The compulsory nature of car insurance has left Admiral well placed to cope with the recession. Indeed, it's possible that today's strained economic conditions might even be working in Admiral's favour - rather then ditch their cars, Admiral points out that struggling car owners simply drive less, meaning fewer accidents. So earnings, while hardly soaring, are at least growing, and the group's combined ratio (of claims to premiums) stands at 89 per cent - meaning a solidly profitable underwriting performance.
The group's traditionally competitive market is looking in better shape, too. Admiral's core UK car business managed to push premium rates up by around 5.5 per cent in the first half, meaning an 8 per cent year-on-year rate increase. That, says management, is in line with wider car market rate movements. Admiral's UK customer numbers rose by a decent looking 17 per cent in the period, too. The price comparison side of the business - dominated by Confused.com - also looks in good shape. Confused continues to boast a dominant-looking third of the total car insurance comparison market and revenues there grew 10 per cent to £40.2m in the six-month period. However, operating profit from the price comparison operations slipped 29 per cent to £11m after a big hike in media spend pushed up operating expenses by 39 per cent.
Meanwhile, Admiral's investment portfolio remains conservatively placed in safe-looking high quality money market funds and cash. Inevitably, in today's ultra low interest rate environment, returns on those investments have plummeted - from 5.1 per cent last year to just 1.8 per cent now. Management doesn't expect that to change much until market interest rates start improving.
Numis Securities expects a full-year pre-tax profit of £214m, giving EPS of 58.1p and a combined ratio of 83.6 per cent (£202m and 54.9p in 2008).
More analysis of company results
ADMIRAL (ADM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,050p | MARKET VALUE: | £2,794m | |
| TOUCH: | 1,049-1,050p | 12-MONTH HIGH: | 1,090p | LOW: 729p |
| DIVIDEND YIELD: | 3.8% | PE RATIO: | 19 | |
| NET ASSET VALUE: | 106p** | COMBINED RATIO: | 89% | |
| Half-year to 30 Jun | Net premiums (£m) | Pre-tax profit (£m) | Investment income (£m) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 77 | 100 | 12.5 | 12.3* |
| 2009 | 101 | 105 | 6.90 | 27.7 |
| % change | +31 | +5 | -45 | +125 |
Ex-div: 7 Oct Payment: 21 Oct *Excludes 13.7p special dividend **Includes intangible assets of £78.2m, or 29p a share | ||||
