Admiral Group plc · LSE:ADM
Admiral — H1 2019 Earnings Presentation
50 slides from Admiral's earnings presentation, Aug 14, 2019
Slide 1: Admiral 2019 Half Year Results
Admiral 2019 Half Year Results 14th August 2019 Introduction David Stevens, Group CEO Group Geraint Jones, Group CFO UK Insurance Cristina Nestares, UK Insurance CEO International Insurance and Comparison Milena Mondini, Head of UK and EU Insurance Loans Scott Cargill, CEO of Admiral Loans Duncan Ru
Slide 2: Group
Group Geraint Jones – Group CFO
Slide 3: Highlights
Highlights Customers Turnover1 9% 8% 11% 6.74m 6% 15% £1.76bn H1 2018: 6.23m H1 2018: £1.66bn Profit before tax2 Solvency ratio Earnings per share 4% £220m 3% xx% 190% xx% 2% xx% 63.0p H1 2018: £212m H1 2018: 196% H1 2018: 61.6p Return on equity Interim dividend per share 13% xx% 47% 5% 63.0p H1 201
Slide 4: Disappointing new Ogden rate adversely impacts 2019 H1
Disappointing new Ogden rate adversely impacts 2019 H1 0% Ogden Rate Profit before tax1 Return on equity Earnings per share £253m 53% 73.0p -0.25% Ogden Rate Profit before tax1 Return on equity Earnings per share £220m 47% 63.0p 2% Notes: (1) Profit before tax adjusted to exclude minority interest s
Slide 5: UK Motor largely flat but strong growth continues elsewhere
UK Motor largely flat but strong growth continues elsewhere Turnover Customers UK Motor Insurance 1% £1,255m 2% 4.33m H1 2018: £1,247m H1 2018: 4.26m UK Household Insurance 17% £80m 18% 0.92m H1 2018: £68m H1 2018: 0.78m International Insurance 23% £320m 21% 1.36m H1 2018: £260m H1 2018: 1.12m Compa
Slide 6: Group profit higher despite adverse Ogden impact
Group profit higher despite adverse Ogden impact Group profit before tax1 ▪ £7.7m increase in UK Insurance profit: ▪ £2.2m higher Motor profit (despite £33m adverse H1 2019 H1 2018 Change Ogden impact) reflecting continued positive back year development ▪ £4.2m household profit (prior period £1.9m l
Slide 7: Elevated solvency ratio continues ahead of internal model application
Elevated solvency ratio continues ahead of internal model application Capital position (£bn)1 ▪ Consistent, strong post-dividend solvency ratio of 190% (H1 2018: 196%, FY 2018: 194%) £0.18 ▪ Pre-dividend adverse Ogden impact of 5%-pts on ratio ▪ Group Solvency Capital Requirement (SCR) based on £1.3
Slide 8: Higher Interim dividend despite Ogden
Higher Interim dividend despite Ogden 2019 Interim dividend Dividend policy and guidance 60.0p 63.0p ▪ 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 ▪ Therefor
Slide 9: Group key messages
Group key messages Group continues to grow top line; UK motor largely flat Interim profit higher despite adverse Ogden rate Consistent and strong solvency position maintained despite full payout of H1 earnings 14th August 2019 9
Slide 10: UK Insurance
UK Insurance Cristina Nestares – UK Insurance CEO
Slide 11: UK Insurance – Summary
UK Insurance – Summary Customers Turnover Profit Motor1 Customers (m) Motor Turnover (£m) Motor Profit2 (£m) 4.33 £249.5 £251.7 4.26 £1,247 £1,255 £224.2 3.8 £1,096 H1 2017 H1 2018 H1 2019 H1 2017 H1 2018 H1 2019 H1 2017 H1 2018 H1 2019 Household Customers (m) Household Turnover (£m) Household Profi
Slide 12: UK Motor – Market
UK Motor – Market Market average premium1 – YoY change Admiral ‘Times Top’2 Indexed to 100 Jan 2017 25% 140 20% 120 15% 10% 100 5% 80 0% -5% 60 -10% 40 -15% -20% 20 -25% - Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2013 2014 2015 2016 2017 2018 2019 ABI Confused Pr
Slide 13: UK Motor – Claims inflation
UK Motor – Claims inflation ABI – Damage frequency and Volume of market portal severity inflation1 notifications2 160 900,000 140 120 800,000 100 80 700,000 60 40 Severity 600,000 20 Frequency 0 500,000 Jul Jul Jul Jul Jul Jan Oct Jan Oct Jan Oct Jan Oct Jan Oct Jan Apr Apr Apr Apr Apr Apr Q1 Q2 Q3
Slide 14: UK Motor – Loss ratios
UK Motor – Loss ratios Admiral projected ultimate loss ratio1 Releases on original Admiral net share 77%, (4%) Ogden Ogden 70%, (1%) 72%, (3%) Ogden impact4 69%, (2%) 69%, (2%) impact3 -4% impact2 -10% 5% -7% 4% -12% -13% 9% 24% 21% 22% () - represents % movement from December 2018 18% 21% 21% 14% -
Slide 15: UK Motor – Other Revenue
UK Motor – Other Revenue Other Revenue per vehicle1 £4 £7 £8 £84 £84 £79 £72 £74 £73 £76 £77 £67 £67 £63 £62 £60 £60 £58 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 HY 19 Other Revenue per vehicle Impact of Updated Reinsurance Agreement² Sales closed online (%
Slide 16: UK Household
UK Household Active Customer Base Household profit/loss (£m) 920,888 £4.2 778,063 548,824 £1.6 £1.2 381,783 (£1.9) H1 2016 H1 2017 H1 2018 H1 2019 H1 2016 H1 2017 H1 2018 H1 2019 ▪ Strong growth continues particularly through cross-sell and price comparison channel ▪ Continued increase in customer s
Slide 17: UK Insurance summary
UK Insurance summary Growth in profit, despite Ogden impact Modest customer/turnover growth in line with prudent approach, prioritising margin over volume Strong growth in Household continues 14th August 2019 17
Slide 18: International Insurance and Comparison
International Insurance and Comparison Milena Mondini – Head of UK and EU Insurance
Slide 19: International Insurance – Strong growth
International Insurance – Strong growth Turnover ($/€) Customers Elephant 15% $159m 11% 222k H1 2018 : $138m H1 2018: 200k ConTe 22% €121m 22% 656k H1 2018 : €99m H1 2018: 540k Admiral Seguros 20% €46m 18% 275k H1 2018 : €38m H1 2018: 233k L’olivier 32% €59m 34% 204k H1 2018 : €44m H1 2018: 152k 14t
Slide 20: International Insurance
International Insurance EU combined Whole account Admiral share of Whole account loss result (€m)1 profit/loss loss ($m)2 (% of turnover) (% of turnover) H1 2017 H1 2018 H1 2019 H1 2017 H1 2018 2019 H1 H1 2017 H1 2018 H1 2019 H1 2017 H1 2018 H1 2019 4% € 4.0 € 3.0 ($3.9m) ($6.3m) (11%) (0%) (13%) ($
Slide 21: International Insurance: Building Economies of Scale
International Insurance: Building Economies of Scale Expense ratios1 Expanding online functionality Online policy purchase Download policy 2017 2018 H1 2019 2017 2018 H1 2019 documents Cost per policy2 Calls per customer Upload documents Mid-term adjustments Online claims registration H1 2017 H1 201
Slide 22: International Comparison
International Comparison Turnover (€m) Profit before tax (€m) Admiral share of loss ($m) € 28.6 € 26.1 H1 2018 H1 2019 €2.5 ($3.5) € 1.0 ($4.4) H1 2018 H1 2019 H1 2018 H1 2019 ▪ Business downsized to adapt to market – smaller and more agile approach ▪ Investment in product and customer experience ▪
Slide 23: UK Comparison
UK Comparison Turnover (£m) Profit before tax (£m) £54.2 £8.7 £47.7 £44.9 £5.8 £4.5 H1 2017 H1 2018 H1 2019 H1 2017 H1 2018 H1 2019 ▪ Confused.com further increases revenue and profit ▪ Market share of home insurance aggregator sales grew from approx. 8% in H1 2018 to 11% in H1 20191 ▪ Improvements
Slide 24: International Insurance and Comparison summary
International Insurance and Comparison summary Strong growth in International Insurance operations Slightly higher International Insurance loss, with European insurance profitable Strong first half for Comparison 14th August 2019 24
Slide 25: Loans
Loans Scott Cargill – CEO of Admiral Loans Duncan Russell – CFO of Admiral Loans
Slide 26: Admiral Loans Overview
Admiral Loans Overview ▪ Loans business launched in 2017 ▪ Investment of approx. £22m1 ▪ Loan book outstanding of £421m ▪ Approx. 45% of loans are for car financing. Approx. 20% existing Admiral insurance customers ▪ Team of 140 based in Cardiff – combination of external and internal hires Product O
Slide 27: Large, growing market where digital channels are taking share
Large, growing market where digital channels are taking share and customers are demanding acceptance certainty and pricing accuracy Loan sales through price comparison Increasingly ranking on acceptance channels & credit score marketplaces certainty and pricing accuracy 100% Eligibility Guaranteed A
Slide 28: Emphasis on data analytics, technology and product innovation
Emphasis on data analytics, technology and product innovation ▪ New data sources Risk Selection & ▪ Multiple & rapid price changes Data Analytics ▪ Using insights from insurance pricing Fixed cost as % of loans balance 3.7% Expense ▪ Cost per sale distribution approx. 1% 2.1% Efficiency ▪ Expect mea
Slide 29: Funded through a mix of internal and external sources
Funded through a mix of internal and external sources ▪ Current/short-term funding – combination of banking warehouse facility and loans from Admiral Group ▪ Medium term, as data and track record is established, public securitisation markets could be opened ▪ As part of an insurance group, Loans has
Slide 30: Default experience improving as pricing and credit rules are fine-tuned
Default experience improving as pricing and credit rules are fine-tuned Default experience by Credit Score 12. 0% 4,500 Population of Loans Written by 4,000 10. 0% 3,500 Default Rate Credit Score 8.0 % 3,000 2,500 6.0 % 2,000 4.0 % 1,500 1,000 2.0 % 500 0.0 % 0 390 400 410 420 430 440 450 460 470 48
Slide 31: Strong controlled growth in balances over time
Strong controlled growth in balances over time Loans Stock Balances (£m) Loans Profit/Loss (£m) £421 £300 £214 (£4.3) (£5.4) £66 (£6.4) £11 H1 2018 H2 2018 H1 2019 H1 2017 H2 2017 H1 2018 H2 2018 H1 2019 ▪ Controlled growth continues ▪ Expect Loans 2019 loss at single digit millions unless a signifi
Slide 32: Loans: An Admiral-like aspiration for the long term
Loans: An Admiral-like aspiration for the long term Admiral Motor Insurance Admiral Loans Refined Risk Selection Identify over-priced risks Creative product Add some differentiation in a commoditised development market Operate at lower expense ratio than legacy Tight expense control competitors Esta
Slide 33: Wrap up
Wrap up David Stevens – Group CEO
Slide 34: Wrap Up
Wrap Up Loans – an option on a potentially attractive business long-term Record European growth along with continued profits Further demonstration of strength of the UK business 14th August 2019 34
Slide 35: Appendix
Appendix
Slide 36: Group key performance indicators
Group key performance indicators1 KPI 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 H1 16 H1 17 H1 18 H1 19 Group Financial Turnover £m 1,077 1,585 2,190 2,215 2,030 1,971 2,119 2,576 2,958 3,283 1,261 1,446 1,662 1,756 Customers m 2.1 2.7 3.4 3.6 3.7 4.1 4.4 5.2 5.7 6.5 4.8 5.5 6.2 6.7 1 Group
Slide 37: Statutory Summary Income Statement
Statutory Summary Income Statement1 International Car UK Insurance Insurance Price Comparison Other Admiral Group H1 17 H1 18 H1 19 H1 17 H1 18 H1 19 H1 17 H1 18 H1 19 H1 17 H1 18 H1 19 H1 17 H1 18 H1 19 Turnover 1,144.1 1,319.11,338.8 221.9 260.1 319.5 72.5 76.6 83.4 7.2 6.2 14.5 1,445.7 1,662.0 1,
Slide 38: Balance Sheet
Balance Sheet Jun-18 Dec-18 Jun-19 £m £m £m ASSETS Property, plant and equipment 28.1 28.1 163.0 Intangible assets 162.8 162.0 158.9 Reinsurance contracts 1,608.5 1,883.5 1,885.9 Financial assets 2,876.3 2,969.7 2,945.6 Deferred income tax 4.4 0.2 5.3 Insurance and other receivables 1,124.8 1,082.0
Slide 39: Group profit before tax reconciliation
Group profit before tax reconciliation Reconciliation from statutory to adjusted profit before tax ▪ Admiral has four operations with shared £2.0 ownership: Rastreator (Admiral share of ownership 75.0%); compare.com (59%); Admiral Law (95.0%); Preminen (50.0%) ▪ Following additional investment in 20
Slide 40: Investment update
Investment update Dec ‘18: £3,347m June ‘19: £3,409m Cash Deposit Fixed Income Investments Money Market Funds GILTS AAA AA A BBB Not Rated¹ Note: (1) Unrated securities consists primarily of an AAA rated money market fund backed by government securities. 14th August 2019 40
Slide 41: Analysis of Other Group items
Analysis of Other Group items H1 2019 H1 2018 ▪ Admiral Loans – Loss in line with expectation and guidance Admiral Loans (4.3) (6.4) ▪ Other interest and investment income – Increase mainly due to reduced unrealised losses from forward contracts Other interest & ▪ Share scheme charges – Increase mai
Slide 42: UK Car Insurance: Ultimate loss ratio, expense ratio and combined ratio
UK Car Insurance: Ultimate loss ratio, expense ratio and combined ratio Admiral projected ultimate loss ratio1 Admiral expense ratio2 77% 70% 69% 72% 69% 16% 16% 16% 16% 17% 15% 56% 2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018 Admiral ultimate combined ratio ▪ Recent accident year pro
Slide 43: UK Car Insurance: Booked loss ratio development by underwriting year
UK Car Insurance: Booked loss ratio development by underwriting year UK car insurance booked loss ratio (%) Development by financial year (colour-coded) Split by underwriting year (x axis) 92% 92% 89% 88% 87% 87% 87% 88% 84% 83% 84% 83% 81% 76% 77% 77% 76% 78% Ultimate loss ratio by 75% 75% underwri
Slide 44: UK Car Insurance: Booked loss ratio sensitivity
UK Car Insurance: Booked loss ratio sensitivity Sensitivity of booked loss ratio (£m) Underwriting year 2014 2015 2016 2017 2018 Booked loss ratio 75.1% 75.0% 75.5% 78.0% 88.2% ▪ The impact includes the change in net insurance claims along with the associated PBT impact of +1% move -12.8 -13.4 -15.6
Slide 45: UK Reinsurance arrangements
UK Reinsurance arrangements Motor Household Admiral Munich Re Other Admiral Quota share 38% 38% 38% 38% 70% 70% 70% 70% 40% 40% 40% 40% 30% 30% 30% 30% 22% 22% 22% 22% 2017 2018 2019 2020 2017 2018 2019 2020 ▪ Fully placed reinsurance arrangements until the end ▪ Similar long term quota share contra
Slide 46: 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 47: Admiral UK Car Co- and Reinsurance
Admiral UK Car Co- and Reinsurance1 Proportional reinsurance (quota share) – 48% Type Munich Re Proportional2 co-insurance – 30% (10% Munich Re, 38% other reinsurers) Cost to Admiral Variable, depending on combined ratio Fixed – c2% of premium Risk protection Co-insurance Starts at 100% combined rat
Slide 48: Key definitions
Key definitions Term Definition Accident year The year in which an accident occurs, also referred to as the earned basis. Co-insurance An arrangement in which two or more insurance companies agree to underwrite insurance business on a specified portfolio in specified proportions. Each co-insurer is
Slide 49: Admiral brands
Admiral brands 14th August 2019 49
Slide 50: 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