Before recovering slightly, shares in Admiral (ADM) were down nearly 8 per cent on the day these numbers were issued. The motor insurance provider adopted a more cautious stance in the wake of revised compensation calculations, and this led to lower reserve releases than previously expected. The company also warned that lower releases and profit commission are likely to stay in place for the next two to four years.
In February this year, the government revised the so-called Ogden discount rate for calculating personal injury damages from 2.5 per cent to minus 0.75 per cent, effectively increasing the size of compensation payouts. Premiums have since hardened, but Admiral's UK car combined ratio (of claims and expenses as a proportion of income) widened sharply from 75 per cent to 82.9 per cent, due to the lower level of releases. So, while the number of insurance customers grew from 3.9m to 4.34m, profits were broadly flat at £226m.
Profit commission, which is revenue from co and reinsurance partners, fell from £41.7m to £28.8m as a result of less substantial improvements to booked loss ratios on prior years. Although small, UK household insurance saw the number of properties insured up by 44 per cent to 548,200. The international insurance business managed to trim its loss from £12.9m to 10.1m.
Analysts at Peel Hunt are forecasting adjusted pre-tax profits of £383m and EPS of 107p for the year to December 2017 (from £272m and 77p in 2016).
| ADMIRAL (ADM) | ||||
| ORD PRICE: | 2,009p | MARKET VALUE: | £5.72bn | |
| TOUCH: | 2,007-2,009p | 12-MONTH HIGH: | 2,219p | LOW: 1,651p |
| DIVIDEND YIELD: | 2.6% | PE RATIO: | 25 | |
| NET ASSET VALUE: | 218p** | COMBINED RATIO: | 81.3% | |
| Half-year to 30 Jun | Net premiums (£m) | Pre-tax profit (£m) | Investment income (£m) | Dividend per share (p*) |
| 2016 | 260 | 190 | 33.4 | 36.8 |
| 2017 | 301 | 193 | 23.3 | 37.9 |
| % change | +16 | +2 | -30 | +3 |
| Ex-div: | 7 Sep | |||
| Payment: | 6 Oct | |||
| *Not including special dividend of 18.1p a share in 2017 and 14.2p in 2016 **Includes intangible assets of £158m, or 56p a share | ||||
