Admiral Group plc - Why we are successful.

Pricing – Peter Marissen

30/03/2015 09:21:29

Pricing

We decide which price to charge each customer Mainly pricing analyses focus on how different parts of the portfolio perform relative to each other Decisions are based on claims results and price sensitivity

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Data

We ask more questions than other insurers e.g. occupations, licence months

We are major users of external data Credit data Vehicle data Demographic data Claims data (CUE)

The quality of our data is very good direct insurer monitoring external data post-sale validation

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Analyses

•

Emphasis on in-house developed methods

•

A high level of detail

•

Use of traditional pricing methods (GLMs) where appropriate

•

Constant review of rates, and quick implementation of changes

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Ratechanges for 2008 (so far) Q1 2008 4-Jan 7-Jan 7-Jan 11-Jan 11-Jan 16-Jan 23-Jan 25-Jan 29-Jan 29-Jan 31-Jan 1-Feb 6-Feb 8-Feb 8-Feb 13-Feb 15-Feb 22-Feb 22-Feb 26-Feb 4-Mar 4-Mar 11-Mar 19-Mar

Q2 2008 Voluntary excess TP Only on Confused Confused: Females 3+ vehicles to Admiral GC, MSM & Bell AGP Int all same rates DD +2% on aggregators NCBP on MoneySuperMarket +5% Modifications Lic Years 0-12 for GoCompare OwnUse Standard & MultiCar Scrutiny high premium rule to £4,000 MSM Males to AD from Bell Tesco Compare Live AD & DI TP Only on Go Compare Rule: Unemployed Class of Use MSM Bell Business Modifications for Minis MultiCar Risks vs Drivers Age change for Northern Ireland CTM quote for all risks AD & DI Base Rate New Business Right Hand Drive UK residency Base Rate New Business Call Connection Live AD & DI & EL

4-Apr 4-Apr 11-Apr 15-Apr 15-Apr 23-Apr 24-Apr 25-Apr 29-Apr 7-May 19-May 21-May 22-May 13-Jun 13-Jun 18-Jun 18-Jun 26-Jun 27-Jun

Q3 2008 Equal Instalments - 100% Live Base Rate New Business TP Only on BTQ Socio-Demographics Rated Driver Rule Age criteria change Block business use for Delivery Driver LTSB Insurance.co.uk Live AD & DI & BL Bell Business cheapest on LTSB Imports from Confused filter change Price Trials TP Only on IW Retired under age 45 Bell Business Call Connection Live Post Code Town MultiCar Region Bell Business for Call Connection Imports from Confused rate change Cover VehAge Value Remove Renewal price trial

15-Jul 15-Jul 16-Jul 18-Jul 22-Jul 24-Jul 29-Jul 29-Jul 1-Aug 14-Aug 15-Aug 22-Aug 22-Aug 28-Aug 1-Sep

EEC License Non-Motoring convictions AGP Direct Internet AD, DI & EL, MSM AD Remove New Business price trial Max Vehicle age Rule Convictions Exotics Voluntary excess Base Rate increase Bell Business for Go Compare Named Driver Lic Years Sex and Age Unemployed by class of use Tracker Base Rate increase

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Philosophy of pricing : what is a good risk?

We like everyone – as long as the price is right

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Our approach to new initiatives

Some new initiatives focus on specific segments of the market  e.g. Northern Ireland, utility vehicles, exotic vehicles, …

New initiatives often have a pricing angle that we explore  e.g. An example is MultiCar

Claims – Stuart Morgan

30/03/2015 09:21:29

Why are we successful?

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 Because we’re good at handling motor insurance claims.

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More Specifically  Getting customers back on the road following a crash  Dealing with their liability to third parties

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 Customers like us  91% say they would renew their policy following a claim  Sometimes we can’t pay them what they want

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 We settle third party bodily injury claims faster than ever

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% BI CLAIMS SETTLED WITHIN 12 MONTH 100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0% 2000

2001

2002

2003

2004

2005

2006

2007

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Liability scenarios  Hit in rear  Misleading signals  Pedestrians

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 We settle 25% of claims without a lawyer getting a fee

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 We reserve conservatively

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We’re good at detecting fraud

 Soft fraud  Hard fraud

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People  Claims Management over 150 years experience  10% attrition in general staff

 We laugh a lot  Especially at fraudsters

UK Operations – Nick Weng Kan

30/03/2015 09:21:29

What does UK operation cover?

Sales Sales

Customer service

0800 118 1644

Opening hours Mon - Fri 8am - 10pm Sat 9am - 5pm Sun 10am - 4pm

Customer services

0871 882 2233

Renewals

Opening hours Mon - Fri 8am - 10pm Sat 9am - 5pm Sun 10am - 4pm

Outbound

Renewals

0844 848 0050

Quality

Opening hours Mon - Fri 8am - 10pm Sat 9am - 5pm Sun 10am - 4pm

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Where are we based? Halifax, NS

Cardiff, Swansea

Bangalore

GMT - 4:00

GMT

GMT + 4:30

Sales, Renewals

All

Customer Service

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Our structure until June 2008 Swansea

Sales, CS, Renewals

Cardiff

Shared resources

Sales, CS, Renewals

Outbound, Quality

Sales, CS, Renewals

Sales, CS, Renewals

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Importance of aggregators Sales by channel 80.00%

70.00%

60.00%

50.00% Telephone Internet Aggrega tor

40.00%

30.00%

20.00%

10.00%

0.00% H1 07

H2 07

H1 08

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New structure

 Sales

Halifax

Swansea

a

a

 Customer service

Cardiff

a

a

a

a

a

 Outbound

a

a

 Quality

a

 Renewals

a

Bangalore

a

a

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What the new structure allowed us to do

 No change to the culture  Manage a portfolio of brands  Greater staffing flexibility  Find staffing synergies

 Extend operating hours  Etc…

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Discounting

 Discounting introduced 19 September 07  Discounting of ancillary products only  Increase ancillary penetration  Capture additional income at renewals stage  First renewals coming now

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Discounting example

 Sale of policy is secured  Sales person offer first ancillary  Then second ancillary

Confused.com – Carlton Hood

30/03/2015 09:21:29

Why we have been so successful

 Being first

 Being focused  Being frugal

 ...and genuinely passionate about what we do

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Being first

 Confused.com was not the first price aggregator  But it was one of the first to go big on TV...  ...benefiting from high TV response rates in early years...

 ...and higher rates of returning customers today

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Being focused 1st position quote to sale ratio [% ]

 Confused.com focused on price comparison for car insurance

16% 14% 12% 10%

 Relentless attention to the detail of the sales process delivered industry leading conversion rates...  ..and resulting higher volumes in a single product area enabled the negotiation of higher revenue / sale from providers...

Source: Ebenchmarkers 2008

8% 6% 4% 2% Confused

MSM

Go Compare

Tesco

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Being frugal # FTES

 Part of the Admiral “DNA” transferred to confused.com

 Management overheads kept to a minimum

 Clear focus on profitability of every single transaction

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Future success Not only...

...But also

Great at a single product

Great at multiple products

Lowest cost of acquisition

Highest cross sell / revenue per customer

Fantastic direct response TV

Highest brand preference / top of mind awareness

First Focused Frugal

+

Breadth / CRM Brand Right people

International

Balumba.es – Christophe Sanchez

30/03/2015 09:21:29

The Spanish market Direct Players

GWP (m Eur) 14 12

10.6

11.2

11.5

12.2

12.5

9.8

10

8.9 8

8 6 4 2

GWP (m Eur) Market Share

Linea Directa Direct Seguros Genesis Fenix Directo Balumba Click Seguros Zurich Connect

644 210 201 56 21 2 new

5,13% 1,67% 1,60% 0,45% 0,12% 0,01% new

Total

1133

9,00%

Mutua Mad

1216

9,69%

0 2000

2001

2002

2003

2004

Market GWP (m Eur)

2005

2006

2007

 Direct Players Marketing Spend in first Semester ´08: Eur 36m (+29% vs ´07). Zurich Connect started in May and today represent 17% of the spend

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Balumba : half year results  Vehicle count 60,000 at end June ´08 (+258% on June ´07, +27% on Dec ´07)  Total premium €13.8m (€6.6m at June ´07)

Loss Ratio development by underwriting year

Month

2007

2008

 Ancillary contribution €2.0m (€0.9m at June ´07). €73.6 per policy (€61.0 at June ´07, increase 21%)

6

149%

107%

12

137%

-

 2008 Loss Ratio 107% (versus 149% for 2007 at the same point in time)

18

136%

-

 Loss in period GBP 800k (€1.1m)  203 Staff based in Seville

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Balumba: approaching our 2nd birthday

 So far, Balumba has proved to be able:

 To generate leads and acquire business  To generate additional income  Challenge of year 2/3:

 Continue with the improvement of the loss ratio

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Balumba: improving the loss ratio (I)  Maturity factors:  Scale  Age of portfolio

Market Frecuency for TPL (no BI) by age of policy Frecuency

Age of policy Key operational challenge for motor insurer

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The internet – an irresistible force

E-mail; Search engines; Surfing

Information about leisure

Visit company / brand sites

Buy goods/ services, e.g. travel; online banking

Buy at auction; Download software

Buy financial products, e.g. car insurance

Immediate

1st year

2nd year

3rd year

4th year

5th year

Source: Forrester Research/ Analysis of Consumer Technographics 1999-2004.

Purchases travel online - forecast (€m)

B2C (total, in €m) 80000

20000

60000

15000

40000

10000

2005: €15bn 2011: €63bn

20000 0 1999

2000 Germany

2005

2008

2011

2005: €5bn 2011: €19bn

5000 0 2005

2008

2011

UK

Germany

Source: HDE/Bundesverband Digitale Wirtschaft 2005

UK

30/03/2015 09:21:29

Why Admiral Germany will be successful

Pricing • Additional rating factors • Deeper rating factors • Usage of external data • More sophisticated combination of rating factors

Marketing • Strongly cost driven • More specific targeting of customer segments • Innovate and test

Sales • Up-selling • Motivated high performing staff

General management Culture

• Cost management • Lower staff attrition rates • Customer approach • Flexible IT

Claims • Efficiency • Claim control • Active claims management

30/03/2015 09:21:29

Admiral – Milestones a year after launch Achievements so far: Launched a direct insurer in 8 months Acquired over 9,000 customers in peak season, currently at 11,000 customers Identified cheap Marketing channels resulting in low customer acquisition cost Portfolio of products that the customer is familiar with and some product innovations Set up network of external suppliers (aggregators, approved garages) Staff: 100 employees Different work environment, young enthusiastic team

Challenges: Further identify attractive customer segments Recruiting experienced insurance staff Overcome operational challenge of peak season

ConTe.it – Milena Mondini

30/03/2015 09:21:29

Italy is a large profitable market ...

25.0 20.0 15.0

14.3

•2nd biggest market in Europe: £ 17.9b (€ 21.5b)

Gross Written Premiums

(€ b)

15.9

16.9

19.6

18.2

20.7

21.1

21.4

21.6

21.5

85%

10.0 5.0 0.0 1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

MOD MTPL

•highest veichle density: 0.87 per person •high avg. private car premium: £ 398 (€ 479)

Underwriting Results

Source: ANIA 2007 Exchange rate £:€ = 1:1.203 (Mid-Aug08)

49

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...with clear ongoing evolution. 3,5%

6,1(1)%

Agents

Italy is still dominated by tied agents,

Direct Others

90,4%

Direct Indemnity / reduced litigation costs No tied-agents mandates allowed

but new regulations aim at increasing number of switchers and price sensitiveness

No automatic renewal Stricter transparency requirements Customers education initiatives Authorities restructuring Internet Penetration (2) 60%

and online business is growing!

+50%

Online Insurance % 3,0%

40%

2,0%

20%

1,0%

0%

0%

2003 2007 Source: Forrester Consumer Technographics, Nov 2005 & Online Insurance Forecast 06-11 (1) Include brokers and all insurance products, but car insurance is the main product (2) Estimated on users age 15+ / total country population age 15+

+21%

•New aggregators

arising

•Direct model 2006 2007

awareness increasing by 30%(3)

(3) Internal elaboration from focus groups 07 vs. 06

50

30/03/2015 09:21:29

6 direct players but only 1 real direct company … Direct Players

Total direct

GWP (€ m)

% Direct

Media invest: 06/07*

8,80%

2.911

8,40%

23%

216

1,90%

2.692

8,00%

22%

153

1,30%

2.252

6,80%

20%

102

-11%

679

15,00%

29%

13

8,30%

4.191

0,30%

n/a

248

18,10%

978

6,8%

GWP (€ m)

07/06 g%

246

Extrapolation estimate based on real investment jan-jul 06/07

Parent Company

34%

Tot.

25%

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….until May 30th!

Low Price

Easiness

= “ WithYou ”

Personal relation

Launched on May, 30th 2008!

52

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ConTe.it is innovative across the value-chain … Marketing Competitive independent networks (loss-adjusters, lawyers, doctors) Anti-fraud kit Working on new claims settlement tools

Selective scouting / strong partnerships  PPP agreements (penalties, rewards)

Product

Claims

Suppliers Management

 In-house Data Center  Edge technologies

Partnership with major media (CPS agreements)  Direct response and testing approach on alternative media

We are different!

Pricing

Sales

IT Payments

 3 cover types  1st to offer a named drivers product in Italy

 up to 10 additional tariff factors Sophisticated and flexible pricing model

 Lean process. E.g.. No signature collection Customer focus service

 Working on alternative payment methods and installments

53

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… and on people management

Diversity

Young motivated talents

Focus on development

Entrepreneurial spirit!

• 6 nationalities, 10 Italian regions • Multitude of industries and expertise • Diverse senior management team (4 countries)

• 90% employees age