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Growth stalls at Admiral

RESULTS: After years of rapid expansion, car insurer Admiral's growth engine has stalled and motor premium rates are falling
August 30, 2012

Half-year profit growth slipped into single-digit percentage territory at motor insurer Admiral after years of robust double-digit growth. The group's combined ratio (of claims to premiums) deteriorated a percentage point on the year to 95.2 per cent and broker Numis Securities only expects full-year pre-tax profits to rise a modest 5 per cent to £316m, giving EPS of 87p (82p in 2011). So despite a healthy 7 per cent yield, the shares are going nowhere.

IC TIP: Hold at 1163p

Motor premium rates have also stalled - down 8 year cent year on year as competitors sacrificed price for market share and further slippage is expected. That's in sharp contrast to hefty rate hikes of recent years - rates rose 15 per cent in the year to end-December, for example. Moreover, UK customer growth is sliding - vehicle numbers insured rose just 1.7 per cent in the half, compared with 4.9 per cent growth in the previous six months. While other revenue per vehicle slipped to £82 per car, from £84 and, from April, a further £7 a vehicle will go - reflecting the ban on personal injury referral fees. Meanwhile, the small international unit's loss soared to £8.9m from last year's £3.2m loss, even though vehicles insured there rose 63 per cent.

ADMIRAL (ADM)

ORD PRICE:1,163pMARKET VALUE:£3.16bn
TOUCH:1,161-1,164p12-MONTH HIGH:1,358pLOW: 773p
DIVIDEND YIELD:7.0%PE RATIO:14
NET ASSET VALUE:160p*COMBINED RATIO:95.2%

Half-year to 30 JunNet premiums (£m)Pre-tax profit (£m)Investment return (£m)Dividend per share (p)
20112021615.1039.1
20122471726.9045.1
% change+22+7+35+15

Ex-div:12 Sep

Payment:12 Oct

*Includes intangible assets of £88.9m, or 33p a share