12th Jan 2005 07:00
Admiral Group PLC12 January 2005 12 January 2005 Admiral Meets IPO Expectations and Enters 2005 with Confidence Before entering its closed period on 21 January 2005, Admiral Group plc("Admiral", or "the Company") today provides an update on current trading. TheCompany will announce its preliminary results for the year ended 31 December2004 on 21 March 2005. Admiral expects to deliver profits in 2004 in line with management expectationsset out at the time of the Company's Initial Public Offering in September 2004. 2004 Highlights •Total premium written rose 27% to £470 million The premium written by Admiral for its own account and on behalf of reinsurerpartners grew from £372 million in 2003 to £470 million in 2004. The policycount at year-end grew from 778,000 to 1,008,000, lifting Admiral's share of theUK private car insurance market from 3% to over 4%. •New business policies sold rose 45% to 557,000 The increase in new business policies sold in 2004 from 383,000 in 2003 to557,000 reflects the success of Admiral's internet offering in general, andelephant.co.uk in particular. During 2004, Admiral's share of the internet newbusiness market remained slightly above 20%. For the market as a whole, newbusiness sourced from the internet continued to increase its share of newbusiness activity, rising from 30% of new car insurance sales in October 2003 to38% of new sales in October 2004*. •Ancillary revenue averaged £51 per policy Admiral's performance in terms of ancillary revenue per policy in the secondhalf of 2004 exceeded that of the first half. Revenue per policy of £51 for 2004as a whole was in line with revenue per policy achieved in 2003. The rapidgrowth of policies written combined with a stable level of revenue per policyled to an increase of around 30% in overall ancillary revenues in 2004. Market Developments The market saw a substantial increase in overall marketing spend, with press andTV spend rising 41% year on year**. These higher levels of marketing expenditureand the continued growth of the internet business mean 2004 is likely to haveseen a further shift in market share from brokers to direct insurers. Admiral believes premium rates in the overall market drifted down by around 3%during 2004, but our conversion data suggests the decreases were more focussedon the lower premium segments which are not part of Admiral's core market.Following a small increase in rates in the second half of 2004, Admiral's ownrates finished the year roughly 2% below the level at the start of the year. These market developments are consistent with the outlook for the UK private carinsurance market described by Admiral at the time of the Initial PublicOffering. Admiral predicts gradual market deterioration from the peak levels ofprofitability of 2001/2 due to the failure of premium inflation to keep up withclaims inflation. Admiral anticipates that, whilst there will be deterioration in marketprofitability, the market will not experience the sustained and substantialrate-cutting activity that led to record high combined ratios in the late 1990s. Instead, Admiral expects a greatly flattened cycle. This reflects both the rapidconsolidation of the market since the late 1990s (with Royal Bank of Scotlandand Norwich Union now accounting for almost 50% of the private car insurancemarket), and higher barriers to entry in a direct-dominated, rather thanbroker-dominated, market. The substantial rise in marketing spend in 2004 is consistent with this analysisof the market, with the leading players rationally investing in extra marketingrather than substantial rate-cutting to defend share. Outlook for 2005 Admiral has already implemented the first of a planned series of rate increasesfor 2005. This reflects our plan for 2005 of decelerating policy growth andwidening margins relative to industry averages, as industry profitabilitydeteriorates. The Company does not, therefore, currently anticipate askingMunich Re for permission to exceed 11% policy count growth in 2005***. Admiral implemented the new Insurance Conduct of Business (ICOB) rules ondisclosure at point-of-sale during October 2004 and November 2004 in advance ofthe new FSA regime taking effect in January 2005. Experience to date suggeststhese rules will not have a material effect on either revenues or costs. Against the market backdrop of deteriorating profitability, Admiral's plan forcontinued, if slower, volume growth in 2005 and its unique business model giveit confidence that it will meet investors' expectations, with continuedout-performance versus the car insurance market as a whole. Henry Engelhardt, Chief Executive Officer of Admiral, said: "We are delightedwith our current business performance. We are trading exactly in line with ourexpectations at this point in the cycle and as communicated at the time of theIPO, in September 2004. "I want to thank everyone who has made Admiral the success that it is for theirhard work during the past historic year. We are in great shape and look forwardto what promises to be an exciting year of sustained and stable growth for theCompany," he added. For further information, please contact:Admiral 029 2043 4224Louisa Scadden Financial Dynamics 020 7269 7200Robert BailhacheCaroline Ledosquet www.admiralgroup.co.uk Notes * Source: ebenchmarkers. Admiral's market share of internet new business in thesix months to Oct 03 = 21%; 6 months to April 04 = 24%; 6 months to Oct 04 =23%. ** Source: AC Nielsen, Dec 02-Nov 03 v Dec 03-Nov 04. *** Under the terms of its reinsurance arrangements with Munich Re, Admiralrequires Munich Re's permission to exceed 11% policy count growth in anycalendar year. About Admiral Admiral is a fast growing financial services intermediary with a track record ofprofitability. Admiral principally sells private motor insurance and ancillaryproducts, such as cover for breakdown, roadside assistance and legal expenses.Admiral markets directly to the public in the UK through its four core brands:Admiral, elephant.co.uk, Diamond, and Bell Direct. The Group also offers customers online quotes through its brand Confused.com,the UK's first insurance aggregator. Unlike other brands, Confused.com does notsell insurance. Visitors to Confused.com's website fill out their details onceonline and Confused.com finds the cheapest quotes available on the internet fromits large panel of insurers. Admiral's motor insurance is underwritten primarily by third party insuranceproviders, with Admiral controlling all pricing and underwriting decisions andadministration. Admiral also retains a proportion (presently 25%, net of quotashare reinsurance) of the private motor underwriting for its own account. Admiral was admitted to the Official List of the London Stock Exchange on 28September 2004 following a Global Offer of Ordinary Shares to institutionalinvestors that was more than seven times subscribed. On 20 December 2004 theCompany became a constituent of the FTSE 250 index. The Ordinary Shares tradeunder the ticker symbol ADM.L. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Admiral