Admiral Group Plc · LSE:ADM
Admiral — H1 2024 Earnings Presentation
56 slides from Admiral's earnings presentation, Aug 15, 2024
Slide 1: Admiral Group plc 2024 Half Year Results
Admiral Group plc Overview 2024 Half Year Results Milena Mondini de Focatiis, Group CEO Group Financials 15th August 2024 Geraint Jones, Group CFO UK Insurance Cristina Nestares, UK Insurance CEO International Insurance Costantino Moretti, Head of International Insurance Wrap-up Milena Mondini de Fo
Slide 2: Overview
At Admiral, we have been putting our customers and people first since 1993 and it has made us the business we are today Overview Milena Mondini de Focatiis, Group CEO 2
Slide 3: Growth in profits, revenues and customers with strong capital position
Growth in profits, revenues and customers with strong capital position • Sustained growth and improved margins from disciplined portfolio +43% Group turnover £3.2bn management • Main driver UK Motor, leveraging favourable market positioning +12% Group customers 10.5m • Improved results on internatio
Slide 4: Strong results in UK motor; different mix in International
Strong results in UK motor; different mix in International Highlights Looking ahead • Substantial turnover growth, driven by higher > 50% • Inflation and prices reducing, market UK Motor average premiums and customer growth Turnover growth increasingly competitive • Leveraged enhanced competitivenes
Slide 5: Steady progress beyond Motor in the UK
Steady progress beyond Motor in the UK UK Household, Admiral Money and UK Travel • Nearly 30% of total group customers at H1, +40% 2014-24 CAGR Customers and Turnover Pre-tax profit +17% • c.10% of group total turnover 2.8m 2.4m £310m +37% • More established businesses Household, 1.9m Admiral Money
Slide 6: Continued progress on our strategy
Continued progress on our strategy Business diversification Motor evolution Increase customer engagement and business resilience, Evolve our propositions for changes in mobility enriching our proposition beyond motor • L’olivier: higher profits and >500k customers, • EVs: sustained growth and favour
Slide 7: Continued focus on our Customers, People and Society
Continued focus on our Customers, People and Society; group targets approved by Science Based Targets initiative Our Customers Our Society Top 2 Trustpilot (or equivalent) UK & Europe 1 • AAA MSCI (upgraded in July 2024) • 23 Sustainalytics (upgraded in H1 2024) >45 Group average NPS2 Admiral Group’
Slide 8: Group Financials
Our pricing and underwriting excellence, and strong focus on data, supported our performance in a challenging cycle Group Financials Geraint Jones, Group CFO 8
Slide 9: Effective response to cycle leads to strong profit and customer growth
Effective response to cycle leads to strong profit and customer growth £310m 77.5p 198% 45% 71.0p +32% +35% +16pts +6pts +39% Profit before tax EPS SII ratio ROE DPS HY23: £234m HY23: 57.6p HY23: 182% / FY23: 200% HY23: 39% HY23: 51.0p Turnover1 Customers UK Motor £2,403m +58% UK Motor 5.48m +15% £3
Slide 10: Group profit up 32%, led by UK Motor growth
Group profit up 32%, led by UK Motor growth Group profit before tax (£m) H1 2024 H1 2023 Change • UK Insurance profit +£59m (+20%) • Motor: £359m v £298m – higher revenue, much UK Insurance1 363.3 303.9 59.4 better combined ratio, higher net investment return European Insurance (1.3) 2.8 (4.1) • Hom
Slide 11: Group profit up 32%, led by UK Motor growth
Group profit up 32%, led by UK Motor growth • US Insurance: £3m profit v £10m loss Group profit before tax (£m) H1 2024 H1 2023 Change • Substantial improvement due to intense focus on loss ratio and expenses (portfolio ~30% smaller v June ’23) UK Insurance1 363.3 303.9 59.4 • Admiral Money: £7m v £
Slide 12: UK Motor: strong H1 with market share gain and improved combined ratio
UK Motor: strong H1 with market share gain and improved combined ratio UK Motor income statement (£m) H1 2024 H1 2023 Change 1 Turnover up 58% from higher average premiums and +15% growth in Turnover 2,402.7 1,520.9 881.8 1 customer numbers vs. HY23 (+11% vs. YE) 2 Higher rates driving higher invest
Slide 13: Loss ratios developing positively; risk adjustment prudence held flat in H1
Loss ratios developing positively; risk adjustment prudence held flat in H1 UK Motor projected ultimate loss ratio (discounted)1 UK Motor booked loss ratio (discounted)1 ()pts movement since December 2023 ()pts movement since December 2023 Ultimate LR at HY24 Booked LR at HY24 First projection of ul
Slide 14: Continued financial strength and strong H1 results lead to a higher interim dividend
Continued financial strength and strong H1 results lead to a higher interim dividend 198% SII ratio1 Interim dividend 59% 3% Pay-out ratio 90% 89% 92% CY: 47% -25% 200% -11% 198% PY: 12% -28% 71p Normal+Special DPS 60p Own Fund Market Change More Than Interim 51p YE23 HY241 HY24 generation impacts2
Slide 15: Summary: Financials
Summary: Financials • Improved results and market share gain in UK Insurance from strong response to very difficult cycle • Claims inflation reducing gradually; market becoming more competitive • Claims reserve strength position remains stable and very prudent • Very strong solvency position maintai
Slide 16: UK Insurance
Our commitment to delivering good customer outcomes has helped us reach the milestone of insuring over 8m policies in Britain UK Insurance Cristina Nestares, UK Insurance CEO 16
Slide 17: UK Insurance: very strong Motor performance and good progress on non-motor diversification
UK Insurance: very strong Motor performance and good progress on non-motor diversification Customers: 8.2m Turnover: £2.7bn PBT: £363m ● +17% growth in customers vs. HY23: ‐ Motor >5m, +15% ‐ Household >1.8m, +8% ‐ Travel >800k, +53% +17% +57% Pet >100k, x2.9 +20% ‐ 8.2m £2.7bn £363m £4m 7.0m £0.3bn
Slide 18: Strong competitiveness drove motor growth in H1; market prices decreased
Strong competitiveness drove motor growth in H1; market prices decreased particularly in Q2 ABI NB/RN market prices Confused NB market prices Admiral Times Top3 YoY change1 QoQ change2 Indexed 100, Q1 22 40% 40% 140 30% 30% 120 100 20% 20% 80 10% 10% 60 40 0% 0% 20 -10% -10% 0 Q1 23 Q2 23 Q3 23 Q4 2
Slide 19: UK Motor claims inflation remaining high but reducing
UK Motor claims inflation remaining high but reducing Damage Market total claims frequency1 ● Market frequency remains 10-15% below pre-Covid level despite overall 14% road usage having largely recovered 12% ● Market claims inflation elevated but slowing down; repair costs increasing Pre-covid level
Slide 20: Household: good performance in improving market conditions
Household: good performance in improving market conditions UK Household market rebuilding costs and average premiums • High building materials cost and claims inflation starting to Indexed 100, average H1 2017 stabilise 160 ABI House Rebuilding Cost Index (HRCI)1 140 ABI NB/RN average premium2 • Inc
Slide 21: Expect H2 market prices and inflation to soften further for Motor
Expect H2 market prices and inflation to soften further for Motor; inflation expected to slow down in Household Pricing outlook Claims outlook Motor Motor • Market prices continuing to come down early Q3, with • Market damage inflation expected to remain high but reducing competition increasing; unc
Slide 22: International Insurance
Focusing on margin and expanding our propositions to deliver value to our 2m international customers International Insurance Costantino Moretti, Head of International Insurance 22
Slide 23: International Insurance highlights
International Insurance highlights Europe • Lower Motor profits largely due to conservative reserves in Italy for increased BI costs • Good performance in France (L’olivier) and solid progress in Spain (Admiral Seguros) nearing breakeven • Slower-than-expected market recovery, especially in Italy an
Slide 24: EU Insurance: continued focus on margins and efficiency
EU Insurance: continued focus on margins and efficiency EU Total customers (m) EU Total turnover (€m) • Customer and turnover trends reflect focus on margins and 1.99 1.96 399 pricing ahead of both competitors and inflation 375 1.74 0.46 0.50 L’olivier 316 145 L’olivier 0.41 135 • Competitive and ch
Slide 25: US Insurance: materially improved performance and considering the right long-term outcome
US Insurance: materially improved performance and considering the right long-term outcome Customers and turnover • Market: lower inflation and increased competition 239k 224k • HY24 profit of $3.8m vs. -$12.8m loss at HY23 156k ‐ Significant improvement driven by 2023 price increases ahead of market
Slide 26: Wrap-up
Wrap-up Milena Mondini de Focatiis, Group CEO 26
Slide 27: Strong results demonstrate agility and quality of the business
Strong results demonstrate agility and quality of the business • Strong volumes and margin improvements in H1 from navigating changing market dynamics well • Building optionality for the future beyond Motor, and continuing to strengthen our foundations for faster delivery, enhanced operational excel
Slide 28: Appendix
Appendix 28
Slide 29: Group Key Performance Indicators
Group Key Performance Indicators KPIs HY24 HY23 FY23 FY22 Group Turnover £bn 3.21 2.24 4.81 3.68 Customers m 10.53 9.41 9.73 9.20 Group profit before tax £m 309.8 233.9 442.8 361.2 Earnings per share 77.5p 57.6p 111.2p 95.4p Dividend per share (FY=total; HY=interim) 71.0p 51.0p 103.0p 112.0p UK Insu
Slide 30: Summary income statement
Summary income statement UK Insurance International Admiral Money Other Admiral Group £m HY24 HY23 FY23 HY24 HY23 FY23 HY24 HY23 FY23 HY24 HY23 FY23 HY24 HY23 FY23 Turnover 2,675.2 1,708.3 3,776.0 450.2 464.3 894.9 50.4 43.6 92.1 32.0 21.3 48.5 3,207.8 2,237.5 4,811.5 Insurance premium net of XoL 1,
Slide 31: Balance sheet
Balance sheet £m HY24 HY23 FY23 FY22 ASSETS Property, plant and equipment 82.0 81.4 90.1 89.8 Intangible assets 335.7 241.8 242.9 217.6 Corporation tax asset 16.2 — 20.4 9.1 Reinsurance contract assets 1,055.6 1,113.4 1,191.9 1,015.4 Financial investments 4,435.9 3,583.4 3,862.4 3,411.2 Deferred tax
Slide 32: Admiral Money: continued strong performance
Admiral Money: continued strong performance, delivering controlled growth and higher profit whilst maintaining prudence Outstanding loans balances +8% ● £7m profit vs. £3m in HY23, with efficient cost- income ratio of 39% ● Net interest income up 10% to £34m from higher net margins and a reduced pro
Slide 33: Investment update
Investment update June 2024 Dec 2023 June 2023 2% 6% 7% 8% 3% 3% 8% 8% Corporate bonds 11% Government bonds 46% Money market funds & other FV £4,789m 48% £4,215m 49% £4,044m Cash 23% 21% 16% Deposit Other1 13% 12% 16% 9% 8% 10% 17% 16% 20% 11% 12% 11% AAA AA £4,215m £4,044m A £4,789m 22% BBB 24% 19%
Slide 34: Investment update
Investment update £m HY24 HY23 • No change in investment strategy in period or forthcoming Underlying investment income yield 3.9% 3.0% • Broadly similar allocations and ratings Investment income £86.1m £58.4m • Higher investment income reflects increased market yields Unrealised losses on derivativ
Slide 35: Analysis of Other Group items
Analysis of Other Group items £m HY24 HY23 Other central costs (20.2) (15.2) • Other central costs increased primarily from project costs relating to the internal model, the US strategic review, and increased allocation of group employee expenses to central costs Business development costs (13.9) (7
Slide 36: Solvency ratio movements – HY23 to HY24
Solvency ratio movements – HY23 to HY24 7% 20% 80% 3% -33% -11% -50% 198% 182% HY23 Own Fund Own Fund Market impacts Change in SCR UK Risk margin More Than Interim dividend HY24 generation - CY generation - PY reforms acquisition 36
Slide 37: 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 38: UK Motor: Ogden discount rate plus risk adjustment sensitivities
UK Motor: Ogden discount rate plus risk adjustment sensitivities HY24 Ogden sensitivities: £m Impact on PBT gross of RI Impact on PBT net of RI • Reflect impacts on HY24 pre-tax profit and equity for changes to the Ogden discount rate sensitivities HY24 FY23 HY24 FY23 Ogden discount rate from the cu
Slide 39: UK Co- and reinsurance arrangements
UK Co- and reinsurance arrangements Car Household Other 38% 38% 38% 38% 70% 70% 70% 70% Quota Share Munich Re 40% 40% 40% 40% Admiral 22% 22% 22% 22% 30% 30% 30% 30% Admiral 2021 2022 2023 2024 2021 2022 2023 2024 • Munich Re continues to underwrite 40% of the UK • 40% quota share contract extended
Slide 40: 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 41: UK Motor: HY24 Total premium to Core product earned premium
UK Motor: HY24 Total premium to Core product earned premium £m 2,251 1,802 -449 1,449 1,384 -353 1,337 -65 -47 Decrease Total Total written Coinsurer share Admiral Gross Movement Gross earned Ancillary earned Admiral core XoL earned Admiral share of premiums 1 of total premiums written premiums in u
Slide 42: UK Motor: loss ratios, discounting and finance expenses
UK Motor: loss ratios, discounting and finance expenses UK Motor: future finance expense remaining1,3 Undiscounted loss ratios At financial year end 2017 2018 2019 2020 2021 2022 2023 2024 • No discounting for time value of money Best Estimate, net of XoL FY 2022 14.0 12.3 15.3 16.4 46.0 53.0 • Refl
Slide 43: UK Motor: undiscounted loss ratio development by underwriting year
UK Motor: undiscounted loss ratio development by underwriting year UK Motor: undiscounted booked LRs1,2,3 Development by financial year (colour-coded) Undiscounted ultimate Split by underwriting year (x axis) LRs by UWY1 104% HY24 FY23 97% 95% 96% 93% 94% 91% 86% 84% 85% UWY 77% 79% 73% 71% 74% 2023
Slide 44: UK Motor: reserve releases by underwriting year
UK Motor: reserve releases by underwriting year Net of XoL1 HY24: £216m £62m £56m £29m £24m £28m £17m UWY 2018 & prior 2019 2020 2021 2022 2023 2024 FY23: £393m HY23: £237m £98m £62m £81m £80m £65m £69m £48m £45m £43m £39m UWY 2018 & prior 2019 2020 2021 2022 UWY 2018 & prior 2019 2020 2021 2022 (1)
Slide 45: UK Motor: FY23 cumulative profit recognition
UK Motor: FY23 cumulative profit recognition Underwriting years Prior 2017 2018 2019 2020 2021 2022 2023 Total written premium, net of XoL cost 1,951 2,077 2,026 2,166 2,132 2,105 2,977 Total earned premium, net of XoL cost 1,951 2,077 2,026 2,166 2,132 2,105 1,403 Total Admiral premium net of XoL 1
Slide 46: UK Motor: HY24 cumulative profit recognition
UK Motor: HY24 cumulative profit recognition Underwriting years Prior 2017 2018 2019 2020 2021 2022 2023 2024 Total written premium, net of XoL cost 1,951 2,077 2,026 2,166 2,132 2,105 2,925 2,148 Total earned premium, net of XoL cost 1,951 2,077 2,026 2,166 2,132 2,105 2,547 551 Total Admiral premi
Slide 47: UK Motor: HY24 CY profit recognition
UK Motor: HY24 CY profit recognition Prior 2017 2018 2019 2020 2021 2022 2023 2024 TOTAL Total written premium, net of XoL cost 0 0 0 0 0 0 0 (52) 2,148 2,096 Total earned premium, net of XoL cost 0 0 0 0 0 0 0 1,144 551 1,695 Total Admiral premium net of XoL 0 0 0 0 0 0 0 908 429 1,337 Insurance se
Slide 48: UK Motor: illustrative earning profile of underwriting year profit
UK Motor: illustrative earning profile of underwriting year profit Illustrative UK Motor underwriting profit • In a profitable underwriting year: earning profile in a profitable year ‐ Y1 – expected to be slightly profitable on average with any 100% underwriting profit and other income largely offse
Slide 49: UK Motor: illustrative accounting for prior period reserve releases
UK Motor: illustrative accounting for prior period reserve releases Underwriting year 2017 2018 2019 2020 2021 Admiral TWP net of XoL (A)1 1,373 1,480 1,456 1,562 1,551 Illustrative: undiscounted and discounted LRs 95.0% Discounted booked loss ratio 90.0% FY22 (B) 61% 67% 69% 63% 86% 85.0% FY23 (C)
Slide 50: UK Motor: illustrative quota-share accounting example
UK Motor: illustrative quota-share accounting example UWY 20X1 FY 20X1 FY 20X2 FY 20X3 Total Value Value Value • UK Motor quota share recoveries 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 sh
Slide 51: UK Motor: illustrative QS accounting commutation example
UK Motor: illustrative QS accounting commutation example • Uses illustrative example of QS accounting UWY 20X1 FY 20X1 FY 20X2 FY 20X3 Total cost for UK Motor Value Value Value Undiscounted combined ratio (CR) 118% 108% 98% • Impact of commutation depends on Total written recovery/(cost) 149 53 (24)
Slide 52: UK Motor: illustrative example of QS accounting for prior period reserve releases
UK Motor: illustrative example of QS accounting for prior period reserve releases IFRS 17 Example 1 Example 2 Example 3 This illustrative example uses the QS example set out on the previous slides QS premium (E) 1,200 1,200 1,200 to illustrate the impact on QS recoveries of favourable changes in los
Slide 53: Admiral Group's ESG ratings
Admiral Group’s ESG ratings 2023 score: C- 2024 score: 23 2024 score: AAA upgraded upgraded 2023 score: 41/100 2023 score: B 53
Slide 54: 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, buffers or to purchase shares for employee share schemes D
Slide 55: Admiral brands
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Slide 56: Disclaimer
Disclaimer For the purposes of this disclaimer, "presentation" means this document, any oral presentation, any question and answer session and any written or oral material discussed or distributed during the analyst presentation. The information contained in this presentation has not been independen