9th Jul 2014 10:33
LONDON (Alliance News) - Admiral Group PLC said Wednesday that car insurance turnover in the UK decreased in its first-half, despite customer numbers increasing, as the insurer was hit by declining premiums, prompting it to lower its margin expectations.
In a trading statement for the six months to June 30, 2014 the FTSE 100-listed company said UK car insurance turnover decreased to GBP0.85 billion, compared to GBP0.92 billion in the first-half 2013. Group turnover also decreased during the period, coming in at GBP1.0 billion, compared to GBP1.1 billion last year.
While not enough to boost its financial results, group customer numbers - the lifeblood of the insurer's business - rose 4% during the period, reaching 3.9 million, compared to the 3.6 million recorded last year, attributed to "positive improvements in retention levels."
UK car insurance vehicle count increased to 3.1 million from 3.0 million last year, said Admiral.
The company said its rates were flat over the first-half, with total premiums down around 9% on the first-half of 2013, as a result of reductions made in 2013. "In the UK there are some signs that premiums are no longer falling but we have yet to see firm evidence of an inflection point and a return to premium growth," said CEO Henry Engelhardt.
Admiral said its expectations for the UK business in the full-year remain unchanged, though noted that its margin expectations for business earned this year are lower than in recent years, mainly as a consequence of the decline in premiums. Much of the impact of the reduced margin will be reflected in earnings of subsequent years, said the insurer, "UK claims development on the back years (2012 and prior) has been positive and we continue to forecast good levels of reserve releases."
On an international basis, the company said car insurance turnover revenue remained in line with the GBP0.1 billion recorded last year, and vehicle count rose by 0.1 million to 0.6 million during the half. "Our European price comparison businesses have had a good, profitable first half of the year and we're encouraged by the very early indicators from comparenow.com in the US, which would suggest meriting an increase in marketing investment in the second half," said Englehardt.
Admiral also said Wednesday that it intends to offer up to GBP200 million of ten year,
tier two, subordinated notes, following meetings with fixed income investors in the UK beginning 15 July.
"Since Admiral went public in 2004 we have been unleveraged, but we think that with a favourable market and rates that seem very reasonable, now is a good time to diversify our capital base," said Englehardt.
"It is an opportune time to strengthen and diversify our capital resources as we make a prudent transition into Solvency II in 2016, with the attendant regulatory capital requirement and buffers. The additional capital also sets us up well for the growth we expect from all our businesses in the coming years whilst being consistent with our existing dividend policy," added the CEO.
The company will announce its interim results for the six months to June 30, 2014 on August 13, 2014.
Admiral Group shares last traded at 1,574.00 pence per share.
By Alice Attwood; [email protected]; @AliceAtAlliance
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