15th Aug 2018 12:47
LONDON (Alliance News) - Car and home insurer Admiral Group PLC on Wednesday reported an increase in interim profit thanks to a strong performance from its core UK motor division, prompting a 7% dividend hike.
Shares in the insurer were up 3.5% at 2,061.00 pence each in midday trading, the top gainer in the FTSE100 index.
Admiral posted a 9.1% increase in pretax profit to GBP211.0 million for the six months to June 30 from GBP193.4 million pretax profit recorded in the comparative year ago period.
The company's overall group pretax profit, however, was dented by GBP38.2 million worth of costs and charges, which included share scheme costs and widened loss in loans business unit.
Share scheme charges totaled GBP21.6 million - where over 10,000 Admiral staff received free shares worth GBP1,800 - up from GBP16.9 million a year before. The company's loans business recorded a GBP6.4 million loss, widened from GBP1.6 million loss a year ago.
First half net revenue increased 8.6% to GBP598.1 million from GBP550.6 million. Net insurance premium revenue increased 7.4% to GBP323.7 million from GBP301.3 million.
Turnover - total premiums plus other revenue - increased to GBP1.66 billion in the first half from GBP1.45 billion. Return on equity fell to 54% from 55% in the same period last year.
Admiral increased its total customers by 13% to 6.2 million from 5.5 million, with UK insurance customers increasing 19% to 5.1 million from 4.3 million.
Share Centre investment research analyst Graham Spooner said: "Best known for its car insurance and cheesy television adverts, Admiral announced its interim results this morning giving a boost to its employees with many set to receive GBP1,800 of shares."
"Investors should be pleased with the 7% increase in the dividend to 60.0 pence and further encouragement should be found in the increasing customer base up 14% to 6.23 million as well as the enlarged overall turnover up 14% to GBP1.66 billion."
He continued: "The share price has trended rather sideways over the last two years, however we continue to recommend the shares as a ‘hold’, for medium risk investors geared to income due to the strength of the motor business in the UK, improving overseas operations and the strong capital position."
The company's UK insurance business reported interim pretax profit of GBP247.0 million, up 9.4% from the GBP225.8 million achieved last year.
Within the UK business, the motor division saw an 11% profit increase to GBP249.5 million from GBP224.2 million, in the period, mainly as a result of "growth in ancillary revenue and instalment income".
Admiral said the division's profit mainly stemmed from motor policy upgrades underwritten by Admiral - including changes in the arrangements of the instalment income with German insurer Munich Reinsurance Co.
Admiral now retains all instalment income on its car insurance business compared to the 60% previously - which totalled GBP37.5 million in the period, up from GBP22.5 million.
UK Motor net insurance premium revenue grew 3.0% to GBP221.1 million from GBP214.7 million a year ago.
The number of cars insured in the UK was over four million and the number of vans insured increased to over 200,000, up from the 4.0 million total vehicles insured at the end of the previous period.
The company's UK household insurance division swung to a interim loss of GBP1.9 million from GBP1.6 million profit a year ago mainly due to the so-called Beast From The East cold snap in February and March.
The household division, however, managed to increase the number of households insured by 42% to 778,100 from 548,200, with a similar increase in revenue to GBP68.3 million from GBP48.3 million.
Admiral's international car insurance unit posted a loss of GBP600,000 compared to a, much wider, GBP10.1 million loss last year. Within this, the European insurance business - comprising operations in Spain, Italy and France - posted its first ever profit of GBP2.5 million, versus a GBP5 million loss a year ago.
The remainder of the international business, Elephant in the US, narrowed its loss to GBP3.1 million from a GBP5.0 million loss last year.
The group's combined ratio was 87.4%, improved from 90.0% a year before, with the lower the figure the more profitable Admiral's underwriting.
The car and home insurer's solvency ratio was 196% in the first half, down from 214% the year before, with a loss ratio of 65.2%, down from 68.0%.
Admiral said this was the result of increased solvency capital requirement - mainly due to growth in premiums and reserves in the UK Motor insurance division.
The company declared an interim dividend of 60.0p per share, a 7.1% increase year-on-year from 56.0p paid the previous year.
The dividend represents a 40.8p normal dividend, plus a special dividend of 19.2p.
Looking ahead, despite the "potential for market volatility", Admiral does not "currently foresee" the Brexit having a material adverse impact on the day-to-day operations of the company.
Chief Executive Officer David Stevens said: "Zut alors. Nos operations europeennes sont rentables! Or probably more accurately, given that over half of our European customers are Italian - le nostre compagnie Europee sono in profitto. Moreover, the European insurers delivered overall profitability whilst growing the business by almost a fifth in a year."
"But that's not the only important milestone in the first half, which was characterised by substantial growth across almost all our businesses."
"Most importantly, the core UK car insurance business continues to grow both in terms of profit and customer numbers. Early in 2018 we passed the four million mark for cars on cover - the car that hit the milestone was a Peugeot 108; our first 25 years ago was an Isuzu Piazza."
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