Ladies and gentlemen, thank you for standing by, and welcome to the Admiral Group Full Year Results 2021 conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. If you require any further assistance, please press star zero. It is now my pleasure to introduce Group CEO, Milena Mondini de Focatiis.
Good morning, everybody, and welcome to our fourth and hopefully last virtual results presentation. 2021, like 2020 before, it was a very interesting year. By no means a standard one. We grew in all our business and recorded strong profits with COVID still remaining a relevant feature. The team is here with you today and Geraint, our CFO, will give you more detail on our great results. Cristina and Adam, respectively CEO and Deputy UK Claims Director, will explain how UK insurance has been the key driver of this exceptional performance. Costantino, Head of International, will talk to us about the growth and the competitive market conditions in the other countries. Scott, CEO of Admiral Money, will share with you how loans is leveraging on strong foundation and is primed for further growth.
At the end, I will share how proud we are of our increased effort and contribution for a more sustainable future for the larger community, and how this long-term focus is an integral part of our strategy. First, the key highlights. 2021 has been a year of growth in customer, and to a lesser extent, turnover across every business and every country in the group. We continue to provide strong service with great feedback scores, and more customer decided to remain with us. We deliver a record profit of GBP 769 million that in turn resulted, once again, in a record dividend of GBP 1.87 per share. Keep in mind that this excludes the additional dividend for the second part of the proceeds from the sales of Penguin Portals. The key contributor of these results was UK motor insurance.
also benefit from lower frequency due to COVID, particularly in H1, as well as the positive evolution of the back-year reserves, as Cristina and Geraint will explain later. As COVID knock-ons unwind, we gradually return to more normal life. We expect a lower level of profit in 2022. We also made strong progress on our strategy. We are indeed growing our customer base internationally and in other lines of businesses, such as household and loans in the U.K. Around 700,000 additional customers joined the Admiral family, and 500,000 of those for products outside U.K. car insurance. This new cohort of customers now accounts for over 40% of the total. In addition, we are enhancing our capability to deliver on evolving customer needs by leveraging new data and modeling techniques to improve our customer experience and pricing.
This is particularly relevant to us in the context of continuous evolution of the market and external conditions that are more volatile than usual. We believe that we're well-placed to face them. Now let me start with a reminder of our overall approach to value creation. Our primary aim remains to continue to focus on doing the common uncommonly well, from risk selection to claims management and always putting our customer first. This continuous search for operational excellence results in a market-leading combined ratio that in turn allow us to grow in different market condition. Our ambition now is to transfer the same virtuous circle into other business lines. How we will achieve that? To me, the secret ingredient has always been a truly unique and powerful culture.
Engaging, empowering, fun, data-driven, curious, inclusive, and also strong alignment of interest with all stakeholders, starting with employees who are incentivized with Admiral shares. As mentioned in the past, we strongly believe that happy employee translate into happy customers, that in turn translate into happy shareholders. The number on these slides are an average of last five years, and 2021 was no different with strong metrics across the board, as Geraint will explain later. It's fair to say that 2021 benefited also from exceptional circumstances linked to COVID, particularly motor insurance, where the starting point was a 2020 record low combined ratio in the last 15 years in every country. In 2021, with the gradual release of restriction, claims frequency generally increased towards, but not entirely back to pre-COVID level. At the same time, we experienced strong claims inflation.
Premiums should have followed the same fortune and gone up. Price increases have been delayed for several reasons. As frequency lagging miles driven, and in the U.K., a lower percentage of bodily injuries in the claims mix. We've seen less young drivers on the road, less congestion in peak hours, less drink and drive, and in the H2 of the year, less whiplash notification. As some of these factors are unwinding, we should expect worsening results for the market as a whole in 2022, and premiums may gradually start to recover. The impact of COVID, though, was different by country and by business line. In Europe and U.S., where shopping habits are less ingrained and in a context of lower renewal premium, we saw less shoppers and less switchers.
This was particularly true in the direct channel, where premiums decreased even more, and Italy and Spain were particularly affected by this dynamic. While France has been the only exception with a moderate premium increase. In the U.S., the overall frequency benefit was lower, with earlier and sharper increase in miles driven. In the States, we also saw strong inflation in acquisition cost. On the other side, it's worth to remind that COVID forced a lot of people to become more aware and confident with online shopping. We expect that direct channel growth will benefit from this once the cycle will revert. Beyond motor insurance, the impact of COVID was less material in household, where the main change was in the mix of claims with less escape of water and theft, but increased accidental damage as people stayed at home more.
Finally, loans and travel insurance market, which severely contracted in 2020, has started to recover in 2021, as Scott will explain later. What's next? We're still in a period with a concentration of sources of uncertainty. From the evolution of COVID, the virus itself, the regulations in place, the driving behaviors, to the evolution of claims inflation that was particularly high toward the end of 2021 in U.K. and with issue around the supply chain. To the FCA pricing reform that is possibly the biggest change in pricing regulation we have seen so far. While the reaction of this, of the market is in the range of what we could have expected, we'll probably see further iteration of pricing adjustment, channel strategies or new products. Finally, the way insurance company operate is so different from what used to be.
We've seen office working, remote working, partially hybrid working, and in 2022 we'll hopefully see what's the new normal will really look like. In my opinion, hybrid at scale may be a great opportunity, but will also be more complex to manage and will require focus and dedication. It also has an impact on technology, infrastructure, and talent acquisitions and retention. All this will affect the market as a whole, and we are not immune, of course. We believe that we are in a good position as some of those changes really play our historical strengths, including our strong culture and focus on people, as well as efficient claims management, pricing sophistication and agility. Having said that, we're not resting on our laurels. We are continuing to invest to make sure we nurture the technical and core competencies that help us to succeed so far.
This is indeed the first pillar of our strategy, to make sure that we're always ready to meet ever-evolving customer needs even faster. I will talk more about this in a moment. The other two pillars of our strategy also remain unchanged. The second is to take our competencies and transfer them into new line of business with the objective of improving our proposition to our customers, increasing our engagement with them, and increase the resilience of our business model. How we will do this? In a very Admiral fashion. Trying to create first something special, learning and pivoting fast, and then scaling it once we gain confidence in its potential. This is exactly what we did for household insurance and loans.
In 2021, household had more than 1.3 million customers, and loans reached a milestone of more than GBP 1 billion dispersed since launch. At the same time, we're planting more seeds for the long term, mainly through Admiral Pioneer, our new ventures arm, that this year launched its first new products for small medium enterprises. The last pillar of our strategy is also centered on our customers. As they change the way they move around, we want to make sure we evolve our offering accordingly. This is a longer term objective as some of these trends are still nascent. For the time being, we are mainly focusing on testing fleet insurance and mastering insurance for electric vehicles that more than doubled in our portfolio in the last year. Now let me go back to the first one, Admiral 2.0.
When I joined Admiral, Henry, our founder, used to say, "Admiral is a speedboat in a sea of tankers." Now, one of our challenges was how we can ensure we remain a speedboat with the required agility while going from 1 to 8 million customers and from 1 to many products. This has been where we've been focusing lots of our attention in the last few years. If I look back at the transformation we went through, it's impressive. Let me highlight a couple of examples. Agile methodology. To me, this is a very close to the concept of a speedboat. Speed, focus, empowerment to teams that live and breathe customer. Scaled Agile is the industrialization of this method at scale. In Italy, where we already completed this last step, we doubled productivity and substantially increased quality of releases.
What I'm most passionate about is advanced modeling techniques. We love data. We always have. In the past, what was turning us on was a new piece of data. Now more and more it's the ability to use it sooner. With more advanced analytics underpinned by solid cloud-based data structure, we can now, for example, provide real-time feedback to our telematic customer that in turn improve their driving. It is a win-win for the customer and for the business. As another example, we were able to make substantial changes to pricing in advance of the FCA pricing reform relatively quickly for new business and renewal, while enhancing pricing sophistication at the same time. Finally, we had to adapt our ways of working not only because of COVID, but also to support these changes and to ensure strong talent where it's needed the most.
We extended our recruitment pool, upskilled and reskilled many people, and I'm always so impressed by the level of commitment and adaptability of our colleagues that I could never thank enough. Bringing this session to a close, we have delivered strong results by focusing on what we do best and helped by unusual market conditions, while continuing to innovate to capture future opportunities. Speaking about smart working and smart people, let me hand over now to Geraint, who is featuring these pictures as smart and very funny of our annual management awards.
Thanks, Milena. Hi, everyone. I'll take some time to explain the large increase in profit Milena highlighted earlier and also cover some decent progress on top line and customer numbers. I'd highlight a continued very strong solvency position and report on the final and full year dividends for 2021. To start with, though, of course, the highlights. As you'll see, a really positive set of figures to report on for 2021. Profit firstly, the pre-tax result was up to GBP 769 million. That's +26%. Earnings per share was up 24% to 212 pence per share. Important to note that both of those figures exclude the impact of some restructure costs that we took in 2021, which I'll cover later. As we flagged previously, the H2 result was significantly lower than H1.
Good growth in customer numbers, not too far away from +10% again. Now up to 8.4 million. Turnover up to GBP 3.5 billion, but the increase there was lower than customer growth as average premiums reduced in several markets. The solvency ratio improved year-on-year to 195%, and inevitably with such a strong profit for the year, return on equity was very strong. The full year dividend was 19% up on 2020, and in addition, we'll pay two of the three Penguin Portals disposal dividends, totaling GBP 0.92 per share with the 2021 dividends. Moving on now to look at revenue and customer numbers. Another full set of green arrows on show here, which is pleasing.
All our businesses grew customers year on year and in the second half, though you'll notice that the rates of growth in some cases slowed in H2. In the UK, motor customers were up 5%, though were only marginally up in H2. Motor turnover was actually pretty flat year-on-year when the impact of the 2020 premium rebate is considered. Cristina will talk more about the second half, particularly later on. Household customers and turnover both up very nicely again, +13%, +14%, and a very similar story to the half year for our international businesses. Customer numbers were up quite nicely, +13%. The pressure on average premium levels meant that turnover growth was quite a bit lower. L'Olivier in France continues to grow particularly strongly.
Finally, it was a really pleasing year for our loans business, and we returned to some strong growth here. Balance is now up over GBP 600 million with more of the same planned for 2022. Let's start now to look at that big profit increase. This is the Group income statement versus 2020 by business segment, and you can clearly see the driver of the year-on-year increase. The total UK Insurance result was nearly GBP 200 million or just under 30% higher than 2020. We saw further improvement in the UK household profits to over GBP 20 million as we continued to grow and saw higher profit commission. The motor result was significantly nearly GBP 190 million higher, and I give a bit more detail on that on the next page.
Outside the U.K., the result worsened by around GBP 20 million compared to a positive COVID impacted result for 2020. All the businesses continued to grow, sometimes in very challenging markets, as we saw just now, but we saw a higher loss ratio as that COVID benefit unwound and a very slightly higher expense ratio too. Our European insurers continued to be profitable overall while investing small amounts in new products in France and Italy. In the U.S., Elephant's loss was higher year-over-year due to a higher loss ratio and increased acquisition costs. More detail later on, of course. Admiral Loans result improved as the charge for expected credit losses was unsurprisingly materially reduced versus 2020, and the relatively small loss there comes despite fast growth and associated acquisition costs.
The split of profit for the year was around GBP 480 million in H1 and around GBP 290 million in H2. It's quite different as the impact of COVID unwound over the course of the year. Hopefully, it's well understood that both 2020 and 2021 years have seen unusually high levels of profit and the results for 2022 will be lower. Let's go into a bit more detail now on the UK motor results. This is the UK motor income statement. As you can see, profit increased from GBP 684 million to GBP 872 million, and we've highlighted the key drivers of the change. Higher premium, higher reserve releases, and higher profit commission are all as reported at the half year. Indeed, much of the positive variance resulted from the first half results.
Offsetting those positive variances, the current year claims cost and loss ratio are higher for 2021 than 2020, as we saw a more normal claims environment in H2, and consequently a higher booked ratio for the year. Let's look a bit more at what's driving the increases in claims reserve releases and profit commission. On the top of this slide, we show the booked loss ratios by underwriting year for the recent past. For example, the 2018 underwriting year was first booked at 92% at the end of 2018. That had released down to 81% at year-end 2019 and has come down to 73% at the end of 2021. On the bottom, we show reserve releases and profit commission split by underwriting year for 2021 on the right and 2020 on the left.
On reserve releases, in the first half, you might remember that we saw very significantly bigger releases in 2021 than in 2020, and a number of those underwriting years have become very profitable. Releases in H2 were much more in line with H2 2020. Because of the very positive first half, 2021's releases overall were higher than 2020. Because of the level of profitability of a number of the underwriting years, we see much higher profit commission, as you can see in the green on the bottom charts. Most evident, of course, for 2020 year, which considering the stage of development, is really very profitable. In summary, as at the half year, there are more points of booked loss ratio movement, and each point of movement is generating more profit.
We have reduced the level of margin held in the book reserve slightly versus the end of last year, but it still of course remains appropriately prudent. Moving on now to look at solvency and dividend. Covering solvency first on the top of the slide, not too much to say here. The year-end position is very strong, just under 200%. We see a similar level of surplus versus the end of 2020 and a decreased capital requirement, both at the half and full year 2021, which is partly an unwind of the increase in the requirement that we saw at the end of 2020 relating to higher profit commission risk at that point. On dividend on the bottom of the slide, we're proposing a final dividend in two parts. Firstly, 72 pence per share in respect to the second half result.
That's 91% of the second half earnings, excluding the impact of the restructure cost or 113% of earnings if that cost is included. On top of that 72p, we add the second tranche of the Penguin Portals disposal, which is 46 pence per share, and that makes a total final dividend of 118 pence per share. For completeness, the full year dividend is 187 pence per share, excluding the Penguin Portals element. That's a healthy 19% up on 2020, and it's 279 pence per share with the Penguin proceeds. Two final points from me before I wrap up. Firstly, as you saw a few slides ago, we took a GBP 56 million restructure charge in the U.K. insurance business in 2021.
There are three main parts to that cost, though two of them comprise the majority. Firstly, technology impairments, which were mainly due to the upgrade of the main policy system. Secondly, the costs of early exit or downsizing a couple of our offices due to the move to hybrid working. The total cost across those three areas was actually around GBP 65 million, with the large bulk of it taken in 2021, and we're not expecting any notable impact in 2022 and beyond. Second, you might remember at the half year, we were just concluding negotiations with Munich Re on the expiring 30% UK co-insurance contract. We're very pleased with the new structure. It's very long-term, with the co-insurance agreement running to 2029, which means our partnership will have extended to nearly 30 years.
The new contracts will allow for greater profit commission to Admiral than the expiring ones. That's it from me. I'll leave you with some key points. Continued decent growth in several places. Though a bit more muted in H2 in the U.K., and average premiums have reduced in several markets. Profit for 2021 was very high and ahead of an already very strong 2020. Our capital position remains strong after another increased full year dividend. I'll hand you now to Cristina to talk to us about the UK insurance business. Cristina.
Hello and welcome. 2021 has been a very strong year for U.K. insurance, with a significant increase in profits and good growth. However, just like football, it's been a game of two halves because the growth in profits and policies has been concentrated in the first half of the year. Let's start with a summary of the highlights. As Geraint has mentioned, the main feature of our results is increasing profits. Also, we have motor policies growing by 5%. The FCA pricing change has impacted new business prices in line with expectation. Claims frequency continues to be low, but lots of external pressures have resulted in very high damage inflation. Our expense ratio has increased by 1 point due to higher investment and low average premium. Finally, our household book has continued growing in profits and size. Moving to market prices.
During the H1 , market conditions were challenging and Admiral became less competitive. We have maintained pricing discipline to reflect claims inflation. This is consistent with our pricing philosophy. To put this into context, let's review our strategy in the past couple of years. As you can see on the graph on the right, there have been strong increases in our Times Top from Q2 2020 to Q1 2021, which resulted in significant growth. Since Q2 last year, Admiral prices have become less competitive, which has resulted in no growth. Also, during the past two years, we have had a strong retention. Finally, our Times Top has increased in December. This month has been impacted by lots of volatility in the market ahead of the FCA pricing changes. What to expect for the first half of 2022?
We still think there will be some volatility in market prices. Admiral, like always, we continue to maintain pricing discipline. What has been the initial impact of the FCA reform? From our perspective, both the motor and household market have behaved on average rationally and have increased new business prices in line with expectations, around high single digits for car and double digits for household. However, it's still too early to understand the full impact of the reform on two key areas, market retention and the price comparison market. We will know more in a few months. Admiral was well prepared for the reform, and our initial strategy has been first, we increased new business prices at the end of December, and our price increase have been in line with the market.
Secondly, we launched last year four tiers for our car product to offer our customers a wide range of products to cover their needs. This includes our Essentials product, which has a lower price and lower coverage than the standard Admiral product. As a reminder, we offer tiers for household since launch with good effect. We believe Admiral is well-placed to face this reform. We have a strong underwriting capabilities, good customer service, and a strong brand, which are key factors for success. Now I'm gonna pass you to Adam, who will tell us much more about claims.
Thanks, Cristina, and good morning everyone. I'm very happy to be here today to talk to you about claims, but I'm conscious that some of you may not have met me before. As Cristina mentioned, I'm Adam, and I've been part of the Admiral Group since 2003, spending virtually all of that time in claims. I've worked in all areas of claims, but the majority of my time has been spent in the technical areas and bodily injury. I'll start by giving you some context from the U.K. motor claims market in the last year. You can see that frequency during the pandemic has been significantly below expected levels. We know that one of the main factors influencing this is miles driven, which has been suppressed during various lockdowns.
We also know that frequency reduces the dynamic on our roads changes, causing the typical mix of accident types to change. This slight change in accident mix, together with some changes in accident times caused by less commuting, is causing frequency to lag behind miles driven. We expect some of these trends to persist after we hopefully leave COVID behind us. While we're on frequency, I thought I'd give you an update on the whiplash reforms too. Nine months or so in, we're building a picture of the market post-reform. Despite being impacted by some COVID-related factors, we're clear now that the whiplash reforms have lowered small BI frequency. It's too early to be certain about the exact extent of that reduction or changes in severity, so we still feel the range we've previously given on savings of GBP 15-GBP 25 per policy is appropriate.
Over the next year or so, as the market recovers from some early technology challenges and adapts to the new rules, the picture on small BI will start to emerge more clearly. Moving on to damage inflation now. The chart shows some steep increases in recent years. There are two points I'd like to make here. First, you can see the inflation dynamic shifting upwards from 2018. We believe this is down to the underlying inflation on repair costs caused by advancing vehicle technology. Second, you can see inflation accelerating again during the pandemic. No doubt some of that is down to some short-term issues in the immediacy of the first lockdown, such as extra cleaning costs and financial assistance given to some garages. However, I wanted to give you some more detail on what we believe is shaping damage inflation across the market in the next slide.
Damage claim spend is largely driven by two factors, the residual value of vehicles and the cost of vehicle repairs. The chart on the top of this slide illustrates the unprecedented rise in residual vehicle values during the pandemic. The reason for this inflation are well documented, mainly chip shortages, reducing the supply of new vehicles, causing secondhand values to rise. We're not anticipating the supply of new vehicles returning to normal levels this year, but we are expecting supply to gradually increase as the year goes on, which may, in turn, reverse out some of the inflation that we're seeing. The chart at the bottom of the slide shows year-on-year inflation on repairs across the market. You'll see the rise between 2020 and 2021. We believe that the repair industry is in something of a perfect storm.
Labor costs are increasing due to supply shortages caused by an aging workforce and Brexit. Fuel and energy costs are increasing garage overheads, some of which will have to be passed on to insurers. There are challenges securing replacement vehicles and driver shortages are making parts distribution challenging. These features are becoming more pronounced since the end of 2021, and we believe they will continue to cause inflation repairs for much of this year. Putting this alongside the rises in residual vehicle values creates a challenging outlook for claims inflation in 2022. Now, I wanted to let you know more about our strategy, what's important to us, and how that helps us to manage these challenging market conditions successfully. The graph on the top left shows claims inflation, us versus our competitors. As you can see, we've managed claims inflation better than the market.
I wanted to spend a couple of minutes letting you know how we've been able to do that. Firstly, on digital and analytics. You'll see from the slide that we've seen good growth in both analytics and digital during the pandemic. Growth in these two areas is in line with our focus on optimizing the combined ratio, allowing our customers to interact with us in new ways, and also allowing us to ensure that our staff can add value on the claims where we feel their expertise is most needed. Secondly, I wanted to mention large BI, an area where we feel we have an advantage. I think the last time we talked to you about the experience level of our large BI team. Since then, I'm very pleased to tell you that they've all got six months more experience.
We believe that our people are crucial to our success in large BI and all areas of claims. We work with many stakeholders on large BI who are always highly complimentary of our claims handling strategy. In short, that strategy is to focus on very early and thorough investigations into all claims, putting claims on the appropriate track as soon as possible. This allows us to strike a balance between investigating where appropriate and pushing for speedy collaborative settlements wherever possible. Finally, I wanted to talk about our customers. Despite these challenging market conditions, we're getting consistently strong feedback from our customers. I mentioned our staff earlier when talking about BI, but I can't overstate how important their experience, dedication, and expertise is to us. They're there for our customers when they need us most, and they've been exemplary during a difficult couple of years. That's it from me.
I'll hand you back to Cristina.
Thanks, Adam. Let's now take a look at our expenses. As you will have noticed, our written expense ratio has increased by 1 point. This was a result of lower average premium, and also it's due to an increase in our IT spend, which we think is the right thing to do for our business. In the past few years, we have increased our spend in technology in areas like system upgrades, cloud-based architecture, investments in data and digital, and cybersecurity. These investments have supported a continued shift to digital channels that is unlocking operational efficiencies as seen in the bottom graph. For the future, we expect to continue to strengthen our capabilities and make further investments in line with the Admiral 2.0 strategy that Milena has explained. To this end, our focus will continue to be improving the overall combined ratio. Moving on to the household book.
2021 has had very strong results. First, significant increase in profits driven by strong loss ratio development of prior years, a better weather year, and a better claims outcomes due partly to the pandemic. Also, our household book has had another year of high growth, helped by our MultiCover proposition and strong retention. Also, we continue investing in making our household offering better for our customers, and we have expanded our digital capabilities, which will also help future growth. We have launched a new claim system, which helps deliver faster claims outcomes, improve customer experience, and better efficiency. For 2022, we're expecting profits to come under some pressure, given that claims will continue having high inflation, there might be changes to claims mix post-COVID, and we expect the impact of the FCA pricing remedies to lower profitability. This is all for UK Insurance business.
2021 has been another strong year for the UK Insurance business. Now over to Costi to tell us more about international results.
Thanks, Cristina. Good morning, everyone. 2021 was a year of investments in International Insurance to continue growing our businesses in a healthy and sustainable way. These investments in growth, as well as the easing of COVID benefits, have impacted our short-term results. Let me start with the long-term perspective. We built efficient customer-oriented businesses, strong teams, and we adopted competitive advantages from Admiral, especially in risk selection. Our strategy remains unchanged, and we continue to build on these foundations to increase economies of scale. Now, for the short-term perspective, we achieved good growth, but we have been operating in competitive markets, mainly with strong downward pressure on premiums and a gradual unwinding of COVID benefits. These effects meant a decrease in profitability in Europe and an increase of losses in the U.S.
However, with nearly GBP 700 million in turnover and 1.8 million customers across four geographies, we remain confident in the long-term trajectory of the business and our ability to improve performance where market cycles revert. Moving now to Europe. As Milena mentioned, COVID impacts have been sharper in Italy and Spain, decreasing average premiums and lowering demand for new car insurance. In both markets, we managed double-digit customer growth and delivered a higher average premium than our competitors, all while investing in expanding distribution channels. France is a bit of a different story as the market was somewhat immune from COVID impacts. Average premium slightly increased in the last two years, though overall shopping decline and price comparison quotes were down. In this context, L'Olivier achieved 26% turnover growth, leveraging direct acquisition and efficient brand investments, all at higher average premiums than our competitors.
We also continue to cultivate the household business, which is a large market in France, and progressed on scaling our partnership with BlaBlaCar, a well-known peer-to-peer mobility provider with a large customer base to engage. In all geographies, we continue to make substantial progress in better use of data, offering more digital services to our customers and making our technology platform more reliable. We now offer a fully digital journey to report a claim, and thanks to artificial intelligence algorithms, we can make an instant settlement offer. Indeed, leading independent surveys rated our customer service and user experience among the best in class with both ConTe.it and L'Olivier winning top awards from major consumer review sites, and we see very positive outcomes on customer loyalty.
We continue promoting our unique culture, and we are proud that our businesses are ranked in the top tier of the Great Place To Work with Admiral Seguros, notably number one in Spain. Before and during the pandemic, our businesses remained resilient and delivered efficient growth and positive results despite market adversities. Over the last four years, we delivered our first GBP 100 million profit on a cumulative written whole account basis, and there is more to come. Although we expect markets to remain challenging in the next months, we remain focused on building long-term value for the group in Europe. Moving now to the U.S. A quicker return to pre-pandemic mobility patterns led to more stable premiums and shopping trends. In spite of a hyper-competitive market, Elephant customer base grew by 10%.
On the downside, as COVID related loss ratio benefits ended, claim frequency and severity inflation accelerated, in particular, in the second half of 2021. We moved our prices up significantly in the last quarter to respond to this market shift, and we have seen many competitors take similar actions. The bottom line results is a function of this context, and internal improvements of our business foundations have not been sufficient to compensate for this market headwinds. The U.S. is the largest market where we operate, and we acknowledge that it is an expensive one, but we are confident that we have built a solid operations with good insurance capabilities. Why do we believe this? We are making good progress, and there are three dimensions where Elephant is doing very well. Loss ratio improvements, efficient growth, and technology.
More sophisticated pricing, investments in claims digitization and wider use of analytics meant our loss ratio inflated less than the market in 2021, a clear signal that we progressed on risk selection and claims handling. We grew 10% by shifting our acquisition sources towards more efficient channels like agencies and price comparison websites. We kept our acquisition cost relatively flat while the market increased by 12% in an already very expensive environment. We have built a solid technology platform which enabled all these achievements. We can engage new commercial partners in a matter of days. We offer a full set of digital services for our customers, and we are pursuing internal efficiencies with more automation. We believe in the importance of the U.S. market for our strategy, and we continue to adopt a rational approach in building a long-term sustainable business.
To wrap up, for International Insurance, 2021 was a year of growth, investments, and progress on business fundamentals. The easing of COVID benefits have impacted our short-term results, but our strategy is unchanged. We continue to grow economies of scale with a disciplined approach to loss ratio to create long-term value for the group. Thank you, and I now pass over to Scott to tell us more about our loans business.
Thank you, Costi. Good morning, everyone. To start my section, a few key highlights on the performance of the loans business in 2021. First, we're back to growth. The loans book finished with gross balances of over GBP 600 million, 10% higher than our pre-COVID peak and 50% up from last year. We are also seeing positive market trends, with comparison growing back to pre-COVID levels and as a category share growing to 22% of all loan volumes. We also saw pleasing progress on our operational and risk selection capabilities while maintaining an appropriately conservative approach to provisioning. 2021 was a year of two halves. However, different for loans, with H2 being more positive. We started a year growing cautiously in H1, and in H2 we grow more meaningfully as outlook improved.
We finished the year with good momentum for 2022 with a stock book of GBP 607 million. We also kept provision conservative at GBP 50 million, and in light of the continued uncertainty and economic outlook, we included GBP 9 million of post-model adjustments, particularly to account for the impact of inflation. We also agreed our second warehouse funding, giving us the capacity to grow in 2022. This takes our total funding capacity up to GBP 1 billion. A reduced impairment charge, despite the growth in the book, improved our P&L to a GBP 5.5 million loss, which is within the range provided at the half year. We are providing balance guidance for 2022 in the range of GBP 800 million-GBP 950 million, and we expect the bottom line to improve, assuming no macroeconomic shocks.
I thought it'd be worthwhile to take a moment to zoom out on the UK loans market and highlight several trends which I see as encouraging. First, a reminder of our loan profile. We are a prime focus lender distributing mostly through comparison. Our average loan size is around GBP 8,500, our customer APR around 8% with a net interest margin of 6%. The chart on the left-hand side shows the overall personal loan market and the category share of comparison as a subset of that. Nowadays, over 90% of loans in the UK are distributed digitally. What you can see is that total loan volumes are still under pre-COVID levels and are expected to remain there until 2023. However, encouragingly, the comparison market has already recovered to pre-COVID levels, with share increasing, as I mentioned, now making up 22%.
We continue to see a pull from both distributors and customers for guaranteed rates and acceptance certainty. There is a gradual shift from a teaser rate representative rate model to a pre-approved guaranteed rate model. The chart on the right demonstrates a real example of this, showing Admiral ranking top with 100% pre-approval and guaranteed rate, despite it being higher than the competitor teaser rates being offered. This was something that Admiral had predicted being a market trend. I'd like to move on now to talk about our underlying capabilities and ultimately why Admiral is having success in loans. For those of you who have followed our story in 2019, I highlighted several capabilities which we identified as success ingredients of the Admiral formula, which we aim to combine to create competitive advantage in the lending market.
On the chart, you see a demonstration of pleasing progress on our competence in risk selection. To show the real performance, which is often hard to see with the forward-looking provisioning impact of IFRS 9, we've taken actual defaults per annual cohort and divided by our actual net interest income, which is analogous to loss ratio. What you can see here is that since 2017, we have year-on-year seen progressively improving loss outcomes as we evolved our pricing capabilities. Something which isn't on the slide, however, something which I find exceptionally positive is the relative outperformance of our loan customers who also hold Admiral insurance products. They consistently outperform and in total hold over GBP 35 billion of consumer debt. Engaging with more of them to better serve their needs in the future is a top priority.
I'd also like to mention another key ingredient, which is tight expense control. Our cost-income ratio has increased temporarily in 2022 as we invest for growth. However, over 70% of our customers are already being serviced digitally, which sets us up well for efficiencies, and I expect our medium-term operational cost-income ratio to be materially lower than legacy competitors. As Milena mentioned, and as I've grown to learn, what makes Admiral successful is that it does the common things uncommonly well, details that find the extra 1%-2% across the whole value chain. Our goal in Admiral Loans is to apply that same rigor and focus to carve out differentiation and a track record of outperforming returns. With that, I'll pass back to Milena to wrap up.
Thanks, Scott. Geraint, Cristina, Adam, Costantino, Scott have just shared with you how we deliver great outcomes for our customer and our shareholders. What about the other stakeholders? We believe that only in the harmony of positive outcomes for all our stakeholders we can succeed and fulfill our purpose to help more people to look after their future. As Adam explained earlier, at the very, very heart of our success is our focus on the great people who work with us today and in the future, and who deliver the winning experience to our customers. These are the key foundation that Admiral has been built on from the very early days. I'm so proud that we are independently recognized as Great Place to Work year after year and in every country we operate in, including being named number one in Spain and number five in the U.K.
We have received recognition for being leaders in diversity in Europe. We also increase our effort to support climate change and made a commitment to be net zero by 2040, with a 50% emission reduction by 2030. Finally, since the beginning of COVID, we made a step change in our investment to support local communities, and we will continue to do so in the future. To conclude, we are proud of the growth and strong results we have delivered, which were thanks to our focus on what we do best and helped significantly by COVID tailwinds, which are clearly subsiding. Our strategy remains unchanged and is grounded on solid foundations and technical competencies and enhanced data and technology capabilities, unique culture and strong team.
We will continue to evolve to remain smart and agile and navigate the change ahead of us, focused on delivering the best outcomes across different countries and business line and for all our stakeholders. Thank you. With that, we're ready to take questions.
Thank you. As a reminder, to ask a question, you will need to press star one on your telephone. Our first question comes from the line of Will Hardcastle with UBS.
Oh, hi, everyone. Thanks for taking the question. The first one is just trying to understand the level of gap and conservatism in the underwriting versus accident year, but you also provide the underwriting years for both the ultimate and the booked. I think if I look at it, you know, on the different comparisons, there's a massive gap. If I look at it just on underwriting years, it looks like 5 points on the initial strike. So there I'm comparing the 90 with the 85, for example. Do you think it's been booked fairly standard? There's been no change in methodology is really the question there. Second one is just in terms of the changed Munich Re terms. Obviously, that's not now, but earlier in the year.
Is there any way that we can sort of try and discuss the quantification of the difference that that would give you in a normal year? Is that possible? Thank you.
Can we look, Geraint?
Morning, Will. Yeah, I'll do both of those ones. Loss ratio margin, first of all, there's no real change in the method. I think if you do the math and compare where our underwriting year booked loss ratios are at the end of 2021, by underwriting year, which you can do from the back of the presentation, and compare it to where we were at the end of 2020, there's not really a big visible difference. You're right, there's 5% difference on the current year and actually not too far difference on some of the back years. If you add all that up, which you sort of struggle to do with the information we give, there's actually a very slight reduction in the level of margin relative to the best estimate, but not that significant.
The method is actually very consistent, not system.
I guess just.
Sorry.
Just a slight change. Is that coming throughout the years essentially, or is that more at the back end, the older years?
No, it comes throughout the years. I mean, the way we think about it is to measure it on.
Total reserve basis, not an individual year basis. Generally, you find that the bigger margins in terms of percentage points are on the most recent years. That obviously continues to be the case. If you look at the margin held across all the years, it is very slightly lower this year-end than it was last year-end, but not that much. The second question is about Munich Re terms. We've got some info in the back of the pack, which talks about how much of the profit that Admiral now retains in the new contract versus the old contract. It also talks about the change in the nature of the contract between co-insurance and quota share and so on. We can do some illustrative math to help you understand what's going on there.
Happy to talk to you about that, Will.
Okay, thanks.
Thank you. Our next question comes from the line of Alexander Evans with Credit Suisse.
Hi, thanks for taking my questions. Just firstly, maybe on the U.K. motor policy count growth. We've seen that relatively flat in the second half. We've also seen some, it looks like pretty aggressive players in January in pricing as well. I just wondered what your sort of growth expectations are for 2022. Then also maybe just on inflation. We've seen and you've highlighted, you know, higher claims inflation going forwards. What are your sort of expectations on your reserve assumptions there? How does it impact, you know, your large BI assumptions? Where do you see the inflation being most impactful for Admiral? Thanks. Then maybe as well, just on sort of the expectations for the pricing in the market.
I think you talked about a few iterations of people reacting to it, but just keen to hear your thoughts on how you think it's gonna develop into 2022. Thank you.
Morning, Alex. I'm gonna focus on your first and your third questions because they're both related to pricing, and then Adam will cover inflation. When you look at the market in the first half of this year, I think it's gonna be particularly dynamic. There's gonna be a lot of volatility. What we can tell you about Admiral prices is that at the moment, our time stop is a bit higher than it was in the second half of last year. Expectations for this year, volatility changes. We have seen a lot of changes during January and February from competitors, and we expect to see the same. Also, when we look at inflation, it's quite high this year. It might continue increasing, and we might see also frequency coming up, which will both have an impact on prices in the market.
Okay. Thank you.
Thank you. Our next question comes from the line of Thomas Bateman with Berenberg.
Hi. Good morning, everybody. Thanks for taking my questions. Just first question on your kind of new tiering of products. Can you just give us an indication of how they compare to kind of your previous pricing, and particularly the lower or more basic product, how does that compare to, yeah, previous iterations of pricing? Where are you seeing the most demand out of those different products? Secondly, are you seeing any decline on your back book as a result of the FCA changes? Do you think those new business increases are sufficient to offset anything? Is that the case? Because I think you said that there was lower profitability expected due to the FCA changes. Yeah, those are my two questions, please. Thank you.
Yes. Morning, Tom. The first one was around tiers, both in household and car. We have had tiers in our household products since launch a few years ago, and it has had a very good result. We launched it in-car because we believe it's a better way for offering different combined products to our customers. This year, we have seen Essentials, which is our lower tier product, taking a bit of a share, but I think it's too early to comment exact on the impact of this product. In terms of the back book, your question was whether we had seen decline. Again, a bit too early. The changes in renewals only impacted it at the end of January.
We are seeing retention increasing for us and we believe for the market, but we cannot yet say how much this impact has been. In terms of lower profitability, I made that comment, especially around household in the market. I was just basically highlighting the fact that the household market has traditionally have very high retention, meaning there are, you know, long books or big books in the market with long tenure, and I think profitability might be impacted.
Okay. That's good. Just to be clear, you're saying that the home market is likely to be less profitable, but you're actually seeing a bit of margin expansion because of the high new business rates. Actually on your back book, you're seeing sufficient new business increases.
Yes. I believe some players in the household market might have profitability impacted because the decrease in renewal rates. Yes to the other comments.
Okay. That's really good. Thank you very much.
Thank you. Our next question comes from the line of James Shuck with Citi.
Yeah. Good morning, everybody. Two questions from me, please. Firstly, on the, I suppose the both the booked loss ratios in 2019 and 2020, if I look at how they were booking it at H1, and then the development into full year. And if I look at the ultimates as well, in the same years, 2019 and 2020, and how they've developed through to full year 2021. I guess I'm surprised by the lower level of development versus previous periods, both on a booked basis and on an ultimate basis. My question is really, you know, do you still expect the ultimate to be developing favorably over time? Or are you now booking those ultimates closer to actual best estimate, i.e., with far less embedded conservatism in them?
Second question, really around guidance for 2022. I know you said that the profits for the group will be lower in 2022 versus 2021. It's very difficult from the outside really to model your PCW, the PYD, all these sorts of things going through in the year. My question is, can you give us some guidance really? Are you still guiding towards low 20s on the PYD? And on the PCW, should we expect that to go back to kind of pre-pandemic type levels? And any comments around the FCA impact on the current year accident loss ratio, or will that go back to pre-pandemic levels as well? Thank you.
Well, James, geez, I think we lost you after about question 7, but we'll go back to it. I got about 3 or 4 of them, and then we'll see where we go from there. On PYD outlook, I think guiding the low 20s is probably okay as an idea, as a guide for the next year or two. Don't see any major change in that. There is less inherent conservatism in our best estimates than there was maybe, say, a decade ago, but actually no significant change over the past couple of years in that. I think maybe, James, you've been a bit spoiled by the ultimate loss ratio development and the book loss ratio development in the past couple of six-month periods.
In the second half of the year, it was lower than the first half. That is for sure. I don't think it was really out of line with averages over the past few years. Nothing of concern, I would say, at all in the second half of the year. I think we mentioned earlier the booking pattern versus the ultimate isn't really that different at the end of 2021 versus the end of 2020. It's a bit less conservative, but really not that much when you measure the points of gap between booked and ultimate. I think there was a question on guidance for 2022. I think when we talk about that, it's important to remember the context, I think.
Our profits over the past couple of years have gone GBP 505 million in 2019, GBP 608 million in 2020, and then GBP 769 million in 2021. Motor combined ratio reported the last couple of years has been around 70%, 2021 and 2020. Historically, it was closer to 80%. There's clearly a very material difference in 2020 and 2021 based on COVID and the pandemic, which is not going to repeat in 2022. That's the context. James, as you know, we don't give profit guidance and definitely not a couple of months into the year. Clearly, you see some of the trends in the pack, some of the data points. The first-party loss ratio for 2021 underwriting, for example, is much more in line with the pre-pandemic loss ratio.
We're, I would say, more normal rather than profits declining. That's obviously trying to paint a slightly more positive picture on it. I think you've got to remember that 2021 and 2020 were exceptionally high years, which aren't part of the ongoing trend of increasing profits over time.
I think you got most of those. If I could just come back on one thing. The FCA price walking stuff, you know, as that gets reversed out, would you expect to be booking a drag on the current year accounting loss ratio from that in 2022?
Morning. Just to say that, I think 2022 will be impacted by two things. First, the change in the prices because of the FCA reform, but also, a very dynamic and complicated maybe claims market given the high inflation and possibly increases in frequency. Looking at the FCA reform, yes, we think it will have an impact in the sense that, renewal rates are gonna decrease. However, the market has a history of being very rational, and therefore, I believe in the long term it wouldn't have a major impact.
Okay. Thank you. Thank you very much for that.
Thank you. Our next question comes from the line of James Pearse with Jefferies.
Yeah. Hi, everyone. Thanks for taking my questions. So you've had really significant profit commissions on your quota share arrangements in 2021. You know, clearly margins have benefited from lower claims frequency in the last couple of years. I guess when that benefit falls away, would you expect to receive any material commissions from your quota shares in future years when we return to more normal margins, under the new terms? I guess I ask because, you know, pre-pandemic, the commissions from your quota share arrangements always seemed fairly minimal. The second question is just on international business. In the past, you've spoken about achieving a EUR 30 million-EUR 60 million annual profit by 2022 on a written whole account basis. Is that still the case? I think you've spoken about increasing your whole account share.
I'm just interested to hear if that is also still the plan, kind of what the timeframe is on that and how you'd go about doing that. Thanks.
Hi, James. I'll take the first one on profit commission on quota share. I think what we've seen in the past is that we've commuted our U.K. quota share contracts after about 2 years. That means that as the profit tends to develop after that point. It doesn't get reported as profit commission. It comes through the reserve releases on the commuted share of the business line in the accounts. The pre-pandemic average combined ratios are probably in the 80s, so there's probably 20 points of margins. There clearly is, you know, profit on the business that we originally reinsure. It's just that post commutation that flows into the reserve releases on commuted reinsurance line rather than profit commission. We sort of expect that to be the case in the future as well.
We're certainly not expecting the disappearance of our margin from here on. That's for sure.
Good morning. Constantino speaking. Yes, you're right. Back in 2018, we shared an ambition to achieve EUR 30 million-EUR 60 million written profit on a whole account basis in 2022. I would say that we achieved this target already in 2019 and in 2020, and then it is too early to make a call on where 2021 will land, and it's incredibly early to comment on 2022. I acknowledge that since 2018, the market has changed with lower premiums, in particular in Italy, where we have the largest operation. The trajectory of our European businesses is solid. We are growing, nevertheless challenging environments, and we are confident that we're building long-term value for the group.
Thanks. Can I just ask a follow-up question on the profit commission question?
Yeah.
I guess that you're kind of shifting margin kind of post commutation and, you know, when it was pre-pandemic. I guess if you're recognizing margin and the profit commissions in 2021, should we think of that as a kind of headwind to future releases on your commuted business, or is that a wrong way to think about it?
No, I don't think that's the case. I think the fact we're recognizing profit commission earlier than usual on some recent underwriting years is not an acceleration. It's just the different level of profitability of some of those years. I don't think that's a change in profit recognition patterns at all. It's just a reflection of the profitability in those most recent years. I wouldn't say that's a change in trend. No.
Got it. Thanks.
Thank you. Our next question comes from the line of Greg Patterson with KBW.
Morning, everybody. Can you hear me?
Yep.
Louder, yeah.
Hello? Can you hear me?
Yeah, clearly, Greg. Go for it.
Good. Hope everything's well. Three quick questions, two numbers, one. For UK Motor 2021, on a written basis, what was the average year-on-year rate increase that you achieved? The second question is, claims inflation UK Motor 2021. I wonder if you can give us a broad estimate of the percentage year-on-year change. During the presentation it was mentioned that during 2021 we'd seen a lower percentage of large BI claims. I assume that will revert back in 2022 and 2023 to your normal sort of two-thirds level. I was wondering what the impact of that mix change would have on inflation, claims inflation UK Motor in 2022 and 2023. Thank you.
Morning, Greg. I'll take the first question, and then Adam, if you don't mind, take the other two. On price increases, for last year, what we did is we increased prices in Q2, and that meant that for the rest of the year we lost time stop, as you could see in the graph on the slides. Our prices reflected the claims inflation we were seeing in the market. I'm not going to go into detail because there was a lot of volatility. I just want to highlight that we maintain pricing discipline.
You can't give me a number for the average price increase year-on-year for 2021?
None. Sorry, Greg.
Oh.
Hi, Greg. It's Adam here.
Yeah, no number on that, no?
Hi, Greg. I'll go on to claims inflation. For 2021, I think we were looking at sort of mid-single digits in terms of inflation. We're now looking at perhaps mid to high single digits for 2022. I think I've covered the drivers for that both in the presentation and in the previous question. On large BI, it's very difficult for us to predict that. You know, I look at a lot of large BI claims, and they're hugely volatile. I think we saw less young drivers in the market over the pandemic, and that certainly had an impact on large bodily injury. I'm loath to make any strong predictions on it for 2022, aside from the fact that we're well used to managing it well.
Yeah. I mean, if I could just make a point, you know, if when we're trying to model the year-on-year progression and loss ratios, if we don't know what the claims, you know, the premium rate increases and other companies do provide, it does really make it difficult and increase the information risk associated with investing in Admiral. Anyway, I've had my two cents. Thank you very much. Cheers.
Thank you. Our next question comes from the line of Yudish Chicooree with Autonomous Research.
Good morning, everyone. Thank you for taking my question. I have two questions, please. The first one, if I could go back on just in the industry pricing in the first couple of months. You talked about high single-digit price increases in motor and even higher in home. Is it possible at all to just, you know, give us a split of how new business pricing is progressing and what renewal pricing has done?
In the first couple of months. That's my first question. And then secondly, just on the international segment, I mean, in terms of the performance in 2021, I get the point that, you know, COVID related frequency benefits unwound last year and there's more price competition. Your results, if I compare it to, let's say, pre-pandemic levels in 2019, it's materially worse. So I was just wondering if you could give us a sense of the trajectory in the near term. Because you mentioned you're increasing prices significantly in the U.S., I would think at least that segment could deliver significant improvement this year. But what about the European segment? Is that basically gonna take a few more years before it breaks even again? Thank you.
Morning. I'll go to answer the question on prices in the market in the first couple of months, and then Costi will cover on the international side. What we have seen so far in the market only relates to new business prices. We're pleased to say that we feel on average, the market has behaved very rationally. We don't yet have information on the impact on renewal prices, but I am going to assume given what we have seen in new business, that in car we will see around mid-single digits decreases in renewals and a bit higher decreases in household. Again, we don't have this information, and it will take a few months until we can know more about what's happening in the market.
Got it. Thank you.
Morning. For international, I think the angle that you're looking for primarily is Europe. For Europe, I would say that strategy is unchanged. We want to build long-term sustainable businesses which deliver meaningful value to the group, and we are continuing to build scale, and this will likely continue in the future. As a reminder, we are in the toughest part of the market cycles, in particular in Italy and Spain. In addition, growth costs generally more in Europe than in the U.K. because of a less efficient distribution. Also we are expanding towards new source of traffic like agencies and intermediaries, and we are making investments for that.
In 2021, we delivered a strong double digit growth in a flattish market, and we are well placed to continue growing and hopefully benefiting in the near future of cycles reversions. In summary, I would say the trajectory of our European businesses is strong, and we will continue to build scale to deliver long-term value for the group. Thank you.
All right. Got it. Thank you.
Thank you. Our next question comes from the line of Rhea Shah with Deutsche Bank.
Thank you. I've just got two questions. My first one comes back to the FCA pricing. Some of your larger peers have implied that they've maintained market share in at least motor in the first couple of months of this year. I just wanna see if you can give any comments on your own market share. Then my second question is on Admiral Pioneer. What sort of trajectory do you expect for the Pioneer losses over the next couple of years?
Morning. Regarding the first couple of months of the year, I could say that our time stop has increased a bit when we compare it to the second half of last year, and that has translated into a small increase in new business market share. However, having said that, I will caution to read too much into this. This is gonna be a very dynamic market in the next few months, and it's too early to make concrete comments in the first half of the year. With regard to Admiral Pioneer, the main intent of Admiral Pioneer is really to build business for the longer run, and to do so in a way that is quite agile and cost effective. We have a structure in place that is really ready to test, learn, pivot, potentially fail and potentially succeed very fast.
We don't expect this to be a massive change in our investment profile in the longer term. Just as a reminder, in the past, we always experiment on new products and new proposition. We're doing this in a way that we think is more effective and more efficient. We will push on the accelerator when we find something that is very exciting and we feel that we've created something special. I wouldn't expect, as mentioned, massive change to our investment profile in the overall context of Admiral profit.
Okay. Thank you.
Thank you. Our next question comes from the line of Thomas Bateman with Berenberg.
Hi there. Sorry, me again. I just wanna come back to the reserving question one more time. The 2021 booked loss ratio does seem very, very conservative at 90% given some of the frequency discounts. But I take the point that you're saying margin's down a little bit. I'm just trying to understand why. I know at half year it felt like you processed a few more large BI claims. Is it to do with that or is it to do with maybe inflation concerns or just kind of weak pricing in 2021? Any more color you can give on that is really great. Just secondly, on the international division, again, you gave the impression then that you were looking at more agents and intermediaries.
Is this a slight change in strategy away from PCWs? Thank you.
Hi, Tom. I'll do the first one. The 2021 booked loss ratio, we've gone from 90% against an ultimate of 85%.
It tends to be conservative early on on the ultimate basis, and it'll be very conservative early on on a book basis, and it'll develop down over time. Is it more conservative than usual? I think there are obviously many things that go into the determination of a loss ratio. Frequency is one, inflation is another. Weak pricing, as you called it, was maybe a bit strong. Pricing is another factor that goes into it. All those taken into account, we've gone for 85% as the ultimate at this point, strongly expecting that'll develop down over time. Do I think it's unduly conservative? I think it's Admiral-like conservatism rather than unduly conservative. Does that make sense, Tom?
Yes, it does. There's that, so that's in line with your conservative. The margin's come down, so again, why has that come down? Is it to do with kind of the reserve releases that you booked at half year in 2021, or is there something else going on there?
No, not really. We've been saying for a little while that we thought that our margin was at the upper bounds of what it actually could be, and we'd expect it to come down over time as things were more stable in the market. That's what we've done at the end of 2021. There's no particularly dramatic reason. A large BI, more of it or less of it isn't necessarily a factor. What we're just seeing is a slightly more stable outlook for claims into 2022, and so we've reduced the margin slightly, certainly not materially, and it's still very conservative.
That's brilliant. Thank you. Just on the international stuff.
On international, I would say that broadly speaking, the strategy is unchanged, and we want to build large and sustainable businesses. We acknowledge that distribution has some growth, direct distribution has some growth challenges. Clearly has grown less than we expected years ago. We need also to consider that in Europe, we are observing different shopping behaviors, and in particular, in the low part of the cycles, people shop less online. Expanding towards new distribution channels was for us a good move, and we believe that we can deploy Admiral competitive advantages also in this distribution channel, primarily risk selection and customer service. We stay committed to build long-term larger business towards distribution expansion.
Brilliant. Thank you.
Thank you.
Thank you. Our next question comes from the line of Philip Ross with Mediobanca.
Hi, good morning. A couple on U.K. motor, please. Firstly, thank you Adam. Claims inflation. It is a bit elevated at the moment, but I guess you're used to dealing with claims inflation over, say, 6 percentage points in the chart you show. How do you think about the whiplash savings? Do you think the sort of few points of savings that you expect to make can help pay for higher claims costs? Or is there a sort of separate dynamic in where those savings might be passed on through premiums to customers? Secondly, on large BI, we do continue to see I think lower levels of serious injuries on U.K. roads or certainly on the government data available to mid-year 2021. Can you give us any color on what you see in your portfolio currently on large BI?
Maybe just how long those sorts of trends take to come through or to manifest themselves in reserve releases? Thanks.
Hi, Philip. It's Adam here. I'll do large BI first 'cause it's a bit quicker. I think last year on large BI was generally unremarkable for us. That's the most I can say on it really. On whiplash, you know, the frequency picture's becoming more apparent, but severity is still quite hard for us to understand. You know, as you pointed out in your question, you know, the savings will pass back to customers. You know, we're certain the range we've given is good, and it's really hard for us to say anything more than that at the moment. As and when it becomes clearer this year, we'll report back.
Okay, thanks.
Thanks, Phil. We're going to move on to web chat questions. There are a number of questions that came through earlier on pricing renewals, FCA. I think Cristina's answered all of them. There is one on the international for Costantino. Costi, you sound more bullish on the U.S. market than ever. Do you feel you now understand the nuances of this new market well enough to drive more consistent growth here?
On the U.S., we have understood that efficient acquisition is key and possible to achieve, and that we have built a good operation with well-established insurance capabilities, and we need greater scale. The U.S. is the largest market where we operate, and it offers a meaningful opportunity for diversification. As the market is large, we need a longer time to develop a self-sustainable business, and it is worth reminding that test and learn approach is in our DNA. We need to build a greater scale and we are conscious that acquisition costs are materially higher than the European ones. We progressively shifted towards more efficient source of traffic like agencies and price comparisons, which deliver a very positive 10% growth year-on-year. But we managed to keep the acquisition costs flat when the market increased by 12%.
Claims frequency and severity higher than pre-pandemic levels has affected the results this year. The market is quickly adjusting the price levels and to respond to that, and we are doing the same. Overall, I would say that we are making good progress. We're confident that we have built a good business with solid insurance capabilities like risk selections and claims handling, but also with a very good technology. We believe in the importance of the U.S. market for our strategy, and we continue to adopt a rational approach to growth.
To manage with discipline the loss ratio with the aim of building a long-term self-sustainable business. Thank you.
Thanks. Our next question is from Faizan Lakhani. I think both for you, Geraint. The first one is, it would be my assumption that the 2021 underwriting year would still be a very good year given the residual COVID benefits, and in conjunction with the new structure I think reinsurance is referring to. Would it be fair to say that profit commissions on that year should still be very strong next year? The second question is related to household. Could you provide additional color on how the household insurance profit commission structure works? Could we see a step change in commissions if a combined ratio goes below a certain level?
Thanks, Marisja. The one of the parts of the first question was about the new reinsurance structure. That actually only takes effect from the 2022 underwriting year. Actually that's the thing for the future or the current underwriting year rather than anything that will affect 2021. On 2021, we'd still expect that to be a profitable year, I think for sure. It'll develop from where we've currently booked it and where we currently project it. Clearly it'll be different to 2020 and 2019. The level of profit commission you might see on that year in the next 12 or 24 months will be lower than 2020, for sure. I still think we'd expect to see profit commission come through on that year as it develops. It'll, we think pretty strongly, be profitable.
On household, we haven't disclosed the full details of the contracts. There are a couple of what have been long-term quota share contracts, and it is the case that the higher, the better the margin, the higher percentage of profit that Admiral will make on those contracts. You have seen some of that come through in the last 12 months in 2021. Those contracts actually are starting to come towards their expiry over the next couple of years. We'll be looking at either extensions or different structures there with hopefully some improvements. We've not started those conversations yet. That's something to look out for maybe in the next couple of years. Hope that helps.
Thank you. Our next question comes from the line of James Pearse with Jefferies.
Hi. Sorry, just a follow-up question, from me, actually on the internal model. I just wondered if we could get an update on the timeframe of your internal model being implemented. It would also just be really helpful to get some more color on what has been causing that delay. Thank you.
Hi, James. Yeah, nothing really too much to report on that at this point. We're working away on that. Team's working very hard in the background on it. When we've got something really material or interesting to say, we'll obviously come back and say it. The reasons for the delay, I think I spoke about either six months or twelve months ago, and they remain the same. The scope of the model, the platform it's built on, the documentation around it, all that type of stuff. That's what we're working on. The plan's underway. When we've got something to report, we'll obviously come back with it.
Thank you.
Thank you. Our next question comes from the line of James Shuck with Citi.
Yeah. Hi. Thanks for taking my follow-ups. I just had a couple of things to return to. One of them is the topic of IFRS 17. I think I asked the question at the first half results when just thinking about the margin over best estimate and the degree of redundancy that can be booked under IFRS 17. Geraint, I think you said you wouldn't expect any change to the overall level of reserving conservatism that you book. I wondered if you could just expand a little bit on that for me, because getting kind of mixed messages from other companies in Europe and in the UK when it comes to the degree of prudence that you can book, partly because you need to reserve closer to best estimate.
Just keen to get your thoughts around that and a little bit more clarity, please. Secondly, a sort of bigger picture question when it comes to the 2022 outlook in the U.K. motor market. Admiral's kind of consistently outperformed and done a great job of doing that on a year-by-year basis. Would you say that 2022 is gonna be a more difficult year to outperform, just given the degree of dislocation in the market? Thank you.
Hi, James. On IFRS 17, we don't believe there's anything in that accounting standard that says you can't hold a conservative margin if that's what the company decides it's appropriate to do. Given our past track record, assuming we've got the ability to do that under the new accounting standard, you might expect us to take a similar approach and maintain a similarly conservative risk appetite on margin. I don't expect at this point we're gonna see a radical change in the level of margin that we hold in our reserves. The accounts, of course, will look quite different, and there'll be some enhanced disclosure on that level of conservatism in the back end, I'm sure. In terms of the overall level of margin, at this point, we're not expecting a change in it.
On your second question on 2022 outlook, I think all our comments were in terms of outperformance were compared to 2020 and 2021. As Geraint explained, for last couple of years, profit increased by 50%, and we had an average combined loss ratio on a reported basis for UK Insurance in the 50s. It is really not plausible that we will continue on that pace unless there are a very strong combination of favorable events. But we're not in relation to the market as a whole, where I think we do have a very, very strong position. We're well placed for the change ahead in terms of FCA pricing reform, as Cristina mentioned, strong pricing, strong foundation.
We also have a lot of other business that are growing everywhere in the group and in U.K. in particular are very excited about the loans business. We don't talk much about it, but it is a very exciting opportunity for us, and we're very well placed also in terms of continue to be competitive in our core markets. Just to remind that it was only in reference to a very exceptional year with some feature of the pandemic that we all hope are not gonna be repeated this year.
Okay. Thank you very much.
Thank you. I'll now turn the call back over to Milena Mondini for any closing remarks.
Thank you very much. I'd just like to thank everybody for your time, for your questions. Really appreciate it. I also would like to really thank my colleague and all Admiral employees and staff. It was an exceptional set of results, record profit and dividend and all. More importantly, a great service to our customer and a lot of innovation and effort to put us in a good position for the future. Very happy to confirm that we can reward also all our colleagues through the share scheme that has been confirmed this year as well, with up to GBP 3,600 for all our employees across the group, 10,000 people. Thank you very much and see you in six months.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating, and you may now disconnect.