 11,711,392 3.9% N.M. Rothschild & Sons Ltd. 9,147,150 3.0% David & Heather Stevens 8,422,950 2.8% Münchener Rückversicherungs- Gesellschaft AG 5,297,781 1.7% Notes: 1 % as at date of notiication. The DTRs require notiication when the % voting rights (through shares and inancial instruments) held by a person reaches, exceeds of falls below an applicable threshold speciied in the DTRs 2 Notiications received by the Company in accordance with the FCA’s DTRs in the period from 31 December 2022 to 3 March 2023 were as follows: Shareholder Date of notiication Number of shares as at date of notiication % of shares as at date of notiication BlackRock Inc. 31 Januay 2023 15,617,104 5.14% BlackRock Inc. 2 Februay 2023 15,624,439 5.14% There are no people who hold shares carying special rights with regard to control of the Company. Futher information on the rights attaching to shares under the employee share schemes are provided in the Remuneation Repot. Directors’ interests The interests of Directors and Oicers and their connected persons in the issued share capital of the Company are given in the Remuneation Committee Repot on page 183. Shares held in Employee Beneit Trust (EBT) The EBT does not use its voting rights in respect of the shares it holds in the EBT at geneal meetings, however, it may choose to do so if recommended by the Company via a letter of wishes. If any ofer is made to shareholders to acquire their shares, the trustee will not be obliged to accept or reject the ofer in respect of any shares which are at that time subject to subsisting awards but will have regard to the interests of the award holders and will have power to consult them to obtain their views on the ofer. Subject to the above, the trustee may take action with respect to any ofer it thinks fair. The trustee has waived its right to dividends on the shares held in the trust. Additional information for shareholders The following provides the additional information required for shareholders in accordance with the Takeovers Directive and the respective UK law. At 31 December 2022, the Company’s issued share capital comprised a single class of shares referred to as ordinay shares. Details of the share capital and shares issued during the year can be found in note 12d. The rights and obligations attached to the Company’s ordinay shares are set out in the Aticles of Association of the Company, copies of which can be obtained from Companies House. If a poll is called at a geneal meeting, evey member present in person or by proxy and entitled to vote shall have one vote for evey ordinay share held. The notice of the geneal meeting speciies deadlines for exercising voting rights either by proxy notice or present in person or by proxy in relation to resolutions to be passed at geneal meeting. All proxy votes are counted and the numbers for, against or withheld in relation to each resolution are announced at the Annual Geneal Meeting and published on the Company’s website after the meeting. There are no restrictions on the tansfer of ordinay shares in the Company other than: • Cetain restrictions may from time to time be imposed by laws and regulations (for example, insider tading laws) • Pursuant to the Listing Rules of the FCA whereby cetain employees and Directors of the Company require the approval of the Company to deal in the Company’s securities 211 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Directors’ Repot continued The Company has not purchased any of its own shares during the period. There are no agreements between the Company and its Directors or employees providing for compensation for loss of oice or employment (whether through resignation, purpoted redundancy or othewise) that occur because of a takeover bid. There are a number of agreements that alter or terminate upon a change of control of the Company following a takeover bid, such as commercial contacts (entered into in the normal course of business). None are considered to be signiicant in terms of their impact on the business of the Group as a whole. Powers of the Company Directors The Directors are responsible for managing the business of the Company and may exercise all powers of the Company subject to the provisions of relevant statutes, to any directions given by special resolution and to the Company’s Memoandum and Aticles. The Aticles, for example, contain speciic provisions and restrictions concerning the Company’s power to borrow money. Powers relating to the issuing of new shares and buyback of shares are also included in the Aticles and such authorities are renewed by shareholders at the Annual Geneal Meeting each year. Power to issue shares At the last Annual Geneal Meeting, held on 28 April 2022, authority was given to the Directors to allot unissued relevant securities in the Company up to a maximum of £199,929, representing the Investment Association’s Guidelines limit of approximately two thirds of the issued share capital as at 18 March 2022. This authority expires on the date of the Annual Geneal Meeting to be held on 27 April 2023 and the Directors will seek to renew this authority for the following year. A futher special resolution passed at that meeting ganted authority to the Directors to allot equity securities in the Company (up to a maximum of 5% of the issued share capital of the Company) for cash, without regard to the pre-emption provisions of the Companies Act 2006. This authority also expires on the date of the Annual Geneal Meeting to be held on 27 April 2023 and the Directors will seek to renew this authority for the following year. The Board is aware of the principles published by the Pre-Emption Group in November 2022, and their template resolutions published on 4 November 2022, allowing a company the ability to seek authority over a futher 10% of the issued ordinay share capital on a non-pre-emptive basis subject to cetain conditions. The Board does not wish to increase the disapplication threshold at this time but will keep this matter under review. Appointments of Directors The Company’s Aticles of Association (the Aticles) give the Directors power to appoint and replace Directors. Under the Terms of Reference of the Group Nomination and Governance Committee, any appointment must be recommended by the Group Nomination and Governance Committee for approval by the Board of Directors. At the Group’s Annual Geneal Meeting on 26 April 2022, new “Aticles” were approved by shareholders which provide that all Directors will retire and ofer themselves for re-election at each Annual Geneal Meeting, in accordance with the UK Corpoate Governance Code and the Company’s current pactice. Therefore, with the exception of Annette Cout, all Directors will be submitting themselves for either election or re-election by shareholders at the fothcoming AGM. Aticles of Association The Aticles may only be amended by special resolution of the shareholders. Directors’ indemnities and insuance Directors and Oicers insuance cover is in place for all Directors to provide cover against cetain acts or omissions on behalf of the Company. A Deed Poll of Indemnity was executed in October 2015, indemnifying each of the Directors and the Company Secretay, in relation to cetain losses and liabilities that they might incur in the course of acting as Directors of the Company. The Deed Poll of Indemnity is categorised as qualifying third paty provisions as deined by Section 234 of the Companies Act 2006 and remains in force for all past and present Directors of the Company. The Board is of the view that it is in the best interests of the Group to attact and retain the sevices of the most able and experienced Directors by ofering competitive terms of engagement, including the ganting of such indemnities. Neither the Deed Poll of Indemnity nor insuance cover would provide any coveage in the event that a Director is proved to have acted faudulently or dishonestly. Annual Geneal Meeting (AGM) It is proposed that the next AGM be held at Tŷ Admial, David Street, Cardif, CF10 2EH on Thursday 27 April 2023 at 2.00pm, notice of which will be sent to shareholders with the Annual Repot. Repoting, accountability and audit UK Corpoate Governance Code Admial is subject to the UK Corpoate Governance Code (the Code), published by the Financial Repoting Council (FRC) in July 2018 and available on its website, www.frc.org.uk. The Company’s Annual Repot and Accounts, taken as a whole, addresses the requirements of the 2018 Code. The Code 2018 (the Code) was applicable for the Group during the year under review, and the Group has applied the principles and complied with the provisions of the Code except with regard to non-compliance with provision 19 as set out in the Governance Repot on page 136. The Directors conirm that the Annual Repot and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessay for shareholders to assess the Company’s position and peformance, business model and stategy. The Board is ultimately responsible for the Group’s system of risk management and internal control and, through the Group Audit Committee, has reviewed the efectiveness of the Group’s internal control and risk management arangements relating to the inancial repoting process and the principal risks facing the business. The Board is satisied that the Group’s internal control and risk management famework is prudent and efective and that, through the Group Audit Committee and Group Risk Committee, risk can be assessed, managed and assuance given that all material controls are reviewed and monitored. 212 Corpoate Governance Admial Group plc Annual Repot and Accounts 2022 Information on the composition and opeation of the Board and its Committees is located in the following sections: • Governance Repot on page 136 in respect of the Board • Nomination and Governance Committee Repot on page 158 • Audit Committee Repot on page 171 • Group Risk Committee Repot on page 178 • Remuneation Committee Repot on page 183 The Group’s gender diversity information for the inancial year, together with an explanation of the policies related to diversity, are set out in the Stategic Repot on pages 77 to 81 and in the Nomination and Governance Committee Repot on page 158. Banches The Group has seveal banches located in Canada, India, Fance and Italy, through its subsidiay structure. Futher details of the Company’s subsidiaries, associated undetakings and banches are contained in note 12f. Directors’ responsibilities The Directors are responsible for preparing the Annual Repot and the Group and Parent Company inancial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Group and Parent Company inancial statements for each inancial year. Under that law they are required to prepare the Group Financial Statements in accordance with United Kingdom adopted international accounting standards and applicable law and have elected to prepare the Parent Company inancial statements in accordance with UK Accounting Standards, including FRS 101 Reduced Disclosure Famework. Under company law, the Directors must not approve the Financial Statements unless they are satisied that they give a true and fair view of the state of afairs of the Group and Parent Company and of their proit or loss for that period. In preparing each of the Group and Parent Company inancial statements, the Directors are required to: • Select suitable accounting policies and then apply them consistently • Make judgements and estimates that are reasonable and prudent • For the Group inancial statements, state whether they have been prepared in accordance with IFRS as adopted by the UK • For the Parent Company inancial statements, state whether applicable UK Accounting Standards, including FRS 101 Reduced Disclosure Famework, have been followed, subject to any material depatures disclosed and explained in the Parent Company inancial statements The Directors are responsible for keeping adequate accounting records that are suicient to show and explain the Parent Company’s tansactions and disclose with reasonable accuacy at any time the inancial position of the Parent Company and enable them to ensure that its Financial Statements comply with the Companies Act 2006. They have geneal responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect faud and other irregularities. Under applicable law and regulations, the Directors are also responsible for preparing a Stategic Repot, Directors’ Repot, Directors’ Remuneation Repot and Corpoate Governance Statement that complies with that law and those regulations. The Directors are responsible for the maintenance and integrity of the corpoate and inancial information included on the Company’s website. Legislation in the UK governing the prepaation and dissemination of Financial Statements may difer from legislation in other jurisdictions. Responsibility statement The Directors conirm that to the best of their knowledge: • The inancial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, inancial position and proit or loss of the Company and the undetakings included in the consolidation taken as a whole, and • The Directors’ Repot and the Stategic Repot include a fair review of the development and peformance of the business and the position of the Company, and the undetakings included in the consolidation taken as a whole, together with a description of the principal risks and uncetainties Disclosure of information to auditor The Directors who held oice at the date of approval of this Directors’ Repot conirm that, so far as they are each aware, there is no relevant audit information of which the Company’s auditor is unaware; and each Director has taken all the steps that they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Company’s auditor is aware of that information. Auditor Following completion of the tender for the Group’s audit sevices and the Board’s approval of the Audit Committee’s recommendation to re-appoint the Company’s auditor, Deloitte LLP has indicated willingness to continue in oice and resolutions to reappoint it and to authorise the Directors to ix its remuneation will be proposed at the AGM. The Directors’ Repot has been approved by the Board, For and on behalf of the Board, Dan Caunt Geaint Jones Company Secretay Chief Financial Oicer 7 March 2023 7 March 2023 213 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Admial Group plc Annual Repot and Accounts 2022 Contents 215 Independent Auditor’s Repot 226 Consolidated Income Statement 227 Consolidated Statement of Comprehensive Income 228 Consolidated Statement of Financial Position 229 Consolidated Cash Flow Statement 230 Consolidated Statement of changes in Equity 231 Notes to the Financial Statements 293 Parent Company Financial Statements 296 Notes to the Parent Company Financial Statements 304 Consolidated Financial Summay (unaudited) Financial Statements Adding value. Delivering difference. For our people Admial Group plc Annual Repot and Accounts 2022 214 Financial Statements Independent Auditor’s Repot to the members of Admial Group plc Repot on the audit of the inancial statements 1. Opinion In our opinion: • the inancial statements of Admial Group plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) give a true and fair view of the state of the Group’s and of the Parent Company’s afairs as at 31 December 2022 and of the Group’s proit for the year then ended; • the Group inancial statements have been properly prepared in accordance with United Kingdom adopted international accounting standards; • the Parent Company inancial statements have been properly prepared in accordance with United Kingdom Geneally Accepted Accounting Pactice, including Financial Repoting Standard 101 “Reduced Disclosure Famework”; and • the inancial statements have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the inancial statements which comprise: • the Consolidated and Parent Company Income Statements; • the Consolidated and Parent Company Statements of Comprehensive Income; • the Consolidated and Parent Company Statements of Financial Position; • the Consolidated Cash Flow Statement; • the Consolidated and Parent Company Statements of Changes in Equity; • the related notes 1 to 14 to the Group inancial statements, excluding the capital adequacy disclosures in note 12e calculated in accordance with the Solvency II regime which are marked as unaudited; and • the related notes 1 to 15 to the Parent Company inancial statements. The inancial repoting famework that has been applied in the prepaation of the Group inancial statements is applicable law and United Kingdom adopted international accounting standards. The inancial repoting famework that has been applied in the prepaation of the Parent Company inancial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Famework” (United Kingdom Geneally Accepted Accounting Pactice). 2. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are futher described in the auditor’s responsibilities for the audit of the inancial statements section of our repot. We are independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the inancial statements in the UK, including the Financial Repoting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed public interest entities, and we have fulilled our other ethical responsibilities in accordance with these requirements. The non-audit sevices provided to the Group for the year are disclosed in note 9c to the inancial statements. We conirm that we have not provided any non- audit sevices prohibited by the FRC’s Ethical Standard to the Group or the Parent Company. We believe that the audit evidence we have obtained is suicient and appropriate to provide a basis for our opinion. 3. Summay of our audit approach Key audit matters The key audit matters that we identiied in the current year were: • Valuation of gross insuance claims reseves; • Inlation assumptions applied to UK motor bodily injuy claims reseves; and • Disclosure of the impact of the adoption of IFRS 17. Within this repot, key audit matters are identiied as follows: Newly identiied Increased level of risk Similar level of risk Decreased level of risk Admial Group plc Annual Repot and Accounts 2022 215 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Materiality The materiality that we used for the Group inancial statements was £23.4 million which was determined on the basis of 5% of proit before tax (‘PBT’). Scoping We identiied ive repoting components which we determined should be subjected to full scope audits this year. Speciic audit procedures were completed in respect of eight futher components which, although not inancially signiicant, did present some speciic audit risks which needed to be addressed. The components within the scope of our audit procedures account for 98% of the Group’s proit before tax, 99% of the Group’s revenue and 99% of the Group’s net assets. Signiicant changes in our approach 2022 has seen a rise in inlation which has been paticularly signiicant in impacting the geneal insuance industy as a whole. Given these changes in the macroeconomic environment in which the Group opeates, as well as the fact that the UK motor reseves are one of the largest and most judgmental balances in the Group inancial statements, we have identiied an additional key audit matter related to the inlation assumptions applied to the bodily injuy claims reseves. The inlationay impacts on bodily injuy claims require the application of signiicant judgment as they are less closely linked to the consumer price index (‘CPI’) and due to the longer-term nature of the Group’s exposure (compared to propety damage claims). We have also identiied the disclosure of the impact of the Group’s adoption of IFRS 17 as an additional key audit matter, as this is a new and complex accounting standard which has required consideable judgment and interpretation in its implementation. 4. Conclusions relating to going concern In auditing the inancial statements, we have concluded that the directors’ use of the going concern basis of accounting in the prepaation of the inancial statements is appropriate. Our evaluation of the directors’ assessment of the Group’s and Parent Company’s ability to continue to adopt the going concern basis of accounting included: • We obtained an understanding of the relevant controls relating to management‘s going concern assessment process; • We inspected the Group ORSA (‘Own Risk and Solvency Assessment’) to suppot our understanding of the key risks faced by the Group, its ability to continue as a going concern, and the longer-term viability of the Group; • We evaluated management’s going concern assessment in light of the current macroeconomic uncetainties; • We considered the available cash and cash equivalents balance at year-end of £297 million and assessed how this is forecast to luctuate over the coming 12 months in line with management’s forecasted peformance. This analysis included assessing the amount of headroom in the forecasts considering cash and regulatoy liquidity requirements; • We assessed management’s reverse stress testing over the projected proitability, solvency and liquidity positions and the likelihood of the various scenarios that could adversely impact upon the Group’s liquidity and solvency headroom; and • We obtained and inspected correspondence between the Group and its regulators, as well as reviewed the Group Risk Committee meeting minutes, to identify any items of interest which could potentially indicate either non-compliance with legislation or potential litigation or regulatoy action held against the Group. Based on the work we have peformed, we have not identiied any material uncetainties relating to events or conditions that, individually or collectively, may cast signiicant doubt on the Group’s and Parent Company’s ability to continue as a going concern for a period of at least twelve months from when the inancial statements are authorised for issue. In relation to the repoting on how the Group has applied the UK Corpoate Governance Code, we have nothing material to add or daw attention to in relation to the directors’ statement in the inancial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this repot. Independent Auditor’s Repot continued to the members of Admial Group plc Admial Group plc Annual Repot and Accounts 2022 216 Financial Statements 5. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most signiicance in our audit of the inancial statements of the current period and include the most signiicant assessed risks of material misstatement (whether or not due to faud) that we identiied. These matters included those which had the greatest efect on: the oveall audit stategy, the allocation of resources in the audit; and directing the efots of the engagement team. These matters were addressed in the context of our audit of the inancial statements as a whole, and in forming our opinion thereon, and we do not provide a sepaate opinion on these matters. 5.1. Valuation of gross insuance claims reseves Key audit matter description The Group’s gross insuance claims reseves total £3,456 million as at 31 December 2022 (2021 year-end: £3,045 million). Judgments made in determining the valuation of claims reseves are by far the most signiicant in terms of their impact on the Group’s inancial position. Setting these claims reseves is an inherently subjective exercise and small changes in underlying assumptions may have a material impact on the oveall year-end result repoted. Speciically, our signiicant areas of focus are the Group’s selection of the frequency and severity assumptions for large bodily injuy claims arising in the UK Car Insuance business. These paticular claims result in higher individual claims reseves and are more judgmental, in terms of the development of the ultimate losses, due to the longer-term nature of the Group’s exposure (compared to propety damage claims). In line with the Group’s accounting policy, management adds a margin to the actuarial best estimate to arrive at the booked gross claims reseves. This margin relects the inherent uncetainty in estimating the ultimate losses on claims, over and above that which can be projected actuarially based on the underlying claims development data. This is a signiicant area of judgment and, therefore, a focus of our audit. Speciically, the consistency of the level of prudence within the margin for the UK Car Insuance reseves, related to large bodily injuy claims, is our key area of focus. Refer to page 172 in the Audit Committee repot where this is included as a signiicant issue and note 3 and note 5d in the inancial statements which refer to this matter. How the scope of our audit responded to the key audit matter We obtained an understanding of and tested the opeating efectiveness of relevant controls relating to the key actuarial assumptions identiied and the setting of the management margin applied as an uplift on the projected actuarial best estimate. We obtained and inspected the repots from both management, and management’s external expet actuay, and have involved our actuarial specialists to challenge key assumptions. We also assessed the objectivity, competence and capability of management’s expet. We benchmarked the frequency assumptions against available industy data and considered the comparison in the context of the risk proile of the Group’s potfolio and the year-on-year changes in these assumptions. We undetook a gaphical analysis of incurred development patterns to assess and challenge the severity assumptions. We benchmarked the aveage cost per claim assumptions against available third-paty industy data in the context of this incurred development analysis. We inspected management’s accounting judgment papers and tested the relevant controls governing the claims distribution model in order to assess the qualitative and quantitative suppot for the margin held over the actuarial best estimate reseves. We analysed the consistency of prudence within the booked reseves against previous repoting periods in the context of the underlying uncetainty in incurred claims development and challenged management’s suppot for the booked position. Key obsevations Based on the procedures described above, we consider that the valuation of the gross insuance claims reseves remain appropriate and in line with the Group’s accounting policy. Admial Group plc Annual Repot and Accounts 2022 217 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Independent Auditor’s Repot continued to the members of Admial Group plc 5.2. Inlation assumptions applied to UK motor bodily injuy claims reseves Key audit matter description Given the ongoing uncetainty associated with the UK’s current and future inlationay environment, the impact of future inlation assumptions requires the application of signiicant judgment which has a material impact on the best estimate reseves. In the current macroeconomic environment, there is a greater level of uncetainty associated with projecting future assumptions than in previous periods owing to the uncetainty in forecast future inlation and the extent to which this will impact claims inlation. The most signiicant impact of such inlation assumptions relates to bodily injuy claims, given the relatively low implicit inlation in historical data trends and the time it takes for such claims to develop and settle; therefore, the efect of such inlationay pressures will not be obsevable in the claims data for some time. This is unlike for damage claims where the impact of inlation is already rising due to inlationay trends in historical data, their faster development, and the fact that they are more closely linked to the Consumer Price Index (‘CPI’). Our audit work to respond to the speciic risks associated with inlationay assumptions in the UK motor bodily injuy claims reseves required signiicant input from our actuarial specialists and was the focus of a signiicant amount of audit efot; therefore, we considered this a key audit matter. Refer to page 172 in the Audit Committee repot where this is included as a signiicant issue and note 3 and note 5d in the inancial statements which refer to this matter. How the scope of our audit responded to the key audit matter We obtained an understanding of and tested the opeating efectiveness of relevant controls relating to the key inlation assumptions identiied. We obtained and inspected the repots from both management, and management’s external expet actuay, and have involved our actuarial specialists to challenge the key assumptions. We also assessed the objectivity, competence and capability of management’s expet. We benchmarked management’s inlation assumptions against available industy data and considered the results of this comparison. We inspected and challenged the methodology applied in determining the impact of excess inlation on the year-end reseves, including challenging the future inlation assumptions with reference to current and future expectations of market wage inlation. Key obsevations Based on the procedures described above, we consider that the inlation assumptions applied to UK motor bodily injuy claims reseves remain appropriate and in line with the Group’s accounting policy. Admial Group plc Annual Repot and Accounts 2022 218 Financial Statements 5.3. Disclosure of the impact of the adoption of IFRS 17 Key audit matter description With efect from 1 Januay 2023, the Group tansitioned to IFRS 17: Insuance Contacts which replaced the existing standard for insuance contacts, IFRS 4. The estimated tansitional impact is disclosed in Note 2 to the inancial statements for the year-ended 31 December 2022 in accordance with the requirements of IAS 8: Accounting Poicies, Changes in Accounting Estimates and Errors. The disclosures in 2022 are intended to provide users with an understanding of the estimated impact of the new standard and, as a result, are more limited than the disclosures to be included in the irst year of adoption, being 2023. We have deemed the disclosure of the impact of the adoption of IFRS 17 a key audit matter as this is a new and complex accounting standard which has required consideable judgment and interpretation in its implementation. Futhermore, the new standard has introduced a number of signiicant changes, including new requirements regarding the recognition and measurement of insuance contacts and related account balances and classes of tansactions. In order to meet the requirements of the new standard, signiicant changes have also been made to the systems, processes and controls with efect from 1 Januay 2023. How the scope of our audit responded to the key audit matter While futher testing of the inancial impact will be peformed as pat of our 2023 year-end audit, we have peformed suicient audit procedures for the purposes of assessing the disclosures made in accordance with IAS 8. We have obtained an understanding of and tested the opeating efectiveness of the relevant controls governing management’s estimate of the tansitional adjustment. We challenged the appropriateness of key technical accounting decisions, judgments, assumptions and elections made in determining the estimate to assess compliance with the requirements of the standard. We involved our actuarial specialists in peforming procedures to challenge the Group’s IFRS 17 calculation models, including those related to the estimate of the fulilment cashlows and risk adjustment which form the Liability for Incurred Claims. We tested the journal entries resulting from the IFRS 17 model outputs which derive the Group’s IFRS 17 position as at 1 Januay 2022 from the underlying IFRS 4 Balance Sheet through reconciling to the audited tansition adjustments. We evaluated the disclosures related to the tansition impact against the requirements of IAS 8 and reconciled the disclosed impact to underlying accounting records. Key obsevations Based on the procedures described above, we consider the assumptions, methodologies and models applied in preparing the IFRS 17 tansition disclosure to be reasonable. Admial Group plc Annual Repot and Accounts 2022 219 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information 6. Our application of materiality 6.1. Materiality We deine materiality as the magnitude of misstatement in the inancial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or inluenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work. Based on our professional judgment, we determined materiality for the inancial statements as a whole as follows: Group inancial statements Parent company inancial statements Materiality £23.4 million (2021: £36.2 million) £4.2 million (2021: £2.9 million) Basis for determining materiality 5% of proit before tax (2021: 5% of proit before tax from continuing and discontinued opeations excluding ‘proit on sale’). 3% of two-year aveage of net assets (2021: 3% of two-year aveage of net assets). Rationale for the benchmark applied We consider proit before tax to be the critical benchmark of the peformance of the Group and consider this benchmark to be suitable having compared to other benchmarks. Our materiality equates to 1% of gross earned premium and 2% of equity (2021: 1% of gross earned premium and 3% of equity). The Parent Company primarily exists as the holding company which carries investments in Group subsidiaries and is the issuer of listed securities. We consider that net assets is the critical benchmark for the Company. The measure uses a two-year aveage of net assets which we consider appropriate given the inherent volatility associated with the timing of dividend payments. PBT £469m Group materiality £23.4m Component materiality range £2.9m to £22.2m Audit Committee reporting threshold £1.1m PBT Group materiality 6.2. Peformance materiality We set peformance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the materiality for the inancial statements as a whole. Group inancial statements Parent company inancial statements Peformance materiality 70% (2021: 70%) of Group materiality 70% (2021: 70%) of Parent Company materiality Basis and ationale for determining peformance materiality In determining peformance materiality, we considered the following factors: • our risk assessment, including our assessment of the Group’s oveall control environment and that we consider it appropriate to rely on controls over a number of business processes; and • our past experience of the audit, which has indicated a low number of uncorrected misstatements identiied in prior periods. 6.3. Error repoting threshold We agreed with the Audit Committee that we would repot to the Committee all audit diferences in excess of £1.1 million (2021: £1.8 million), as well as diferences below that threshold that, in our view, waranted repoting on qualitative grounds. We also repot to the Audit Committee on disclosure matters that we identiied when assessing the oveall presentation of the inancial statements. Independent Auditor’s Repot continued to the members of Admial Group plc Admial Group plc Annual Repot and Accounts 2022 220 Financial Statements 7. An oveview of the scope of our audit 7.1. Identiication and scoping of components The ive (2021: ive) signiicant components of the Group which were identiied in our audit planning are Admial Insuance (Gibaltar) Limited, Admial Insuance Company Limited, EUI Limited, Admial Europe Compañía de Seguros, and the Parent Company, Admial Group plc. Each of these signiicant components was subjected to a full-scope audit, completed to individual component materiality levels which anged from £2.9 million to £22.2 million (2021: £2.9 million to £31.4 million) dependent upon the relative signiicance of each individual component. Additionally, we have completed speciic audit procedures, designed to address speciic audit risks, for eight (2021: seven) futher components. The components within the scope of our audit procedures account for 98% (2021: 99%) of the Group’s proit before tax, 99% (2021: 99%) of the Group’s revenue and 99% (2021: 99%) of the Group’s net assets. For the remaining components, which were not subject to full-scope audits or speciied audit procedures, we peformed analysis at an aggregated Group level to re-assess our evaluation that there were no signiicant risks of material misstatement in any of these components. 92% 90% 9% 1%6% 2% 7% 1% 92% Profit before tax Net assets Full audit scope Specified audit procedures Review at group level Full audit scope Specified audit procedures Review at group level Full audit scope Specified audit procedures Review at group level Revenue 7.2. Our consideation of the control environment We obtained an understanding of and tested the relevant controls within the Group, including controls over the following business processes: inancial repoting, premiums written, other revenue, claims paid, claims reseves, reinsuance and coinsuance, cash and investments. We also identiied the key IT systems in the UK that were relevant to the audit, including the policy administation system, claims administation systems and the data warehouse. Our audit approach was reliant upon the efectiveness of the controls over all these business processes. 7.3. Our consideation of climate-related risks In planning our audit, we have considered the impact of climate change on the Group’s opeations and subsequent impact on its inancial statements. The Group sets out its assessment of the potential impact on pages 121 to 124 of the Emerging Risks section. In conjunction with our Task Force on Climate Related Financial Disclosures (TCFD) specialists, we have held discussions with the Group to understand management’s: • process for identifying afected opeations, including the governance and controls over this process, and the subsequent efect on the inancial repoting of the Group; and • long-term stategy to respond to climate-related risks as they emerge including the efect on the Group’s forecasts. In addition, our audit work also involved: • challenging the completeness of the physical and tansition risks identiied and considered in the Group’s climate risk assessment and the conclusion that there is no material impact of climate change risk on the current year inancial repoting; • assessing the Group’s qualitative analysis which suppots the Group’s conclusion that there is no material inancial statement impact of climate risk on expected credit losses; and • assessing disclosures in the Annual Repot against the requirements of the TCFD famework, paagaph 8(a) of Listing Rule 9.8.6R. Admial Group plc Annual Repot and Accounts 2022 221 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Independent Auditor’s Repot continued to the members of Admial Group plc We have not been engaged to provide assuance over the accuacy of TCFD disclosures set out on pages 97 to 111 of the Annual Repot. As pat of our procedures, we are required to read these disclosures and to consider whether they are materially inconsistent with the inancial statements or our knowledge obtained during the course of our audit. We did not identify any material inconsistencies as a result of these procedures. 7.4. Working with other auditors We engaged local component auditors, being Deloitte member irms in the US and Spain, to peform the audit work in these respective territories on our behalf. We directed and supevised the work of Deloitte Spain, including through visits to the opeations in Madrid, and remote communication and review of their work. Due to the relative signiicance of the Group’s opeations in the US, while we did not undetake visits to the opeations in the US, we directed and supevised the work of the component auditor by having frequent phone calls with the component audit team, paticipating in video conferences and reviewing cetain key audit documentation remotely. 8. Other information The other information comprises the information included in the Annual Repot other than the inancial statements and our auditor’s repot thereon. The directors are responsible for the other information contained within the Annual Repot. Our opinion on the inancial statements does not cover the other information and, except to the extent othewise explicitly stated in our repot, we do not express any form of assuance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the inancial statements or our knowledge obtained in the course of the audit, or othewise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the inancial statements themselves. If, based on the work we have peformed, we conclude that there is a material misstatement of this other information, we are required to repot that fact. We have nothing to repot in this regard. 9. Responsibilities of directors As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the prepaation of the inancial statements and for being satisied that they give a true and fair view, and for such internal control as the directors determine is necessay to enable the prepaation of inancial statements that are free from material misstatement, whether due to faud or error. In preparing the inancial statements, the directors are responsible for assessing the Group’s and the Parent Company’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the Parent Company or to cease opeations, or have no realistic alternative but to do so. 10. Auditor’s responsibilities for the audit of the inancial statements Our objectives are to obtain reasonable assuance about whether the inancial statements as a whole are free from material misstatement, whether due to faud or error, and to issue an auditor’s repot that includes our opinion. Reasonable assuance is a high level of assuance, but is not a guaantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from faud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to inluence the economic decisions of users taken on the basis of these inancial statements. A futher description of our responsibilities for the audit of the inancial statements is located on the FRC’s website at: www.frc.org.uk/ auditorsresponsibilities. This description forms pat of our auditor’s repot. 11. Extent to which the audit was considered capable of detecting irregularities, including faud Irregularities, including faud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including faud. The extent to which our procedures are capable of detecting irregularities, including faud is detailed below. Admial Group plc Annual Repot and Accounts 2022 222 Financial Statements 11.1. Identifying and assessing potential risks related to irregularities In identifying and assessing risks of material misstatement in respect of irregularities, including faud and non-compliance with laws and regulations, we considered the following: • the nature of the industy and sector, control environment and business peformance including the design of the Group’s remuneation policies, key drivers for directors’ remuneation, bonus levels and peformance targets; • the Group’s own assessment of the risks that irregularities may occur either as a result of faud or error; • results of our enquiries of management, internal audit, the directors and the Audit Committee about their own identiication and assessment of the risks of irregularities, including those that are speciic to the Group’s sector; • any matters we identiied having obtained and reviewed the Group’s documentation of their policies and procedures relating to: – identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance; – detecting and responding to the risks of faud and whether they have knowledge of any actual, suspected or alleged faud; – the internal controls established to mitigate risks of faud or non-compliance with laws and regulations; and • the matters discussed among the audit engagement team including signiicant component audit teams and relevant internal specialists, including tax, actuarial, inancial instruments, IT, climate, and industy specialists regarding how and where faud might occur in the inancial statements and any potential indicators of faud. As a result of these procedures, we considered the oppotunities and incentives that may exist within the organisation for faud and identiied the greatest potential for faud in the following areas: valuation of gross insuance claims reseves and inlation assumptions applied to UK motor bodily injuy claims reseves. In common with all audits under ISAs (UK), we are also required to peform speciic procedures to respond to the risk of management override. We also obtained an understanding of the legal and regulatoy fameworks that the Group opeates in, focusing on provisions of those laws and regulations that had a direct efect on the determination of material amounts and disclosures in the inancial statements. The key laws and regulations we considered in this context included the UK Companies Act, Listing Rules, Solvency II regulation and relevant tax legislation. In addition, we considered provisions of other laws and regulations that do not have a direct efect on the inancial statements but compliance with which may be fundamental to the Group’s ability to opeate or to avoid a material penalty. These included the Group’s opeating licence, and the Financial Conduct Authority and the Prudential Regulation Authority regulations. 11.2. Audit response to risks identiied As a result of peforming the above, we identiied the valuation of gross insuance claims reseves and the inlation assumptions applied to UK motor bodily injuy claims reseves as key audit matters related to the potential risk of faud. The key audit matters section of our repot explains the matters in more detail and also describes the speciic procedures we peformed in response to those key audit matters. In addition to the above, our procedures to respond to the risks identiied included the following: • reviewing the inancial statement disclosures and testing to suppoting documentation to assess compliance with provisions of relevant laws and regulations described as having a direct efect on the inancial statements; • enquiring of management, the Audit Committee and in-house legal counsel concerning actual and potential litigation and claims; • peforming analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to faud; • reading minutes of meetings of those charged with governance, reviewing internal audit repots and reviewing correspondence with HMRC, the Financial Conduct Authority and the Prudential Regulation Authority; and • in addressing the risk of faud through management override of controls, testing the appropriateness of journal entries and other adjustments; assessing whether the judgments made in making accounting estimates are indicative of a potential bias; and evaluating the business ationale of any signiicant tansactions that are unusual or outside the normal course of business. We also communicated relevant identiied laws and regulations and potential faud risks to all engagement team members including internal specialists and signiicant component audit teams, and remained alet to any indications of faud or non-compliance with laws and regulations throughout the audit. Admial Group plc Annual Repot and Accounts 2022 223 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Independent Auditor’s Repot continued to the members of Admial Group plc Repot on other legal and regulatoy requirements 12. Opinions on other matters prescribed by the Companies Act 2006 In our opinion the pat of the Directors’ Remuneation Repot to be audited has been properly prepared in accordance with the Companies Act 2006. In our opinion, based on the work undetaken in the course of the audit: • the information given in the Stategic Repot and the Directors’ Repot for the inancial year for which the inancial statements are prepared is consistent with the inancial statements; and • the Stategic Repot and the Directors’ Repot have been prepared in accordance with applicable legal requirements. In the light of the knowledge and understanding of the Group and the Parent Company and their environment obtained in the course of the audit, we have not identiied any material misstatements in the Stategic Repot or the Directors’ Repot. 13. Corpoate Governance Statement The Listing Rules require us to review the directors’ statement in relation to going concern, longer-term viability and that pat of the Corpoate Governance Statement relating to the Group’s compliance with the provisions of the UK Corpoate Governance Code speciied for our review. Based on the work undetaken as pat of our audit, we have concluded that each of the following elements of the Corpoate Governance Statement is materially consistent with the inancial statements and our knowledge obtained during the audit: • the directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncetainties identiied set out on page 210; • the directors’ explanation as to its assessment of the Group’s prospects, the period this assessment covers and why the period is appropriate set out on page 122 to 124; • the directors’ statement on fair, balanced and understandable set out on page 212; • the Board’s conirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 114; • the section of the Annual Repot that describes the review of efectiveness of risk management and internal control systems set out on pages 114 to 120; and • the section describing the work of the Audit Committee set out on page 171. 14. Matters on which we are required to repot by exception 14.1. Adequacy of explanations received and accounting records Under the Companies Act 2006 we are required to repot to you if, in our opinion: • we have not received all the information and explanations we require for our audit; or • adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from banches not visited by us; or • the Parent Company inancial statements are not in agreement with the accounting records and returns. We have nothing to repot in respect of these matters. 14.2. Directors’ remuneation Under the Companies Act 2006 we are also required to repot if in our opinion cetain disclosures of directors’ remuneation have not been made or the pat of the Directors’ Remuneation Repot to be audited is not in agreement with the accounting records and returns. We have nothing to repot in respect of these matters. Admial Group plc Annual Repot and Accounts 2022 224 Financial Statements 15. Other matters which we are required to address 15.1. Auditor tenure Following the recommendation of the Audit Committee, we were appointed by shareholders’ approval at the Annual Geneal Meeting on 28 April 2022 to audit the inancial statements for the year ending 31 December 2022 and subsequent inancial periods. The period of total uninterrupted engagement including previous renewals and reappointments of the irm is seven years, covering the years ending 31 December 2016 to 31 December 2022. 15.2. Consistency of the audit repot with the additional repot to the Audit Committee Our audit opinion is consistent with the additional repot to the Audit Committee we are required to provide in accordance with ISAs (UK). 16. Use of our repot This repot is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Pat 16 of the Companies Act 2006. Our audit work has been undetaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s repot 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 and the Company’s members as a body, for our audit work, for this repot, or for the opinions we have formed. As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Tansparency Rule (DTR) 4.1.14R, these inancial statements form pat of the European Single Electronic Format (‘ESEF’) prepared Annual Financial Repot iled on the National Stoage Mechanism of the UK FCA in accordance with the ESEF Regulatoy Technical Standard (‘ESEF RTS’). This auditor’s repot provides no assuance over whether the annual inancial repot has been prepared using the single electronic format speciied in the ESEF RTS. David Rush (Senior statutoy auditor) For and on behalf of Deloitte LLP Statutoy Auditor London, United Kingdom 7 March 2023 Admial Group plc Annual Repot and Accounts 2022 225 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Consolidated Income Statement For the year ended 31 December 2022 Year ended Continuing opeations Note 31 December 2022 £m 31 December 2021 £m Insuance premium revenue 2,705.4 2,492.3 Insuance premium ceded to reinsurers (1,794.4) (1,637.3) Net insuance premium revenue 5 911.0 855.0 Other revenue 8 318.8 314.8 Proit commission 5 170.9 304.5 Interest income 7 58.7 36.6 Interest expense 7 (12.6) (6.1) Net interest income from loans 46.1 30.5 Investment return – interest income at efective interest ate 6 52.3 40.6 Investment return – other 6 12.3 6.2 Investment return recoveable from co- and reinsurers 6 (20.0) (1.6) Net revenue 1,491.4 1,550.0 Insuance claims and claims handling expenses 5 (2,081.4) (1,506.8) Insuance claims and claims handling expenses recoveable from reinsurers 1,575.3 1,174.5 Net insuance claims 5 (506.1) (332.3) Opeating expenses and share scheme charges 9 (924.8) (970.1) Opeating expenses and share scheme charges recoveable from co- and reinsurers 9 439.3 491.1 Expected credit losses 6, 9 (18.9) (13.3) Net opeating expenses and share scheme charges (504.4) (492.3) Total expenses (1,010.5) (824.6) Opeating proit 480.9 725.4 Finance costs 6 (13.4) (13.7) Finance costs recoveable from co- and reinsurers 6 1.5 1.8 Net inance costs (11.9) (11.9) Proit before tax from continuing opeations 469.0 713.5 Taxation expense 10 (97.2) (130.2) Proit after tax from continuing opeations 371.8 583.3 Proit before tax from discontinued opeations – 11.3 Gain on disposal – 404.4 Taxation expense – (2.3) Proit after tax from discontinued opeations 13 – 413.4 Proit after tax from continuing and discontinued opeations 371.8 996.7 Proit after tax attributable to: Equity holders of the parent 373.0 997.9 Non-controlling interests (NCI) (1.2) (1.2) 371.8 996.7 Earnings per share – from continuing opeations Basic 12 124.3p 196.7p Diluted 12 123.7p 196.1p Earnings per share – from continuing and discontinued opeations Basic 12 124.3p 335.5p Diluted 12 123.7p 334.5p Dividends declared and paid (total) 12 658.3 720.9 Dividends declared and paid (per share) 12 223.0p 247.0p Admial Group plc Annual Repot and Accounts 2022 226 Financial Statements Consolidated Statement of Comprehensive Income For the year ended 31 December 2022 Year ended Note 31 December 2022 £m 31 December 2021 £m Proit for the period – from continuing and discontinued opeations 371.8 996.7 Other comprehensive income Items that are or may be reclassiied to proit or loss Movements in fair value reseve (255.6) (50.1) Deferred tax charge in relation to movement in fair value reseve 10 13.0 1.4 Exchange diferences on tanslation of foreign opeations 6.9 (10.4) Movement in hedging reseve 25.1 6.6 Deferred tax charge in relation to movement in hedging reseve (7.0) – Other comprehensive income for the period, net of income tax (217.6) (52.5) Total comprehensive income for the period 154.2 944.2 Total comprehensive income for the period attributable to: Equity holders of the parent 155.3 945.7 Non-controlling interests (1.1) (1.5) 154.2 944.2 Admial Group plc Annual Repot and Accounts 2022 227 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Consolidated Statement of Financial Position As at 31 December 2022 As at Note 31 December 2022 £m 31 December 2021 £m ASSETS Propety and equipment 11 89.8 103.2 Intangible assets 11 248.3 179.9 Deferred income tax 10 18.5 9.3 Corpoation tax asset 10 – 10.6 Reinsuance assets 5 2,714.0 2,176.1 Loans and advances to customers 7 823.9 556.8 Insuance and other receivables 6 1,335.8 1,208.5 Financial investments 6 3,411.2 3,742.6 Cash and cash equivalents 6 297.0 372.7 Total assets 8,938.5 8,359.7 EQUITY Share capital 12 0.3 0.3 Share premium account 13.1 13.1 Other reseves 12 (173.7) 44.0 Retained earnings 1,114.5 1,348.8 Total equity attributable to equity holders of the parent 954.2 1,406.2 Non-controlling interests 1.2 2.3 Total equity 955.4 1,408.5 LIABILITIES Insuance contact liabilities 5 4,792.5 4,215.0 Subordinated and other inancial liabilities 6 939.1 670.9 Tade and other payables 6, 11 2,158.0 1,960.0 Lease liabilities 6 88.5 105.3 Corpoation tax liability 10 5.0 – Total liabilities 7,983.1 6,951.2 Total equity and total liabilities 8,938.5 8,359.7 The accompanying notes form pat of these inancial statements. These financial statements were approved by the Board of Directors on 7 March 2023 and were signed on its behalf by: Geraint Jones Chief Financial Officer Admiral Group plc Company Number: 03849958 Admial Group plc Annual Repot and Accounts 2022 228 Financial Statements Consolidated Cash Flow Statement For the year ended 31 December 2022 Year ended Note 31 December 2022 £m 31 December 2021 £m Proit after tax – from continuing and discontinued opeations 371.8 996.7 Adjustments for non-cash items: – Depreciation of propety, plant and equipment and right-of-use assets 11 18.2 23.6 – Impairment/Disposal of propety, plant and equipment and right-of-use assets 11 (1.2) 23.8 – Amotisation and impairment of intangible assets 11 23.7 44.7 – Gain on disposal of Comparison entities held for sale 13 – (404.4) – Movement in expected credit loss provision 6 11.7 13.3 – Share scheme charges 9 57.3 65.2 – Accrued interest income from loans and advances to customers – (0.8) – Interest expense on funding for loans and advances to customers 12.6 6.1 – Investment return 6 (64.6) (45.2) – Finance costs, including unwinding of discounts on lease liabilities 13.4 12.0 – Taxation expense 10 97.2 132.5 Change in gross insuance contact liabilities 5 577.5 133.7 Change in reinsuance assets 5 (537.9) (92.9) Change in insuance and other receivables 6, 11 (129.8) (9.2) Change in loans and advances to customers 7 (280.6) (205.2) Change in tade and other payables, including tax and social security 11 198.0 (56.1) Cash lows from opeating activities, before movements in investments 367.3 637.8 Purchases of inancial instruments (3,198.0) (3,710.2) Proceeds on disposal/maturity of inancial instruments 3,328.3 3,397.1 Interest and investment income received 6 58.7 46.6 Cash lows from opeating activities, net of movements in investments 556.3 371.3 Taxation payments (91.2) (126.7) Net cash low from opeating activities 465.1 244.6 Cash lows from investing activities: Purchases of propety, equipment and software 11 (98.6) (69.2) Investment in associates (2.4) – Proceeds from sale of Comparison entities – 471.8 Net costs paid on sale of Comparison entities – (14.8) Net cash used in investing activities (101.0) 387.8 Cash lows from inancing activities: Proceeds on issue of loan backed securities 6 267.8 185.9 Finance costs paid, including interest expense paid on funding for loans 6, 7 (25.3) (20.2) Repayment of lease liabilities 6 (9.2) (9.6) Equity dividends paid 12 (658.3) (720.9) Net cash used in inancing activities (425.0) (564.8) Net (decrease) / increase in cash and cash equivalents (60.9) 67.6 Cash and cash equivalents at 1 Januay 372.7 351.7 Cash and cash equivalents included in disposal of comparison entities – (41.3) Efects of changes in foreign exchange ates (14.8) (5.3) Cash and cash equivalents at 31 December 6 297.0 372.7 Admial Group plc Annual Repot and Accounts 2022 229 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Consolidated Statement of Changes in Equity For the year ended 31 December 2022 Attributable to the owners of the Company Note Share capital £m Share premium account £m Fair value reseve £m Hedging reseve £m Foreign exchange reseve £m Retained proit and loss £m Total £m Non- controlling interests £m Total equity £m Balance at 1 Januay 2021 0.3 13.1 85.4 (3.6) 13.1 1,004.4 1,112.7 10.7 1,123.4 Proit/(loss) for the period – from continuing and discontinued opeations – – – – – 997.9 997.9 (1.2) 996.7 Other comprehensive income Movements in fair value reseve – – (50.1) – – – (50.1) – (50.1) Deferred tax credit in relation to movement in fair value reseve 10 – – 1.4 – – – 1.4 – 1.4 Movement in hedging reseve – – – 6.6 – – 6.6 – 6.6 Currency tanslation diferences – – – – (10.1) – (10.1) (0.3) (10.4) Total comprehensive income for the period – – (48.7) 6.6 (10.1) 997.9 945.7 (1.5) 944.2 Tansactions with equity holders Dividends 12 – – – – – (720.9) (720.9) – (720.9) Share scheme credit 9 – – – – – 63.1 63.1 – 63.1 Deferred tax credit on share schemes credit 10 – – – – – 6.0 6.0 – 6.0 Tansfer to gain on disposal of assets held for sale – – – – 1.3 (2.0) (0.7) 0.1 (0.6) Change in ownership interests on sale of comparison – – – – – – – (6.7) (6.7) Change in ownership interests without a change in control – – – – – 0.3 0.3 (0.3) – Total tansactions with equity holders – – – – 1.3 (653.5) (652.2) (6.9) (659.1) As at 31 December 2021 0.3 13.1 36.7 3.0 4.3 1,348.8 1,406.2 2.3 1,408.5 Balance at 1 Januay 2022 0.3 13.1 36.7 3.0 4.3 1,348.8 1,406.2 2.3 1,408.5 Proit/(loss) for the period – from continuing and discontinued opeations – – – – – 373.0 373.0 (1.2) 371.8 Other comprehensive income Movements in fair value reseve – – (255.6) – – – (255.6) – (255.6) Deferred tax credit in relation to movement in fair value reseve 10 – – 13.0 – – – 13.0 – 13.0 Movement in hedging reseve – – – 25.1 – – 25.1 – 25.1 Deferred tax on charge in relation to movement in hedging reseve – – – (7.0) – – (7.0) – (7.0) Currency tanslation diferences – – – – 6.8 – 6.8 0.1 6.9 Total comprehensive income for the period – – (242.6) 18.1 6.8 373.0 155.3 (1.1) 154.2 Tansactions with equity holders Dividends 12 – – – – – (658.3) (658.3) – (658.3) Share scheme credit 9 – – – – – 57.3 57.3 – 57.3 Deferred tax charge on share schemes credit 10 – – – – – (6.3) (6.3) – (6.3) Change in ownership interests without a change in control – – – – – – – – – Total tansactions with equity holders – – – – – (607.3) (607.3) – (607.3) As at December 2022 0.3 13.1 (205.9) 21.1 11.1 1,114.5 954.2 1.2 955.4 Admial Group plc Annual Repot and Accounts 2022 230 Financial Statements Notes to the Financial Statements For the year ended 31 December 2022 1. General information Admiral Group plc is a public limited company incorporated in England and Wales. Its registered office is at Tŷ Admiral, David Street, Cardiff CF10 2EH and its shares are listed on the London Stock Exchange. The nature of Admiral Group operations and its principal activities is set out in the Business model section on page 6. The consolidated financial statements have been prepared and approved by the Directors in accordance with United Kingdom adopted international accounting standards in conformity with the requirements of the Companies Act 2006. The Company has elected to prepare its parent company financial statements in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101). 2. Basis of preparation The consolidated financial statements have been prepared on a Going Concern basis. In making this assessment, the Directors’ have considered in detail the impact of the pandemic on the Group’s financial position and performance, including the projection of the Group’s profits, regulatory capital surpluses and sources of liquidity for the next 12 months and beyond. The following areas were focused on as part of this review: • The Group’s profit projections, including: – Changes in premium rates and projected policy volumes across the Group’s insurance businesses, including early indications of the impact of the FCA general insurance pricing reform which came into effect at the start of 2022 – Potential impacts on the cost of settling claims across all insurance businesses, including the impact of inflationary pressures – Projected trends in other revenue generated by the Group’s insurance business from fees and the sale of ancillary products – Projected contributions to profit from businesses other than the UK Car insurance business – Expected trends in unemployment in the context of credit risks and the growth of the Group’s Loans business • The Group’s solvency position, which has been closely monitored through periods of market volatility. The Group continues to maintain a strong solvency position above target levels • The adequacy of the Group’s liquidity position after considering all of the factors noted above • The results of business plan scenarios and stress tests on the projected profitability, solvency and liquidity positions including the impact of severe downside scenarios that assume severe adverse economic, credit and trading stresses • The regulatory environment, in particular focusing on regulatory guidance issued by the Group’s regulators and ongoing communications between management and regulators • A review of the Company’s principal risks and uncertainties and the assessment of emerging risks Following consideration of the above, the Directors have reasonable expectation that the Group has adequate resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report, and that it is therefore appropriate to adopt the going concern basis in preparing the financial statements. Further information regarding the Company’s business activities, together with the factors likely to affect its future development, performance and position, is set out in the Strategic Report. Further information regarding the financial position of the Company, its cash flows, liquidity position and borrowing facilities are also described in the Strategic Report. In addition, notes 6 and 12 to the financial statements include the Company’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments; and its exposures to credit risk and liquidity risk. The accounting policies set out in the notes to the financial statements have, unless otherwise stated, been applied consistently to all periods presented in these Group financial statements. The financial statements are prepared on the historical cost basis, except for the revaluation of financial assets classified as fair value through profit or loss or as fair value through other comprehensive income. The Group and Company financial statements are presented in pounds sterling, rounded to the nearest £0.1 million. Cash flows from operating activities before movements in investments comprise all cash flows arising from the Group’s insurance and reinsurance activities, and from loans and advances issued to customers. Cash flows from financing activities include the cash flows on issues of loan backed securities, lease liabilities and other financial liabilities. Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and can affect those returns through its power over the entity. Admial Group plc Annual Repot and Accounts 2022 231 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Notes to the Financial Statements continued For the year ended 31 December 2022 In assessing control, the Group takes into consideration potential voting rights that are currently exercisable. The acquisition date is the date on which control is transferred to the acquirer. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date control ceases. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance. The Group has securitised certain loans and advances to customers by the transfer of the loans to special purpose entities (“SPEs”) controlled by the Group. Securitisation enables a subsequent issuance of debt by the SPEs to investors who gain the security of the underlying assets as collateral. These SPEs are fully consolidated into the Group financial statements under IFRS 10, as the Group controls the entity in line with the above definition. The preparation of financial statements in conformity with adopted IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimate is reviewed. To the extent that a change in an accounting estimate gives rise to changes in assets and liabilities, the movement is recognised by adjusting the carrying amount of the related asset or liability in the period in which the change occurs. Adoption of new and revised standards The Group has adopted the following IFRSs and interpretations during the year, which have been issued and endorsed: • Amendments to IFRS 3 Reference to the Conceptual Framework (effective 1 January 2022) • Amendments to IAS 16 Property, Plant and Equipment–Proceeds before Intended Use (effective 1 January 2022) • Amendments to IAS 37 Onerous Contracts – Cost of Fulfilling a Contract (effective 1 January 2022) • Annual Improvements to IFRS Standards 2018–2020 Cycle: Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards, IFRS 9 Financial Instruments, and IFRS 16 Leases (effective 1 January 2022) New and revised IFRS Standards in issue but not yet effective At the date of authorisation of these financial statements, the Group has not applied the following new and revised IFRS Standards that have been issued but are not yet effective: • IFRS 17 Insurance Contracts (effective 1 January 2023) • Amendments to IAS 1 Classification of Liabilities as Current or Non-current and Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting Policies (effective 1 January 2023) • Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates (effective 1 January 2023) • Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a single transaction (effective 1 January 2023) The Directors do not expect that the adoption of the Standards listed above will have a material impact on the financial statements of the Group in future periods, except as noted below: Admiral Group plc Annual Report and Accounts 2022 232 Financial Statements IFRS 17: Accounting for Insurance contracts IFRS 17 Insurance Contracts, as issued by the IASB and endorsed by the UK Endorsement Board on 16 May 2022, is a replacement for IFRS 4 Insurance Contracts, effective for annual periods beginning on or after 1 January 2023, with a transition balance sheet date of 1 January 2022. The adoption of IFRS 17 does not change the classification of the Group’s insurance contracts. However, IFRS 17 establishes specific principles for the recognition, measurement, presentation and disclosure of insurance contracts issued and reinsurance contracts held by the Group. Applying IFRS 17 to the Group’s contracts, the scope of the standard is aligned to IFRS 4, with insurance liabilities comprised of the Liability for Remaining Coverage (‘LRC’), and the Liability for Incurred Claims (‘LIC’). Reinsurance assets are comprised of the Asset for Remaining Coverage (‘ARC’) and Asset for Incurred Claims (‘AIC’). IFRS 17 outlines a general model, which is simplified if certain criteria are met by measuring the liability for remaining coverage using the premium allocation approach (‘PAA’). Under IFRS 17, the Group’s insurance contracts issued and reinsurance contracts held are all eligible to be measured by applying the PAA, given that: • The Group’s insurance contracts issued have coverage periods of 6 to 12 months in duration and therefore automatically qualify for the PAA under IFRS 17.53(b); and • Whilst the Group’s reinsurance contracts have coverage periods which extend beyond 12 months, modelling of these contracts shows that using the PAA produces a measurement of the LRC which is not materially different from the LRC produced using the general model. These contracts are therefore eligible to be measured applying the PAA under IFRS 17.53(a). The Group therefore intends to apply the PAA across all of its insurance contracts issued and reinsurance contracts held. Differences in measurement principles The measurement principles of the PAA differ from the approach used by the Group under IFRS 4 in the following key areas: • The measurement of insurance liabilities and reinsurance assets is performed at a more granular level than IFRS 4, taking into account: – the type of risk and how it is managed (a “portfolio” of insurance contracts); – the projected level of profitability; and – disaggregating the contracts into annual cohorts (i.e. each “group” of contracts is considered by underwriting year for the Group. • The measurement of the liability for incurred claims (claims outstanding under IFRS 4, comprised of the best estimate of claims outstanding plus a margin held above actuarial best estimates for adverse development) is determined on a discounted probability- weighted expected value basis plus an explicit risk adjustment for non-financial risk, which is separately reported • The measurement of the liability for remaining coverage reflects premiums received less any deferred insurance acquisition cash flows (unless these are expensed as incurred) and less amounts recognised in revenue for insurance services provided. This corresponds to items reported under IFRS 4 as the unearned premium reserve, less deferred acquisition costs and insurance receivables • Where facts and circumstances exist indicating that a group of contracts may be onerous, the Group must assess whether an onerous loss component should be recognised. The calculation of the onerous loss component compares the fulfilment cashflows relating to the liability for remaining coverage measured using the general model (including the risk adjustment for non-financial risk) to the recognised liability for remaining coverage, with any deficiency recognised as an onerous loss component • The asset for remaining coverage reflects reinsurance premiums paid for reinsurance held, less ceded earned reinsurance premiums. Ceded reinsurance premiums under IFRS 17 are presented and earned net of any ceded reinsurance expense recoveries, which were presented separately under IFRS 4 and recognised in line with the timing of the gross expenses incurred. In addition, the asset for remaining coverage is adjusted to include a loss-recovery component to reflect the expected recovery of onerous contract losses (on the underlying insurance contracts issued) where such contracts reinsure onerous direct contracts • The asset for incurred claims reflects the expected reinsurance recoveries of claims related cashflows on a discounted, probability weighted expected value basis, inclusive of the risk adjustment • Under IFRS 17, income that is currently recognised immediately as commission income on underwritten ancillary products is required to be recognised over the life of the policy as insurance revenue. This is because the commission income is not considered a separable component under IFRS 17. As a result, part of the income that was recognised under IFRS 4 at year end 2021 is deferred under IFRS 17 A dmiral Group plc Annual Report and Accounts 2022 233 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information Key accounting policy decisions • As set out above, both the Group’s insurance and reinsurance contracts have been deemed eligible for the PAA, and the Group is intending to apply the PAA across all of its insurance and reinsurance contracts • The application of the disaggregation requirements of IFRS 17 have resulted in the Group determining its portfolios of insurance contracts as being by country of issue and line of business • The Group intends to take the option to expense its insurance acquisition cashflows immediately (with all contracts eligible for this treatment, given the coverage period of < 12 months), having previously deferred these expenses under IFRS 4 • The Group will compute its discount yield curves using a risk-free rate, plus an illiquidity premium reflective of the illiquidity of the underlying claims. The illiquidity premium will be set by reference to several illiquidity data points, principally using illiquidity on internal asset information supplemented by quantitative analysis when required • The Group intends to implement the option to take the difference arising from changes in the discount yield curve through Other Comprehensive Income rather than the Income Statement, with insurance finance expenses thereby only comprising the unwinding of discounting based on the locked-in rate at the time the claims are incurred • Although IFRS 17 requires a risk adjustment to be included in the measurement of the liability for incurred claims, there is no prescribed methodology or range. The Group has made an accounting policy decision to base its risk adjustment on a confidence level approach, setting the risk adjustment between the 85 th and 95 th percentile at an entity level basis, based on Group risk appetite. At the date of transition, the Group expects the risk adjustment to be at the upper end of the corridor Estimated impact of transition The Group is in the advanced stages of implementing the standard. The Group will be applying the standard using a fully retrospective approach, and with its first reporting in 2023 will restate the 2022 comparatives, including the opening Balance Sheet under IFRS 17 as at 1 January 2022. The estimated impact on the opening Balance Sheet is expected to be a reduction in the Group’s equity of between £100 million and £130 million. The final impact within the range presented is dependent on the final outcome of a small number of outstanding technical judgements in respect of the calculation of the risk adjustment for non-financial risk. The key changes driving the estimated adverse impact on transition are: • An adverse impact arising from the Group’s accounting policy choice to expense acquisition costs, which results in a write off of the Group’s gross deferred acquisition cost asset • A reduction in quota share reinsurance assets as a result of the change in timing in recognition of ceded quota share expense recoveries • An adverse impact due to the deferral of revenue in relation to underwritten ancillary products, which was previously recognised immediately as commission income • An offsetting favourable impact due to changes in the Group’s claims liabilities, net of reinsurance, as a result of the requirements for the liability and asset for incurred claims to be calculated using a probability weighted, discounted best estimate plus risk adjustment for non-financial risk. • The tax treatment of the transition impact follows the accounting treatment, with no transitional relief available. The tax impact on transition has been calculated at an entity level, based on the tax rates that are expected to be in place in 2023, when the transition impacts will be realised. Deferred tax assets in relation to carried forward losses are recognised only to the extent that it is probable future taxable profit will be available against which the assets can be utilised, in accordance with the Group’s accounting policy for taxation These estimates are based on accounting policies, assumptions, judgements and estimation techniques that remain subject to change until the Group finalises and reports its interim results in August 2023. In addition to the impact on equity at transition, there are a number of presentational changes that will result in a reduction in insurance contract liabilities and reinsurance contract assets, primarily as a result of these balances being offset by the related insurance receivables and reinsurance receivables and payables. The cash flows and underlying capital generation of our businesses are not materially affected by IFRS 17, and we do not expect the standard to have an impact on the Group’s Solvency II performance metrics. Notes to the Financial Statements continued For the year ended 31 December 2022 Admiral Group plc Annual Report and Accounts 2022 234 Financial Statements 3. Critical accounting judgements and key sources of estimation uncertainty In applying the Group’s accounting policies as described in the notes to the financial statements, the Directors are required to make judgements (other than those involving estimations) that have a significant impact on the amounts recognised and to make estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Critical accounting judgements The following are the critical judgements, apart from those involving estimations (which are presented separately below), that the Directors have made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements. Classification of the Group’s contracts with reinsurers as reinsurance contracts A contract is required to transfer significant insurance risk in order to be classified as such. Management reviews all terms and conditions of each such insurance and reinsurance contract in order to be able to make this judgement. In particular, all reinsurance contracts (both excess of loss and quota share contracts) held by the Group have been assessed and it has been concluded that all contracts transfer significant insurance risk and have therefore been classified and accounted for as reinsurance contracts within these financial statements. Consolidation of the Group’s special purpose entities (‘SPEs’) The Group has set up SPEs in relation to the Admiral Loans business, whereby the Group securitises certain loans by the transfer of the loans to the respective SPEs. The securitisation enables a subsequent issue of debt by the SPEs to investors who gain the security of the underlying assets as collateral. The accounting treatment of SPEs has been assessed and it has been concluded that the entities should be fully consolidated into the Group’s financial statements under IFRS 10. This is due to the fact that despite not having legal ownership, the Group has control of the SPEs, being exposed to the returns and having the ability to affect those returns through its power over the SPEs. The SPEs have been fully consolidated into the Group’s financial statements. Key sources of estimation uncertainty The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below. Calculation of insurance claims provisions and reinsurance assets The Group’s reserving policy requires management to set provisions for outstanding claims for the purpose of the financial statements, above the projected best estimate outcome to allow for unforeseen adverse claims development. In the application of this policy, management applies judgement in: • Calculating the best estimate of the gross ultimate total cost of settling claims that have been incurred prior to the balance sheet date; • Calculating the best estimate of the non-proportional excess of loss reinsurance recoveries relating to outstanding claims; and • Determining where, above the projected best estimate outcomes of gross outstanding claims and reinsurance recoveries, the insurance claims provisions should sit in line with the Group’s reserving methodology Estimation techniques are used in the calculation of the provisions for claims outstanding, which represent a projection of the ultimate estimated total cost of settling claims that have been incurred prior to the balance sheet date and remain unsettled at the balance sheet date, along with a margin to allow for unforeseen adverse claims development. The primary areas of estimation uncertainty are as follows: 1) Calculation of gross best estimate claims provisions The key area where estimation techniques are used is in the ultimate projected cost of reported claims, which includes the emergence of claims that occurred prior to the balance sheet date, but had not been reported at that date. The Group, utilising internal actuarial teams, projects the best estimate claims reserves using a variety of different recognised actuarial projection techniques (for example incurred and paid chain ladders, and initial expected assumptions) to allow an actuarial assessment of their potential outcome. This includes an allowance for unreported claims. The projection techniques are subject to review by an independent external actuarial specialist to provide an impartial assessment. Admiral Group plc Annual Report and Accounts 2022 235 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information Claims are segmented into groups with similar characteristics and which are expected to develop and behave similarly, for example bodily injury (attritional and large) and damage claims, with specific projection methods selected for each head of damage. Key sources of estimation uncertainty arise from both the selection of the projection methods and the assumptions made in setting claims provisions through the review of historical development of underlying case reserve estimates, overlaid with emerging market trends. Allowance is made for changes arising from the internal and external environment which may cause future claim cost inflation to deviate from that seen in historic data. Examples of these factors include: • Changes in the reporting patterns of claims impacting the frequency of bodily injury claims; • Emerging inflationary trends on the average cost of bodily injury and damage claims; • The likelihood of bodily injury claims settling as Periodic Payment Orders; • Changes in the regulatory or legal environment that lead to changes in awards for bodily injury claims and associated legal costs; • Changes to the underlying process and methodologies employed in setting and reviewing case reserve estimates Implicit assumptions in the actuarial projections include average cost per claim and average claim numbers by accident year, future rates of claims inflation and loss ratios by accident year and underwriting year. These metrics are reviewed and challenged as part of the process for making allowance for the uncertainties noted. 2) Calculation of excess of loss reinsurance recoveries The Group uses excess of loss reinsurance in order to mitigate the impact of large claims. The reinsurance is non-proportional and recoveries are made on individual claims above the relevant thresholds. As for the underlying gross claims, actuarial teams project the best estimate excess of loss reinsurance recoveries using a variety of actuarial projection techniques that focus on both the ultimate frequency of reported recoveries and the average size of the recovery. Key sources of estimation uncertainty arise from both the selection of the projection methods and the assumptions made in calculating the recoveries through the review of historical development of underlying case reserve estimates, overlaid with emerging market trends. The most significant element of the estimation relates to large bodily injury claims. The key assumption in the calculation of excess of loss recoveries relates to the numbers of large claims in the Group’s UK Motor insurance business that will attract recoveries, where the high retention means that a small number of additional large claims would potentially result in a material increase in the excess of loss recoveries. 3) Calculation of the margin held for adverse development A wide range of factors inform management’s recommendation in setting the margin held above actuarial best estimates, which is subject to approval from the Group’s Reserving and Audit Committees, including: • Reserve KPIs such as the level of margin as a percentage of the ultimate reserve; • Results of stress testing of key assumptions underpinning key actuarial assumptions within best estimate reserves; • A review of a number of individual and aggregated reserve scenarios which may result in future adverse variance to the ultimate best estimate reserve; • Qualitative assessment of the level of uncertainty and volatility within the reserves and the change in that assessment compared to previous periods In addition, for the Group’s UK Car insurance business, the Group’s internal reserve risk distribution is used to determine the approximate confidence level of the recommended booked reserve position which enables comparison of the reserve strength to previous periods and of it’s compliance with IFRS 4. For sensitivities in respect of the claims reserves, refer to note 5d(ii) of the financial statements. These sensitivities are provided based on booked loss ratios, as it is impractical to disaggregate the assumptions further, but for the disaggregated assumptions it is reasonably possible, on the basis of existing knowledge, that outcomes within the next financial year that are different from the assumption could require a material adjustment to the carrying amount. For further detail on objectives, policies and procedures for managing insurance risk, refer to note 5 of the financial statements. Future changes in claims reserves also impact profit commission income, as the measurement of this income is dependent on the loss ratio booked in the financial statements, and cash receivable is dependent on actuarial projections of ultimate loss ratios. Notes to the Financial Statements continued For the year ended 31 December 2022 Admiral Group plc Annual Report and Accounts 2022 236 Financial Statements Calculation of expected credit loss provision The Group is required to calculate an expected credit loss (‘ECL’) allowance in respect of the carrying value of the Admiral loans book in line with the requirements of IFRS 9. Due to the size of the loan book, the calculation of the ECL is deemed to be a critical accounting judgement and includes key sources of estimation uncertainty. Management applies judgement in: • Determining the appropriate modelling solution for measuring the ECL; • Calibrating and selecting appropriate assumptions; • Setting the criteria for what constitutes a significant increase in credit risk; • Identification of key scenarios to include and determining the credit loss in these instances The key areas of estimation uncertainty are in the calculation of the probability of default (PD) in the base scenario for stage 1 and 2 assets, and the determination, impact assessment and weighting of the forward-looking scenarios. Refer to the analysis in note 7 to the financial statements for further detail on the Group’s ECL methodology applied in the period. 4. Operating segments 4a. Accounting policies (i) Group consolidation The consolidated financial statements comprise the results and balances of the Company and all entities controlled by the Company, being its subsidiaries and SPEs (together referred to as the Group), for the year ended 31 December 2022 and comparative figures for the year ended 31 December 2021. The financial statements of the Company’s subsidiaries and its SPEs are consolidated in the Group financial statements. The Company controls 100% of the voting share capital of all its principal subsidiaries, except Admiral Law Limited, Inspop USA LLC, comparenow.com Insurance Agency LLC (indirect holding). An SPE is fully consolidated into the Group financial statements under IFRS 10, where the Group has control over the SPE. The parent company financial statements present information about the Company as a separate entity and not about its Group. In accordance with IAS 24, transactions or balances between Group companies that have been eliminated on consolidation are not reported as related party transactions in the consolidated financial statements. (ii) Foreign currency translation Items included in the financial records of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in pounds sterling, the Group’s presentational currency, rounded to the nearest £0.1 million. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Non-monetary items measured at cost are translated at their historic rate and non-monetary items held at fair value are translated using the foreign exchange rate on the date that the fair value was established. The financial statements of foreign operations whose functional currency is not pounds sterling are translated into the Group presentation currency (pound sterling) as follows: • Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet • Income and expenses for each income statement are translated at average monthly exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the date of the transaction) • All resulting exchange differences are recognised in other comprehensive income and in a separate component of equity except to the extent that the translation differences are attributable to non-controlling interests On disposal of a foreign operation, the cumulative amount recognised in equity relating to that particular operation is recognised in the income statement. Admiral Group plc Annual Report and Accounts 2022 237 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information 4. Operating segments continued 4b. Segment reporting The Group has four (five for financial year 2021 including discontinued operations) reportable segments, as described below. These segments represent the principal split of business that is regularly reported to the Group’s Board of Directors, which is considered to be the Group’s chief operating decision maker in line with IFRS 8 Operating Segments. UK Insurance The segment consists of the underwriting of Motor, Household, Pet and Travel insurance and other products that supplement these insurance policies within the UK. It also includes the generation of revenue from additional products and fees from underwriting insurance in the UK. The Directors consider the results of these activities to be reportable as one segment as the activities carried out in generating the revenue are not independent of each other and are performed as one business. This mirrors the approach taken in management reporting. International Insurance The segment consists of the underwriting of car and home insurance and the generation of revenue from additional products and fees from underwriting car insurance outside of the UK. It specifically covers the Group operations Admiral Seguros in Spain, ConTe in Italy, L’olivier Assurance in France and Elephant Auto in the US. None of these operations are reportable on an individual basis, based on the threshold requirements in IFRS 8. Admiral Money The segment relates to the Admiral Money business launched in 2017, which provides unsecured personal loans and car finance products in the UK, primarily through the comparison channel. Other The ‘Other’ segment is designed to be comprised of all other operating segments that are not separately reported to the Group’s Board of Directors and do not meet the threshold requirements for individual reporting. It includes compare.com and Admiral Pioneer. Discontinued operations – 2021 Financial Year As set out in note 13 to the financial statements, on 29 December 2020 the Group announced its planned sale of the majority of its comparison businesses. The sale was completed on 30 April 2021. The comparison operations are presented as discontinued operations in 2021. The results for 2021 are reflective of the profit on disposal and four months of trading prior to disposal. The segment relates to the comparison businesses disposed of including: Confused.com in the UK, Rastreator in Spain, LeLynx in France, and Preminen entities. Taxes are not allocated across the segments and, as with the corporate activities, are included in the reconciliation to the consolidated income statement and consolidated statement of financial position. Notes to the Financial Statements continued For the year ended 31 December 2022 Admiral Group plc Annual Report and Accounts 2022 238 Financial Statements An analysis of the Group’s revenue and results for the year ended 31 December 2022, by reportable segment, is shown below. The accounting policies of the reportable segments are materially consistent with those presented in the notes to the financial statements for the Group. Year ended 31 December 2022 UK Insurance £m International Insurance £m Admiral Money £m Other £m Eliminations 4 £m Total £m Turnover 1 2,784.3 795.9 59.0 41.7 (0.3) 3,680.6 Net insurance premium revenue 628.8 251.7 – 30.5 – 911.0 Other Revenue and profit commission 440.8 40.1 0.3 8.8 (0.3) 489.7 Net interest income – – 44.6 – 1.5 46.1 Investment return 2 35.0 2.3 – (0.1) (2.2) 35.0 Net revenue 1,104.6 294.1 44.9 39.2 (1.0) 1,481.8 Net insurance claims (260.4) (227.3) – (18.4) – (506.1) Expenses (228.3) (120.6) (42.8) (40.0) 0.3 (431.4) Segment profit/(loss) before tax 615.9 (53.8) 2.1 (19.2) (0.7) 544.3 Other central revenue and expenses, including share scheme charges (75.3) Investment and interest income 11.4 Finance costs 3 (11.4) Consolidated profit before tax 469.0 Taxation expense (97.2) Consolidated profit after tax 371.8 Other segment items: – Intangible and tangible asset additions 122.2 44.7 2.3 13.6 – 182.8 – Depreciation and amortisation 63.9 50.4 1.0 7.6 – 122.9 Admiral Group plc Annual Report and Accounts 2022 239 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information 4. Operating segments continued Revenue and results for the corresponding reportable segments for the year ended 31 December 2021 are shown below. Year ended 31 December 2021 UK Insurance £m International Insurance £m Admiral Money £m Other £m Discontinued operations 6 £m Eliminations 4 £m Total (continuing) £m Total £m Turnover 1 2,751.7 690.3 37.6 27.9 67.2 (7.8) 3,507.3 3,566.9 Net insurance premium revenue 612.6 230.0 – 12.4 – – 855.0 855.0 Other Revenue and profit commission 577.8 34.6 1.0 6.1 67.2 (7.8) 619.3 678.9 Net interest income – – 27.8 – – 2.7 30.5 30.5 Investment return 2 40.8 0.5 – – – (2.7) 38.6 38.6 Net revenue 1,231.2 265.1 28.8 18.5 67.2 (7.8) 1,543.4 1,603.0 Net insurance claims (144.5) (176.2) – (11.6) – – (332.3) (332.3) Expenses (246.7) (100.5) (34.3) (20.6) (55.5) 7.8 (401.9) (449.8) Gain on disposal – – – – 404.4 – – 404.4 Segment profit/(loss) before tax 840.0 (11.6) (5.5) (13.7) 416.1 – 809.2 1,225.3 Other central revenue and expenses, including share scheme charges (88.3) (88.7) Investment and interest income 4.0 4.0 Finance costs 3 (11.4) (11.4) Consolidated profit before tax 5 713.5 1,129.2 Taxation expense (130.2) (132.5) Consolidated profit after tax 583.3 996.7 Other segment items: – Intangible and tangible asset additions 94.8 47.6 0.6 1.2 – – 144.2 144.2 – Depreciation and amortisation 65.5 44.5 0.7 0.2 – – 110.9 110.9 1 Turnover is an Alternative Performance Measure presented before intra-group eliminations and consists of total premiums written (including co-insurers’ share) and Other revenue. Refer to the glossary and note 14 for further information 2 Investment return is reported net of impairment on financial assets, in line with management reporting 3 £0.5 million (2021: £0.6 million) of IFRS 16 interest expense (being the Group’s net share of IFRS 16 interest expense) included within Finance Costs in the income statement has been reallocated to individual segments within expenses, in line with management segmental reporting 4 Eliminations are in respect of the intra-group trading between the Group’s comparison and UK and International insurance entities and intra-group interest. Of the £0.3 million (2021: £7.8 million) elimination of other revenue and profit commission, £nil (2021: £7.6 million) relates to discontinued operations, with the remaining £0.3 million (2021: £0.2 million) relating to compare.com. £1.5 million (2021: £2.7 million) of intra-group interest charges related to the UK Insurance and Admiral Money segment and £0.7 million (2021: £nil) related to UK Insurance and central finance costs have also been eliminated on consolidation 5 Profit before tax for the year ended 31 December 2021 above of £1,129.2 million includes profit before tax from continuing operations (£713.5 million) and discontinued operations (£415.7 million, including £0.4 million of central expenses) 6 See note 13 for further detail on discontinued operations Segment revenues The UK and International insurance reportable segments derive all insurance premium income from external policyholders. Revenue within these segments is not derived from an individual policyholder that represents 10% or more of the Group’s total revenue. Revenues from external customers for products and services are consistent with the split of reportable segment revenues. Information about geographical locations All material revenues from external customers, and net assets attributed to a foreign country, are shown within the International insurance reportable segment shown on the previous pages. Notes to the Financial Statements continued For the year ended 31 December 2022 Admiral Group plc Annual Report and Accounts 2022 240 Financial Statements Segment assets and liabilities The identifiable segment assets and liabilities at 31 December 2022 are as follows: As at 31 December 2022 UK Insurance £m International Insurance £m Admiral Money £m Other £m Elimination £m Total £m Reportable segment assets 6,908.0 1,313.8 929.2 285.3 (693.4) 8,742.9 Reportable segment liabilities 5,884.7 1,150.3 902.1 500.1 (683.5) 7,753.7 Reportable segment net assets 1,023.3 163.5 27.1 (214.8) (9.9) 989.2 Unallocated assets and liabilities (33.8) Consolidated net assets 955.4 Unallocated assets and liabilities consist of other central assets and liabilities, plus deferred and current corporation tax balances. These assets and liabilities are not regularly reviewed by the Board of Directors in the reportable segment format. Eliminations represent inter-segment funding, balances included in insurance and other receivables and deemed loan receivables in respect of securitised loan receivables. The segment assets and liabilities at 31 December 2021 are as follows: As at 31 December 2021 UK Insurance £m International Insurance £m Admiral Money £m Other £m Eliminations £m Total £m Reportable segment assets 6,428.8 1,059.0 762.2 150.8 (635.0) 7,765.8 Reportable segment liabilities 5,342.8 934.8 629.4 429.3 (589.5) 6,746.8 Reportable segment net assets 1,086.0 124.2 132.8 (278.5) (45.5) 1,019.0 Unallocated assets and liabilities 389.5 Consolidated net assets 1,408.5 5. Premium, claims and profit commissions 5a. Accounting policies (i) Revenue – premiums Premiums relating to insurance contracts are recognised as revenue, net of expected cancellations and insurance premium tax, proportionally over the period of cover. Premiums with an inception date after the end of the period are held in the statement of financial position as deferred revenue. Outstanding collections from policyholders related to unexpired risk are recognised within policyholder receivables. A corresponding unearned premium provision is recognised (see note 5a(iii)). (ii) Revenue – profit commission Some of the co-insurance and reinsurance contracts under which motor premiums are shared or ceded, profit commission may be earned on a particular year of account, which is usually subject to performance criteria such as loss ratios and expense ratios. The commission is dependent on the ultimate outcome of any year, with revenue being recognised when loss and expense ratios used in the preparation of the financial statements move below a contractual threshold. Profit commission receivable from reinsurance contracts is accounted for in line with IFRS 4, whereas profit commission receivable from co-insurance contracts with third parties is in line with IFRS 15. Further detail of the policy under IFRS 15 is set out in note 8. (iii) Insurance contracts and reinsurance assets Premiums The proportion of premium receivable on in-force policies relating to unexpired risks is reported in insurance contract liabilities and reinsurance assets as the unearned premium provision – gross and reinsurers’ share respectively. Claims Claims and claims handling expenses are charged as incurred, based on the estimated direct and indirect costs of settling all liabilities arising on events occurring up to the balance sheet date. The provision for claims outstanding comprises provisions for the estimated cost of settling all claims incurred but unpaid at the balance sheet date, whether reported or not. Anticipated reinsurance recoveries are disclosed separately as assets. Whilst the Directors consider that the gross provisions for claims and the related reinsurance recoveries are fairly stated on the basis of the information currently available to them, the ultimate liability will vary as a result of subsequent information and events and may result in significant adjustments to the amounts provided. Admiral Group plc Annual Report and Accounts 2022 241 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information 5. Premium, claims and profit commissions continued Adjustments to the amounts of claims provisions established in prior years are reflected in the income statement for the period in which the adjustments are made and disclosed separately if material. The methods used, and the estimates made, are reviewed regularly. A provision for unexpired risk is made where necessary for the estimated amount required over and above unearned premiums (net of deferred acquisition costs) to meet future claims and related expenses. Co-insurance The Group has entered into certain co-insurance contracts with external parties under which insurance risks are shared on a proportional basis, with the co-insurer taking a specific percentage of premium written and being responsible for the same proportion of each claim. The co-insurer therefore takes direct insurance risk from the policyholder and is directly responsible to the claimant for its proportion of the claim. As the contractual liability is several and not joint, neither the premiums nor claims relating to the co-insurance agreements with external parties are included in the income statement. Under the terms of these agreements, the co-insurers reimburse the Group for the same proportionate share of the costs of acquiring and administering the business. Reinsurance assets Contracts entered into by the Group with reinsurers under which the Group is compensated for losses on the insurance contracts issued by the Group are classified as reinsurance contracts. A contract is only accounted for as a reinsurance contract where there is significant insurance risk transfer between the insured and the insurer. Reinsurance assets are comprised of balances due from reinsurance companies for ceded insurance liabilities. Amounts recoverable from reinsurers are estimated in a consistent manner with the outstanding claims provisions or settled claims associated with the reinsured policies and in accordance with the relevant reinsurance contract. The Group assesses its reinsurance assets for impairment on a regular basis, and in detail every six months. If there is objective evidence that the asset is impaired, then the carrying value will be written down to its recoverable amount. On commutation of reinsurance contracts, the reinsurer is discharged from all obligations relating to the contract. Reinsurance assets and liabilities relating to the commuted contracts are settled in the period in which the commutation agreement is signed . 5b. Net insurance premium revenue 31 December 2022 £m 31 December 2021 £m Total insurance premiums including co-insurers’ share 1 3,243.1 3,098.7 Group gross premiums written excluding co-insurance 2,849.7 2,513.6 Outwards reinsurance premiums (1,922.4) (1,643.0) Net insurance premiums written 927.3 870.6 Change in gross unearned premium provision (144.3) (21.3) Change in reinsurers’ share of unearned premium provision 128.0 5.7 Net insurance premium revenue 911.0 855.0 1 Alternative Performance Measures – refer to the end of the report for definition and explanation, and to note 14a for reconciliation to Group gross premiums written The Group’s share of its insurance business was underwritten by Admiral Insurance (Gibraltar) Limited, Admiral Insurance Company Limited, Admiral Europe Compania Seguros (‘AECS’) and Elephant Insurance Company. The vast majority of contracts are short term in duration, lasting for between 6 and 12 months. Notes to the Financial Statements continued For the year ended 31 December 2022 Admiral Group plc Annual Report and Accounts 2022 242 Financial Statements 5c. Profit commission 31 December 2022 £m 31 December 2021 £m Underwriting year (UK Motor only) 2017 and prior 54.4 94.4 2018 35.8 18.6 2019 31.5 27.6 2020 48.5 150.0 2021 – – 2022 – – Total UK Motor profit commission 1 170.2 290.6 Total UK Household and International profit commission 1 0.7 13.9 Total profit commission 170.9 304.5 1 From the total UK Motor profit commission of £170.2 million (2021: £290.6 million), £130.4 million (2021: £162.9 million) relates to co-insurance arrangements and £39.8 million (2021: £127.7 million) to reinsurance arrangements. The UK Household and International profit commission relates solely to reinsurance arrangements Sensitivities of the recognition of profit commission to movements in the booked loss ratio are shown in note 5d (ii). 5d. Reinsurance assets and insurance contract liabilities (i) Objectives, policies and procedures for the management of insurance risk The Group’s primary business is the issuance of insurance contracts that transfer risk from policyholders to the Group and its co- insurance partners. Insurance risk involves uncertainty over the occurrence, amount or timing of claims arising on insurance contracts issued. It is primarily comprised of reserve risk; the risk that the value of insurance liabilities established is insufficient to cover the ultimate cost of claims incurred at the balance sheet date, and premium risk; the risk that the claims experience on business written but not earned is higher than allowed for in the premiums charged to policyholders. The Board of Directors is responsible for the management of insurance risk, although as mentioned in note 6, it has delegated the detailed oversight of risk management to the Group Risk Committee. The Group also has a Group Reserving Committee as well as local Reserving Committees which are comprised of senior managers within the finance, claims, pricing and actuarial functions in the respective businesses. The Reserving Committees primarily recommends the approach for insurance reserving but also reviews the systems and controls in place to support accurate reserving and considers material reserving issues such as large bodily injury claims frequency and severity. The Board implements certain policies to mitigate and control the level of insurance risk accepted by the Group. These include pricing policies and claims management and administration processes, in addition to reserving policies and co- and reinsurance arrangements as detailed below. Reserve risk Reserve risk is mitigated through a series of processes and controls. The key processes are as follows: • Regular management and internal actuarial review of individual and aggregate case claim reserves, including regular reporting of management information and exception reporting of significant movements; • Regular management and internal actuarial review of large claims, including claims settled or potentially settled by PPOs for which the uncertainty is increased by factors such as the lifetime of the claimant and movements in the indexation for the cost of future care of the claimant; • Bi-annual external actuarial review of best estimate claims reserves using a variety of recognised actuarial technique; • Internal actuarial analysis of reserve uncertainty through qualitative analysis, scenario testing and a range of stochastic reserving techniques; • Ad hoc external reviews of reserving related processes and assumptions; • Use of a reserving methodology which informs management’s reserving decisions for the purposes of the Group’s financial statements. As described in note 3, critical accounting judgements and estimates, the methodology determines that reserves should be set above projected best estimate outcomes to allow for unforeseen adverse claims development As noted above, the Group shares a significant amount of the insurance business generated with external underwriters. As well as these proportional arrangements, excess of loss reinsurance programmes are also purchased to protect the Group against very large individual claims and catastrophe losses. Admiral Group plc Annual Report and Accounts 2022 243 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information 5. Premium, claims and profit commissions continued Claims reserving Admiral’s reserving policy (both within the claims function and in the financial statements) is initially to reserve conservatively, above internal and independent projections of actuarial best estimates. This is designed to create a margin held in reserves to allow for unforeseen adverse development in open claims and typically results in Admiral making above industry average reserve releases. Admiral’s booked claims reserves continue to include a significant margin above projected best estimates of ultimate claims costs. The margin held above ultimate outcomes in the financial statement reserves remains both significant and prudent. In relative terms, it is lower than that held at the end of 2021, reflecting the crystallisation of some of the uncertainty previously held in the margin, in the best estimate reserves. As profit commission income is recognised in the income statement in line with loss ratios accounted for on Admiral’s own claims reserves, the reserving policy also results in profit commission income being deferred and recognised over time due to the application of constraint on variable consideration. Premium risk As noted above, the Group defines premium risk as the risk that claims cost on business written but not yet earned is higher than allowed for in the premiums charged to policyholders. This also includes catastrophe risk, the risk of incurring significant losses as a result of the occurrence of manmade catastrophe, or natural weather events. Key processes and controls operating to mitigate premium risk are as follows: • Experienced and focused senior management and teams in relevant business areas including pricing and claims management; • A data-driven and analytical approach to regular monitoring of claims and underwriting performance; • Observations of weather events trends to understand climate impacts on frequency and severity; • Capability to identify and resolve underperformance promptly through changes to key performance drivers, in particular pricing In addition, as mentioned above, excess of loss reinsurance programmes are also purchased to protect the Group against very large individual claims and catastrophe losses. Other elements of insurance risk include reinsurance risk, the risk of placement of ineffective reinsurance arrangements, or the economic risk of reduced availability of co-insurance and reinsurance arrangements in future periods. The Group mitigates these risks by ensuring that it has a diverse range of financially secure reinsurance partners, including a long-term relationship with Munich Re and a number of other large reinsurers. Concentration of insurance risk The Directors do not believe there are significant concentrations of insurance risk. This is because the risks are spread across a large number of policies and a wide regional base. The International Car insurance, UK Household, and UK Travel business further contribute to the diversification of the Group’s insurance risk. Information regarding reinsurance credit risk is provided in note 6j to the financial statements. (ii) Sensitivity of recognised amounts to changes in assumptions Underwriting year loss ratios – UK Car insurance The following table sets out the impact on equity and post-tax profit or loss at 31 December 2022 that would result from a 1%, 3% and 5% increase and decrease in the UK Car insurance loss ratios used for each underwriting year for which material amounts remain outstanding. This includes the impact on profit commission of the respective changes in booked loss ratios, which are also shown separately below. Underwriting year Total impact on income statement (including profit commission) 2019 2020 2021 2022 Booked loss ratio 67% 61% 89% 102% Impact of 1% deterioration in booked loss ratio (£m) (15.5) (16.4) (3.7) (1.9) Impact of 3% deterioration in booked loss ratio (£m) (46.2) (49.2) (11.0) (5.6) Impact of 5% deterioration in booked loss ratio (£m) (76.4) (82.0) (18.3) (9.3) Impact of 1% improvement in booked loss ratio (£m) 15.5 16.4 3.7 1.9 Impact of 3% improvement in booked loss ratio (£m) 46.6 49.2 11.0 5.6 Impact of 5% improvement in booked loss ratio (£m) 77.6 82.0 18.3 9.3 As above, the impact is stated net of reinsurance and includes the change in net insurance claims along with the associated profit commission movements that result from changes in loss ratios. The figures are stated net of tax at the current rate. Notes to the Financial Statements continued For the year ended 31 December 2022 Admiral Group plc Annual Report and Accounts 2022 244 Financial Statements The following table sets out the impact on equity and post-tax profit or loss at 31 December 2022 that would result from a 1%, 3% and 5% increase and decrease in the UK Car insurance loss ratios used for each underwriting year for which material amounts remain outstanding, on profit commission only. Underwriting year Impact on profit commission only 2019 2020 2021 2022 Booked loss ratio 67% 61% 89% 102% Impact of 1% deterioration in booked loss ratio (£m) (5.6) (8.0) – – Impact of 3% deterioration in booked loss ratio (£m) (16.5) (23.9) – – Impact of 5% deterioration in booked loss ratio (£m) (26.8) (39.8) – – Impact of 1% improvement in booked loss ratio (£m) 5.6 8.0 – – Impact of 3% improvement in booked loss ratio (£m) 16.8 23.9 – – Impact of 5% improvement in booked loss ratio (£m) 28.0 39.8 – – Sensitivities to key assumptions in the best estimate reserves have not been presented, given the significant and prudent margin held above best estimate reserves and the co- and reinsurance arrangements that are also considered when determining the net impact on the income statement. The underwriting year sensitivities presented above are considered to provide relevant and transparent information on the changes to key inputs to the financial statements. Sensitivities exclude any impact on climate given the assessment of low short term risk. (iii) Analysis of recognised amounts 31 December 2022 £m 31 December 2021 £m Gross Claims outstanding 1 3,456.1 3,045.0 Unearned premium provision 1,336.4 1,170.0 Total gross insurance liabilities 4,792.5 4,215.0 Recoverable from reinsurers Claims outstanding 1,807.5 1,415.7 Unearned premium provision 906.5 760.4 Total reinsurers’ share of insurance liabilities 2,714.0 2,176.1 Net Claims outstanding 2 1,648.6 1,629.3 Unearned premium provision 429.9 409.6 Total insurance liabilities – net 2,078.5 2,038.9 1 Gross claims outstanding at 31 December 2022 is presented before the deduction of salvage and subrogation recoveries totalling £125.9 million (2021: £87.6 million) 2 Admiral typically commutes quota share reinsurance contracts in its UK Car insurance business 36 months following the start of the underwriting year. After commutation, claims outstanding from these contracts are included in Admiral’s net claims outstanding balance. Refer to note (v) below A dmiral Group plc Annual Report and Accounts 2022 245 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information 5. Premium, claims and profit commissions continued (iv) Analysis of claims incurred The following tables illustrate the development of gross and net UK insurance and International insurance claims incurred for the past ten financial periods, including the impact of re-estimation of claims provisions at the end of each financial year. The first table shows actual gross claims incurred and the second shows actual net claims incurred. Figures are presented on an underwriting year basis. Financial year ended 31 December Analysis of claims incurred (gross amounts) 2013 £m 2014 £m 2015 £m 2016 £m 2017 £m 2018 £m 2019 £m 2020 £m 2021 1 £m 2022 £m Total £m Underwriting year (UK insurance) 2013 and prior (680.7) (196.3) 181.3 56.2 125.3 92.9 33.7 30.0 31.7 15.1 (310.8) 2014 – (438.2) (347.1) 25.6 17.1 52.0 15.7 22.5 19.0 13.6 (619.8) 2015 – – (428.4) (411.2) 21.7 53.3 58.0 34.0 25.8 18.9 (627.9) 2016 – – – (529.4) (463.7) 82.1 54.8 46.1 50.3 41.0 (718.8) 2017 – – – – (691.8) (615.0) 123.1 79.5 82.5 37.5 (984.2) 2018 – – – – – (818.8) (546.9) 52.8 80.3 104.3 (1,128.3) 2019 – – – – – – (812.4) (476.2) 89.8 71.1 (1,127.7) 2020 – – – – – – – (697.4) (519.5) 95.2 (1,121.7) 2021 – – – – – – – – (864.5) (749.6) (1,614.1) 2022 – – – – – – – – – (1,089.0) (1,089.0) UK insurance gross claims incurred (680.7) (634.5) (594.2) (858.8) (991.4) (1,153.5) (1,074.0) (908.7) (1,004.6) (1,441.9) (9,342.3) Underwriting year (International insurance) 2013 and prior (120.8) (46.3) 11.2 18.3 7.7 10.6 4.4 (0.2) 0.8 0.2 (114.1) 2014 – (85.2) (65.5) 4.4 5.8 5.5 2.0 (0.4) 0.5 (0.3) (133.2) 2015 – – (92.6) (101.6) 7.7 3.1 0.1 (0.1) 0.1 0.1 (183.2) 2016 – – – (138.9) (125.3) 11.7 6.9 3.6 1.4 0.9 (239.7) 2017 – – – – (174.1) (147.3) 16.5 8.6 5.0 (0.4) (291.7) 2018 – – – – – (204.9) (165.7) 20.1 6.2 2.8 (341.5) 2019 – – – – – – (293.8) (141.2) 13.3 9.1 (412.6) 2020 – – – – – – – (233.6) (160.6) 19.6 (374.6) 2021 – – – – – – – – (284.5) (225.5) (510.0) 2022 – – – – – – – – – (353.6) (353.6) International insurance gross claims incurred (120.8) (131.5) (146.9) (217.8) (278.2) (321.3) (429.6) (343.2) (417.8) (547.1) (2,954.2) Other gross claims incurred (2.2) (7.1) (5.4) (0.1) (3.6) (1.1) – – (18.4) (16.6) (54.5) Claims handling costs (22.9) (21.4) (22.6) (27.1) (35.5) (37.9) (64.5) (66.7) (66.0) (75.8) (440.4) Total gross claims incurred (826.6) (794.5) (769.1) (1,103.8) (1,308.7) (1,513.8) (1,568.1) (1,318.6) (1,506.8) (2,081.4) (12,791.4) Notes to the Financial Statements continued For the year ended 31 December 2022 Admiral Group plc Annual Report and Accounts 2022 246 Financial Statements Financial year ended 31 December Analysis of claims incurred (net amounts) 2013 £m 2014 £m 2015 £m 2016 £m 2017 £m 2018 £m 2019 £m 2020 £m 2021 1 £m 2022 £m Total £m Underwriting year (UK insurance) 2013 and prior (242.3) (5.8) 165.2 91.1 133.1 85.2 26.5 25.3 29.4 14.2 321.9 2014 – (187.0) (144.1) (16.4) 25.3 38.4 17.2 18.6 13.6 11.3 (223.1) 2015 – – (182.1) (162.0) (2.6) 42.6 48.2 26.1 27.8 15.0 (187.0) 2016 – – – (219.4) (180.7) 48.1 50.7 46.6 41.8 33.5 (179.4) 2017 – – – – (214.3) (182.9) 77.8 67.1 72.6 35.0 (144.7) 2018 – – – – – (261.0) (165.2) 40.6 62.3 98.0 (225.3) 2019 – – – – – – (258.1) (142.5) 56.9 53.5 (290.2) 2020 – – – – – – – (218.5) (157.8) 52.5 (323.8) 2021 – – – – – – – – (277.2) (231.0) (508.2) 2022 – – – – – – – – – (327.9) (327.9) UK insurance net claims incurred (242.3) (192.8) (187.0) (306.7) (239.2) (229.6) (202.9) (136.7) (130.6) (245.9) (2,087.7) Underwriting year (International insurance) 2013 and prior (49.1) (18.9) 5.1 9.2 3.1 5.3 2.1 – 0.3 0.2 (42.7) 2014 – (31.6) (23.3) 1.8 1.8 2.2 0.8 (0.1) 0.2 (0.1) (48.3) 2015 – – (33.4) (39.6) 5.1 1.3 1.3 – 0.1 – (65.2) 2016 – – – (47.9) (43.5) 6.3 2.4 1.5 0.6 0.3 (80.3) 2017 – – – – (60.7) (51.5) 5.5 3.2 2.3 0.1 (101.1) 2018 – – – – – (71.2) (58.4) 7.8 2.7 0.9 (118.2) 2019 – – – – – – (89.6) (50.1) 4.9 2.2 (132.6) 2020 – – – – – – – (95.4) (64.0) 5.3 (154.1) 2021 – – – – – – – – (114.3) (88.0) (202.3) 2022 – – – – – – – – – (133.9) (133.9) International insurance net claims incurred (49.1) (50.5) (51.6) (76.5) (94.2) (107.6) (135.9) (133.1) (167.2) (213.0) (1,078.7) Other net claims incurred (2.1) (6.9) (5.4) (0.2) (2.6) (1.1) – – (11.6) (18.0) (47.9) Claims handling costs (9.5) (8.9) (9.4) (11.2) (11.1) (11.8) (20.5) (23.4) (22.9) (29.2) (157.9) Total net claims incurred (303.0) (259.1) (227.4) (394.6) (347.1) (350.1) (359.3) (293.2) (332.3) (506.1) (3,372.2) 1 Financial Year 2021 has been restated to disclose gross claims and net claims incurred in relation to the other segment and net claims in relation to a reclassification between UK insurance and International insurance The table below shows the development of UK Car insurance loss ratios for the past six financial periods, presented on an underwriting year basis. Financial year ended 31 December UK Car insurance loss ratio development 2017 2018 2019 2020 2021 2022 Underwriting year (UK Car only) 2017 87% 83% 75% 70% 65% 62% 2018 – 92% 81% 78% 73% 67% 2019 – – 92% 76% 72% 67% 2020 – – – 72% 66% 61% 2021 – – – – 90% 89% 2022 – – – – – 102% Admiral Group plc Annual Report and Accounts 2022 247 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information 5. Premium, claims and profit commissions continued (v) Analysis of claims reserve releases The following table analyses the impact of movements in prior year claims provisions on a gross and net basis. Figures are presented on an underwriting year basis. Financial year ended 31 December Gross 2017 £m 2018 £m 2019 £m 2020 £m 2021 £m 2022 £m Underwriting year (UK Motor insurance) 2017 and prior 214.0 270.5 252.4 186.0 187.5 109.4 2018 – – 83.2 57.3 64.1 100.3 2019 – – – 54.8 76.2 70.6 2020 – – – – 52.9 87.5 2021 – – – – – 13.8 Total gross release (UK Motor insurance) 214.0 270.5 335.6 298.1 380.7 381.6 Total gross release (UK Household insurance) 1.6 4.6 8.3 9.2 6.0 3.6 Total gross release (UK Travel insurance) – – – – 2.2 0.4 Total gross release (International insurance) 23.2 35.2 39.1 53.2 52.0 46.1 Total gross release (Other insurance) – – – – – 5.6 Total gross release 238.8 310.3 383.0 360.5 440.9 437.3 Financial year ended 31 December Net 2017 £m 2018 £m 2019 £m 2020 £m 2021 £m 2022 £m Underwriting year (UK Motor insurance) 2017 and prior 165.9 221.0 217.6 183.9 184.9 108.2 2018 – – 25.8 40.7 61.9 97.2 2019 – – – 17.0 54.6 52.7 2020 – – – – 15.9 51.4 2021 – – – – – 3.6 Total net release (UK Motor insurance) 165.9 221.0 243.4 241.6 317.3 313.1 Total net release (UK Household insurance) 0.5 1.4 2.5 2.8 2.5 1.6 Total net release (UK Travel insurance) – – – – 2.2 0.4 Total net release (International insurance) 9.5 13.5 14.4 18.6 16.4 15.8 Total net release (Other insurance) – – – – – 3.3 Total net release 175.9 235.9 260.3 263.0 338.4 334.2 Analysis of net releases on UK Motor insurance: – Releases on original Admiral net share (UK Motor) 92.1 111.4 121.7 104.3 128.1 124.0 – Releases on commuted quota share reinsurance contracts (UK Motor) 73.8 109.6 121.7 137.3 189.2 189.1 Total UK Motor net release as above 165.9 221.0 243.4 241.6 317.3 313.1 Notes to the Financial Statements continued For the year ended 31 December 2022 Admiral Group plc Annual Report and Accounts 2022 248 Financial Statements Admiral typically commutes quota share reinsurance contracts in its UK Car insurance business 36 months following the start of the underwriting year. After commutation, any changes in claims costs on the commuted proportion of the business are reflected within claims costs and are separately analysed here. Releases on the share of business originally reinsured but since commuted are analysed by underwriting year as follows: Financial year ended 31 December 2017 £m 2018 £m 2019 £m 2020 £m 2021 £m 2022 £m Underwriting year 2017 and prior 73.8 109.6 121.7 113.9 116.4 66.0 2018 – – – 23.4 43.5 66.5 2019 – – – – 29.3 31.4 2020 – – – – – 25.2 Total releases on commuted quota share reinsurance contracts (UK Motor) 73.8 109.6 121.7 137.3 189.2 189.1 Profit commission is analysed in note 5c. (vi) Reconciliation of movement in claims outstanding 31 December 2022 Gross £m Reinsurance £m Net £m Claims outstanding at start of period 3,045.0 (1,415.7) 1,629.3 Claims incurred (excluding claims handling costs and releases) 2,443.0 (1,631.9) 811.1 Reserve releases (437.3) 103.1 (334.2) Movement in claims outstanding due to commutation – 194.1 194.1 Claims paid and other movements 1 (1,594.6) 942.9 (651.7) Claims outstanding at end of period 3,456.1 (1,807.5) 1,648.6 31 December 2021 Gross £m Reinsurance £m Net £m Claims outstanding at start of period 2,919.9 (1,319.3) 1,600.6 Claims incurred (excluding claims handling costs and releases) 1,881.8 (1,234.0) 647.8 Reserve releases (440.9) 102.5 (338.4) Movement in claims outstanding due to commutation – 318.4 318.4 Claims paid and other movements 1 (1,315.8) 716.7 (599.1) Claims outstanding at end of period 3,045.0 (1,415.7) 1,629.3 1 Claims and other movements includes foreign exchange impacts of £33.9 million adverse (2021: £3.8 million adverse) on a gross basis, £28.3 million gain (2021: £3.4 million gain) on a reinsurance basis resulting in a £5.6 million adverse (2021: £0.4 million) impact on a net basis (vii) Reconciliation of movement in net unearned premium provision 31 December 2022 Gross £m Reinsurance £m Net £m Unearned premium provision at start of period 1,170.0 (760.4) 409.6 Written in the period 2,849.7 (1,922.4) 927.3 Earned in the period (2,705.4) 1,794.4 (911.0) Translation differences 22.1 (18.1) 4.0 Unearned premium provision at end of period 1,336.4 (906.5) 429.9 31 December 2021 Gross £m Reinsurance £m Net £m Unearned premium provision at start of period 1,161.4 (763.9) 397.5 Written in the period 2,513.6 (1,643.0) 870.6 Earned in the period (2,492.3) 1,637.3 (855.0) Translation differences (12.7) 9.2 (3.5) Unearned premium provision at end of period 1,170.0 (760.4) 409.6 Admiral Group plc Annual Report and Accounts 2022 249 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information Notes to the Financial Statements continued For the year ended 31 December 2022 6. Investment income and costs 6a. Accounting policies i) Financial assets Classification and measurement The classification and subsequent measurement of the financial asset under IFRS 9 depends on: a. the Group’s business model for managing the financial assets; and b. the contractual cash flow characteristics of the financial asset. Based on these factors, the financial asset is classified into one of the following categories: • Amortised cost – assets which are held in order to collect contractual cash flows and the contractual terms of the financial asset give rise to cash flows which are solely payments of principal and interest on the principal amount outstanding (SPPI), where the asset is not designated as fair value through profit or loss (FVTPL) For the Group, these include deposits with credit institutions, cash and cash equivalents, insurance receivables, trade and other receivables and loans and advances to customers. The interest income generated from these assets is included in investment returns, with the exception of loans and advances to customers, where the interest receivable is recognised in interest income. Impairment is recognised on these assets using the expected credit loss model. • Fair value through other comprehensive income (FVOCI) – assets which are held both to collect contractual cash flows and to sell the asset, where the contractual terms of the financial asset give rise to cash flows which are solely payments of principal and interest on the principal amount outstanding (SPPI), where the asset is not designated as FVTPL For the Group, these assets include corporate, government and private debt securities. In addition, IFRS 9 allows an irrevocable election at initial recognition to designate equity investments at FVOCI that otherwise would be held at FVTPL, provided these are not held for trading. The Group has made this election for certain equity investments. Movements in the carrying amount are taken through OCI, with the exception of recognition of impairment gains or losses, interest revenue and foreign exchange gains or losses which are recognised in profit or loss. • Fair value through profit or loss (FVTPL) – assets which do not meet the criteria for amortised cost or FVOCI, or which are designated as FVTPL For the Group these assets include liquidity funds investing in short duration assets, other funds and derivative financial instruments. A gain or loss on disposal of an investment measured at FVOCI is presented within investment return in the period in which it arises. Impairment The expected credit loss model is used to calculate any impairment to be recognised for all assets measured at amortised cost, as well as financial investments measured at FVOCI. The general approach, which utilises the three-stage model, is used for Loans and advances to customers (see note 7) whilst impairment for the remaining assets is measured using the simplified approach. Derecognition A financial asset is derecognised when the rights to receive cash flows from that asset have expired, or when the Group transfers the asset and all the attached substantial risks and rewards relating to the asset to a third party. ii) Financial liabilities Classification and subsequent measurement All financial liabilities are classified as subsequently measured at amortised cost using the effective interest method, except for derivatives that are classified at fair value through profit or loss and subsequently measured at fair value. Movements in the amortised cost are recognised through the income statement. Derecognition A financial liability is derecognised when the obligation under that liability is discharged, cancelled or expires. Admiral Group plc Annual Report and Accounts 2022 250 Financial Statements iii) Investment return and finance costs Investment return from financial assets comprises distributions as well as net realised and unrealised gains on financial assets classified as FVTPL, interest income and net realised gains from financial assets classified as FVOCI, and interest income from financial assets classified as amortised cost. Finance costs from financial liabilities comprise interest expense on subordinated notes, loan backed securities, credit facilities and lease liabilities, calculated using the effective interest rate method. The effective interest rate method calculates the amortised cost of a financial asset or liability (or group of financial assets or financial liabilities) and allocates the interest income or expense over the expected life of the asset or liability . 6b. Investment return 31 December 2022 £m 31 December 2021 £m At EIR Other Total At EIR Other Total Investment return On assets classified as FVTPL – 8.4 8.4 – 3.6 3.6 On assets classified as FVOCI 13 50.3 2.3 52.6 40.0 2.3 42.3 On assets classified as amortised costs 1 2.0 – 2.0 0.6 – 0.6 Net unrealised losses Unrealised gains on forward contracts – 0.5 0.5 – – – Share of associate profit/ loss – (0.1) (0.1) – – – Accrual for reinsurers’ share of investment return – (20.0) (20.0) – (1.6) (1.6) Interest receivable on cash and cash equivalents 1 – 1.2 1.2 – 0.3 0.3 Total investment and interest income 2 52.3 (7.7) 44.6 40.6 4.6 45.2 1 Interest received during the year was £58.7 million (2021: £46.6 million) 2 Total investment return excludes £2.2 million of intra-group interest (2021: £2.7 million) 3 Realised gains on sales of debt securities classified as FVOCI are £2.2 million (2021: £2.3 million) 6c. Finance costs Continuing operations 31 December 2022 £m 31 December 2021 £m Interest payable on subordinated loan notes and other credit facilities 12 11.4 11.4 Interest payable on lease liabilities 2.0 2.3 Interest recoverable from co- and reinsurers (1.5) (1.8) Total finance costs on continuing operations 11.9 11.9 1 Interest paid during the year was £13.4 million (2021: £14.1 million) 2 See note 7e for details of credit facilities Finance costs represent interest payable on the £200.0 million (2021: £200.0 million) subordinated notes and other financial liabilities. Interest payable on lease liabilities represents the unwinding of the discount on lease liabilities under IFRS 16 and does not result in a cash payment. 6d. Expected credit losses 31 December 2022 £m 31 December 2021 £m Expected credit losses/(gains) on financial investments 6f (1.8) 2.6 Expected credit losses on Loans and advances to customers 1 7b 20.7 10.7 Total expense for expected credit losses 18.9 13.3 1 Includes £7.2 million (2021: £2.5 million) of write-offs, with total movement in the expected credit loss provision being £20.7 million (2021: £10.7 million) See note 6f and note 7b for details of the impairment methodology. Admiral Group plc Annual Report and Accounts 2022 251 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information Notes to the Financial Statements continued For the year ended 31 December 2022 6. Investment income and costs continued 6e. Financial assets and liabilities The Group’s financial assets and liabilities can be analysed as follows: Continuing operations 31 December 2022 £m 31 December 2021 £m Financial investments measured at FVTPL Money market funds 706.5 868.0 Other funds 188.8 187.6 Derivative financial instruments 33.0 5.2 Equity Investments (designated FVTPL) 6.4 2.2 Investment in Associate 2.4 – 937.1 1,063.0 Financial investments classified as FVOCI Corporate debt securities 1,701.2 2,101.0 Government debt securities 479.8 348.5 Private debt securities 166.6 125.5 2,347.6 2,575.0 Equity investments (designated FVOCI) 25.1 19.3 2,372.7 2,594.3 Financial assets measured at amortised cost Deposits with credit institutions 101.4 85.3 Total financial investments 3,411.2 3,742.6 Other financial assets Insurance receivables 1,009.5 956.6 Trade and other receivables (measured at amortised cost) 326.3 251.9 Insurance and other receivables 1,335.8 1,208.5 Loans and advances to customers (note 7) 823.9 556.8 Cash and cash equivalents 297.0 372.7 Total financial assets 5,867.9 5,880.6 Financial liabilities Subordinated notes 204.4 204.4 Loan backed securities 714.7 446.5 Other borrowings 20.0 20.0 Subordinated and other financial liabilities 939.1 670.9 Trade and other payables 1 2,158.0 1,960.0 Lease liabilities 88.5 105.3 Total financial liabilities 3,185.6 2,736.2 1 Trade and other payables total balance of £2,158.0 million (2021: £1,960.0 million) above includes £1,807.6 million (2021: £1,528.4 million) in relation to tax and social security, deferred income and reinsurer balances that are outside the scope of IFRS 9 2 Insurance receivables are treated under IFRS4 A dmiral Group plc Annual Report and Accounts 2022 252 Financial Statements The maturity profile of financial assets and liabilities under the scope of IFRS 4 and 9 at 31 December 2022 is as follows: On demand £m < 1 year £m Between 1 and 2 years £m > 2 years £m Financial investments Money market funds and derivative financial instruments – 915.2 8.8 4.3 Deposits with credit institutions – 101.4 – – Debt securities 33.3 398.1 263.1 1,653.1 Total financial investments 33.3 1,414.7 271.9 1,657.4 Trade and other receivables – 1,335.8 – – Loans and advances to customers – 235.1 237.3 351.5 Cash and cash equivalents 297.0 – – – Total financial assets 330.3 2,985.6 509.2 2,008.9 Financial liabilities Subordinated notes 2 – 11.0 211.0 – Loan backed securities – 241.0 187.8 285.8 Other borrowings – 20.0 – – Trade and other payables 1 – 1,864.1 – – Total financial liabilities – 2,136.1 398.8 285.8 1 Of the £1,864.1 million held within trade and other payables in the maturity table, £1,513.7 million do not meet the definition of a financial liability under IFRS 9 but fall within the scope of IFRS 4 hence are included in the above maturity profile 2 Maturity analysis has been performed on a cash-settled basis The maturity profile of financial assets and liabilities under the scope of IFRS 4 and 9 at 31 December 2021 was as follows: On demand £m < 1 year £m Between 1 and 2 years £m > 2 years £m Financial investments Money market funds and derivative financial instruments – 1,057.9 1.7 1.1 Deposits with credit institutions – 75.3 10.0 – Debt securities – 713.2 362.4 1,499.2 Total financial investments – 1,846.4 374.1 1,500.3 Trade and other receivables – 1,208.5 – – Loans and advances to customers – 171.3 174.7 210.8 Cash and cash equivalents 372.7 – – – Total financial assets 372.7 3,226.2 548.8 1,711.1 Financial liabilities Subordinated notes 2 – 11.0 11.0 211.0 Loan backed securities – 170.2 126.7 172.0 Other borrowings – 20.0 – – Trade and other payables 1 – 1,706.5 – – Total financial liabilities – 1,907.7 137.7 383.0 1 Of the £1,706.5 million held within trade and other payables in the maturity table, £1,274.9 million do not meet the definition of a financial liability under IFRS 9 but fall within the scope of IFRS 4 hence are included in the above maturity profile 2 Maturity analysis has been performed on a cash-settled basis A dmiral Group plc Annual Report and Accounts 2022 253 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information Notes to the Financial Statements continued For the year ended 31 December 2022 6. Investment income and costs continued The maturity profile of discounted gross insurance liabilities at the end of 2022 was as follows < 1 year £m 1 –3 years £m > 3years £m Claims outstanding 1,342.0 886.3 1,227.8 Unearned premium provision 1,336.4 – – Total gross insurance liabilities 2,678.4 886.3 1,227.8 The maturity profile of discounted gross insurance liabilities at the end of 2021 was as follows: < 1 year £m 1 –3 years £m > 3years £m Claims outstanding 909.9 829.8 1,305.3 Unearned premium provision 1,170.0 – – Total gross insurance liabilities 2,079.9 829.8 1,305.3 6f. Financial investments 31 December 2022 FVTPL £m FVOCI £m Amortised Cost 2 £m Total £m AAA- AA 410.5 922.8 23.5 1,356.8 A 328.3 847.3 355.4 1,531.0 BBB 56.4 410.2 19.2 485.8 Sub BBB 33.4 43.4 – 76.8 Not rated 1 106.1 149.0 0.3 255.4 Total financial investments 934.7 2,372.7 398.4 3,705.8 1 £59.4 million of the unrated exposure stems from money market funds, which are rated AAA, but the underlying securities are not. The remaining unrated exposure is a mixture of private debt (£123.9 million) and other holdings (£71.8 million) 2 Investments held at amortised cost comprise deposits with credit institutions, and cash 31 December 2021 FVTPL £m FVOCI £m Amortised Cost 2 £m Total £m AAA- AA 500.6 906.9 21.2 1,428.7 A 401.0 1,007.9 426.2 1,835.1 BBB 42.6 477.9 10.6 531.1 Sub BBB 22.0 71.7 – 93.7 Not rated 1 96.8 129.9 – 226.7 Total financial investments 1,063.0 2,594.3 458.0 4,115.3 1 £72.3 million of the unrated exposure stems from money market funds, which are rated AAA, but the underlying securities are not. The remaining unrated exposure is a mixture of private debt (£127.5 million) and other holdings (£26.8 million) 2 Investments held at amortised cost comprise deposits with credit institutions, and cash Classification and measurement At initial recognition, the Group measures financial investments at fair value plus or minus, in the case of financial instruments not measured at fair value through profit and loss, directly attributable transaction costs. Transaction costs of financial instruments measured at fair value through profit and loss are expensed to the profit and loss when incurred. Money market funds and derivative financial instruments are measured at FVTPL. The regulatory capital within the Group is used to invest in these instruments in addition to any surplus funds which may be held. Buying and selling activity occurs depending on timing of different cash flows. Debt securities are measured at FVOCI and as such fall under the scope of the ECL model. These assets are held to match policyholder liabilities or interest on debt liabilities. If sold before maturity, gains or losses on these assets impact the P&L. Private Equity investments have been designated as being reported through FVOCI due to these being long term, strategic investments. Dividends are recognised in the income statement whilst a change in fair values will be reflected in OCI. Other funds are measured at FVTPL. Admiral Group plc Annual Report and Accounts 2022 254 Financial Statements Impairment All financial investments held at FVOCI and at amortised cost have been assessed for impairment using the expected credit loss model under IFRS 9. The assessment has been made based on the credit ratings of the entities and externally available credit loss ratios. The calculated impairment loss within the fair value is recognised through the income statement whilst fair value movements are recognised in other comprehensive income. Deposits are held with well rated institutions and are held at book value, with impairment calculated in a similar manner to debt securities. All assets which require a calculation of impairment, are considered based on an external credit rating agency or an assessment from Admiral’s external asset managers. The credit rating of all assets is regularly monitored. As at the year-end reporting date, the vast majority of financial assets are of investment grade and considered low risk under IFRS 9. These therefore remain within stage 1 and a 12-month expected loss is used to calculate the impairment provision required. Any assets downgraded to below BBB or any sub BBB asset that is downgraded by 1 full credit rating, are considered by the Group to have significantly increased in credit risk, and therefore are stage 2 under IFRS 9. The impairment provision at 31 December 2022 is £9.4 million (£11.3 million at 31 December 2021). Given there is no material change in the credit quality or type of financial assets in the year and the movement in provision is immaterial, no further disclosure has been made. Fair value measurement IFRS 13 requires assets and liabilities that are held at fair value to be classified according to a hierarchy which reflects the observability of significant market inputs, based on three levels. The Group policy is to recognise transfer between fair value hierarchy levels as at the end of the reporting period. There were no transfers between fair value hierarchy levels in the reporting period (2021: none). The table below shows how the financial assets held at fair value have been measured using the fair value hierarchy: 31 December 2022 31 December 2021 FVTPL £m FVOCI £m FVTPL £m FVOCI £m Level one (quoted prices in active markets) 900.2 2,180.9 1,060.8 2,449.5 Level two (use of observable inputs) 28.1 – – – Level three (use of significant unobservable inputs) 6.4 1 191.8 2.2 1 144.8 Total 934.7 2,372.7 1,063.0 2,594.3 1 Gains through the income statement are recognised within Investment return. See note 6b for further information Fair value measurement using significant unobservable inputs (level three) Level three investments consist of debt securities and equity investments. Debt securities are comprised primarily of investments in debt funds which are valued at the proportion of the Group’s holding of the Net Asset Value (NAV) reported by the investment vehicle. In addition, there is a small allocation of privately placed bonds which do not trade on active markets, these are valued using discounted cash-flow models designed to appropriately reflect the credit and illiquidity of these instruments. The key unobservable input across private debt securities is the discount rate which is based on the credit performance of the assets. Equity securities are primarily comprised of investments in Private Equity and Infrastructure Equity funds, which are valued at the proportion of the Group’s holding of the NAV reported by the investment vehicle. These are based on several unobservable inputs including market multiples and cash flow forecasts. There were no significant inter-relationships between unobservable inputs that materially affect fair values. Admiral Group plc Annual Report and Accounts 2022 255 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information Notes to the Financial Statements continued For the year ended 31 December 2022 6. Investment income and costs continued The table below presents the movement in the period relating to financial instruments valued using a level three valuation: 31 December 2022 Level Three Investments Equity Securities £m Debt Securities £m Total £m Balance as at 1 January 2022 21.5 125.5 147.0 Gains/(losses) recognised in IS 1.8 3.9 5.7 Gains/(losses) recognised in OCI 1.1 (9.6) (8.5) Purchases 9.4 74.4 83.8 Disposals (2.5) (27.6) (30.1) Translation differences 0.3 – 0.3 Balance as at 31 December 2022 31.6 166.6 198.2 31 December 2021 Level Three Investments Equity Securities £m Debt Securities £m Total £m Balance as at 1 January 2021 11.3 63.5 74.8 Gains/(losses) recognised in IS 0.2 1.4 1.6 Gains/(losses) recognised in OCI 2.6 1.5 4.1 Purchases 8.5 80.9 89.4 Disposals (0.6) (21.8) (22.4) Translation differences (0.5) – (0.5) Balance as at 31 December 2021 21.5 125.5 147.0 6g. Cash and cash equivalents 31 December 2022 £m 31 December 2021 £m Cash at bank and in hand 1 297.0 372.7 Total cash and cash equivalents 297.0 372.7 1 Cash at bank and in hand includes £36.6 million (2021: £37.6 million) related to special purpose entities which is not available for use by the Group C ash 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. All cash and cash equivalents are measured at amortised cost. An assessment has been completed for impairment purposes in line with that set out in note 6f above. Given the short-term duration of these assets and low risk of these assets, no impairment provision has been recognised. For cash at bank and cash deposits and other receivables, the fair value approximates to the book value due to their short maturity. 6h. Other assets Insurance and other receivables 31 December 2022 £m 31 December 2021 £m Insurance receivables 1 1,009.5 956.6 Amounts owed by co- and reinsurers 2 48.4 – Trade and other receivables 236.6 221.5 Prepayments and accrued income 41.3 30.4 Total insurance and other receivables 1,335.8 1,208.5 1 Insurance receivables include £125.9 million in respect of salvage and subrogation recoveries (2021: £87.6 million) 2 Amounts owed by co- and reinsurers include £44.6 million for amounts owed by reinsurers. The amount owed by reinsurers has been included within the credit rating analysis within note 6j A dmiral Group plc Annual Report and Accounts 2022 256 Financial Statements Insurance receivables Insurance receivables are measured at historic cost. Given that non-repayment would result in a withdrawn policy and the short-term duration of these assets no bad debt provision has been recognised. Trade and other receivables Classification. Trade and other receivables are measured at amortised cost, being made up of multiple types of receivable balances. Impairment. Where a provision is required for these receivables, it is calculated in line with the simplified method for trade receivables per IFRS 9, whereby lifetime expected credit losses are recognised irrelevant of the credit risk. In this case, the provision is based on a combination of: (i) aged debtor analysis; (ii) historic experience of write-offs for each receivable, (iii) any specific indicators of credit deterioration observed, and (iv) management judgement. The level of provision is immaterial. The amortised cost carrying amount of receivables is a reasonable approximation of fair value. Contract balances The following table provides information about receivables and contract assets from contracts with customers. Both balances are included in trade and other receivables. Continuing operations 31 December 2022 £m 31 December 2021 £m Receivables 20.0 16.8 Contract assets 19.3 23.8 The contract asset relates to the Group’s right to consideration for work undertaken in the law companies on behalf of clients which is ongoing or where the final fee has not yet been billed. The contract asset is transferred to trade receivables once the fee has been billed. Significant changes in the contract asset balance during the period are as follows: Contract asset balance 31 December 2022 £m At 1 January 2022 23.8 Revenue recognised 16.3 Transferred to trade receivables (20.2) Write-offs (0.6) At 31 December 2022 19.3 The amount of revenue recognised in 2022 from performance obligations satisfied (or partially satisfied) in previous periods in relation to the above contract balances is £nil (2021: £nil). See note 5c for details of profit commission recognised on previous underwriting years. Admiral Group plc Annual Report and Accounts 2022 257 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information Notes to the Financial Statements continued For the year ended 31 December 2022 6. Investment income and costs continued 6i. Financial and lease liabilities 31 December 2022 Subordinated notes £m Loan backed securities £m Other borrowings and derivatives £m Lease liabilities £m Total £m Financial liability at the start of the period 204.4 446.5 20.0 105.3 776.2 Interest payable per income statement 11.0 11.7 1.3 2.0 26.0 Cash flows 1 (11.0) 256.5 (0.9) (11.3) 233.3 Other foreign exchange and non-cash movements – – (0.4) (7.5) (7.9) Financial liability at the end of the period 204.4 714.7 20.0 88.5 1,027.6 1 Cash amounts relating to the interest proportion of the lease liability were £2.1 million in 2022 (2021: £2.7 million) 31 December 2021 Subordinated notes £m Loan backed securities £m Other borrowings and derivatives £m Lease liabilities £m Total £m Financial liability at the start of the period 204.3 260.7 23.6 122.8 611.4 Interest payable per income statement 11.1 5.5 0.9 2.3 19.8 Cash flows 1 (11.0) 180.3 (0.9) (12.3) 156.1 Other foreign exchange and non-cash movements – – (3.6) (7.5) (11.1) Financial liability at the end of the period 204.4 446.5 20.0 105.3 776.2 1 Cash amounts relating to the interest proportion of the lease liability were £2.1 million in 2022 (2021: £2.7 million) Subordinated notes Financial liabilities are inclusive of £200.0 million subordinated notes issued on 25 July 2014 at a fixed rate of 5.5% with a redemption date of 25 July 2024. The notes are unsecured subordinated obligations of the Group and rank pari passu without any preference among themselves. In the event of a winding-up or bankruptcy, they are to be repaid only after the claims of all other creditors have been met. There have been no defaults on any of the notes during the year. The Group has the option to defer interest payments on the notes but to date has not exercised this right. The fair value of subordinated notes (level one valuation based on quoted prices in active markets) at 31 December 2022 is £196.4 million (2021: £217.1 million). Other borrowings The Group holds various revolving credit facilities including a £200.0 million facility which expires in April 2023, a £20.0 million facility which expires in August 2023 and a €100.0 million facility which expires in August 2024. £20.0 million was drawn under the agreement expiring in August 2023 as at 31 December 2022 (2021: £20.0 million), which is shown within other borrowings in the table above. The carrying value is a reasonable approximation of fair value. Loan backed securities Asset backed senior loan note facilities of £1,000.0 million have been established in relation to the Admiral Money business (see note 3 for details of the accounting treatment of SPEs). As at the year end, £714.7 million (2021: £446.5 million) of these facilities had been utilised. The carrying value is a reasonable approximation of fair value. Lease liabilities The Group leases various properties, with rental contracts typically for fixed periods of 5 to 25 years although these may have extension options. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes. For each lease, a right-of-use asset and corresponding lease liability is recognised at the date at which the leased asset becomes available for use by the Group. The lease liability is initially measured at the present value of remaining lease payments, which include the following: • fixed payments (including in-substance fixed payments), less any lease incentives receivable • variable lease payments that are based on an index or a rate • payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option A dmiral Group plc Annual Report and Accounts 2022 258 Financial Statements The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the Group’s incremental borrowing rate is used, being the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of a similar value in a similar economic environment, with similar terms and conditions. Generally, the Group uses its incremental borrowing rate as the discount rate. Subsequently, lease payments are allocated to the lease liability, split between repayments of principal and interest. A finance cost is charged to the profit and loss so as to produce a constant period rate of interest on the remaining balance of the lease liability. Whereby a change in lease term is identified, the lease liability is recalculated based on the present value of the remaining lease payments. 6j. Objectives, policies and procedures for managing financial assets and liabilities The Group’s activities expose it primarily to financial risks of credit, interest rate, liquidity and foreign exchange risk. The Board of Directors has delegated the task of supervising risk management and internal control to the Group Risk Committee. There is also an Investment Committee that makes recommendations to the Group and subsidiary Boards on investment strategy, and overseas the Group’s investments. There are several key elements to the risk management environment throughout the Group. These are detailed in full in the Corporate Governance Statement. Specific considerations for the risks arising from financial assets and liabilities are detailed below. Credit risk The Group defines credit risk as the risk of financial loss if another party fails to perform its obligations. The key areas of exposure to credit risk for the Group result through its reinsurance programme, investments, bank deposits, loans and advances to customers and policyholder receivables. The Directors consider credit quality and counterparty exposure frequently and in significant detail. The Directors consider that the policies and procedures in place to manage credit exposure continue to be appropriate for the Group’s risk appetite and, during 2022 and historically, no material credit losses have been experienced by the Group. The impact on equity of 100 and 200 basis point increases in credit spreads at the relevant valuation date, is as follows: 31 December 2022 £m 31 December 2021 £m Reduction in equity – 100bps (64.4) (71.0) Reduction in equity – 200bps (128.7) (142.0) The impact on the income statement from movements in credit spreads on the portfolio classified as FVOCI is £nil. There is no significant exposure to credit risk for assets classified as FVTPL. Also see notes 7 and 6f for further information on credit risk in relation to loans and advances to customers, and financial investments. Financial investments and cash Credit and counterparty risk is managed by the Group by investing in high quality money market funds, and setting suitable parameters for asset managers to adhere to when purchasing debt securities. Cash balances and deposits are placed only with highly rated credit institutions. The detailed holdings are reviewed regularly by the Investment Committee. Invested assets As noted above, the Group primarily invests the following asset types: • Debt securities are held within segregated mandates and investment funds. This includes government debt, private debt and asset backed securities. The guidelines of the investments ensure management of credit risk. Generally, the duration of the securities is relatively short and similar to the duration of the on book claims liabilities • Liquidity funds, which in turn invest in a mixture of short-dated fixed and variable rate securities, such as cash deposits, certificates of deposits, floating rate notes and other commercial paper • Deposits with well rated institutions and are short in duration (one to three years). These are classified as held at amortised cost. Therefore, neither the carrying value of the asset, nor the interest return will be impacted by fluctuations in interest rates Reinsurance assets To mitigate the risk arising from exposure to reinsurers (in the form of reinsurance recoveries and profit commissions), the Group only conducts business with companies of appropriate financial strength ratings. In addition, many reinsurance contracts are operated on a funds withheld basis, which substantially reduces credit risk, as the Group retains the cash received from policyholders. Admiral Group plc Annual Report and Accounts 2022 259 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information Notes to the Financial Statements continued For the year ended 31 December 2022 6. Investment income and costs continued Loans and advances to customers The risk appetite for the lending business is set to ensure that the risk taken is commensurate with the expected returns. Management has defined an amber and a red loan loss limit, representing points at which action is required. These limits have been defined by management to reflect the business maturity, the business’ ambitions and the economic climate. Risk appetite is assessed at least annually, while the limits are continuously monitored. Insurance assets A further principal form of credit risk is in respect of amounts due from policyholders, largely due to the potential for default by instalment payers. The impact of this is mitigated by the large customer base and low average level of balance recoverable. There is also mitigation by the operation of numerous high- and low-level controls in this area, including payment on policy acceptance as opposed to inception and automated cancellation procedures for policies in default. The amount of bad debt expense relating to policyholder debt charged to the income statement in 2022 and 2021 is insignificant. Trade and other receivables Trade receivables and other debtors are also subject to credit risk, although this is mitigated by a review of the credit worthiness of all counterparties prior to them being accepted. Other assets All other assets are assessed as low credit risk under IFRS 9, with no significant amounts past due or impaired. No further disclosure is provided due to this having an immaterial impact on the financial statements. The Group’s credit risk exposure to assets with external ratings is as follows: Rating 31 December 2022 £m 31 December 2021 Restated £m Financial institutions – credit institutions AAA 324.6 355.0 Financial institutions – credit institutions AA 556.1 746.6 Financial institutions – credit institutions A 1,529.4 1,801.5 Financial institutions – credit institutions BBB and below 818.2 863.7 Government securities AAA 266.6 103.1 Government securities AA 209.4 231.4 Government securities A 1.7 14.0 Government securities BBB and below 2.1 – Reinsurers AA 816.5 685.5 Reinsurers A 421.8 210.3 Reinsurers BBB and below 6.6 5.4 1 BBB and below includes not rated. The Group’s maximum exposure to credit risk at 31 December 2022 is 31 December is £5,901.3 million (2021: £5,675.4 million), being the carrying value of financial investments and cash, the carrying value of loans and advances to customers, and the excess of reinsurance assets over amounts owed to reinsurers under funds withheld arrangements which are settled on a net basis. The Group does not use credit derivatives or similar instruments to mitigate exposure. There were no further significant financial assets that were past due at the close of either 2022 or 2021 Interest rate risk The Group considers interest rate risk to be the risk that unfavourable movements in interest rates could adversely impact on the capital values of financial assets and liabilities. The impact on equity of 50 and 100 basis point increases and decreases in interest rates at the relevant valuation date, is as follows: 31 December 2022 £m 31 December 2021 £m Increase in interest rates – 50bps (37.6) (51.0) Increase in interest rates – 100bps (75.2) (101.9) Decrease in interest rates – 50bps 37.6 51.0 Decrease in interest rates – 100bps 75.2 101.9 Admiral Group plc Annual Report and Accounts 2022 260 Financial Statements The impact reflects movements in the Group’s asset portfolio and is stated before any offsetting movements in liabilities. The Group’s solvency II balance sheet, which includes technical provisions discounted using Bank of England and EIOPA yield curves reflects a low sensitivity to interest rates as a result of well-matched durations of assets and liabilities. Loans and advances to customers The Group’s loan portfolio consists of fixed rate loans, which are funded at a floating variable rate. The Group has interest rate swap arrangements, the risk management objective of which is to eliminate the majority of the interest rate risk variability in the cash flows payable on the loan backed securities. This relates to the difference between fixed rate on loans written and floating variable rate on funding. Hedge accounting Hedge accounting is applied when the criteria specified in IFRS 9 (including amendments, as set out above) are met. In line with IFRS 9, the gain or loss on the hedged position as at the balance sheet date is recognised through other comprehensive income. This results in a hedging reserve in relation to the interest rate swap. Financial liabilities The Group also holds a financial liability in the form of £200.0 million of subordinated notes with a ten year maturity and fixed rate coupon of 5.5%. This liability is valued at amortised cost and therefore neither the carrying value of the deposits, nor the interest payable, will be impacted by fluctuations in interest rates. Other financial assets and liabilities There is no significant exposure to interest rate risk for other financial assets and liabilities due to these being held at amortised cost. Liquidity risk Liquidity risk is defined as the risk that the Group does not have sufficient available financial resources to enable it to meet its obligations as they fall due, or can only secure them at excessive cost. The Group holds appropriate liquidity buffers at the parent company and subsidiary levels. The Group is strongly cash-generative due to the large proportion of revenue arising from non-underwriting activity. Further, as noted above, a significant portion of insurance funds are invested in investment funds with same day liquidity, meaning that a large proportion of the Group’s cash and investments are immediately available. A breakdown of the Group’s other borrowings, trade payables and other payables is shown in note 11. The subordinated notes have a maturity date of July 2024, whereas all trade and other payables will mature within three to six months of the balance sheet date (Refer to the maturity profile at the start of this note for further detail). In practice, the Group’s Directors expect actual cash flows to be consistent with this maturity profile except for amounts owed to co- insurers and reinsurers. Of the total amounts owed to co-insurers and reinsurers of £1,623.2 million (2021: £1,436.8 million), £1,389.4 million (2021: £1,169.8 million) is held under funds withheld arrangements and therefore not expected to be settled within 12 months. A maturity analysis for insurance contract liabilities is included in note 6e. The maturity profile for financial assets is included at the start of this note. The Group’s Directors believe that the cash flows arising from these assets will be consistent with this profile. Liquidity risk is not, therefore, considered to be significant. Foreign exchange risk Foreign exchange risk arises from unfavourable movements in foreign exchange rates that could adversely impact the valuation of overseas assets and liabilities. The Group is exposed to foreign exchange risk through its operations overseas. Although the relative size of the international operations means that the risks are relatively small, increasingly volatile foreign exchange rates could result in larger potential gains or losses. Assets held to fund insurance liabilities are held in the currency of the liabilities; however, surplus assets held as regulatory capital in foreign currencies remain exposed. The Group’s exposure to net assets and profits in currencies other than the reporting currency is immaterial other than for US dollars and euros. The Group’s exposure to net assets held in dollars at the balance sheet date was £34.7 million (2021: £21.3 million); the exposure to net assets held in euros was £124.4 million (2021: £102.8 million). If the sterling exchange rates against US dollars had strengthened/weakened by 10%, the Group’s profit before tax for the year would increase/decrease by £5.1 million (2021: £1.9 million). If the sterling rates with euros had strengthened/weakened by 10%, the Group’s profit before tax for the year would increase/decrease by £1.0 million (2021: £1.1 million). Admiral Group plc Annual Report and Accounts 2022 261 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information Notes to the Financial Statements continued For the year ended 31 December 2022 6. Investment income and costs continued 6k. Investment in Associates 31 December 2022 £m 31 December 2021 £m Investment in Associates 2.4 – On 21 September 2022, Admiral Group announced a £2.5m investment into Wagonex Limited resulting in a holding of 23.56% of the company. 7. Loans and advances to customers 7a. Accounting policies Loans and advances to customers relate to the Admiral Money’s business, consisting of unsecured personal loans and car finance products. Classification Loans and advances to customers are measured at amortised cost. This is because assets are held in order to collect contractual cash flows and the contractual terms of the financial asset demand cash inflows which are solely payments of principal and interest on the principal amount outstanding. Interest income and expense Interest income received in relation to loans and advances to customers is calculated using the effective interest method which allocates interest, direct and incremental fees and costs over the expected lives of the assets and liabilities. There has been no change in recognition of interest income from the comparative period. Interest expense is calculated using the process appropriate to each source of funding, which is not linked to individual accounts. Finance leases Included within loans and advances to customers are personal contract purchase (PCP) and hire purchase (HP) arrangements which are classified as finance leases under IFRS 16. A receivable equal to the net investment in the lease has been recognised. The net investment is equal to the gross investment in the lease discounted at the rate implicit in the lease. Lease interest income is recognised within interest income in the income statement over the term of the lease using the effective interest rate method. The title to the underlying vehicle remains with the Group until the lessee has made all contractual payments, at which point ownership is transferred to the lessee. In the event of breach of contract, such as non-payment, the vehicle itself acts as collateral for the finance lease, becoming available for repossession in most cases. Some of the ways in which the Group maintains its rights to the vehicle, and thus manages the risk of loss associated with the finance lease, include: • The Group does not enter into any finance leases with a maximum loan-to-value limit, reducing the risk of shortfall on termination of the contract • The Group requires the lessee to insure the underlying vehicle at all times, reducing the risk of non-recovery if the asset is stolen or destroyed • The estimated future value of each vehicle, which is sourced externally, is considered in the pricing of the lease contracts to provide protection against deterioration in that value. 7b. Loans and advances to customers 31 December 2022 £m 31 December 2021 £m Loans and advances to customers – gross carrying amount 887.6 607.0 Loans and advances to customers – provision (63.7) (50.2) Total net loans and advances to customers 823.9 556.8 Loans and advances to customers are comprised of the following: 31 December 2022 £m 31 December 2021 £m Unsecured personal loans 856.0 566.9 Finance leases 31.6 40.1 Total loans and advances to customers, gross 887.6 607.0 Admiral Group plc Annual Report and Accounts 2022 262 Financial Statements Fair value measurement The loans and advances are recognised at fair value at the point of origination and then subsequently on an amortised cost basis. This is deemed a reasonable approximation of fair value. Expected credit losses The expected credit loss model is a three-stage model based on forward looking information regarding changes in the credit quality since origination. Credit risk is measured using a Probability of Default (PD), Exposure at Default (EAD) and Loss Given Default (LGD) defined as follows: • Probability of Default (PD): The likelihood of an account defaulting; calibrated through analysis of historic customer behaviour. Where customers have already met the definition of default this is 100%. For customers that are not in default the PD is determined through analysis of historic data at a credit grade level. A behavioural PD is then used after 2 months based on observed default rates by month on book and risk grade • Exposure at Default: The amount of balance at the time of default. For loans that are in arrears the EAD is taken as the current balance plus any expected interest arrears. For up-to-date loans the EAD is calculated as the expected balance 3 months prior to each period, plus 3 months of interest arrears to account for the time it takes to default following falling into arrears • Loss Given Default (LGD): The amount of the asset not recovered following a borrower’s default, determined through analysis of historic recovery performance The PD is applied to the EAD to calculate the expected loss excluding recoveries. The LGD is then applied to this loss to calculate the total expected loss including recoveries. A forward-looking provision is also calculated, as set out later in this note. Loan assets are segmented into three stages of credit impairment: • Stage 1 – no significant increase in credit risk of the financial asset since inception • Stage 2 – significant increase in credit risk of the financial asset since inception • Stage 3 – financial asset is credit impaired For assets in stage 1, the allowance is calculated as the expected credit losses from events within 12 months after the reporting date. For assets in stages 2 and 3 the allowance is calculated as the expected credit loss from events in the remaining lifetime of each asset. Significant increase in credit risk (SICR) (stage 2) As explained above, stage 1 assets have an ECL allowing for losses in the next twelve months, and stage 2 or 3 assets have an ECL allowing for losses over the remaining lifetime of the contract. An asset moves to stage 2 when its credit risk has increased significantly since initial recognition. IFRS 9 does not prescribe a definition of significant increase in credit risk but does include a rebuttable presumption that this does occur for loan assets which are 30 days past due (which the Group does not rebut). The Group has deemed a significant increase in credit risk to have occurred where: • the loan is 1 to 2 loan payments in arrears, or • the behavioural PD has moved outside a specified threshold from the application PD • the customer is identified as being two or more payments in arrears on a product reported to the credit reference agency Credit impaired (stage 3) The Group does not rebut the presumption within IFRS 9 that default has occurred when an exposure is greater than 90 days past due, which is consistent with a customer being three or more payments in arrears. In addition, a loan is deemed to be credit impaired where: • there is an Individual Voluntary Arrangement (IVA) agreement confirmed or proposed, or; • customer has started or progressed bankruptcy action, or; • a repayment plan is in place, or; • a customer is deceased A dmiral Group plc Annual Report and Accounts 2022 263 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information Notes to the Financial Statements continued For the year ended 31 December 2022 7. Loans and advances to customers continued Judgments required – Post Model Adjustments (PMAs) As at 31 December 2022, the expected credit loss allowance included PMAs totalling £11.3 million (2021: £9.1 million). Post Model Adjustments 31 December 2022 £m 31 December 2021 £m Model performance 3.9 2.0 Inflation 4.0 2.5 Economic scenarios 0.9 4.6 Mortgage contagion 2.5 – 11.3 9.1 PMAs are calculated using management judgement and analysis. The key categories of PMAs are as follows: Model performance The model has been calibrated on historical data that may not fully reflect the risk of losses in the recent and ongoing, highly volatile macro-economic period. For this reason a Model Performance PMA has been made. It effectively recalibrates the modelled probability of default of the loans to reflect recent monitored performance. Inflation This PMA has been updated to reflect the higher inflation outlook which has increased significantly since the end of 2021. Inflation could adversely impact the ability of some customers to make their loan repayments. A PMA is held to acknowledge this. Economic scenarios An uncertainty factor determined by management judgment has been added to reflect the recent volatility in unemployment forecasts. This factor has been reduced as variability between successive forecasts has fallen. Mortgage contagion Captures the risk that as mortgage rates rise, customers may experience payment shocks when their standard variable or fixed term mortgages come to an end, and may have to prioritise mortgage payments over other debts. Write off policy Loans are written off where there is no reasonable expectation of recovery. The Group’s policy is to write off balances to their estimated net realisable value. Write offs are actioned on a case-by-case basis taking into account the operational position and the collections strategy. Forward-looking information Under IFRS 9 the provision must reflect an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes. The means by which the Group has determined this is to run scenario analysis. Management judgment has been used to define the weighting and severity of the different scenarios based on available data. The key economic driver of credit losses from the scenarios is the likelihood of a customer entering hardship through unemployment. Unemployment forecasts include a risk grade split of PD based on the correlation between grade-level default rates observed relative to the change in unemployment rates in the previous downturn, adjusted for the unemployment forecast expected in the current economic environment. The scenario weighting assumptions used are detailed below, along with the unemployment rate assumed in each scenario at 31 December 2022. 31 December 2022 Scenario peak Unemployment rate 31 December 2022 Weighting 31 December 2021 Scenario peak Unemployment rate 31 December 2021 Weighting Base 4.8% 40% 4.3% 40% Upturn 3.5% 10% 4.0% 10% Downturn 6.0% 40% 6.3% 30% Severe 7.9% 10% 6.6% 20% The economic scenarios and forecasts have been updated in conjunction with a third party economics provider. The probability weightings reflect the view that there is a probability of 90% attached to recessionary outcomes. Admiral Group plc Annual Report and Accounts 2022 264 Financial Statements Sensitivities to key areas of estimation uncertainty The key areas of estimation uncertainty identified, as per note 3 to the financial statements, are in the PD and the forward- looking scenarios. 31 December 2022 Weighting 31 December 2022 Sensitivity £m 31 December 2021 Weighting 31 December 2021 Sensitivity £m Base 40% (1.3) 40% (2.5) Upturn 10% (6.9) 10% (9.7) Downturn 40% 1.4 30% 6.9 Severe 10% 5.7 20% 11.1 The sensitivities in the above tables show the variance to ECL that would be expected if the given scenario unfolded rather than the weighted position the provision is based on. At 31 December 2022 the implied weighted peak unemployment rate is 5.5%: the table shows that in a downturn scenario with a 6.0% peak unemployment rate the provision would increase by £1.4 million, whilst the upturn would reduce the provision by £6.9 million, base case reduce by £1.3 million and severe increase the provision by £5.7 million. Stage 1 assets represent 82% of the total loan assets; 0.1% increase in the stage 1 PD, i.e. from 2.4% to 2.5% would result in a £0.7 million increase in ECL. Amounts arising from ECL: loans and advances to customers The Group is exposed to credit risk from the Admiral Money business. The following table sets out information about the credit quality of the loans and advances to customers measured at amortised cost. Credit grades are used to segment customers by apparent credit risk at the time of acquisition. Higher grades are the lowest credit risk with each subsequent grade increasing in expected credit risk. The Group does not have any purchased or originated credit impaired assets. These tables are inclusive of the finance lease assets which are held by the Group, further analysis of these balances can be found in note 7c. All probability of default figures included in this paragraph allow for forward-looking information, i.e. the PDs are a weighted average from the economic scenarios considered. The average probability of default in for stage 1 assets is 2.7% (2021: 2.4%) reflecting the expectation of defaults within 12 months of the reporting date. The average PD for assets in stage 2 is 36.6% (2021: 30.0%) reflecting expected losses over the remaining life of the assets. The PD for assets in stage 3 is 100% (2021: 100%) as these assets are deemed to have defaulted. Stage 1 12- month ECL £m Stage 2 Lifetime ECL £m Stage 3 Lifetime ECL £m 31 December 2022 Total £m 31 December 2021 Total £m Credit Grade 1 Higher 506.4 94.0 – 600.4 405.1 Medium 176.0 24.0 – 200.0 141.9 Lower 46.0 7.2 – 53.2 32.0 Credit impaired – – 34.0 34.0 28.0 Gross carrying amount 728.4 125.2 34.0 887.6 607.0 Expected credit loss allowance (13.4) (23.5) (26.2) (63.1) (49.9) Other loss allowance 2 (0.6) – – (0.6) (0.3) Carrying amount 714.4 101.7 7.8 823.9 556.8 1 Credit grade is the internal credit banding given to a customer at origination. This is based on external credit rating information 2 Other loss allowance covers losses due to a reduction in current or future vehicle value or costs associated with recovery and sale of vehicles and those as a result of changes in the performance of the EIR asset Admiral Group plc Annual Report and Accounts 2022 265 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information Notes to the Financial Statements continued For the year ended 31 December 2022 7. Loans and advances to customers continued The following tables reconcile the opening and closing gross carrying amount and expected credit loss allowance. 2022 Stage 1 12- month ECL £m Stage 2 Lifetime ECL £m Stage 3 Lifetime ECL £m Total £m Gross carrying amount as at 1 January 2022 510.6 68.4 28.0 607.0 Transfers Transfers from stage 1 to stage 2 (62.6) 62.6 – – Transfers from stage 1 to stage 3 (9.4) – 9.4 – Transfers from stage 2 to stage 1 25.3 (25.3) – – Transfers from stage 2 to stage 3 – (4.2) 4.2 – Transfers from stage 3 to stage 1 0.2 – (0.2) – Transfers from stage 3 to stage 2 – 0.4 (0.4) – Principal redemption payments (235.3) (39.9) (5.9) (281.1) Write offs – – (7.2) (7.2) EIR adjustment 3.4 0.4 – 3.8 New financial assets originated or purchased 496.1 62.9 6.1 565.1 Gross carrying amount as at 31 December 2022 728.3 125.3 34.0 887.6 The EIR adjustment represents incremental acquisition costs incurred when advancing loans. These costs are spread over the expected economic lives of the loans under the effective interest rate method. 2021 Stage 1 12- month ECL £m Stage 2 Lifetime ECL £m Stage 3 Lifetime ECL £m Total £m Gross carrying amount as at 1 January 2021 343.2 37.5 21.1 401.8 Transfers Transfers from stage 1 to stage 2 (42.2) 42.2 – – Transfers from stage 1 to stage 3 (4.7) – 4.7 – Transfers from stage 2 to stage 1 17.6 (17.6) – – Transfers from stage 2 to stage 3 – (5.6) 5.6 – Transfers from stage 3 to stage 1 0.4 – (0.4) – Transfers from stage 3 to stage 2 – 0.3 (0.3) – Principal redemption payments (163.2) (22.5) (2.9) (188.6) Write offs – – (2.4) (2.4) New financial assets originated or purchased 359.5 34.1 2.6 396.2 Gross carrying amount as at 31 December 2021 510.6 68.4 28.0 607.0 Admiral Group plc Annual Report and Accounts 2022 266 Financial Statements 2022 Stage 1 12- month ECL £m Stage 2 Lifetime ECL £m Stage 3 Lifetime ECL £m Total £m Expected credit loss allowance as at 1 January 2022 13.7 12.7 23.5 49.9 Movements with a profit and loss impact Transfers Transfers from stage 1 to stage 2 (1.5) 4.4 – 2.9 Transfers from stage 1 to stage 3 (0.4) – 1.0 0.6 Transfers from stage 2 to stage 1 1.8 (3.9) – (2.1) Transfers from stage 3 to stage 1 – – (0.1) (0.1) Changes in PDs/LGDs/EADs (10.1) (2.4) 4.4 (8.1) New financial assets originated or purchased 9.9 12.7 4.6 27.2 Total net profit and loss charge in the period (0.3) 10.8 9.9 20.4 Write-offs – – (7.2) (7.2) Expected credit loss allowance as at 31 December 2022 13.4 23.5 26.2 63.1 Other movements with no profit and loss impact Transfers Transfers from stage 2 to stage 3 – (1.3) 1.3 – Transfers from stage 3 to stage 2 – – – – 2021 Stage 1 12- month ECL £m Stage 2 Lifetime ECL £m Stage 3 Lifetime ECL £m Total £m Expected credit loss allowance as at 1 January 2022 10.9 12.7 17.9 41.5 Movements with a profit and loss impact Transfers Transfers from stage 1 to stage 2 (1.3) 2.3 – 1.0 Transfers from stage 1 to stage 3 (0.4) – 0.6 0.2 Transfers from stage 2 to stage 1 3.1 (5.1) – (2.0) Transfers from stage 3 to stage 1 0.1 – (0.2) (0.1) Changes in PDs/LGDs/EADs (8.8) (4.8) 5.6 (8.0) New financial assets originated or purchased 10.1 7.6 2.0 19.7 Total net profit and loss charge in the period 2.8 – 8.0 10.8 Write-offs – – (2.4) (2.4) Expected credit loss allowance as at 31 December 2022 13.7 12.7 23.5 49.9 Other movements with no profit and loss impact Transfers Transfers from stage 2 to stage 3 – (4.0) 4.0 – Transfers from stage 3 to stage 2 – 0.1 (0.1) – Admiral Group plc Annual Report and Accounts 2022 267 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information Notes to the Financial Statements continued For the year ended 31 December 2022 7. Loans and advances to customers continued 7c. Finance lease receivables Loans and advances to customers include the following finance leases. The Group is the lessor for leases of cars. 31 December 2022 £m 31 December 2021 £m Gross investment in finance leases, receivable Less than 1 year 9.8 11.7 Between 1 to 5 years 25.7 33.3 More than 5 years – – 35.5 45.0 Unearned finance income (4.0) (5.2) Net investment in lease receivables 31.5 39.8 Less impairment allowance (0.8) (1.3) 30.7 38.5 Net investment in finance leases, receivable Less than 1 year 7.9 9.2 Between 1 to 5 years 23.7 30.6 More than 5 years – – 31.6 39.8 The net investment in finance leases shown above includes an unguaranteed residual value of £0.3 million (2021: The net investment in finance leases shown above is net of the unguaranteed residual value of £0.4 million). 7d. Interest income Post Model Adjustments 31 December 2022 £m 31 December 2021 £m From loans and advances to customers 56.1 34.0 From finance leases 2.6 2.6 Total interest income 58.7 36.6 Interest income receivable is recognised in the income statement using the effective interest method, which calculates the amortised cost of the financial asset and allocates the interest income over the expected product life. 7e. Interest expense Post Model Adjustments 31 December 2022 £m 31 December 2021 £m Interest payable on loan backed securities 11.7 5.5 Interest payable on other credit facilities 0.9 0.6 Total interest expense 1 12.6 6.1 1 Interest paid in total during the year was £11.9 million (2021: £6.1 million) 8. Other revenue 8a. Accounting policy (i) Contribution from additional products and fees and other revenue Revenue is credited to the income statement over the period matching the Group’s obligations to provide services. Where the Group has no remaining obligations, the revenue is recognised immediately. An allowance is made for expected cancellations where the customer may be entitled to a refund of amounts charged. Commission from the provision of insurance intermediary services is credited to revenue on the sale of the underlying insurance policy. There has been no change in revenue recognition from the comparative period. Admiral Group plc Annual Report and Accounts 2022 268 Financial Statements (ii) Nature of goods and services The following is a description of the principal activities within the scope of IFRS 15 from which the Group generates its other revenue. Products and services Nature, timing of satisfaction of performance obligations and significant payment terms Fee and commission revenue: Commission on underlying products The performance obligation is the provision of insurance intermediary services, at which point the performance obligation is met. Revenue is therefore recognised at a point in time. Payment of the commission is due within 30 days of the period close. Fee and commission revenue: Administration fees The performance obligation is the change requested being made to the underlying policy, at which point the performance obligation is met. Revenue is therefore recognised at a point in time and is collected immediately or in line with direct debit instalments. Revenue from law firm The performance obligation is the pursuit of the compensation from the at fault party’s insurer on behalf of the customer. Once the case is settled the performance obligation is fully satisfied. Revenue is therefore recognised over time using the expected value method. This method values revenue by multiplying hours incurred on open cases by a 12-month realisable rate. The realisable rate is a probability weighted transaction price based on settled cases. The expected value method therefore results in revenue recognised being constrained to that where there is a high probability of no significant reversal. Revenue is recognised over time because as the Group has an enforceable right to payment for performance completed to date and the work performed to date has no alternative use to the Group. A contract asset is recognised equal to the work performed up to the balance sheet date but not yet billed. Refer to note 6h for further detail of this balance. Payment is due within 28 days of invoice. Profit commission from co-insurers The Group’s profit commission revenue falling within the scope of IFRS 15 Revenue from Contracts with Customers relates to a contractual arrangement between the Group’s insurance intermediary EUI Limited, and an external co-insurer (Great Lakes) which underwrites a share of the UK Car Insurance business generated by EUI Limited. The variable consideration, being the profit commission recognised in respect of each underwriting year at the end of each reporting period, is recognised at a point in time, and calculated based on a number of detailed inputs, the most material of which are as follows: • Premiums, defined as gross premiums ceded including any instalment income, less reinsurance premium (for excess of loss reinsurance) • Insurance expenses incurred • Claims ratio (more typically referred to as a loss ratio) Whilst the premiums and insurance expenses related to an underwriting year are typically fixed at the conclusion of each underwriting year and are not subject to judgement, the claims ratio is calculated from the underwriting year loss ratios that result from the setting of claims reserves in the financial statements meaning it is subject to inherent uncertainty. As stated in note 5d, Admiral’s reserving policy is initially to reserve conservatively, above internal and independent projections of actuarial best estimates. This is designed to create a margin held in reserves to allow for unforeseen adverse development in open claims. Admiral’s financial statement loss ratios, used in the calculation of profit commission income, continue to include a significant margin above projected best estimates of ultimate claims costs. It is this margin for uncertainty, included in the financial statement loss ratios, which creates the constraint over the recognition of the variable consideration, as using the booked loss ratio rather than the actuarial best estimate constrains the profit commission income to a level where there is a high probability of no significant reversal of the revenue recognised. The key methods, inputs and assumptions used to estimate the variable consideration of profit commission are therefore in line with those used for the calculation of claims liabilities, as set out in note 3 to the financial statements, with further detail also included in note 5. There are no further critical accounting estimates or judgements in relation to the recognition of profit commission. Comparison The performance obligation is the provision of insurance intermediary services, at which point the performance obligation is met. Revenue is therefore recognised at a point in time. Admiral Group plc Annual Report and Accounts 2022 269 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information Notes to the Financial Statements continued For the year ended 31 December 2022 8. Other revenue continued Instalment income on insurance premium paid via instalments is using the effective interest rate, and as such is not within the scope of IFRS 15. Profit commission from reinsurers is within the scope of IFRS 4, and not within the scope of IFRS 15 Revenue from Contracts with Customers due to the nature of the income. 8b. Disaggregation of revenue In the following tables, other revenue is disaggregated by major products/service lines and timing of revenue recognition. The total revenue disclosed in the table of £489.7 million (2021: £678.9 million) represents total other revenue and profit commission and is disaggregated into the segments included in note 4. Year ended 31 December 2022 UK Insurance £m International Insurance £m Admiral Money £m Other £m Total £m Major products/service line Instalment income 93.0 5.9 – – 98.9 Fee and commission revenue 149.9 33.8 0.3 – 184.0 Revenue from law firm 15.8 – – – 15.8 Comparison 1 – – – 8.3 8.3 Other 11.6 – – 0.2 11.8 Total other revenue 270.3 39.7 0.3 8.5 318.8 Profit commission 170.5 0.4 – – 170.9 Total other revenue and profit commission 440.8 40.1 0.3 8.5 489.7 Timing of revenue recognition Point in time 289.9 33.8 0.3 8.5 332.5 Over time 17.8 – – – 17.8 Revenue outside the scope of IFRS 15 133.1 6.3 – – 139.4 440.8 40.1 0.3 8.5 489.7 Year ended 31 December 2021 UK Insurance £m International Insurance £m Admiral Money £m Other £m Total (continuing) £m Comparison (discontinued) £m Total £m Major products/service line Instalment income 101.7 3.7 – – 105.4 – 105.4 Fee and commission revenue 137.2 28.3 1.0 – 166.5 – 166.5 Revenue from law firms 25.0 – – – 25.0 – 25.0 Comparison 1 – – – 5.3 5.3 59.6 64.9 Other 12.0 – – 0.6 12.6 – 12.6 Total other revenue 275.9 32.0 1.0 5.9 314.8 59.6 374.4 Profit commission 301.9 2.6 – – 304.5 – 304.5 Total other revenue and profit commission 577.8 34.6 1.0 5.9 619.3 59.6 678.9 Timing of revenue recognition Point in time 309.6 28.3 1.0 5.9 344.8 59.6 404.4 Over time 27.5 – – – 27.5 – 27.5 Revenue outside the scope of IFRS 15 240.7 6.3 – – 247.0 – 247.0 577.8 34.6 1.0 5.9 619.3 59.6 678.9 1 Comparison revenue excludes £0.3 million (31 December 2021: £7.8 million) of income from other Group companies, including £nil million (2021: £7.5 million) from discontinued operations A dmiral Group plc Annual Report and Accounts 2022 270 Financial Statements 9. Expenses 9a. Accounting policies (i) Acquisition costs and operating expenses Acquisition costs incurred in obtaining new and renewal business are charged to the income statement over the period in which those premiums are earned. All other operating expenses are charged to the income statement as incurred. (ii) Employee benefits As detailed in the Remuneration Committee Report, the key elements of employee remuneration are: • Base salaries and pension contributions; • Share based incentive plans; • A discretionary bonus, (the ‘DFSS Bonus’), rather than an annual cash bonus, that is based on the number of DFSS awards held and actual dividends paid out to shareholders Within note 9b, the charges for base salaries and pension contributions (and the related social security costs) are recognised within insurance contract expenses or administration and other marketing costs, based on the role of the employee. Charges for the share-based incentive plans (and related social security costs) and discretionary bonus are included within share scheme charges. These charges are not shown as part of the result for each reportable segment, or within the expense ratio, due to them being materially comprised of an accounting charge in line with IFRS 2 Share-based payments which does not result in a cash payment to employees but instead results in an issue of new shares (resulting in a dilution of existing shares). The rules of the share schemes ensure that the actual dilution level does not exceed 10% in any rolling ten-year period. Base salaries and pension contributions Base salaries and the related employer social security costs are charged to the income statement in the period that they are incurred. The Group contributes to defined contribution personal pension plans for its employees. The contributions payable to these schemes are charged in the accounting period to which they relate. Share based incentive plans and related social security costs The Group operates a number of equity and cash settled compensation schemes for its employees, the main ones being: • A Share Incentive Plan (SIP), which is in place for all UK employees encouraging wide share ownership across employees, and • The Discretionary Free Share Scheme (DFSS). DFSS shares are typically awarded to managers, and for the majority of employees 50% of the DFSS shares awarded are subject to three performance conditions being Earnings per Share growth, Return on Equity and Total Shareholder Return vs. the FTSE 350 (excluding investment companies) over a three-year period. The other 50% are guaranteed with continued employment For both schemes, employees must remain in employment three years after the award date (i.e. at the vesting date), otherwise the shares are forfeited. The majority of these schemes are classed as equity settled under IFRS 2, due to the employees receiving shares (rather than cash) as consideration for the services provided. For equity settled schemes, the charge, which reflects the fair value of the employee services received in exchange for the grant of the free shares, is recognised as an expense, with a corresponding increase in equity, as shown in the consolidated statement of changes in equity (2022: £57.3 million; 2021: £63.1 million). For the cash settled schemes, the expense recognised for the fair value of services received results in a corresponding increase in liabilities. The key drivers and assumptions used to calculate the charge for the schemes over the three year vesting period are: • The number of shares awarded, which is set at the start of each scheme. Details of the number of shares awarded for each scheme where shares remain unvested is set out in note 9f(iii) • The fair value of the shares; – For the SIP, the fair value of the shares awarded is the share price at the award date. Awards under the SIP are entitled to receive dividends, and hence no adjustment is made to this fair value – For the DFSS equity settled awards, awards are not eligible for dividends, although a discretionary bonus is currently paid equivalent to the dividend that would have been paid on the shareholding, hence the fair value of the shares is revised downwards to take account of these expected dividends – For the DFSS cash settled awards, the fair value is based on the share price at the vesting date. The closing share price at the end of each reporting period is used as an approximation for the closing price at the end of the vesting period A dmiral Group plc Annual Report and Accounts 2022 271 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information Notes to the Financial Statements continued For the year ended 31 December 2022 9. Expenses continued • Staff attrition rates, which impact the ultimate number of shares that vest • In the case of the DFSS, the vesting rates based on the performance conditions, which also impact the ultimate number of shares that vest The number of shares that have ultimately vested compared to those originally awarded is set out in note 9f(iv). At each balance sheet date, the Group revises its assumptions on the number of shares which will ultimately vest based on the latest forecast information for attrition rates and, for the DFSS, the extent to which the performance conditions are met. The financial impact as a result of any change in the assumptions is recognised through the income statement. Any significant changes in assumptions may therefore result in an increased / decreased charge in an accounting period as a result of this true-up of the expected cumulative charge required. Social security costs on share-based incentive plans Social security costs are incurred by the Group in respect of the share-based incentive plans, with the expense recognised over the vesting period for each share scheme. For the SIP, these costs are paid when the employees sell the shares after vesting (typically 3–5 years after the grant date). For the DFSS, the costs are paid immediately upon vesting. The total social security costs are calculated based on the following: • The taxable value of the shares, being: – For the SIP, the lower of the share price at award date and the share price at the balance sheet date – For the DFSS, the share price at the balance sheet date • the number of shares expected to vest for each scheme, driven by the number of shares awarded, attrition rates and, for the DFSS, the vesting rate based on performance conditions • the appropriate social security rate These assumptions are updated at the end of each reporting period. The financial impact as a result of any change in the assumptions is recognised through the income statement. Any significant changes in assumptions may therefore result in an increased / decreased charge in an accounting period as a result of this true-up of the expected cumulative charge required. Discretionary bonus on shares allocated but unvested The cost of the DFSS bonus is recognised and paid in each period equivalent to the dividends on shares allocated to employees that are still entitled to vest but have not yet vested. The cost shown also includes the social security costs on the discretionary bonus. No accrual is made for future discretionary bonus payments due to there being no contractual obligation for such a bonus at the balance sheet date. Admiral Group plc Annual Report and Accounts 2022 272 Financial Statements 9b. Operating expenses and share scheme charges 31 December 2022 Continuing operations Gross £m Recoverable from co- and reinsurers £m Net £m Acquisition of insurance contracts 1 178.8 (98.1) 80.7 Administration and other marketing costs (insurance contracts) 530.5 (313.6) 216.9 Insurance contract expenses 709.3 (411.7) 297.6 Administration and other marketing costs (other) 136.2 – 136.2 Share scheme charges 79.3 (27.6) 51.7 Movement in expected credit loss provision 18.9 – 18.9 Total expenses and share scheme charges – continuing operations 943.7 (439.3) 504.4 31 December 2021 Continuing operations Gross £m Recoverable from co- and reinsurers £m Net £m Acquisition of insurance contracts 1 179.5 (113.0) 66.5 Administration and other marketing costs (insurance contracts) 540.0 (343.8) 196.2 Insurance contract expenses 719.5 (456.8) 262.7 Administration and other marketing costs (other) 151.5 – 151.5 Share scheme charges 99.1 (34.3) 64.8 Movement in expected credit loss provision 13.3 – 13.3 Total expenses and share scheme charges – continuing operations 983.4 (491.1) 492.3 1 Acquisition of insurance contracts expense excludes £0.3 million (2021: £0.2 million) of aggregator fees from other Group companies The £216.9 million (2021: £196.2 million) administration and marketing costs allocated to insurance contracts is principally made up of salary costs. Analysis of other administration and other marketing costs: Continuing operations 31 December 2022 £m 31 December 2021 £m Expenses relating to additional products and fees 74.5 91.9 Loans expenses (excluding movement on ECL provision) 22.2 23.7 Other expenses 39.5 35.9 Total 136.2 151.5 Refer to note 14 for a reconciliation between insurance contract expenses and the reported expense ratio. Admiral Group plc Annual Report and Accounts 2022 273 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information Notes to the Financial Statements continued For the year ended 31 December 2022 9. Expenses continued 9c. Employee costs and other expenses 31 December 2022 31 December 2021 Continuing operations Total £m Net £m Total £m Net £m Salaries 397.0 127.9 338.2 111.9 Social security charges 41.4 15.1 35.4 12.8 Pension costs 14.6 5.0 17.7 6.0 Share scheme charges (see note 9f) 79.3 51.7 99.1 64.8 Total employee expenses 523.3 199.7 490.4 195.5 Depreciation charge: – Owned assets 10.1 2.8 13.4 3.4 – ROU assets 8.1 2.2 10.2 2.7 Amortisation charge: – Software 23.7 7.2 19.3 5.6 – Deferred acquisition costs 179.1 81.0 180.6 68.0 Auditor’s remuneration (including VAT) (total Group): – Fees payable for the audit of the Company’s annual accounts 0.1 0.1 0.1 0.1 – Fees payable for the audit of the Company’s subsidiary accounts 1.7 0.9 1.5 0.6 – Fees payable for audit related assurance services pursuant to legislation or regulation 1.0 0.5 0.8 0.5 £10,800 (inclusive of VAT) (2021: £34,800) was payable to the auditor for other services in the year. Total and net expenses are before and after co- and reinsurance arrangements respectively. Refer to the Corporate Governance Report for details of the Audit Committee’s policy on fees paid to the Company’s auditor for non- audit services. Audit fees are 65% (2021: 64%) of total fees and 35% (2021: 36%) of total fees are for non-audit services, which are classed as audit related assurance services under the FRC rules on non-audit services. The amortisation of software and deferred acquisition cost assets is charged to expenses in the income statement. 9d. Employee numbers (including Directors) Average for the year 2022 Number 2021 Number Direct customer contact employees 7,490 7,271 Support employees 3,845 3,454 Total 11,335 10,725 Total average employees in 2021 relating to comparison entities disposed of during the year were 222. 9e. Directors’ remuneration (i) Directors’ remuneration 31 December 2022 £m 31 December 2021 £m Directors’ emoluments 1.1 1.1 Amounts receivable under SIP and DFSS share schemes 2.2 3.0 Company contributions to money purchase pension plans – – Total 1 3.3 4.1 1 Directors’ remuneration is stated as that of the executive directors. For information on non-executive directors’ remuneration see the remuneration report ( ii) Number of Directors 2022 Number 2021 Number Retirement benefits are accruing to the following number of Directors under: – Money purchase schemes 2 2 Admiral Group plc Annual Report and Accounts 2022 274 Financial Statements 9f. Employee share schemes Total share scheme costs for the Group excluding discontinued operations are analysed below: 31 December 2022 SIP charge (i) DFSS charge (ii) Total charge Gross £m Net £m Gross £m Net £m Gross £m Net £m IFRS 2 charge for equity settled share schemes 18.0 12.1 39.3 25.6 57.3 37.7 IFRS 2 charge for cash settled share schemes – – 0.2 0.2 0.2 0.2 Total IFRS 2 charge 18.0 12.1 39.5 25.8 57.5 37.9 Social security costs on IFRS 2 charge 0.7 0.5 0.4 0.3 1.1 0.8 Discretionary bonus on shares allocated but unvested – – 20.7 13.0 20.7 13.0 Total share scheme charges 18.7 12.6 60.6 39.1 79.3 51.7 31 December 2021 SIP charge (i) DFSS charge (ii) Total charge Gross £m Net £m Gross £m Net £m Gross £m Net £m IFRS 2 charge for equity settled share schemes 19.9 13.7 41.3 27.0 61.2 40.7 IFRS 2 charge for cash settled share schemes – – 5.0 2.9 5.0 2.9 Total IFRS 2 charge 19.9 13.7 46.3 29.9 66.2 43.6 Social security costs 0.8 0.5 9.0 6.4 9.8 6.9 Discretionary bonus on shares allocated but unvested – – 23.1 14.3 23.1 14.3 Total share scheme charges – continuing operations 20.7 14.2 78.4 50.6 99.1 64.8 Total share scheme costs for discontinued operations in 2021 were £0.4 million. The total IFRS 2 charge for equity settled share schemes for discontinued operations in 2021 were £0.5 million. Admiral Group plc Annual Report and Accounts 2022 275 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information 9. Expenses continued Net share scheme charges are presented after allocations to co-insurers (in the UK and Italy) and reinsurers (in the International Insurance businesses). The proportion of net to gross share scheme charges would be expected to be consistent in each period, at approximately 65%. Financial year ended 31 December Analysis of gross cost 2019 and prior £m 2020 £m 2021 £m 2022 £m Total cumulative charge to date £m Year of share scheme – SIP 2018 9.3 5.9 2.4 – 17.6 2019 3.4 6.0 6.4 4.1 19.9 2020 1 – 3.1 6.7 5.4 15.2 2021 1 – – 4.4 5.4 9.8 2022 1 – – – 3.1 3.1 Gross IFRS 2 costs – SIP 19.9 18.0 Year of share scheme – DFSS 2018 18.5 16.6 12.6 – 47.7 2019 3.4 10.9 15.8 8.0 38.1 2020 2 – 4.7 13.0 14.6 32.3 2021 2 – – 4.9 13.4 18.3 2022 2 – – – 3.5 3.5 Gross IFRS 2 costs – DFSS 46.3 39.5 Total IFRS 2 costs – continuing operations 66.2 57.5 1 Awards are made in March and September of each year, and vest over 36 months from award date. On the 2020 scheme, an average of 5 months’ charge remains outstanding, on the 2021 scheme an average of 17 months’ charge remains outstanding, and on the 2022 schemes an average of 29 months’ charge remains outstanding 2 The main award is made in September of each year, with smaller awards made at other points through the year. The shares vest over 36 months from award date. On the 2020 main DFSS, 9 months’ charge remains outstanding; on the 2021 main DFSS 21 months’ charge remains outstanding, and on the 2022 main DFSS, 33 months’ charge remains outstanding (i) The Approved Share Incentive Plan (the SIP) Eligible UK based employees qualify for awards under the SIP based upon the performance of the Group in each half-year period. The maximum award for each year is £3,600 per employee and the maximum number of shares that can vest relating to the 2022 schemes is 872,728 (2021 schemes: 688,384; 2020 schemes: 982,643). The awards are made at the discretion of the Remuneration Committee, taking into account the Group’s performance. (ii) The Discretionary Free Share Scheme (the DFSS) Under the DFSS, details of which are contained in the remuneration policy section of the Directors’ Remuneration Report, individuals receive an award of free shares at no charge. The maximum number of shares that can vest relating to the 2022 schemes is 3,070,323 (2021 scheme: 2,850,114; 2020 scheme: 2,795,261). The vesting percentage for most employees for the 2019 DFSS scheme which vested during 2022 was 98.9% (2018 DFSS scheme: 99.3%). (iii) Number of free share awards committed at 31 December 2022 Awards outstanding 1 SIP 2020 2 982,643 SIP 2021 2 688,384 SIP 2022 2 872,728 DFSS 2020 3 2,795,261 DFSS 2021 3 2,850,114 DFSS 2022 3 3,070,323 Total awards committed 11,259,453 1 Being the maximum number of awards committed before accounting for expected staff attrition and vesting conditions 2 Shares are awarded in March and September of each year, and vest three years later 3 The main award is made in September of each year, with smaller awards made at other points through the year Notes to the Financial Statements continued For the year ended 31 December 2022 Admiral Group plc Annual Report and Accounts 2022 276 Financial Statements (iv) Number of free share awards vesting during the year ended 31 December 2022 During the year ended 31 December 2022, awards under the SIP H1 19 and H2 19 schemes and the DFSS 2019 schemes vested. The total number of awards vesting for each scheme is as follows. Original awards Awards vested SIP 2019 schemes 1,113,496 907,466 DFSS 2019 schemes 2,637,196 2,262,590 The difference between the original and vested awards reflects employee attrition (SIP schemes) and both employee attrition and the vesting outcomes based on performance conditions noted above (DFSS schemes). The weighted average fair value of the shares granted in the year was £19.45 (2021: £31.16). The weighted average market share price at the date of exercise for shares exercised during the year was £21.51 (2021: £31.92). 10. Taxation 10a. Accounting policy Income tax on the profit or loss for the periods presented comprise of current and deferred tax. (i) Current tax Current tax is the expected tax payable on the taxable income for the period, using tax rates that have been enacted or substantively enacted by the balance sheet date, and includes any adjustment to tax payable in respect of previous periods. Current tax related to items recognised in other comprehensive income is also recognised in other comprehensive income and not in the income statement. (ii) Deferred tax Deferred tax is provided in full using the balance sheet liability method, providing for temporary differences arising between the carrying amount of assets and liabilities for accounting purposes and the amounts used for taxation purposes. Deferred tax is calculated at the tax rates that have been enacted or substantially enacted by the balance sheet date and that are expected to apply in the period when the liability is settled, or the asset is realised. The principal temporary differences arise from carried forward losses, depreciation of property and equipment and share scheme charges. The resulting deferred tax is charged or credited in the income statement, except in relation to share scheme charges where the amount of tax benefit credited to the income statement is limited to an equivalent credit calculated on the accounting charge. Any excess is recognised directly in equity. Deferred tax assets relating to carried forward losses are recognised only to the extent that it is probable that future taxable profits will be available against which the assets can be utilised. The probability of the availability of future taxable profits is determined by a combination of the classification of the status of the businesses holding cumulative tax losses and the business plan profit projections for that business, subject to appropriate stress testing. 10b. Taxation Continuing operations 31 December 2022 £m 31 December 2021 £m Current tax Corporation tax on profits for the year 107.6 129.2 (Over)/under-provision relating to prior periods (0.9) 4.2 Current tax charge 106.7 133.4 Deferred tax Current period deferred taxation movement (10.2) (1.5) (Over)/under- provision relating to prior periods 0.7 (1.7) Total tax charge per consolidated income statement 97.2 130.2 Admiral Group plc Annual Report and Accounts 2022 277 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information 10. Taxation continued Factors affecting the total tax charge are: Continuing operations 31 December 2022 £m 31 December 2021 £m Profit before tax 469.0 713.5 Corporation tax thereon at effective UK corporation tax rate of 19.0% (2021: 19.0%) 89.1 135.6 Expenses and provisions not deductible for tax purposes 2.3 2.2 Non-taxable income (8.7) (8.3) Impact of change in UK tax rate on deferred tax balances (2.2) (3.6) Adjustments relating to prior periods (0.2) 2.5 Impact of different overseas tax rates 4.5 (1.4) Unrecognised deferred tax 12.4 3.2 Total tax charge for the period as above 97.2 130.2 The corporation tax liability as at 31 December 2022 was £5.0 million (2021: £10.6 million recoverable for continuing operations). In 2021, over 130 countries reached a historic agreement to reform the international tax framework. The main aim of the agreement was to ensure that large, multinational corporations pay their fair share of tax in the countries in which they operate and this included the introduction of a new global minimum corporate income tax rate of 15%. In November 2022, the UK Tax Authorities confirmed that, for accounting periods beginning on or after 31 December 2023, it would introduce rules requiring UK headquartered multinational groups to pay a top-up tax where their foreign operations had an effective tax rate of less than 15%. These new rules are not expected to have a material impact on the Admiral Group. 10c. Deferred income tax asset/(liability) Analysis of deferred tax asset/(liability) Tax treatment of share schemes £m Capital allowances £m Carried forward losses £m Fair value reserve £m Hedging reserve £m Other differences £m Total £m Balance brought forward at 1 January 2021 8.8 (1.7) – (7.2) – (0.8) (0.9) Tax treatment of share scheme charges through income or expense (6.3) – – – – – (6.3) Tax treatment of share scheme charges through reserves 6.0 – – – – – 6.0 Capital allowances – 9.5 – – – – 9.5 Movement in fair value reserve – – – 1.4 – – 1.4 Other difference – – – – – (0.4) (0.4) Balance carried forward at 31 December 2021 8.5 7.8 – (5.8) – (1.2) 9.3 Tax treatment of share scheme charges through income or expense 1.2 – – – – – 1.2 Tax treatment of share scheme charges through reserves (6.3) – – – – – (6.3) Capital allowances – (0.7) – – – – (0.7) Carried forward losses – – 7.9 – – – 7.9 Movement in fair value reserve – – – 13.0 – – 13.0 Movement in hedging reserve – – – – (7.0) – (7.0) Other difference – – – (0.3) – 1.4 1.1 Balance carried forward at 31 December 2022 3.4 7.1 7.9 6.9 (7.0) 0.2 18.5 Positive amounts presented above relate to a deferred tax asset position. The average effective rate of tax for 2022 is 19.0% (2021: 19.0%). An increase to the main rate of corporation tax in the UK to 25% was announced in the 2021 Budget and is expected to come into effect in 2023. This will increase the Group’s future tax charge accordingly. Notes to the Financial Statements continued For the year ended 31 December 2022 Admiral Group plc Annual Report and Accounts 2022 278 Financial Statements The deferred tax asset has increased during the year, mainly relating to the movements in the fair value reserve. The deferred tax asset in relation to carried forward losses in the US remains at £nil at the year-end (2021: £nil) due to uncertainty over the availability of future taxable profits against which to offset or utilise any deferred tax asset. At 31 December 2022, the Group had unused tax losses amounting to £322.0 million (2021: £261.8 million), relating primarily to the Group’s US businesses Elephant Auto and compare.com, for which no deferred tax asset has been recognised. The earliest expiry date for any of these tax losses is 2029. The total aggregated unrecognised deferred tax liabilities on temporary differences associated with subsidiaries is £nil (2021: £nil). 11. Other assets and other liabilities 11a. Accounting policy (i) Property and equipment, and depreciation All property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method to write off the cost less residual values of the assets over their useful economic lives. These useful economic lives are as follows: Improvements to short leasehold buildings – four to ten years Computer equipment – two to four years Office equipment – four years Furniture and fittings – four years Motor vehicles – four years Right-of-use assets – two – twenty years, aligned to lease agreement As set out further in note 6i to the financial statements, a right-of-use asset is established in relation the Group’s lease arrangements. The right-of-use asset is measured at cost, which comprises the following: • the amount of the initial measurement of lease liability (note 6i to the financial statements) • any lease payments made at or before the commencement date less any lease incentives received • any initial direct costs, and • restoration costs The right-of-use asset is subsequently depreciated over the shorter of the lease term and the asset’s useful life on a straight-line basis. The Group does not have any significant leases which qualify for the short-term leases or leases of low-value assets exemption. (ii) Impairment of property and equipment In the case of property and equipment, carrying values are reviewed at each balance sheet date to determine whether there are any indicators of impairment. If any such indicators exist, the asset’s recoverable amount is estimated and compared to the carrying value. The carrying value is the higher of the fair value of the asset less costs to sell and the asset’s value in use. Impairment losses are recognised through the income statement. (iii) Intangible assets Goodwill All business combinations are accounted for using the acquisition method. Goodwill has been recognised in acquisitions of subsidiaries and represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired. The classification and accounting treatment of acquisitions occurring before 1 January 2004 have not been reconsidered in preparing the Group’s opening IFRS balance sheet at 1 January 2004 due to the exemption available in IFRS 1 (First time adoption). In respect of acquisitions prior to 1 January 2004, goodwill is included at the transition date on the basis of its deemed cost, which represents the amount recorded under UK GAAP, which was tested for impairment at the transition date. On transition, amortisation of goodwill has ceased as required by IAS 38. Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash generating units (CGUs) according to business segment and is reviewed annually for impairment. The goodwill held on the balance sheet at 31 December 2022 and 2021 is allocated solely to the UK Insurance segment. Impairment of goodwill The annual impairment review involves comparing the carrying amount to the estimated recoverable amount (by allocating the goodwill to CGUs) and recognising an impairment loss if the recoverable amount is lower. Impairment losses are recognised through the income statement and are not subsequently reversed. Admiral Group plc Annual Report and Accounts 2022 279 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information 11. Other assets and other liabilities continued The recoverable amount is the greater of the fair value of the asset less costs to sell and the value in use of the CGU. The value in use calculations use cash flow projections based on financial budgets approved by management covering a period of up to three years. Cash flows beyond this period are considered, but not included in the calculation. The key assumptions used in the value in use calculations are those regarding revenue growth, along with expected changes in pricing and expenses incurred during the forecast period. Management estimates revenue growth rates and changes in pricing based on past practices and expected future changes in the market. The headroom above the goodwill carrying value is very significant, and there is no foreseeable event that would eliminate this margin. Deferred acquisition costs Acquisition costs comprise all direct and indirect costs arising from the conclusion of insurance contracts. Deferred acquisition costs represent the proportion of acquisition costs incurred that correspond to the unearned premiums provision at the balance sheet date. This balance is held as an intangible asset. It is amortised over the term of the contract as premium is earned. Software Purchased software is recognised as an intangible asset and amortised over its expected useful life (generally the licence term). Internally generated software is recognised as an intangible asset, with directly attributable costs incurred in the development stage capitalised. The internally generated software assets are amortised over the expected useful life of the systems and amortisation commences when the software is available for use. The carrying value of software is reviewed every six months for evidence of impairment, with the value being written down if any impairment exists. Impairment may be reversed if conditions subsequently improve. (iv) Provisions, contingent liabilities and contingent assets Provisions are recognised when a legal or constructive obligation arises as a result of an event that occurred before the balance sheet date, when a cash-outflow relating to this obligation is probable and when the amount can be estimated reliably. Where a material obligation exists, but the likelihood of a cash outflow or the amount is uncertain, or where there is a possible obligation arising from a past event that is contingent on a future event, a contingent liability is disclosed. Contingent assets are possible assets that arise from past events, whose existence will be confirmed only by the occurrence or non-occurrence of future events. Where it is probable that a cash inflow will arise from a contingent asset, this is disclosed. Notes to the Financial Statements continued For the year ended 31 December 2022 Admiral Group plc Annual Report and Accounts 2022 280 Financial Statements 11b. Property and equipment Improvements to short leasehold buildings £m Computer equipment £m Office equipment £m Furniture and fittings £m ROU Asset – Leasehold buildings £m Total £m Cost At 1 January 2021 36.0 78.6 22.6 10.2 124.2 271.6 Additions 1.9 7.6 0.4 0.7 5.6 16.2 Impairment (0.2) – (0.7) (0.6) (17.8) (19.3) Disposals (0.3) (17.1) (0.1) (0.3) (8.2) (26.0) Foreign exchange and other movements (0.4) (0.2) (0.3) (0.1) (0.5) (1.5) At 31 December 2021 37.0 68.9 21.9 9.9 103.3 241.0 Depreciation At 1 January 2021 23.0 59.6 20.0 9.1 19.5 131.2 Charge for the year 3.9 8.2 0.9 0.4 10.2 23.6 Impairment (0.2) – (0.7) (0.6) – (1.5) Disposals (0.2) (10.4) (0.1) (0.3) (3.8) (14.8) Foreign exchange and other movements (0.2) (0.1) (0.2) (0.1) (0.1) (0.7) At 31 December 2021 26.3 57.3 19.9 8.5 25.8 137.8 Net book amount At 1 January 2021 13.0 19.0 2.6 1.1 104.7 140.4 Net book amount At 31 December 2021 10.7 11.6 2.0 1.4 77.5 103.2 Cost At 1 January 2022 37.0 68.9 21.9 9.9 103.3 241.0 Additions 1.7 7.0 0.6 0.7 1.3 11.3 Impairment – – – – (1.3) (1.3) Disposals (1.6) (2.7) (1.5) (0.1) (9.7) (15.6) Foreign exchange and other movements 0.4 0.7 0.4 0.2 1.4 3.1 At 31 December 2022 37.5 73.9 21.4 10.7 95.0 238.5 Depreciation At 1 January 2022 26.3 57.3 19.9 8.5 25.8 137.8 Charge for the year 3.2 5.5 0.8 0.6 8.1 18.2 Impairment – – – – (0.7) (0.7) Disposals (1.6) (2.4) (1.5) – (3.2) (8.7) Foreign exchange and other movements 0.2 0.7 0.3 0.1 0.8 2.1 At 31 December 2022 28.1 61.1 19.5 9.2 30.8 148.7 Net book amount At 31 December 2022 9.4 12.8 1.9 1.5 64.2 89.8 Admiral Group plc Annual Report and Accounts 2022 281 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information 11. Other assets and other liabilities continued 11c. Intangible assets Goodwill £m Deferred acquisition costs £m Software – Internally generated 1 £m Software – Other 1 £m Total £m At 1 January 2021 62.3 27.3 72.6 4.5 166.7 Additions – 69.4 36.8 21.8 128.0 Amortisation charge – (68.0) (18.1) (1.2) (87.3) Disposals – – – – – Impairment – – (25.4) – (25.4) Foreign exchange movement – (0.5) (1.5) (0.1) (2.1) At 31 December 2021 62.3 28.2 64.4 25.0 179.9 Additions – 82.9 83.4 5.2 171.5 Amortisation charge – (81.0) (18.3) (5.4) (104.9) Disposals – – – – – Impairment – – – – – Foreign exchange movement and other – 0.6 6.9 (5.9) 1.6 At 31 December 2022 62.3 30.7 136.4 18.9 248.3 1 Gross carrying amount and accumulated amortisation of internally generated software as at the end of 2022 are £173.7 million (2021: £119.7 million) and £37.3 million respectively (2021: £55.3 million). Gross carrying amount and accumulated amortisation of other software as at the end of 2022 are £91.5 million (2021: £55.9 million) and £72.6 million respectively (2021: £30.9 million). During the period, there are reclassifications on gross cost and accumulated depreciation between internally generated software and other software Goodwill relates to the acquisition of Group subsidiary EUI Limited (formerly Admiral Insurance Services Limited) in November 1999. As described in the accounting policies, the amortisation of this asset ceased on transition to IFRS on 1 January 2004. All annual impairment reviews since the transition date have indicated that the estimated recoverable value of the asset is greater than the carrying amount and therefore no impairment losses have been recognised. Internally generated software includes a new claims system implemented within the UK business during 2022 which has a net carrying amount of £33.4m as at 31 December 2022 and a remaining amortisation period of 4 years. Only one year of forecasts is required to support the recoverable value of goodwill above. Given the short time period used to support the recoverable amount, no terminal growth rate or discounting is applied. Refer to the accounting policy for goodwill for further information. An analysis of deferred acquisition costs is given in the table below: Gross £m Reinsurance £m Total £m At 1 January 2021 77.6 (50.3) 27.3 Additions 181.4 (112.0) 69.4 Amortisation (180.6) 112.6 (68.0) Foreign exchange movement (1.5) 1.0 (0.5) At 31 December 2021 76.9 (48.7) 28.2 Additions 174.3 (91.4) 82.9 Amortisation (179.1) 98.1 (81.0) Foreign exchange movement 0.6 – 0.6 At 31 December 2022 72.7 (42.0) 30.7 Notes to the Financial Statements continued For the year ended 31 December 2022 Admiral Group plc Annual Report and Accounts 2022 282 Financial Statements 11d. Trade and other payables 31 December 2022 £m 31 December 2021 £m Trade payables 30.0 39.8 Amounts owed to co-insurers 109.5 161.9 Amounts owed to reinsurers 1,513.7 1,274.9 Other taxation and social security liabilities 90.2 71.7 Other payables 96.2 112.4 Accruals and deferred income (see below) 318.4 299.3 Total trade and other payables 2,158.0 1,960.0 Of amounts owed to reinsurers (recognised under IFRS 4), £1,389.4 million (2021: £1,169.8 million) is held under funds withheld arrangements. Analysis of accruals and deferred income: 31 December 2022 £m 31 December 2021 £m Premium received in advance of policy inception 136.6 117.4 Accrued expenses 114.7 117.5 Deferred income 67.1 64.4 Total accruals and deferred income as above 318.4 299.3 11e. Leases The Group occupies various properties under leasing arrangements that are now recognised as right of use assets and lease liabilities. A maturity analysis of lease liabilities based on contractual undiscounted cash flows is set out below: 31 December 2022 £m 31 December 2021 £m Maturity analysis – contractual undiscounted cash flows Within one year 10.2 12.9 Between two to five years 35.0 41.8 Between five to ten years 26.8 32.7 Over ten years 30.9 35.4 Total 102.9 122.8 Amounts recognised in the statement of financial position are as follows: 31 December 2022 £m 31 December 2021 £m Lease liabilities Current 8.3 10.5 Non-Current 80.2 94.8 Total 88.5 105.3 See note 11b for right of use assets depreciation and the carrying amount of right of use asset at the end of the reporting period. Only one class of underlying assets is identified as leasehold buildings. Total cash outflows in relation to leases is disclosed under 6i. The Group has no significant financial commitments other than those accounted for as right of use assets and lease liabilities under IFRS 16. Admiral Group plc Annual Report and Accounts 2022 283 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information 11. Other assets and other liabilities continued 11f. Contingent liabilities The Group’s legal entities operate in numerous tax jurisdictions and on a regular basis are subject to review and enquiry by the relevant tax authority. One of the Group’s previously owned subsidiaries was subject to a Spanish Tax Audit which concluded with the Tax Authority denying the application of the VAT exemption relating to insurance intermediary services. The Company has appealed this decision via the Spanish Courts and is confident in defending its position which is, in its view, in line with the EU Directive and is also consistent with the way similar supplies are treated throughout Europe. Whilst the Company is no longer part of the Admiral Group, the contingent liability which the Company is exposed to has been indemnified by the Admiral Group up to a cap of £22 million. The Group is also in discussions with some of the tax authorities in the other countries in which it operates. To date these discussions have focused primarily on the transfer pricing and cross-border arrangements in place between the Group’s intermediaries and insurers. No material provision has been made in these financial statements in relation to the matters noted above. The Group is, from time to time, subject to threatened or actual litigation and/or legal and/or regulatory disputes, investigations or similar actions both in the UK and overseas. All potentially material matters are assessed, with the assistance of external advisers if appropriate, and in cases where it is concluded that it is more likely than not that a payment will be made, a provision is established to reflect the best estimate of the liability. In some cases it will not be possible to form a view, for example if the facts are unclear or because further time is needed to properly assess the merits of the case. No provisions are held in relation to such matters. In these circumstances, specific disclosure of a contingent liability will be made where material. The Directors do not consider that the final outcome of any such current case will have a material adverse effect on the Group’s financial position, operations or cash flows, and no material provisions are currently held in relation to such matters. A number of the Group’s contractual arrangements with reinsurers include features that, in certain scenarios, allow for reinsurers to recover losses incurred to date. The overall impact of such scenarios would not lead to an overall net economic outflow from the Group. 12. Share capital The Group’s capital includes share capital and the share premium account, other reserves which are comprised of the fair value reserve, hedging reserve and foreign exchange reserve, and retained earnings. 12a. Accounting policies (i) Share capital Shares are classified as equity when there is no obligation to transfer cash or other assets. (ii) Dividends Dividends are recorded in the period in which they are declared and paid. (iii) Earnings per share Basic earnings per share is calculated by dividing profit or loss attributable to equity holders of the Group parent company, Admiral Group plc by the weighted average number of ordinary shares during the period. Diluted earnings per share is calculated by dividing profit or loss attributable to equity holders of the Group parent company by the weighted average number of ordinary shares outstanding, adjusted for the effects of all dilutive potential ordinary shares. 12b. Dividends Dividends were proposed, approved and paid as follows. 31 December 2022 £m 31 December 2021 £m Proposed March 2021 (86.0 pence per share approved April 2021 and paid June 2021) – 250.8 Declared August 2021 (161.0 pence per share paid October 2021) – 470.1 Proposed March 2022 (118.0 pence per share, approved April 2022 and paid June 2022) 348.1 – Declared August 2022 (105.0 pence per share, paid October 2022) 310.2 – Total dividends 658.3 720.9 The dividends proposed in March (approved in April) represent the final dividends paid in respect of the 2020 and 2021 financial years. The dividends declared in August are interim distributions in respect of 2021 and 2022. A 2022 final dividend of 52.0 pence per share (approximately £155.0 million) has been proposed. Refer to the Chair’s Statement and financial narrative for further detail. Notes to the Financial Statements continued For the year ended 31 December 2022 Admiral Group plc Annual Report and Accounts 2022 284 Financial Statements 12c. Earnings per share 31 December 2022 £m 31 December 2021 £m Profit for the financial year after taxation attributable to equity shareholders – continuing operations 373.0 585.0 Profit for the financial year after taxation attributable to equity shareholders – discontinued operations – 412.9 Profit for the financial year after taxation attributable to equity shareholders – continuing and discontinued operations 373.0 997.9 Weighted average number of shares – basic 300,207,330 297,480,041 Unadjusted earnings per share – basic – continuing operations 124.3p 196.7p Unadjusted earnings per share – basic – discontinued operations – 138.8p Unadjusted earnings per share – basic – continuing and discontinued operations 124.3p 335.5p Weighted average number of shares – diluted 301,543,390 298,351,248 Unadjusted earnings per share – diluted – continuing operations 123.7p 196.1p Unadjusted earnings per share – diluted – discontinued operations – 138.4p Unadjusted earnings per share – diluted – continuing and discontinued operations 123.7p 334.5p The difference between the basic and diluted number of shares at the end of 2022 (being 1,336,060 2021: 871,207) relates to awards committed, but not yet issued under the Group’s share schemes. Refer to note 9 for further detail. 12d. Share capital 31 December 2022 £m 31 December 2021 £m Authorised 500,000,000 ordinary shares of 0.1 pence 0.5 0.5 Issued, called up and fully paid 302,837,726 ordinary shares of 0.1 pence 0.3 – 299,554,720 ordinary shares of 0.1 pence – 0.3 0.3 0.3 During 2022, 3,283,006 (2021: 2,862,657) new ordinary shares of 0.1 pence were issued to the trusts administering the Group’s share schemes. 675,927 (2021: 632,657) of these were issued to the Admiral Group Share Incentive Plan Trust for the purposes of this share scheme resulting in cumulative shares issued to the Trust at 31 December 2022 of 13,693,299 (31 December 2021: 13,017,372). Of the shares issued, 3,851,967 remain in the Trust at 31 December 2022 (2021: 4,078,496). These shares are entitled to receive dividends. 2,607,079 (2021: 2,230,000) shares were issued to the Admiral Group Employee Benefit Trust for the purposes of the Discretionary Free Share Scheme resulting in cumulative shares issued to the Trust of 30,549,027 (31 December 2021: 27,941,948). Of the shares issued 5,111,601 remain in the Trust at 31 December 2022 (2021: 4,767,112) to be used for future vesting, the remaining issued shares having vested. The balance of awards made to employees under the Discretionary Free Share Scheme that have not either vested or lapsed is 8,302,363 (2021: 7,981,132). The Trustees have waived the right to dividend payments, other than to the extent of 0.001 pence per share, unless and to the extent otherwise directed by the Company from time to time. There is one class of share with no unusual restrictions. Admiral Group plc Annual Report and Accounts 2022 285 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information Notes to the Financial Statements continued For the year ended 31 December 2022 12. Share capital continued 12e. Objectives, policies and procedures for managing capital The Group’s capital management policy defines the Board oversight, risk appetite and tier structure of the Group’s capital in addition to management actions that may be taken in respect of capital, such as dividend payments. The Group aims to operate a capital-efficient business model by transferring a significant proportion of underwriting risk to co-insurance and reinsurance partners. This in turn reduces the amount of capital the Group needs to retain to operate and grow and allows the Group to distribute the majority of its earnings as dividends. The Board has determined that it will hold capital as follows: • Sufficient Solvency II Own Funds to meet all of the Group’s Solvency II capital requirements (over a 1 year and ultimate time horizon) • An additional contingency to cover unforeseen events and losses that could realistically arise. This risk appetite buffer is assessed via stress testing performed on an annual basis and is calibrated in relation to the one-year regulatory SCR The Group’s current risk appetite buffer is 30% above the regulatory SCR. This forms the lower bound of the longer-term solvency target operating range of 130% to 150%. The Group’s dividend policy is to: • Pay a normal dividend equal to 65% of post-tax profits for the period • Pay a special dividend calculated with reference to distributable reserves and surplus capital held above the risk appetite buffer This policy gives the Directors flexibility in managing the Group’s capital. As noted above, the Group’s regulatory capital position is calculated under the Solvency II Framework. The Solvency Capital Requirement (SCR) is based on the Solvency II Standard Formula, with a capital-add-on to reflect limitations in the Standard Formula with respect to Admiral’s risk profile (predominately in respect of profit commission arrangements in co-and reinsurance agreements and risks relating to Periodic Payment Order (PPO) claims). Solvency ratio (unaudited) At the date of this report, the Group’s regulatory solvency ratio, calculated using a capital add-on that has not been subject to regulatory approval, is 180% (2021: 195%). This includes the recognition of the 2022 final dividend of 52 pence per share (2021: 118 pence per share). The Group’s 2022 Solvency and Financial Condition Report (SFCR) will, when published, disclose a solvency ratio that is calculated at the balance sheet date rather than annual report date, using the capital add-on that was most recently subject to regulatory approval. The estimated and unaudited SFCR solvency ratio is 150%, with the reconciliation between this ratio and the 180% noted above being as follows: 31 December 2022 £m 31 December 2021 £m Regulatory Solvency ratio (Unaudited) Solvency Ratio reported in the Annual Report 180% 195% Change in valuation date (11%) (5%) Other (including impact of updated, unapproved capital add-on) (19%) (9%) Solvency Ratio to be reported in the SFCR 150% 181% The Group has complied with its regulatory capital requirements throughout the period. Subsidiaries The Group manages the capital of its subsidiaries to ensure that all entities within the Group are able to continue as going concerns and also to ensure that regulated entities meet regulatory requirements with an appropriate risk appetite buffer. Excess capital above these levels within subsidiaries is paid up to the Group holding company in the form of dividends on a regular basis. Admiral Group plc Annual Report and Accounts 2022 286 Financial Statements 12f. Group related undertakings The parent company’s subsidiaries are as follows: Subsidiary Class of shares held % ownership Principal Activity Incorporated in England and Wales Registered office: Ty Admiral, David Street, Cardiff, United Kingdom, CF10 2EH Admiral Law Limited Ordinary 95 Legal company Registered office: Ty Admiral, David Street, Cardiff, United Kingdom, CF10 2EH Able Insurance Services Limited Ordinary 100 Insurance Intermediary Registered office: Ty Admiral, David Street, Cardiff, United Kingdom, CF10 2EH EUI Limited 2 Ordinary 100 Insurance Intermediary Admiral Insurance Company Limited Ordinary 100 Insurance company Admiral Life Limited Ordinary 100 Dormant1 Admiral Syndicate Limited Ordinary 100 Dormant1 Admiral Syndicate Management Limited Ordinary 100 Dormant1 Bell Direct Limited Ordinary 100 Dormant1 Diamond Motor Insurance Services Limited Ordinary 100 Dormant1 Elephant Insurance Services Limited Ordinary 100 Dormant1 Admiral Financial Services Limited Ordinary 100 Financial services company Incorporated in Gibraltar Registered office: 2Aa 2nd Floor, Leisure Island Business Centre, 23 Ocean Village Promenade, Gibraltar, GX11 1AA Admiral Insurance (Gibraltar) Limited Ordinary 100 Insurance company Incorporated in France Registered office: 4 Rue Marceau 92300 Levallois Perret Pioneer Intermediary Europe Services Ordinary 100 (indirect) Insurance intermediary Incorporated in Italy Registered office: Via Della Bufalotta 374, Romat Admiral Financial Services Italia S.P.A. Ordinary 100 Financial services company Incorporated in Spain Registered office: Calle Rodríguez Marín 61 1ª Planta, 28016 Madrid Admiral Europe Compañía de Seguros, S.A. Ordinary 100 Insurance company Registered office: Calle Albert Einstein, 10 41092 Sevilla Admiral Intermediary Services S.A. 3 Ordinary 100 Insurance Intermediary Incorporated in the United States of America Registered office: Deep Run 1; Suite 400, 9950 Mayland Drive, Henrico, VA 23233 Elephant Insurance Company Ordinary 100 (indirect) Insurance company Grove General Agency Inc Ordinary 100 (indirect) Insurance intermediary Platinum General Agency Inc Ordinary 100 (indirect) Insurance intermediary Registered office: Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801 Elephant Insurance Services LLC Ordinary 100 (indirect) Insurance intermediary Elephant Holding Company LLC Ordinary 100 Holding company Registered office: 6802 Paragon Place Suite 410 Richmond, VA 23230 compare.com Insurance Agency LLC Ordinary 70.98 (indirect) Internet-based Comparison Site Inspop USA LLC Ordinary 70.98 Holding company Admiral Group plc Annual Report and Accounts 2022 287 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information Notes to the Financial Statements continued For the year ended 31 December 2022 Subsidiary Class of shares held % ownership Principal Activity Subsidiaries by virtue of control The related undertakings below are subsidiaries in accordance with IFRS 10, as Admiral can exercise dominant influence or control over them: Registered office: 10th Floor, 5 Churchill Place, London E14 5HU Seren One Limited n/a 0 Special purpose entity Seren Two Limited n/a 0 Special purpose entity Associates Registered office: Tramshed Tech, Pendyris Street, Cardiff, Wales, CF11 6BH Wagonex Limited Ordinary 23.56 (indirect) Internet-based Subscription Platform 1 Exempt from audit under S480 of Companies Act 2006 2 EUI Limited has branches in India and Canada 3 Admiral Intermediary Services S.A. has branches in Italy and France For further information on how the Group conducts its business across the UK, Europe and the US, refer to the Strategic Report. 12g. Related party transactions The Board considers that only the Executive and Non-Executive Directors of Admiral Group plc are key management personnel. A summary of the remuneration of key management personnel is as follows, with further detail relating to the remuneration and shareholdings of key management personnel set out in the Directors’ Remuneration Report. Key management personnel received short term employee benefits in the year of £3,058,170 (2021: £3,077,686), post-employment benefits of £30,000 (2021: £30,643) and share based payments of £1,561,768 (2021: £2,149,734). Key management personnel are able to obtain discounted motor insurance at the same rates as all other Group staff, typically at a reduction of 15% . 12h. Post balance sheet events No events have occurred since the reporting date that materially impact these financial statements. On 4 March 2023, the Group reached an agreement with Insurify, Inc. (“Insurify”) whereby, Insurify will purchase 100% of the shares of Inspop USA, LLC (“Compare”) from the Group and Compare’s minority shareholders, in return for a minority shareholding in Insurify. The total transaction value, including amounts attributable to minority shareholders is immaterial based on an assessment of the fair value of shares in Insurify and related options to be received as consideration, as at the date of the agreement. The Group will not receive any cash consideration. As at 31 December 2022, the net assets of Compare and the carrying value of the Group parent company’s investment in Compare net of impairment provisions, were both £nil. The transaction is expected to complete during the first half of 2023 and is subject to regulatory approval. 12. Share capital continued Admiral Group plc Annual Report and Accounts 2022 288 Financial Statements 13. Discontinued Operations 13a. Accounting policy Disposal groups are classified as held for sale in accordance with IFRS 5 if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. A discontinued operation is a component of the business that has been disposed of or is classified as held for sale and represents a separate major line of business or is part of a single co-ordinated plan to dispose of such a line of business. The assets and liabilities of a disposal group classified as held for sale are presented separately from the other assets and liabilities in the Statement of Financial Position. The results of discontinued operations are presented separately in the Statement of Comprehensive Income. The result comprises the profit or loss after tax from discontinued operations and other comprehensive income attributable to discontinued operations . 13b. Description On the 29 December 2020, the Group announced that it had reached an agreement with ZPG Comparison Services Holdings UK Limited (“RVU”) that RVU would purchase the Penguin Portals Group (“Penguin Portals”, comprising online comparison portals Confused. com, Rastreator.com and LeLynx.fr and the Group’s technology operation Admiral Technologies) and its 50% share of Preminen Price Comparison Holdings Limited (“Preminen”). MAPFRE would also sell its 25% holding in Rastreator and 50% holding in Preminen as part of the transaction. Management considered these entities to meet the definition of a disposal group as set out under IFRS 5 above. The disposal group is included within the “Discontinued (comparison)” operating segment as stated in note 4. On the 30 April 2021, the Group announced that, following regulatory and competition authority approvals, RVU had completed the purchase of the Penguin Portals Group and acquired Admiral’s 50% share of Preminen. MAPFRE also sold its 25% holding in Rastreator and 50% holding in Preminen to RVU. The total transaction value was settled in cash on completion. 13c. Financial performance and cash flow information Financial information relating to the discontinued operations for the financial year ending 31 December 2021 are presented below. The results for the financial year ending 31 December 2021 relates to the profit earned prior to completion on 30 April 2021, and the gain recognised on disposal. Gross £m Eliminations £m Net £m Revenue (Other Revenue) 67.2 (7.6) 59.6 Interest Income – – – Net Revenue 67.2 (7.6) 59.6 Operating expenses and share scheme charges (55.8) 7.6 (48.2) Operating profit 11.4 – 11.4 Finance costs (0.1) – (0.1) Gain on disposal sale of Comparison entities held for sale 404.4 – 404.4 Profit before tax from discontinued operations 415.7 – 415.7 Taxation expense (2.3) – (2.3) Profit after tax from discontinued operations 413.4 – 413.4 Due to the availability of certain tax reliefs on the gain of the comparison businesses sold, the effective tax rate for 2021 for discontinued operations is lower than the current standard corporate tax rate. Operating expenses and share scheme charges include £0.5 million of share scheme expenses that are not included in the segmental result in note 4. The net cash flows incurred by the disposal group are as follows: 31 December 2021 £m Net cash inflow from operating activities 10.6 Net cash (outflow) from investing activities (0.2) Net cash (outflow) from financing activities (22.6) Net cash (outflow)/inflow from discontinued operations (12.2) Admiral Group plc Annual Report and Accounts 2022 289 Company Overview Strategic Report Corporate Governance Financial Statements Additional Information Notes to the Financial Statements continued For the year ended 31 December 2022 13. Discontinued Operations continued 13d. Assets disposed of Consideration received consisted of cash only and was received at the point of completion. The total consideration received by the Group in cash was £471.8 million. This excludes any costs incurred by the Group in relation to the sale. The total gain on disposal was £404.4 million. The carrying amount of assets and liabilities as at the date of sale (30 April 2021) are outlined below. All assets previously held for sale have been disposed of as at 31 December 2021 and as at 31 December 2022. Note 30 April 2021 £m Assets Property and equipment 11b 5.4 Intangible assets 11c 1.1 Deferred tax asset 10c 4.2 Trade and other receivables 41.9 Corporation tax asset 0.2 Cash and cash equivalents 41.3 Assets associated with disposal group held for sale 94.1 Liabilities Trade and other payables 33.3 Lease liabilities 3.6 Corporation tax liability – Liabilities directly associated with disposal group held for sale 36.9 13e. Gain on disposal 31 December 2021 £m Gross sales proceeds 508.1 Accrued sale proceeds less dividends received prior to disposal and costs to sell recharged from purchaser (7.4) Non-controlling interest share of sales proceeds (28.9) Total Admiral Group cash received (note 13c) 471.8 Costs to sell incurred by seller, out of proceeds (17.6) Proceeds to Admiral, net of minority interests and transaction costs 454.2 Assets held for sale (note 13d) (57.2) Non-controlling interest share of assets held for sale 6.6 Other adjustments 0.8 Gain on disposal of comparison entities held for sale 404.4 Admiral Group plc Annual Report and Accounts 2022 290 Financial Statements 14. Reconciliations The following tables reconcile significant key performance indicators and non-GAAP measures included in the Strategic Report to items included in the financial statements. 14a. Reconciliation of continuing operations turnover to reported gross premiums written and other revenue as per the financial statements 31 December 2022 £m 31 December 2021 £m Gross premiums written after co-insurance per note 5b of financial statements 2,849.7 2,513.6 Premiums underwritten through co-insurance arrangements 393.4 585.1 Total premiums written 3,243.1 3,098.7 Other Revenue 1 318.8 314.8 Admiral Loans interest income 58.7 36.6 3,620.6 3,450.1 Other 2 60.0 57.2 Turnover as per note 4b of financial statements 1 3,680.6 3,507.3 Intra-group income elimination 3 0.3 0.2 Total turnover – continuing operations 1 3,680.9 3,507.5 1 Continuing operations 2 Other reconciling items represent co-insurer and reinsurer shares of Other Revenue in the Group’s Insurance businesses outside of UK Car Insurance 3 Intra-group income elimination relates to comparison income earned in the Group from other Group companies 14b. Reconciliation of claims incurred to reported loss ratios, excluding releases on commuted reinsurance December 2022 UK Motor £m UK Home £m Int. Ins £m Other £m Group £m Net insurance claims (note 5) 159.8 51.8 220.3 74.2 506.1 Deduct claims handling costs (12.0) (1.7) (14.3) (1.2) (29.2) Prior year release/strengthening – net original share 124.0 1.1 15.8 3.7 144.6 Prior year release/strengthening – commuted share 189.1 0.5 – – 189.6 Impact of reinsurer caps – – (10.5) – (10.5) Impact of weather events – (17.8) – – (17.8) Attritional current period claims 460.9 33.9 211.3 76.7 782.8 Net insurance premium revenue 471.0 55.6 241.8 142.6 911.0 Loss ratio – current period attritional 97.8% 61.1% 87.4% – 85.9% Loss ratio – current period weather events – 32.0% – – 2.0% Loss ratio – prior year release/strengthening (net original share) (26.3%) (1.9%) (6.5%) – (15.9%) Loss ratio – reported 71.5% 91.2% 80.9% – 72.0% Admial Group plc Annual Repot and Accounts 2022 291 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Notes to the Financial Statements continued For the year ended 31 December 2022 14. Reconciliations continued December 2021 UK Motor £m UK Home £m Int. Ins £m Other £m Group £m Net insurance claims (note 5) 86.1 31.8 170.8 43.6 332.3 Deduct claims handling costs (12.1) (1.4) (8.9) (0.5) (22.9) Prior year release/strengthening – net original share 128.1 1.8 16.4 2.2 148.5 Prior year release/strengthening – commuted share 189.2 0.7 – – 189.9 Impact of reinsurer caps – – 1.0 – 1.0 Impact of weather events – (1.1) – – (1.1) Attritional current period claims 391.3 31.8 179.3 45.3 647.7 Net insurance premium revenue 496.5 49.1 221.0 88.4 855.0 Loss ratio – current period attritional 78.8% 64.8% 81.1% – 75.8% Loss ratio – current period weather events – 2.2% – – 0.1% Loss ratio – prior year release/strengthening (net original share) (25.8%) (3.7%) (7.4%) – (17.4%) Loss ratio – reported 53.0% 63.3% 73.7% – 58.5% 14c. Reconciliation of expenses related to insurance contracts to reported expense ratios December 2022 UK Motor £m UK Home £m Int. Ins £m Other £m Group £m Net insurance expenses (note 9) 125.7 17.0 114.8 40.1 297.6 Claims handling costs 12.0 1.7 14.3 1.2 29.2 Intra-group expenses elimination 1 – – 0.3 – 0.3 Impact of co- and reinsurers recoveries 2 (35.6) – (21.7) – (57.3) Net IFRS 16 finance costs 0.4 – – – 0.4 Adjusted net insurance expenses 102.5 18.7 107.7 41.3 270.2 Net insurance premium revenue 471.0 55.6 241.8 142.6 911.0 Expense ratio – reported 21.8% 33.5% 44.5% – 29.7% December 2021 UK Motor £m UK Home £m Int. Ins £m Other £m Group £m Net insurance expenses (note 9) 136.7 17.9 91.3 16.8 262.7 Restructure Costs 3 (41.6) (4.4) – – (46.0) Claims handling costs 12.1 1.4 8.9 0.5 22.9 Intra-group expenses elimination 1 – – 0.3 – 0.3 Impact of reinsurer caps (10.1) – (1.7) – (11.8) Net IFRS 16 finance costs 0.5 – 0.1 – 0.6 Adjusted net insurance expenses 97.6 14.9 98.9 17.3 228.7 Net insurance premium revenue 496.5 49.1 221.0 88.4 855.0 Expense ratio – reported 19.7% 30.3% 44.8% – 26.7% 1 The intra-group expenses elimination amount relates to aggregator fees charges by the Group’s comparison business, Compare.com to other Group companies: given the re-presentation of other comparison businesses to discontinued operations, those expenses are now included in net insurance expenses in note 9, as acquisition costs 2 Impact of co- and reinsurers recoveries relates to the impact of reinsurer caps and ceding commissions 3 For the year ended 31 December 2021, restructure costs of £8.0 million relate to ancillary costs. Total restructure costs incurred for the year ended 31 December 2021 within UK insurance are £54.0 million Admiral Group plc Annual Repot and Accounts 2022 292 Financial Statements Parent Company Income Statement Year ended Note 31 December 2022 £m 31 December 2021 £m Administative expenses 2 (26.3) (19.7) Opeating loss (26.3) (19.7) Investment and interest income 3 320.1 630.4 Impairment expense 4 (37.0) (16.0) Gain on disposal of subsidiaries – 445.2 Interest payable 6 (12.0) (11.3) Proit before tax 244.8 1,028.6 Taxation credit 7 5.7 3.3 Proit after tax 250.5 1,031.9 Parent Company Statement of Comprehensive Income Year ended 31 December 2022 £m 31 December 2021 £m Proit for the period 250.5 1,031.9 Other comprehensive income Items that are or may be reclassiied to proit or loss Movements in fair value reseve (20.9) (10.1) Deferred tax in relation to movement in fair value reseve 7 5.2 0.8 Other comprehensive income for the period, net of income tax (15.7) (9.3) Total comprehensive income for the period 234.8 1,022.6 Parent Company Financial Statements Admial Group plc Annual Repot and Accounts 2022 293 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Parent company inancial statements continued Parent Company Statement of Financial Position As at Note 31 December 2022 £m 31 December 2021 £m ASSETS Investments in group undetakings 4 421.6 315.1 Intangible assets 5 0.4 0.4 Financial investments 6 167.5 557.0 Corpoation tax asset 7 4.6 3.5 Deferred tax asset 7 0.9 – Tade and other receivables 8 184.5 187.1 Cash and cash equivalents 6 3.5 11.2 Total assets 783.0 1,074.3 EQUITY Share capital 10 0.3 0.3 Share premium account 13.1 13.1 Fair value reseve 10 (1.6) 14.1 Retained earnings 96.7 447.3 Total equity 108.5 474.8 LIABILITIES Subordinated and other inancial liabilities 6 224.4 224.3 Deferred tax 7 – 4.3 Tade and other payables 9 450.1 370.9 Total liabilities 674.5 599.5 Total equity and total liabilities 783.0 1,074.3 The accompanying notes form pat of these inancial statements. These inancial statements were approved by the Board of Directors on 7 March 2023 and were signed on its behalf by: Geaint Jones Chief Financial Officer Admial Group plc Company Number: 03849958 Admial Group plc Annual Repot and Accounts 2022 294 Financial Statements Parent Company Statement of Changes in Equity Note Share capital £m Share premium account £m Fair value reseve £m Retained earnings £m Total equity £m At 1 Januay 2021 0.3 13.1 23.4 73.0 109.8 Proit for the period – – – 1,031.9 1,031.9 Other comprehensive income Movements in fair value reseve – – (10.1) – (10.1) Deferred tax charge in relation to movements in fair value reseve 7 – – 0.8 – 0.8 Total comprehensive income/(expense) for the period – – (9.3) 1,031.9 1,022.6 Tansactions with equity holders Dividends 10 – – – (720.9) (720.9) Issues of share capital 10 – – – – – Share scheme credit – – – 63.1 63.1 Deferred tax on share scheme credit – – – 0.2 0.2 Total tansactions with equity holders – – – (657.6) (657.6) As at 31 December 2021 0.3 13.1 14.1 447.3 474.8 At 1 Januay 2022 0.3 13.1 14.1 447.3 474.8 Proit for the period – – – 250.5 250.5 Other comprehensive income Movements in fair value reseve – – (20.9) – (20.9) Deferred tax charge in relation to movements in fair value reseve 7 – – 5.2 – 5.2 Total comprehensive income for the period – – (15.7) 250.5 234.8 Tansactions with equity holders Dividends 10 – – – (658.3) (658.3) Issues of share capital 10 – – – – – Share scheme credit – – – 57.3 57.3 Deferred tax on share scheme credit – – – (0.1) (0.1) Total tansactions with equity holders – – – (601.1) (601.1) As at 31 December 2022 0.3 13.1 (1.6) 96.7 108.5 Admial Group plc Annual Repot and Accounts 2022 295 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Notes to the Parent Company Financial Statements For the year ended 31 December 2022 1. Accounting policies 1.1 Basis of prepaation These inancial statements were prepared in accordance with Financial Repoting Standard 101 Reduced Disclosure Famework (FRS 101). The inancial statements are prepared on the historical cost basis except for the revaluation of inancial assets classiied as fair value through the proit or loss or as fair value through other comprehensive income. The parent company inancial statements are presented alongside the consolidated inancial statements which can be found on page 293. In preparing these inancial statements, the Company applies the recognition, measurement and disclosure requirements of International Financial Repoting Standards as adopted by the EU (“Adopted IFRSs”) but makes amendments where necessay in order to comply with Companies Act 2006 and has set out below where advantage of the FRS 101 disclosure exemptions has been taken. Admiral Group plc is considered to be the parent entity and the ultimate parent company of the Group. 1.2 Changes to accounting policies No changes to accounting policies have been made in the period which have a material impact. 1.3 Disclosure exemptions applied under FRS 101 The Company has taken advantage of the following disclosure exemptions under FRS 101: • FRS 101.8 (a): the requirements of paagaph 45(b) and 46 to 52 of IFRS 2 Share-based payment • FRS 101.8 (d): the requirement of IFRS 7 Financial Instruments: Disclosure to make disclosures about inancial instruments • FRS 101.8 (): the requirement in paagaph 38 of IAS 1 Presentation of Financial Statements to present compaative information in respect of: – paagaph 118(3) of IAS 38 Intangible Assets • FRS 101.8 (g): the requirements of paagaphs 10(d), 10(), 16, 38A, 38B, 38C, 38D, 40A, 40B, 40C, 40D and 111 of IAS 1 Presentation of Financial Statements to produce a cash low statement, a third balance sheet and to make an explicit and unreseved statement of compliance with IFRSs • FRS 101.8 (h): the requirements of IAS 7 Statements of Cash Flows to produce a cash low statement • FRS 101.8 (i): the requirements of paagaphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to include a list of new IFRSs that have been issued but that have yet to be applied • FRS 101.8 (k): the requirements in IAS 24 Related Paty Disclosures to disclose related paty tansactions entered into between two or more members of a group, provided that any subsidiay which is a paty to tansaction is wholly owned by such a member The accounting policies set out below have, unless othewise stated, been applied consistently to all periods presented in these inancial statements. 1.4 Going concern The inancial statements have been prepared on a going concern basis. In considering the appropriateness of this assumption, the Board have reviewed the Company’s projections for the next twelve months and beyond, including cash low forecasts and regulatoy capital surpluses. The Directors have a reasonable expectation that the Company has adequate resources to continue in opeational existence for the foreseeable future. Thus, they continue to adopt the going concern basis in preparing the annual inancial statements. 1.5 Critical accounting judgements and key source of estimation uncetainty In applying the Company’s accounting policies as described below, management consider there to be a key source of estimation uncetainty within the impairment testing of the Company’s investments in group undetakings. Management recognises the estimation involved in determining whether the carying value of the investment may be suppoted by the recoveable amount calculation based on the ‘value in use’ of the asset (the net present value of future cash-lows arising from the asset). In calculating the net present value of future cash-lows, Management has made assumptions over the timing and amount of underlying proit projections of the relevant undetakings, long term growth ates in those projections and the discount ate applied to these projections that is appropriate to relect the market’s view of the risk of the relevant investment. Sensitivity of these assumptions is also considered in calculating the net present value and suitably incorpoated in Management’s valuations. No key accounting judgements have been made in the process of applying the Company’s accounting policies. Admial Group plc Annual Repot and Accounts 2022 296 Financial Statements 1.6 Shares in Group undetakings Shares in Group undetakings are valued at cost less any provision for impairment in value. The requirements of IAS 36 are applied to determine whether it is necessay to recognise any impairment loss with respect to the Company’s investments in subsidiaries. When necessay, the entire carying amount of the investment is tested for impairment in accordance with IAS 36 Impairment of Assets as a single asset by comparing its recoveable amount (higher of value in use and fair value less costs of disposal) with it’s carying amount. Any impairment loss recognised forms pat of the carying amount of the investment. Any reversal of that impairment loss is recognised in accordance with IAS 36 to the extent that the recoveable amount of the investment subsequently increases. See note 4 to these inancial statements for futher detail. 1.7 Employee share schemes The Company opeates a number of share schemes for employees of the Group’s subsidiaries. For equity settled schemes, the fair value of the employee sevices received in exchange for the gant of free shares under the schemes is recognised as an increase in equity in the Company. A corresponding intercompany charge is made to the subsidiaries whose employees receive the free shares. For futher detail, see note 9 in the consolidated inancial statements. 1.8 Taxation The charge for taxation is based on the proit for the year and takes into account taxation deferred because of timing diferences between the treatment of cetain items for taxation and accounting purposes. Deferred tax assets are recognised to the extent that they are regarded as recoveable. They are regarded as recoveable to the extent that, on the basis of all available evidence, it can be regarded as more likely than not that there will be suicient taxable proits from which the future reversal of the underlying timing diferences can be deducted. 1.9 Financial assets and inancial liabilities Under IFRS 9, classiication and subsequent measurement of inancial assets depend on: • The Company’s business model for managing the asset; and • The cash low chaacteristics of the asset Based on these factors, the Company classiies its inancial assets into one of the three categories below: • Amotised cost: assets held for collection of contactual cash lows where the cash lows represent solely payments of principal and interest, that are not designated as FVTPL • Fair value through other comprehensive income (FVOCI): Financial assets that are held for collection of contactual cash lows and selling the assets, where the assets’ cash lows represent solely payments of principal and interest, and that are not designated at FVTPL • Fair value through proit or loss (FVTPL): Assets that do not meet the criteria for amotised cost or FVOCI, or which are designated as FVTPL at initial recognition In line with the above: • Gilts and other debt securities are measured at FVOCI. Unrealised changes in the fair value of these assets are recognised in Other Comprehensive Income (OCI). The recognition of impairment gains or losses and interest revenue are recognised in the proit or loss • Investments measured at FVTPL are primarily money market funds. Interest income is recognised in the Income statement The expected credit loss model is used to calculate any impairment to be recognised for all assets measured at amotised cost, as well as inancial investments measured at FVOCI. Impairment is measured using the simpliied approach. Most of the investments held at AICL at amotised costs and FVOCI are of investment gade. Cash and cash equivalents include cash in hand and deposits held at call with banks. All cash and cash equivalents are measured at amotised cost. The Company’s inancial liabilities comprise of subordinated notes which are held at amotised cost using the efective interest method. 1.10 Intangible Assets Purchased software licences are classiied as an intangible asset and stated in the balance sheet at a cost less accumulated amotisation. Software is amotised from the point at which the asset is opeational and is amotised over the licence period. 1.11 Tade and other receivables Tade and other receivables are measured at amotised cost, less any impairment. 1.12 Tade and other payables Tade and other payables are measured at amotised cost. Admial Group plc Annual Repot and Accounts 2022 297 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information 2. Administative expenses Included within administative expenses are re-charges of £6.1 million (2021: £4.2 million) relating to employees within the Group who peform sevices on behalf of the Company. No staf are directly employed by the Company. 3. Investment and interest income 31 December 2022 £m 31 December 2021 £m Dividend income from subsidiay undetakings 310.0 626.0 Interest income – other 1.3 0.3 Interest income at efective interest ate 8.8 4.1 Total investment and interest income 320.1 630.4 4. Investments in Group undetakings £m Investments in subsidiay undetakings: At 1 Januay 2021 327.3 1 Additions 13.0 Disposals (9.2) Impairment (16.0) At 31 December 2021 315.1 Additions 143.5 Disposals – Impairment (37.0) At 31 December 2022 421.6 1 Of this amount, £9.2 million relates to Assets held for sale. See note 11 for futher detail A full list of the Company’s subsidiaries is disclosed in note 12 of the consolidated inancial statements. The additions to investments in the period of £143.5 million relate to the following: • Futher investment in Elephant Insuance Company (‘Elephant’) (£65.7 million); • Futher investment in Admial Europe Compañía de Seguros (‘AECS’) (£34.3 million); • Futher investment in Able Insuance Sevices Limited (‘Able’) (£5.0 million); • Futher investment in Admial Insuance (Gibaltar) Limited (‘AIGL’) (£30.0 million); • Initial investment in and a futher capital contribution in Admial Financial Sevices Italia S.P.A (‘AFSI’) (£5.0m and £3.5m respectively) An annual impairment review is peformed over the carying value of the investments in subsidiay undetakings, which involves comparing the carying amount to the estimated recoveable amount. The recoveable amount is the greater of the fair value of the asset less costs to sell, and the value in use of the subsidiay, calculated using cash low projections based on inancial budgets approved by the Group Board. Elephant In 2022 a non-cash impairment loss of £35.2 million (2021: £14.1 million) has been recognised by the parent company in respect of its investment in the Group’s US Insuance business Elephant. The impairment charge is to relect the loss incurred during 2022 to bring the value of the investment to its recoveable amount, being its fair value less costs to sell (equivalent to net asset value), of £56.3 million (2021: £25.8 million). The impairment charge is presented within the “impairment losses” line of the parent company Income Statement. The carying value is based on fair value less costs of disposal, for which the net assets has been used as a reasonable approximation, using tier 3 of the fair value hiearchy. Due to limitations on evidential market information and restrictions in readily available information, net assets have been used to estimate fair value less costs to sell. As the valuation is based on net assets, any movement in future proits will impact the investment held. The Board continues to suppot Elephant in the achievement of its goals. Notes to the Parent Company Financial Statements continued For the year ended 31 December 2022 Admial Group plc Annual Repot and Accounts 2022 298 Financial Statements Compare.com In 2022 a non-cash impairment loss of £1.8 million (2021: £1.9 million) has been recognised by the parent company in respect of its investment in the Group’s US comparison business compare.com. The impairment charge is to relect the loss incurred during 2022 to bring the value of the investment to its recoveable amount, being its fair value less costs to sell (equivalent to the Group’s share of net asset value), of £nil (2021: £1.8 million). The impairment charge is presented within the “impairment losses” line of the parent company Income Statement. The carying value is based on fair value less costs of disposal, for which the Group’s share of net assets has been used as a reasonable approximation following a review of the carying value of those assets compared to fair value, using tier 3 of the fair value hiearchy. 5. Intangible Assets Software £m Total £m Cost At 1 Januay 2022 0.4 0.4 Additions – – Disposal – – At 31 December 2022 0.4 0.4 Amotisation At 1 Januay 2022 – – Charge for the year – – Disposal – – At 31 December 2022 – – Net Book Value At 31 December 2021 0.4 0.4 At 31 December 2022 0.4 0.4 Admial Group plc Annual Repot and Accounts 2022 299 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Notes to the Parent Company Financial Statements continued For the year ended 31 December 2022 6. Financial assets and liabilities The Company’s inancial instruments can be analysed as follows: 31 December 2022 £m 31 December 2021 £m Investments classiied as FVOCI Gilts (level 1 of the IFRS 13 hiearchy) 143.6 166.4 Debt securities (level 1 of the IFRS 13 hiearchy) – 242.0 143.6 408.4 Investments classiied as FVTPL Money market and other similar funds (level 1 of the IFRS 13 hiearchy) 23.9 148.6 23.9 148.6 Total inancial investments 167.5 557.0 Financial assets held at amotised cost Tade and other receivables (Note 8) 184.5 187.1 Cash and cash equivalents 3.5 11.2 Total inancial assets 355.5 755.3 Financial liabilities Subordinated notes 204.4 204.3 Other borrowings 20.0 20.0 Tade and other payables (Note 9) 450.1 370.9 Total inancial liabilities 674.5 595.2 The amotised cost carying amount of deposits and receivables is a reasonable approximation of fair value. The table below compares the carying value of subordinated notes (as per the Statement of Financial Position) with the fair value of the subordinated notes using a level one valuation: 31 December 2022 31 December 2021 Carying amount £m Fair value £m Carying Amount £m Fair Value £m Financial liabilities Subordinated notes 204.4 196.4 204.3 217.1 The subordinated notes were issued on 25 July 2014 at a ixed ate of 5.5%, with a redemption date of 25 July 2024. Total interest payable of £12.0 million (2021: £11.4 million) was recognised, of which £11.1 million (2021: £11.1 million) was in relation to the subordinated loan notes. Admial Group plc Annual Repot and Accounts 2022 300 Financial Statements 7. Taxation 7a. Taxation credit 31 December 2022 £m 31 December 2021 £m Current tax Corpoation tax credit on proits for the year 4.6 (3.5) Change in provision relating to prior periods 1.0 0.1 Current tax credit 5.6 (3.4) Deferred tax Current period deferred taxation movement 0.1 0.1 Change in provision relating to prior periods – – Total tax credit per income statement 5.7 (3.3) Factors afecting the total tax credit are: 31 December 2022 £m 31 December 2021 £m Proit before tax 244.8 1,028.6 Corpoation tax thereon at efective UK corpoation tax ate of 19.0% (2021: 19.0%) 46.5 195.4 Expenses and provisions not deductible for tax purposes 6.2 4.8 Non-taxable income (58.4) (203.5) Total tax credit for the period as above (5.7) (3.3) At the year end, the corpoation tax asset was £4.6 million (2021: £3.5 million). 7b. Deferred income tax (asset)/ liability Analysis of deferred tax (asset)/liability Tax treatment of share schemes £m Capital allowances £m Carried foward losses £m Fair value reseve £m Other diferences £m Total £m Balance brought foward at 1 Januay 2021 (0.2) – – 5.4 – 5.2 Tax treatment of share scheme charges through income or expense 0.1 – – – – 0.1 Tax treatment of share scheme charges through reseves (0.2) – – – – (0.2) Movement in fair value reseve – – – (0.8) – (0.8) Balance carried foward at 31 December 2021 (0.3) – – 4.6 – 4.3 Tax treatment of share scheme charges through income or expense (0.1) – – – – (0.1) Tax treatment of share scheme charges through reseves 0.1 – – – – 0.1 Movement in fair value reseve – – – (5.2) – (5.2) Balance carried foward at 31 December 2022 (0.3) – – (0.6) – (0.9) The aveage efective ate of tax for 2022 is 19.0% (2021: 19.0%). An increase to the main ate of corpoation tax in the UK to 25% was announced in the 2021 Budget and is expected to come into efect in the year ending 2023. This will increase the Company’s future tax charge accordingly. The deferred tax liability at 31 December 2022 has been calculated based on the ate at which each timing diference is most likely to reverse. Admial Group plc Annual Repot and Accounts 2022 301 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information 8. Tade and other receivables 31 December 2022 £m 31 December 2021 £m Tade and other receivables 1.2 1.6 Amounts owed by subsidiay undetakings 183.3 185.5 Total tade and other receivables 184.5 187.1 Held within amounts owed by subsidiay undetakings is £182.2 million (2021: £184.5 million) which relate to loans with formal agreements in place between the parent and the subsidiay. The estimated credit losses of these loans has been considered and any expected credit loss is considered to immaterial due to the assessment of credit risk being low due to the positive net value of assets of the subsidiaries and future tading projections. The exception to the above is the intercompany receivable from compare.com where future tading forecast indicate the intercompany balance will not be repaid which has resulted in a provision of 50% being booked against this loan (£2.7 million). Of the above amount, £155.1 million is due in greater than one year (2021: £151.0 million). 9. Tade and other payables 31 December 2022 £m 31 December 2021 £m Tade and other receivables 7.2 9.5 Amounts owed by subsidiay undetakings 442.9 361.4 Total tade and other receivables 450.1 370.9 Held within amounts owed to subsidiay undetakings is £198.2 million (2021: £0.5 million) which relate to loans with formal agreements in place between the parent and the subsidiay. 10. Share capital and reseves Capital within the Company is comprised of share capital and the share premium account, the fair value reseve (which relects movements in the fair value of assets classiied as FVOCI) and retained earnings. Futher information can be found within note 12 of the consolidated inancial statements. 10a. Share capital 31 December 2022 £m 31 December 2021 £m Authorised 500,000,000 ordinay shares of 0.1 pence 0.5 0.5 Issued, called up and fully paid 302,837,726 (2021: 299,554,720) ordinay shares of 0.1 pence 0.3 0.3 0.3 0.3 10b. Dividends Dividends were proposed, approved and paid as follows: 31 December 2022 £m 31 December 2021 £m Proposed March 2021 (86.0 pence per share, approved April 2021 and paid June 2021) – 250.8 Declared August 2021 (161.0 pence per share, paid October 2021) – 470.1 Proposed March 2022 (118.0 pence per share, approved April 2022 and paid June 2022) 348.1 – Declared August 2022 (105.0 pence per share, paid October 2022) 310.2 – Total dividends 658.3 720.9 The dividends proposed in March (approved in April) represent the inal dividends paid in respect of the 2020 and 2021 inancial years. The dividends declared in August are interim distributions in respect of 2021 and 2022. A inal dividend of 52.0 pence per share (£155.0 million) has been proposed in respect of the 2022 inancial year. Refer to the Chair’s Statement and Stategic Repot for futher detail. The proit and loss account of the Parent Company does not include any unrealised proits, therefore the amount available for distribution by reference to these accounts is £96.7 million. Interim accounts will be laid before Companies House prior to payment of the 2022 Final Dividend in order to demonstate that proits are available for distribution. Notes to the Parent Company Financial Statements continued For the year ended 31 December 2022 Admial Group plc Annual Repot and Accounts 2022 302 Financial Statements The Group also has substantial retained proits in its subsidiay companies which are expected to low up to the Parent Company in due course, such that surplus cash geneated can continue to be returned to shareholders. 11. Assets held for sale On 29 December 2020, Admial Group plc (“the Group”) announced that it had reached an agreement with ZPG Comparison Sevices Holdings UK Limited (“RVU”) that RVU will purchase the Penguin Potals Group (“Penguin Potals”, comprising online comparison potals Confused.com, Rastreator.com and LeLynx.fr and the Group’s technology opeation Admial Technologies) and its 50% share of Preminen Price Comparison Holdings Limited (“Preminen”). MAPFRE would also sell its 25% holding in Rastreator and 50% holding in Preminen as pat of the tansaction. These entities are determined to be the disposal group. Futher information can be found within the consolidated accounts. On 30 April 2021, the Group announced that, following regulatoy and competition authority approvals, RVU had completed the purchase of the Penguin Potals Group and acquired the Group’s 50% share of Preminen. MAPFRE also sold its 25% holding in Rastreator and 50% holding in Preminen to RVU. The tansaction was settled in cash on completion. 12. Related paty tansactions The Company has taken advantage of the exemptions permitted by Financial Repoting Standard 101.8 (k) and not disclosed details of tansactions with other wholly owned group undetakings. Tansactions with group undetakings that are not wholly owned by Admial Group plc are disclosed below. Tansaction Value 2022 £m Balance at 31 December 2022 due/(to) related paty £m Tansaction Value 2021 £m Balance at 31 December 2021 due/(to) related paty £m compare.com Insuance Agency LLC (Subsidiay undetaking) 0.3 2.6 0.2 4.5 The balance owed from compare.com relates to a convetible loan issued for which interest is being accrued. 13. Guaantees and contingent liabilities During 2018, a Special Purpose Entity (SPE) was set up in order to secure additional funding for the Admial Money business, with a second such SPE set up in October 2021. The Company acts as guaantor for cetain opeational peformance conditions of its subsidiay, AFSL, as seller and sevicer for the SPEs, and indemniies AFSL in respect of any amount that would have been payable by AFSL for non- compliance with such peformance conditions. One of the Groups’ previously owned subsidiaries was subject to a Spanish Tax Audit which concluded with the Tax Authority denying the application of the VAT exemption relating to insuance intermediay sevices. The Company has appealed this decision via the Spanish Couts and is conident in defending its position which is, in its view, in line with the EU Directive and is also consistent with the way similar supplies are treated throughout Europe. Whilst the Company is no longer pat of the Admial Group, the contingent liability which the Company is exposed to has been indemniied by the Admial Group up to a cap of £22 million. A number of the Group’s contactual arangements with reinsurers include features that, in cetain scenarios, allow for reinsurers to recover losses incurred to date. The oveall impact of such scenarios would not lead to an oveall net economic outlow from Admial Group plc. 14. Post balance sheet events No events have occurred since the repoting date that materially impact these inancial statements. On 4 March 2023, the Group reached an agreement with Insurify, Inc. (“Insurify”) whereby, Insurify will purchase 100% of the shares of Inspop USA, LLC (“Compare”) from the Group and Compare’s minority shareholders, in return for a minority shareholding in Insurify. The total tansaction value, including amounts attributable to minority shareholders is immaterial based on an assessment of the fair value of shares in Insurify and related options to be received as consideation, as at the date of the agreement. The Group will not receive any cash consideation. As at 31 December 2022, the net assets of Compare and the carying value of the Group parent company’s investment in Compare net of impairment provisions, were both £nil. The tansaction is expected to complete during the irst half of 2023 and is subject to regulatoy approval. 15. Continued application of Financial Repoting Standard (FRS) 101 – Reduced Disclosure Famework Following the irst time application of FRS 101 Reduced Disclosure Famework in 2015, the Board considers that it is in the best interests of the Group for Admial Group plc to continue to apply the FRS 101 Reduced Disclosure Famework in future periods. A shareholder or shareholders holding in aggregate 5% or more of the total allotted shares in Admial Group plc may seve objections to the use of the disclosure exemptions on Admial Group plc, in writing, to its registered oice (Tŷ Admial, David Street, Cardif CF10 2EH) no later than 30 June 2022. Admial Group plc Annual Repot and Accounts 2022 303 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Consolidated Financial Summay (unaudited) Basis of prepaation The igures below are as stated in the Group inancial statements preceding this inancial summay and issued previously. Only selected lines from the income statement and balance sheet have been included. Income statement 2022 £m 2021 £m 2020 £m 2019 1 £m 2018 £m Total premiums 3243.1 3,098.7 2,957.2 2,938.6 2,766.4 Net insuance premium revenue 911.0 855.0 751.6 709.4 671.8 Other Revenue 364.9 345.3 359.0 348.8 460.6 Proit commission 170.9 304.5 134.0 114.9 93.2 Investment and interest income 44.6 45.2 60.7 35.7 36.0 Net revenue 1491.4 1,550.0 1,305.3 1,208.8 1,261.6 Net insuance claims (506.1) (332.3) (293.2) (359.3) (350.1) Net expenses (504.4) (492.3) (391.6) (331.9) (424.0) Opeating proit 480.9 725.4 620.5 517.6 487.5 Net inance costs (11.9) (11.9) (12.3) (12.5) (11.3) Proit before tax from continuing opeations 469.0 713.5 608.2 505.1 – Proit before tax from discontinued opeations – 415.7 29.4 17.5 – Proit before tax from continuing and discontinued opeations 469.0 1,129.2 637.6 522.6 476.2 1 Re-presented from inancial year 2019 to relect discontinued opeations Balance sheet 2022 £m 2021 £m 2020 1 £m 2019 £m 2018 £m Propety and equipment 89.8 103.2 146.3 154.4 28.1 Intangible assets 248.3 179.9 167.9 160.3 162.0 Deferred income tax 18.5 9.3 3.3 – 0.2 Corpoation tax asset – 10.6 17.9 – – Reinsuance assets 2714.0 2,176.1 2,083.2 2,071.7 1,883.5 Insuance and other receivables 1335.8 1,208.5 1,200.2 1,227.7 1,082.0 Loans and advances to customers 823.9 556.8 359.8 455.1 300.2 Financial investments 3411.2 3,742.6 3,506.0 3,234.5 2,969.7 Cash and cash equivalents 297.0 372.7 351.7 281.7 376.8 Total assets 8938.5 8,359.7 7,836.3 7,585.4 6,802.5 Equity 955.4 1,408.5 1,123.4 918.6 771.1 Insuance contacts 4792.5 4,215.0 4,081.3 3,975.0 3,736.4 Subordinated and other inancial liabilities 939.1 670.9 488.6 530.1 444.2 Tade and other payables 2158.0 1,960.0 2,016.1 1,975.9 1,801.5 Lease liabilities 88.5 105.3 126.9 137.1 – Deferred income tax – – – 0.4 – Current tax liabilities 5.0 – – 48.3 49.3 Total equity and total liabilities 8938.5 8,359.7 7,836.3 7,585.4 6,802.5 1 Balance sheet is shown on a total group basis (including discontinued opeations) Admial Group plc Annual Repot and Accounts 2022 304 Financial Statements Adding value. Delivering difference. For our shareholders Admial Group plc Annual Repot and Accounts 2022 305 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Contents 306 Glossay Additional Information Glossay Alternative Peformance Measures Throughout this repot, the Group uses a number of Alternative Peformance Measures (APMs); measures that are not required or commonly repoted under International Financial Repoting Standards or the Geneally Accepted Accounting Principles (GAAP) under which the Group prepares its inancial statements. These APMs are used by the Group, alongside GAAP measures, for both internal peformance analysis and to help shareholders and other users of the Annual Repot and inancial statements to better understand the Group’s peformance in the period in comparison to previous periods and the Group’s competitors. The table below deines and explains the primay APMs used in this repot. Financial APMs are usually derived from inancial statement items and are calculated using consistent accounting policies to those applied in the inancial statements subject to cetain adjustments as explained in this glossay. Non-inancial KPIs incorpoate information that cannot be derived from the inancial statements but provide futher insight into the peformance and inancial position of the Group. APMs may not necessarily be deined in a consistent manner to similar APMs used by the Group’s competitors. They should be considered as a supplement ather than a substitute for GAAP measures. Turnover Turnover is deined as total premiums written (as below), other revenue and income from Admial Money. It is reconciled to inancial statement line items in note 14a to the inancial statements. This measure has been presented by the Group in evey Annual Repot since it became a listed Group in 2004. It relects the total value of the revenue geneated by the Group and analysis of this measure over time provides a clear indication of the size and growth of the Group. The measure was developed as a result of the Group’s business model. The UK Car insuance business has historically shared a signiicant propotion of the risks with Munich Re, a third-paty reinsuance Group, through a co-insuance arangement, with the arangement subsequently being replicated in some of the Group’s international insuance opeations. Premiums and claims accruing to the external co-insurer are not relected in the Group’s income statement and therefore presentation of this metric enables users of the Annual Repot to see the scale of the Group’s insuance opeations in a way not possible from taking the income statement in isolation. Total Premiums Written Total premiums written are the total forecast premiums, net of forecast cancellations written in the undewriting year within the Group, including co-insuance. It is reconciled to inancial statement line items in note 14a to the inancial statements. This measure has been presented by the Group in evey Annual Repot since it became a listed Group in 2004. It relects the total premiums written by the Group’s insuance intermediaries and analysis of this measure over time provides a clear indication of the growth in premiums, irrespective of how co-insuance agreements have changed over time. The reasons for presenting this measure are consistent with that for the Turnover APM noted above. Group proit before tax Group proit before tax represents proit before tax from continuing opeations. Earnings per share, continuing opeations Earnings per share from continuing opeations before restructure costs represents the proit after tax attributable to equity shareholders excluding restructure costs, divided by the weighted aveage number of basic shares. Undewriting result (proit or loss) For each insuance business an undewriting result is presented showing the segment result prior to the inclusion of proit commission, other income contribution and instalment income. It demonstates the insuance result, i.e. premium revenue and investment income on insuance assets less claims incurred and insuance expenses. Admial Group plc Annual Repot and Accounts 2022 306 Additional Information Loss Ratio Repoted loss atios are expressed as a percentage of claims incurred divided by net earned premiums. There are a number of instances within the Annual Repot where adjustments are made to this calculation in order to more clearly present the underlying peformance of the Group and opeating segments within the Group. The calculations of these are presented within note 14b to the accounts and explanation is as follows. UK repoted motor loss atio: Within the UK insuance segment the Group sepaately presents motor atios, i.e. excluding the undewriting of other products that supplement the car insuance policy. The motor atio is adjusted to i) exclude the impact of reseve releases on commuted reinsuance contacts and ii) exclude claims handling costs that are repoted within claims costs in the income statement. International insuance loss atio: As for the UK Motor loss atio, the international insuance loss atios presented exclude the undewriting of other products that supplement the car insuance policy. The motor atio is adjusted to exclude the claims element of the impact of reinsurer caps as inclusion of the impact of the capping of reinsurer claims costs would distot the underlying peformance of the business. Group loss atios: Group loss atios are repoted on a consistent basis as the UK and international atios noted above. Adjustments are made to i) exclude the impact of reseve releases on commuted reinsuance contacts, ii) exclude claims handling costs that are repoted within claims costs in the income statement and iii) exclude the claims element of the impact of international reinsurer caps. Expense Ratio Repoted expense atios are expressed as a percentage of net opeating expenses divided by net earned premiums. There are a number of instances within the Annual Repot where adjustments are made to this calculation in order to more clearly present the underlying peformance of the Group and opeating segments within the Group. The calculations of these are presented within note 14c to the accounts and explanation is as follows. UK repoted motor expense atio: Within the UK insuance segment the Group sepaately presents motor atios, i.e. excluding the undewriting of other products that supplement the car insuance policy. The motor atio is adjusted to i) include claims handling costs that are repoted within claims costs in the income statement, ii) include inta-group aggregator fees charged by the UK comparison business to the UK insuance business and iii) exclude the expense element of the impact of reinsurer caps as inclusion of the impact of the capping of reinsurer expenses would distot the underlying peformance of the business, and iv) exclude restructure costs. International insuance expense atio: As for the UK Motor loss atio, the international insuance expense atios presented exclude the undewriting of other products that supplement the car insuance policy. The motor atio is adjusted to i) exclude the expense element of the impact of reinsurer caps as inclusion of the impact of the capping of reinsurer expenses would distot the underlying peformance of the business and ii) include inta-group aggregator fees charged by the overseas comparison businesses to the international insuance businesses. Group expense atios: Group expense atios are repoted on a consistent basis as the UK and international atios noted above. Adjustments are made to i) include claims handling costs that are repoted within claims costs in the income statement, ii) include inta-group aggregator fees charged by the Group’s comparison businesses to the Group’s insuance businesses and iii) exclude the expense element of the impact of reinsurer caps. Combined Ratio Repoted combined atios are the sum of the loss and expense atios as deined above. Explanation of these igures is noted above and reconciliation of the calculations are provided in notes 14b and 14c. Return on Equity Return on equity is calculated as proit after tax from continuing opeations, before restructure costs, for the period attributable to equity holders of the Group divided by the aveage total equity attributable to equity holders of the Group in the year excluding any net assets related to discontinued opeations, including the exclusion of the net proceeds from sale still to be distributed. This aveage is determined by dividing the opening and closing positions for the year by two. It has been redeined in the prior period to exclude the impact of discontinued opeations. Group Customers Group customer numbers relect the total number of cars, households and vans on cover at the end of the year, across the Group, and the total number of tavel insuance and loans customers. This measure has been presented by the Group in evey Annual Repot since it became a listed Group in 2004. It relects the size of the Group’s customer base and analysis of this measure over time provides a clear indication of the growth. It is also a useful indicator of the growing signiicance to the Group of the diferent lines of business and geogaphic regions. Admial Group plc Annual Repot and Accounts 2022 307 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Glossay continued Efective Tax Rate Efective tax ate is deined as the approximate tax ate derived from dividing the Group’s proit before tax by the tax charge going through the income statement. It is a measure historically presented by the Group and enables users to see how the tax cost incurred by the Group compares over time and to current corpoation tax ates. Additional Terminology There are many other terms used in this repot that are speciic to the Group or the markets in which it opeates. These are deined as follows: Accident year The year in which an accident occurs, also referred to as the earned basis. Actuarial best estimate The probability-weighted aveage of all future claims and cost scenarios calculated using historical data, actuarial methods and judgement. ASHE ‘Annual Suvey of Hours and Earnings’ – a statistical index that is typically used for calculating inlation of annual payment amounts under Periodic Payment Order (PPO) claims settlements. Claims reseves A monetay amount set aside for the future payment of incurred claims that have not yet been settled, thus representing a balance sheet liability. Co-insuance An arangement in which two or more insuance companies agree to undewrite insuance business on a speciied potfolio in speciied propotions. Each co-insurer is directly liable to the policyholder for their propotional share. Commutation An agreement between a ceding insurer and the reinsurer that provides for the valuation, payment, and complete discharge of all obligations between the paties under a paticular reinsuance contact. The Group typically commutes UK motor insuance quota share contacts after 36 months from the stat of an undewriting year where it makes economic sense to do so. Although an individual undewriting year may be proitable, the margin held in the inancial statement claims reseves may mean that an accounting loss on commutation must be recognised at the point of commutation of the reinsuance contacts. This loss on commutation unwinds in future periods as the inancial statement loss atios develop to ultimate. Coveage period The period during which the entity provides coveage for insured events. This period includes the coveage that relates to all premiums within the bounday of the insuance contact. Liability for incurred claims (“LIC”) The risk of a possible future change in one or more of a speciied interest ate, inancial instrument price, commodity price, currency exchange ate, index of prices or ates, credit ating or credit index or other variable, provided in the case of a non-inancial variable that the variable is not speciic to a paty to the contact. Liability for remaining coveage (“LRC”) An entity’s obligation to investigate and pay valid claims under existing insuance contacts for insured events that have not yet occurred (i.e. the obligation that relates to the unexpired potion of the coveage period). Insuance market cycle The tendency for the insuance market to swing between highs and lows of proitability over time, with the potential to inluence premium ates (also known as the “undewriting cycle”). Net claims The cost of claims incurred in the period, less any claims costs recovered via salvage and subrogation arangements or under reinsuance contacts. It includes both claims payments and movements in claims reseves. Net insuance premium revenue Also referred to as net earned premium. The element of premium, less reinsuance premium, earned in the period. Net promotor score NPS is currently measured based on a subset of customer responding to a single question: On a scale of 0–10 (10 being the best score), how likely would you recommend our company to a friend, family or colleague through phone, online or email. Answers are then placed in 3 groups; Detactors: scores anging from 0 to 6; Passives/neutals: scores anging from 7 to 8; Promoters: scores anging from 9 to 10 and the inal NPS score is : % of promoters - % of detactors Ogden discount ate The discount ate used in calculation of personal injuy claims settlements in the UK. Periodic Payment Order (PPO) A compensation award as pat of a claims settlement that involves making a series of annual payments to a claimant over their remaining life to cover the costs of the care they will require. Premium A series of payments are made by the policyholder, typically monthly or annually, for pat of or all of the duation of the contact. Written premium refers to the total amount the policyholder has contacted for, whereas earned premium refers to the recognition of this premium over the life of the contact. Premium Allocation Approach (“PAA”) Under the PAA, the geneal measurement model may be simpliied for cetain contacts to measure the liability for remaining coveage. Geneally, the PAA measures the liability for remaining coveage as the amount of premiums received net of acquisition cash lows paid, less the amount of premiums and acquisition cash lows that have been recognised in the proit and loss over the expired potion of the coveage period based on the passage of time. Proit commission A clause found in some reinsuance and coinsuance agreements that provides for proit sharing. Admial Group plc Annual Repot and Accounts 2022 308 Additional InformationAdditional information Reinsuance Contactual arangements whereby the Group tansfers pat or all of the insuance risk accepted to another insurer. This can be on a quota share basis (a percentage share of premiums, claims and expenses) or an excess of loss basis (full reinsuance for claims over an agreed value). Retrospective approach (full – IFRS 17) The method of tansition to IFRS 17 meaning an entity shall at the tansition date: identify, recognise and measure each group of insuance contacts as if IFRS 17 had always applied. Risk adjustment for non-inancial risk The compensation an entity requires for bearing the uncetainty about the amount and timing of the cash lows that arises from non-inancial risk as the entity fulils insuance contacts. Scaled Agile Scaled Agile is a famework that uses a set of organisational and worklow patterns for implementing agile pactices at an enterprise scale. Scaled agile at Admial represents the ability to drive agile at the team level whilst applying the same sustainable principles of the group. Securitisation A process by which a group of assets, usually loans, is aggregated into a pool, which is used to back the issuance of new securities. A company tansfer assets to a special purpose entity (SPE) which then issues securities backed by the assets. Special Purpose Entity (SPE) An entity that is created to accomplish a narrow and well-deined objective. There are speciic restrictions or limited around ongoing activities. The Group uses an SPE set up under a securitisation progamme. Ultimate loss atio A projected actuarial best estimate loss atio for a paticular accident year or undewriting year. Undewriting year The year in which an insuance policy was incepted. Undewriting year basis Also referred to as the written basis. Claims incurred are allocated to the calendar year in which the policy was undewritten. Undewriting year basis results are calculated on the whole account (including co-insuance and reinsuance shares) and include all premiums, claims, expenses incurred and other revenue (for example instalment income and commission income relating to the sale of products that are ancillay to the main insuance policy) relating to policies incepting in the relevant undewriting year. Written/Earned basis An insuance policy can be written in one calendar year but earned over a subsequent calendar year. Designed and produced by Radley Yeldar www.y.com This annual repot is printed on Revive 100 which is 100% recycled. The manufacturers of Revive 100 hold ISO 9001 & ISO 14001 cetiications and are also FSC & PEFC cetiied. This repot is printed by Pureprint a CarbonNeutal® company. Both manufacturing mill and the printer are registered to the Environmental Management System ISO14001 and are Forest Stewardship Council® (FSC) chain-of-custody cetiied. If you have inished reading the Repot and no longer wish to retain it, please pass it on to other interested readers or dispose of it in your recycled paper waste. 309 Company Oveview Stategic Repot Corpoate Governance Financial Statements Additional Information Registered Office Tŷ Admial David Street Cardiff CF10 2EH www.admialgroup.co.uk
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