Re Contract

Admiral Group PLC
07 December 2006


                 Coinsurance and Reinsurance Arrangements 

Admiral Group ('Admiral') announces that it has extended its long-term
coinsurance arrangement with Great Lakes Reinsurance (UK) PLC (Great Lakes), a
subsidiary of Munich Re Group. Admiral has also signed new reinsurance contracts
with Swiss Re and Partner Re.

Proportional support by Munich Re and other leading reinsurers has been an
important part of Admiral's business model since its formation in late 1999.
Admiral's first long-term proportional reinsurance contract was with Munich Re
and provided support from January 2000. This was superceded by a new coinsurance
contract effective from January 2002 through Great Lakes . This contract was due
to lapse in December 2008. It has now been agreed that Great Lakes will continue
to support Admiral's business beyond the end of the current agreement. The new
extended agreement is a continuous contract. However, both parties have a right
to cancel with two years notice, exercisable no earlier than 31 December 2012.

Admiral has also signed a five-year quota share contract with Swiss Re and a
two-year quota share contract with Partner Re. Swiss Re will reinsure 10% of
Admiral's UK car insurance premium in 2007 to 2009 inclusive, and have an option
to reinsure 7.5% and 5% in 2010 and 2011. Partner Re will reinsure 7.5% of
Admiral's UK car insurance premium in 2007 and 2008.

Great Lakes Coinsurance Contract

Great Lakes currently underwrites 65% of Admiral's UK private motor business.
This percentage will decline by 5 percentage points each year from 2007 to 2011
inclusive, so that in 2011 and thereafter 40% of Admiral's UK car insurance
premiums will be underwritten by Great Lakes . Admiral will be required, under
the terms of the contract, to underwrite for its own account at least 25% (22.5%
for 2007 only) of its UK private motor business. The balance of the premium can
be underwritten by Admiral or reinsured elsewhere at Admiral's discretion.

The current agreement with Great Lakes requires Admiral to seek Great Lakes'
permission if Admiral wants to grow the number of policyholders in any one
calendar year by more than 11%. The new agreement includes a new, more flexible,
growth cap, which allows Admiral to vary the speed of policy growth in response
to cyclical changes in underwriting profitability. Admiral does not believe that
the new growth cap will have a material impact on the company's growth pattern
unless and until substantial premium inflation returns to the UK private car
insurance market.

The contract also includes a revision of the profit commission structure. As
with the existing contract, the level of profit commission paid by Great Lakes
to the Group will continue to vary depending on the underwriting margin
achieved. The revised commission arrangements are not expected to have a
material impact on Admiral's reported profits in 2007 and 2008, mainly due to
delayed recognition of underwriting profit (and hence profit commission)
resulting from Admiral's conservative reserving policy. The profit commission
arrangement for 2010 onwards will potentially lead to substantially increased
profit commission payments to Admiral per pound of premium ceded.

Swiss Re and Partner Re Quota Share Contracts

The Swiss Re and Partner Re quota share contracts provide additional and
flexible protection against a negative insurance result (being the underwriting
result plus investment income). Protection is provided throughout the range of
probable loss ratio outcomes and there is a cap on the extent of protection
provided by these contracts. However, the profit commission arrangements allow
Admiral a greater share of the underwriting result than the current quota share
contracts with Swiss Re and Axis.

Admiral's Share of Premium

The new quota share arrangements and the re-negotiation of the coinsurance
contract gives Admiral the following flexibility with respect to how much of its
UK car insurance premium it can underwrite itself:

+------------------+---------------+---------------------+------------------+
|Underwriting Year |Minimum Admiral|Committed to         |Share that Admiral|
|                  |share          |Co-insurance and     |has option to     |
|                  |               |Quota share contracts|insure or reinsure|
+------------------+---------------+---------------------+------------------+
|2007              |     22.5%     |        77.5%        |        0%        |
+------------------+---------------+---------------------+------------------+
|2008              |     25.0%     |        72.5%        |       2.5%       |
+------------------+---------------+---------------------+------------------+
|2009              |     25.0%     |        60.0%        |      15.0%       |
+------------------+---------------+---------------------+------------------+
|2010              |     25.0%     |        52.5%        |      22.5%       |
+------------------+---------------+---------------------+------------------+
|2011              |     25.0%     |        45.0%        |      30.0%       |
+------------------+---------------+---------------------+------------------+
|2012 onwards      |     25.0%     |        40.0%        |      35.0%       |
+------------------+---------------+---------------------+------------------+

Commenting on the extended contract, Admiral's Chief Executive Henry Engelhardt,
said, 'Admiral's use of coinsurance and reinsurance support has helped us
combine rapid growth with cash generation and significant dividend payments. In
addition, it has helped us to provide our shareholders with a higher quality,
lower risk profit stream by providing some protection against the underwriting
cycle.

'However, our consistent track record of outperformance versus the UK motor
market means that our underlying insurance business continues to generate
returns on capital significantly above our cost of capital. It makes sense for
us to position ourselves for the next up-turn and to look to generate profit
growth, not only through improved combined ratios, but also through the option
of keeping a larger share of the premium written for our own account.

'Considering where we are in the UK car insurance underwriting cycle, we feel it
is prudent to delay any substantial increase in Admiral's retained share at
least until 2009, especially given the availability of support from reinsurers
of the calibre of Swiss Re and Partner Re.'

Henry Engelhardt goes on to say that, 'Munich Re and its subsidiary, Great Lakes
have been fantastic partners for Admiral and we look forward to a long and
mutually beneficial relationship for years to come. We are also glad to deepen
our reinsurance relationships with Swiss Re and Partner Re. These contracts give
us a firm foundation for the growth of our UK business over the coming years.'

ANALYSTS: There will be a conference call today for analysts at 0830 GMT.
Participants are invited to email Rob Bailhache at Financial Dynamics on
[e-mail] for the conference call details.

For further information please contact:


Financial Dynamics                  [phone]
                                    [e-mail]
Rob Bailhache
Nick Henderson

www.admiralgroup.co.uk



                      This information is provided by RNS
            The company news service from the London Stock Exchange