Motor insurer Admiral delivered another robust performance. Its combined ratio (of claims to premiums) of 94 per cent made the company decently profitable at the underwriting level. Its market share is rising, too - the number of UK vehicles it insured rose 15 per cent in the half year to 2.8m; and Admiral reported an 11 per cent overall rise in UK premium rates.
But that rise in rates is nothing special for UK motor insurers. Motor rates have been rising rapidly in the past year or so following an extended period of sector losses; yet analysts don't think the pace of rising rates will last much longer. Moreover, Admiral underwrote just 27.5 per cent of its premiums in the period, with the remainder being passed to big reinsurers, such as Munich Re. Management says that, given the attractive loss rates from such business, the reinsurers have to accept a lower margin. But that has still left Admiral needing to share lots of potential profit with reinsurance partners at a time when rates were soaring.
Meanwhile, Admiral's investment portfolio is focused on cash. That's low risk, but it does make for a slender investment return in today's world of ultra-low interest rates.
Broker Numis Securities expects full-year pre-tax profit of £308m, giving EPS of 82.8p (from £260.4m and 70p in 2010).
ADMIRAL (ADM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,437p | MARKET VALUE: | £3.89bn | |
| TOUCH: | 1,436-1,438p | 12-MONTH HIGH: | 1,754p | LOW: 1,366p |
| DIVIDEND YIELD: | 5.2% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 145p* | COMBINED RATIO: | 94.2% | |
| Half-year to 30 Jun | Net premiums (£m) | Pre-tax profit (£m) | Investment income (£m) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 125 | 127 | 3.6 | 32.6 |
| 2011 | 202 | 161 | 5.1 | 39.1 |
| % change | +62 | +27 | +42 | +20 |
Ex-div: 28 Sep Payment: 21 Oct *Includes intangible assets of £84.2m, or 31p a share | ||||
