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Admiral profits beat despite Ogden charge

The insurer produced a better-than-expected half-year result thanks to higher reserve releases
August 14, 2019

Higher reserve releases meant Admiral (ADM) beat market pre-tax profit expectations during the first half, despite incurring a £33m charge to account for the government’s change to the Ogden rate. 

IC TIP: Hold at 2101p

UK motor pre-tax profits nudged up marginally as management said it was increasing rates ahead of the market. However, those rate increases still lagged claims inflation, which pushed up the motor attritional loss ratio by 2.2 percentage points, excluding the Ogden rate change. Premium growth also continued to slow as the insurer aimed to protect margins over volume growth. Household insurance swung to a pre-tax profit of £4.2m, from last year's loss of £1.9m, thanks to more benign weather that lowered the loss ratio. 

International insurance customer numbers grew more than a fifth, although the combined ratio – of claims costs as a proportion of premium income – still came in at a lossmaking 103.3 per cent. That was due to higher underwriting losses in the US via its Elephant Auto business. The burgeoning loans business almost doubled customer balances to £421m and losses to £4.3m, from £6.4m.  

Analysts at Peel Hunt forecast net tangible assets of 203p at the December 2019 year-end, from 205p in the prior year. 

ADMIRAL (ADM)    
ORD PRICE:2,101pMARKET VALUE:£6.11bn
TOUCH:2,100-2,102p12-MONTH HIGH:2,300pLOW: 1,886p
DIVIDEND YIELD:6.1%PE RATIO:15
NET ASSET VALUE: 279pCOMBINED RATIO:92.3%
Half-year to 30 JunNet premiums (£m)Pre-tax profit (£m)Investment income (£m)Dividend per share (p)
201832421117.260
201934921818.363
% change+8+3+6+5
Ex-div:05 Sep   
Payment:04 Oct