Admiral Group Plc · LSE:ADM
Admiral — H1 2023 Earnings Presentation
58 slides from Admiral's earnings presentation, Aug 16, 2023
Slide 1: Admiral Group plc 2023 Half Year Results
Overview Milena Mondini de Focatiis, Group CEO Group Financials Geraint Jones, Group CFO UK Insurance Cristina Nestares, UK Insurance CEO International Insurance Costantino Moretti, Head of International Insurance Admiral Money Milena Mondini de Focatiis, Group CEO Admiral Group plc Strategic Outloo
Slide 2: Overview
Colleagues celebrating the 2023 Top 10 awards. We celebrate our brilliant people with regular colleague recognition events. Overview Milena Mondini de Focatiis, Group CEO 2
Slide 3: Resilience and premium growth in a continued challenging environment
Resilience and premium growth in a continued challenging environment • Solid results in the context of a challenging market +21% Admiral Group Turnover • Premium growth across all businesses and geographies • Customer growth continues in all businesses except UK and US motor +4% Admiral Group Custom
Slide 4: Inflation persists, cycle is turning and Admiral remains disciplined
Inflation persists, cycle is turning and Admiral remains disciplined Market • Persistent high inflation continued across markets, remained • Insurance cycle navigated with agility, underwriting discipline and higher than market had anticipated prudent reserving • Market average premiums catching up
Slide 5: Group Financials
Admiral continues to take a long-term approach to the business, maintaining pricing discipline and a prudent approach to reserving for insurance claims and loans credit losses. Group Financials Geraint Jones, Group CFO 5
Slide 6: Inflation still impacting, but solid H1 2023 results; first reporting under IFRS17
Inflation still impacting, but solid H1 2023 results; first reporting under IFRS17 £234m 9.41m £2.24bn Profit before tax1 Customers2 Turnover3 H1 2022: £225m H1 2022: 9.05m H1 2022: £1.85bn +4% +4% +21% 57.6p 182% 39% 51.0p Earnings per share1 Solvency ratio Return on equity1 Dividend per share H1 2
Slide 7: Strong pricing response to inflation evident in customer and turnover metrics
Strong pricing response to inflation evident in customer and turnover metrics UK Motor £1,521m 4.76m UK Household £157m 1.67m Insurance1 Turnover Customers Insurance Turnover Customers H1 2022: £1,272m H1 2022: 5.14m H1 2022: £121m H1 2022: 1.46m +20% -7% +30% +14% International £464m 2.21m £1.03bn
Slide 8: IFRS17 – big changes to accounting & presentation; limited impact on bottom line
IFRS17 – big changes to accounting & presentation; limited impact on bottom line expected moving forward Reminder of Key Messages: • New accounting standard for insurance contracts • Doesn’t change ultimate profitability, or cash, or dividend capacity, or solvency, or strategy • Potential for change
Slide 9: High claims inflation still prevalent in results, underlying picture improving
High claims inflation still prevalent in results, underlying picture improving across the Group IFRS17 IFRS4 ● UK Insurance profit +£13m Group Profit Before Tax ● UK Motor £298m v £291m: increase in H1 2023 H1 2022 Change H1 2022 investment income; various other (£m) offsetting impacts UK Insurance1
Slide 10: High claims inflation still prevalent in results, underlying picture improving
High claims inflation still prevalent in results, underlying picture improving across the Group IFRS17 IFRS4 • US Insurance loss £10m v £14m Group Profit Before Tax ● High claims inflation persists H1 2023 H1 2022 Change H1 2022 (£m) ● Very robust actions in 2022 and H1 2023 UK Insurance1 303.9 290.
Slide 11: UK Motor - Higher investment income contributing to solid H1 profits
UK Motor - Higher investment income contributing to solid H1 profits UK Motor Income Statement (£m) H1 2023 H1 20221 Change Notes on changes Turnover 1,520.9 1,271.8 +249.1 1 Despite lower customer numbers in H1 2023 v 2022, significantly higher (and still rising) average premium Underwriting result
Slide 12: No significant change in claims inflation; reserves remain very prudent
No significant change in claims inflation; reserves remain very prudent UK Motor Projected Ultimate Loss Ratio (discounted)1 UK Motor Booked Loss Ratio (discounted)1 New IFRS17 () % movement since December 2022 () % movement since December 2022 basis! Ultimate projection after 1 year Booked loss rat
Slide 13: Strong solvency position maintained with high dividend pay-out ratio
Strong solvency position maintained with high dividend pay-out ratio ● Solvency capital requirement still based on H1 2023 Capital Position1 (£bn) standard formula plus add-on 185% 180% 182% ● Own funds include new £250m tier 2 capital £1.24bn £1.20bn £1.25bn (untendered residual 2024 bond of £55m n
Slide 14: Summary: Financials
Summary: Financials • Impacts of high inflation continue to be seen through the results in H1 2023, though Group customer numbers continue to grow and turnover increased strongly • Underlying performance is improving notably across the Group and some markets are turning more positively • Capital pos
Slide 15: UK Insurance
We have been named the 3rd Best Workplace™ for Women in the UK in 2022 & 2023 UK Insurance Cristina Nestares, UK Insurance CEO 15
Slide 16: UK Insurance Highlights
UK Insurance Highlights • Motor pricing discipline, with continued strong price increases ~23pts YTD; resulted in 7% decrease in Motor customers YoY (-3% in H1) • Motor claims inflation remains high, with some early signs of improvement; slight increase in frequency • Household continues to grow des
Slide 17: Motor pricing discipline with continued strong price increases
Motor pricing discipline with continued strong price increases ~23pts YTD, results in 7% reduction in customers (-3% in H1) UK Motor - Market Average Premium Admiral Times Top3 YoY change Indexed 100, Jan 2022 - July 2023 50% Confused - Annual, NB ABI - Annual, NB/RN 120 40% 100 30% 80 20% 60 10% 40
Slide 18: Motor claims inflation remains high, with some early signs of improvement
Motor claims inflation remains high, with some early signs of improvement; slight increase in frequency Car Road Usage1 Frequency 1.20 ● Car road usage increased towards end of H1 1.00 ● Frequency remains 10-15% below pre-Covid 0.80 levels; partly impacted by whiplash reforms 0.60 Damage inflation 0
Slide 19: Household continues to grow in the context of price increases and high inflation
Household continues to grow in the context of price increases and high inflation UK Household - ABI Market average premium, NB/RN1 YoY Change Average Premium • Market premiums have increased from H2 £323 £320 £329 12% 10% £309 £312 £318 £318 £314 £318 £298 £299 £303 £305 £315 350 2022 and into H1 20
Slide 20: For H2 2023 we expect continued price increase, with claims inflation stabilising
For H2 2023 we expect continued price increase, with claims inflation stabilising Pricing – Outlook Claims – Outlook Motor Motor • Admiral will continue to increase prices in H2 to reflect inflation • Frequency saw an uptick at the end of H1 but remains 10-15% and expects market prices to continue t
Slide 21: International Insurance
Our international businesses play a key role in our group strategy International Insurance Costantino Moretti, Head of International Insurance 21
Slide 22: International Insurance Highlights
International Insurance Highlights US ● Strong action has led to reduced losses as expected, whilst high market claims inflation persists ● On track with assessing options Europe ● Good growth and profit progress against continued challenging inflationary environment ● Increasing prices ahead of the
Slide 23: US Insurance: Results as expected with lower losses, whilst high market inflation continues
US Insurance: Results as expected with lower losses, whilst high market inflation continues US Customers and Turnover 400 Elephant Result ($m) 3 • On track with plan to reduce losses in H1 350 Turnover (m) $190 2023, with focus on materially improving the $166 $170 300 $159 underwriting result and m
Slide 24: EU Insurance: Growth and profitability despite a challenging market environment
EU Insurance: Growth and profitability despite a challenging market environment EU Motor Combined Result (IFRS17) (€m)1 EU Motor Customers (million) • EU profitable with good growth rate • Results driven by decision to increase prices ahead of the market since Q2 2022 1.94 € 5.4 1.49 1.70 Seguros •
Slide 25: Admiral Money
Admiral Money has continued to achieve sustainable growth Admiral Money Milena Mondini de Focatiis, Group CEO 25
Slide 26: Admiral Money built on strong fundamentals; increasing profitability and cautious growth
Admiral Money built on strong fundamentals; increasing profitability and cautious growth despite challenging environment in 2023 • Strong performance in H1 Loans Gross Stock Balances (£m) • Continued profitability; £2.7m • Loans balance growth of 16% vs full year • Controlled cost base: Strong cost-
Slide 27: Strategic Outlook & Wrap Up
In 2023 Admiral turns 30 years old … Our company culture is based on four pillars: Fun, Communication, Equality, and Recognition and Reward Happy Birthday Admiral! Strategic Outlook & Wrap Up Milena Mondini de Focatiis, Group CEO 27
Slide 28: Continued progress on unchanged Group strategy
Continued progress on unchanged Group strategy Admiral 2.0 Motor Evolution Strengthen core competencies and increase speed of delivery Evolve our proposition for changes in mobility on customer needs Over half of UK Household & Motor policies priced using next gen data analytics Electric Mobility: >
Slide 29: Business Diversification – developing options for the future
Business Diversification – developing options for the future Higher NPS score and building on our existing strengths UK PRIVATE Why? UK Multi-Cover Travel Advantage • Stronger customer propositions • Higher customer engagement and satisfaction +25% +10pt • More resilient business model Better Pet Gr
Slide 30: Admiral remains focused on our Customers, our People and our Society
Admiral remains focused on our Customers, our People and our Society Our Customers Our Society • Top Rated on TrustPilot across Europe1 • Community: Focused approach to impact Employability in the community • Group NPS average of 502 • Supported over 1000 people in the broader community into • Award
Slide 31: Wrap-up: Solid progress and focus on long term value in a challenging market
Wrap-up: Solid progress and focus on long term value in a challenging market • Solid result in a challenging market • Premium growth across all businesses and geographies • The cycle is turning, and we are well positioned for the future • Product diversification showing stronger progress • Businesse
Slide 32: Appendix
Appendix 32
Slide 33: Group Key Performance Indicators
Group Key Performance Indicators KPI H1 2023 H1 2022 FY 2022 Group Financial Turnover £bn 2.24 1.85 3.68 Customers m 9.41 9.05 9.20 Group pre-tax profit £m 233.9 224.6 361.2 Earnings per share 57.6p 60.8p 95.4p Dividend per share 51.0p 60.0p 112.0p UK Insurance Customers (000s) 7.01 6.94 6.96 Total
Slide 34: Summary Income Statement
Summary Income Statement1 UK Insurance International Admiral Money Other Admiral Group £m H1 2023 H1 2022 FY 2022 H1 2023 H1 2022 FY 2022 H1 2023 H1 2022 FY 2022 H1 2023 H1 2022 FY 2022 H1 2023 H1 2022 FY 2022 Turnover 1708.3 1409.9 2784.3 464.3 393.7 795.9 43.6 25.7 59 21.3 18 41.7 2237.5 1847.3 36
Slide 35: Balance Sheet
Balance Sheet H1 2023 H1 2022 FY 2022 £m £m £m ASSETS Property, plant and equipment 81.4 93.1 89.8 Intangible assets 241.8 182.6 217.6 Corporation tax asset 0.0 4.3 9.1 Reinsurance assets 1,113.4 965.3 1,015.4 Financial investments 3,583.4 3,393.7 3,411.2 Deferred income tax 12.2 24.2 28.4 Insurance
Slide 36: Solvency Ratio Waterfall – FY 2022 to H1 2023
Solvency Ratio Waterfall – FY 2022 to H1 2023 0% FY 2022 Prior Period Loss Generation of Impacts of Credit Impacts of Changes in Change in Dividend Additional Tier 2 HY 2023 Ratio Current Period Spreads Risk Free Yields SCR capital Improvements Economic Capital 36
Slide 37: UK Motor Insurance: Booked Loss Ratio Development by Underwriting Year
UK Motor Insurance: Booked Loss Ratio Development by Underwriting Year UK Motor Insurance Booked Loss Ratio % (undiscounted)1 Development by financial year (colour-coded) Split by underwriting year (x axis) 104% 100% Ultimate loss ratio by 92% 97% 95% 92% underwriting year 91% 87% (undiscounted)1 82
Slide 38: Ogden Discount Rate plus Risk Adjustment Sensitivities
Ogden Discount Rate plus Risk Adjustment Sensitivities1 Ogden Discount Rate Sensitivity2 H1 2023 (unaudited) By 100bps to +0.75% +74.9 By 50bps to +0.25% +35.9 By 25bps to 0.00% +17.7 By 25bps to -0.50% -19.2 By 50bps to -0.75% -45.4 By 100bps to -1.25% -112.4 UK Motor Risk Adjustment Sensitivity H1
Slide 39: Investment update
Investment update Jun ‘22: £3,900m Dec ‘22: £3,706m Jun ‘23: £4,044m Cash Deposit Government bonds Corporate bonds Money Market Funds and other fair value 1 Other 1 AAA AA A BBB 2 Other 2 Notes: (1) ‘Other’ comprises of private debt and equity investments; (2) ‘Other’ comprises of sub-BBB unrated se
Slide 40: Investment update
Investment update H1 2023 H1 2022 • No change in investment strategy in period or forthcoming Underlying investment income • Very limited changes in allocation and ratings 3.0% 1.4% yield • Higher investment income reflects increased market yields Investment income £58.4m £27.8m • Rate increases thr
Slide 41: Analysis of Other Group items
Analysis of Other Group items1 • Other interest and investment income decreased to £2.3 £m H1 2023 H1 2022 million, noting the non-repeat of the sale of UK government Other interest & investment bonds generating £4.7 million in H1 2022 £2.3 £8.0 income • Compare.com reported a loss of £2.6 million,
Slide 42: Solvency Ratio sensitivities
Solvency Ratio sensitivities The sensitivities below have been selected to show a range of impacts on the reported base case solvency ratio. They cover the two main material risk types - insurance risk and market risk. Within each risk type the sensitivities performed cover the underlying drivers of
Slide 43: UK Co- and Reinsurance Arrangements
UK Co- and Reinsurance Arrangements Car Household Admiral Munich Re Other Admiral Quota Share 38% 38% 38% 38% 70% 70% 70% 70% 40% 40% 40% 40% 22% 22% 22% 22% 30% 30% 30% 30% 2020 2021 2022 2023 2020 2021 2022 2023 • 38% 'Other' quota share in place until at least 2024 • Quota share contracts where A
Slide 44: UK Car Co- and Reinsurance Arrangements
UK Car Co- and Reinsurance Arrangements1, 2 Proportional reinsurance (quota share) – 58% from 2022 underwriting year onwards Type Munich Re Proportional co-insurance – 20% from 2022 underwriting year onwards (20% Munich Re, 38% other reinsurers) Cost to Admiral Variable, depending on combined ratio
Slide 45: Group Profit H1 & FY 2022: IFRS4 to IFRS17 by Business
Group Profit H1 & FY 2022: IFRS4 to IFRS17 by Business UK Insurance: • Impacts primarily relate to UK Motor. Further analysis follows • Lower prior year release of risk adjustment (IFRS17) compared to risk margin (IFRS4) • Impact larger in H2 European Insurance: • Small offsetting impacts in H1 • La
Slide 46: Group Profit H1 & FY 2022: IFRS4 to IFRS17 PBT Waterfall
Group Profit H1 & FY 2022: IFRS4 to IFRS17 PBT Waterfall Risk adjustment vs booked margin: • IFRS4 and IFRS17 at 95th percentile risk adjustment at YE 2022 • Difference in when that change happened: under IFRS17 at transition, under IFRS4 during 2022 Discounting and quota share recoveries: • High di
Slide 47: UK Motor Profit H1 & FY 2022: IFRS4 to IFRS17 PBT Waterfall
UK Motor Profit H1 & FY 2022 : IFRS4 to IFRS17 PBT Waterfall • UK Motor drives majority of IFRS 4 to IFRS 17 movements in 2022 • Primary driver is timing of the movement in risk adjustment • Discounting Gross net of XoL claims for FY 2022 is a positive impact on current year claims (circa £50m) offs
Slide 48: Group Equity Waterfall FY 2021: IFRS4 to IFRS17
Group Equity Waterfall FY 2021: IFRS4 to IFRS17 1 2 Notes: (1) Events Not in Data (2) Onerous loss component shown net of reinsurance recoveries 48
Slide 49: IFRS4 into IFRS17 Income Statement
IFRS4 into IFRS17 Income Statement IFRS4 income statement (management view) IFRS17 income statement (management view)++ New under IFRS17 A Gross earned premium A Gross earned premium Removal of management margin, inclusion of B XoL reinsurance premium L +M Other insurance revenue QQ ENIDs and risk a
Slide 50: UK Motor H1 2022: IFRS17 vs IFRS4
UK Motor H1 2022: IFRS17 vs IFRS4 IFRS 4 numbers re-presented in IFRS 17 IFRS 4 Add back Split out IFRS 4 IFRS 17 Difference £m As reported Quota share Other revenue Re-presented format: • IFRS 4 originally reported on net of all Insurance premium revenue 239.6 572.5 53.4 865.5 865.5 0.0 reinsurance
Slide 51: Loss and Expense Ratios
Loss and Expense Ratios RNS Core Total Total Gross, Core Product Net 1. Reported ratios £m Note Other Revenue Net of XoL Product Gross of XoL Reinsurance Reinsurance • Used to describe overall performance Insurance Premium Revenue (E) 5b/5d 907.7 53.5 961.2 935.2 881.7 Other Insurance Revenue1 5b 58
Slide 52: Loss Ratios, Discounting and Finance Expenses
Loss Ratios, Discounting and Finance Expenses UK Motor: Future Finance Expense Remaining1,3 Undiscounted loss ratios Underwriting Year • No discounting for time value of money At financial year end 2016 2017 2018 2019 2020 2021 2022 2023 • Reflective of ultimate cash settlements FY 2021 8.7 11.0 19.
Slide 53: UK Motor Cumulative Profit Recognition FY 2022: IFRS17 vs IFRS4
UK Motor Cumulative Profit Recognition FY 2022: IFRS17 vs IFRS4 Underwriting Year • Presentation aligned to IFRS17 format: £m Prior 2017 2018 2019 2020 2021 2022 Total Total written premium, net of XoL cost 1,951 2,077 2,026 2,166 2,132 1,859 • Starting point based on total premium net Total earned
Slide 54: UK Motor Profit Recognition HY 2023
UK Motor Profit Recognition HY 2023 Underwriting Year £m Prior 2017 2018 2019 2020 20213 2022 2023 Total Total written premium, net of XoL cost 1,951 2,077 2,026 2,166 2,132 2,100 1,298 Total earned premium, net of XoL cost 1,951 2,077 2,026 2,166 2,132 1,859 308 Total Admiral premium net of XoL 1,3
Slide 55: Illustrative example: QS Accounting & Guide/Notes
Illustrative example: QS Accounting & Guide/Notes UWY 20X1 FY 20X1 FY 20X2 FY 20X3 Total • UK Motor quota share recoveries Value Value Value earned based on expected cashflows Total written premium net of XoL 1 2,000 2,000 2,000 • Lower premiums and recoveries: same ultimate cost as IFRS 4 QS share
Slide 56: Dividend Policy Overview and Dates
Dividend Policy Overview and Dates Dividend policy and guidance ▪ Admiral will pay 65% of post-tax profits as a normal dividend each half-year ▪ Admiral expects to continue to distribute all earnings not required to be retained for solvency and buffers ▪ Therefore expect normal plus special dividend
Slide 57: Admiral brands
Admiral brands Admiral ‘Admiral @GLapiaToR Money s | Qualitas ‘Diamond veygo . toolbox be Auto “vi ot by @gmiral Admiral i Lolivier Connect | dmit PLC Admiral . Admiral Aces: (©) elephant. Admiral | SEGUROS conte: MJBell counbes “i * = assicurazioni Admiral 57
Slide 58: Disclaimer
Disclaimer The information contained in this document has not been independently verified and no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions contained herein. No