Expectations for a stellar set of trading figures from Admiral (ADM) were high. During the past three years, the insurer has consistently paid out special dividends, improved its combined ratio and grown its customer numbers. However, with new chief executive David Stevens warning of low interest rates dampening the value of the group's own funds - held to pay out future claims - investors were less than impressed with these first-half results, with the shares falling as much as 8 per cent. The downturn in the yield curve amounted to a 20 percentage point decline in the insurer's Solvency II ratio to 180 per cent.
However, Admiral continued to deliver against the majority of its primary metrics. Net insurance premium revenue for its core UK car insurance business grew 12 per cent to £211m. Its motor loss ratio improved to 56.9 per cent from 58.2 per cent a year earlier thanks to higher reserve releases, and an additional 340,000 customers were gained, taking the total to 3.52m.
Management is keen to expand operations outside the UK, launching its Elephant Auto brand in two new US states and growing its youngest and smallest French business L'olivier. The latter insured 75,400 vehicles last year, an increase of three-quarters on the previous comparable period. However, its US business made a £13m loss, despite an impressive uplift in sales, as a result of heavy investment.
The price comparison market may be competitive, but Admiral continued to make good inroads. Confused.com drew in more visitors, boosting sales by 13 per cent to £44m. This, together with rising prices, also improved its operating margin to 19 per cent from 12 per cent. Money spent getting compare.com off the ground in the US resulted in a £9m loss for the business. This offset a stronger performance from Europe resulting in an overall £9m loss for international price comparison.
Analysts at Peel Hunt expect adjusted pre-tax profit of £427m in the year to December 2016 and EPS of 119p (from £380m and 107p in 2015).
ADMIRAL (ADM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 2,096p | MARKET VALUE: | £5.91bn | |
| TOUCH: | 2,092-2,096p | 12-MONTH HIGH: | 2,288p | LOW: 1,400p |
| DIVIDEND YIELD*: | 5.5% | PE RATIO: | 19 | |
| NET ASSET VALUE: | 230p** | COMBINED RATIO: | 82.2% | |
| Half-year to 30 Jun | Net premiums (£m) | Pre-tax profit (£m) | Investment income (£m) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 229 | 182 | 9.6 | 51.0 |
| 2016 | 260 | 190 | 33.4 | 51.0 |
| % change | +13 | +4 | +248 | - |
Ex-div: 8 Sep Payment: 7 Oct *Includes special dividends, but excludes 11.9p return of capital **Includes intangible assets of £156m, or 55p a share | ||||
