Admiral Group Plc · LSE:ADM
Admiral — FY2019 Earnings Presentation
56 slides from Admiral's earnings presentation, Mar 5, 2020
Slide 1: Admiral 2019 Full Year Results
Admiral 2019 Full Year Results 5th March 2020 Introduction David Stevens, Group CEO Group Geraint Jones, Group CFO UK Insurance Cristina Nestares, UK Insurance CEO UK Motor Claims Deep Dive Alistair Hargreaves, UK Insurance COO Comparison and International Insurance Milena Mondini, Group CEO Designa
Slide 2: Group
Group Geraint Jones – Group CFO 2019 Admiral Managers’ Awards Ceremony
Slide 3: Another year of record profit
Another year of record profit Customers Turnover1 9% 7% 11% 6.98m 9% 5% 11% £3.46bn 2018: 6.51m 2018: £3.28bn Profit before tax2 Solvency ratio Earnings per share 9% 10% 11% £526m 2% 11% 9% 190% 8% 11% 9% 148.3p 2018: £479m 2018: 194% 2018: 137.1p Return on equity Full year dividend per share 7% 11%
Slide 4: UK Motor largely flat but strong growth continues elsewhere
UK Motor largely flat but strong growth continues elsewhere Turnover Customers UK Motor Insurance1 1% £2,455m 1% 4.37m 2018: £2,423m 2018: 4.32m UK Household Insurance 17% £171m 17% 1.01m 2018: £146m 2018: 0.87m International Insurance 16% £624m 16% 1.42m 2018: £539m 2018: 1.22m Comparison Loans Bal
Slide 5: 2019 profit significantly higher, led by positive back year movements
2019 profit significantly higher, led by positive back year movements Group profit before tax1 ▪ UK Insurance profit £42m (8%) higher: 2019 2018 Change ▪ Motor profit +£30m, reflecting very high releases and profit commission ▪ Household +£11m, 2019 benefitting from better UK Insurance £597.4m £555.
Slide 6: Very positive movements in back year loss ratios, though a less positive current year
Very positive movements in back year loss ratios, though a less positive current year Admiral projected ultimate loss ratio1 83% 83% ▪ Loss ratios on -0.25% Ogden basis 82% 81% 76% 83% ▪ More positive loss ratio improvement during 2019 70%, (0%) 73%, (-4%) than usual, predominantly driven by favoura
Slide 7: Very positive back years = elevated reserve releases and profit commission
Very positive back years = elevated reserve releases and profit commission Releases on original Admiral Reserve Releases and Profit net share Commission (£m) Ogden 3 (2%) Profit commission impact 2 +4% Reserve releases (commuted share) 400 Reserve releases (net share) 350 300 1 (9%) 250 27% 21% 24%
Slide 8: Strong solvency position maintained
Strong solvency position maintained Capital position (£bn)1 Solvency position: 190% 190% 194% £1.16bn £1.20bn ▪ Consistent and strong post-dividend solvency position £1.07bn of 190% (HY 2019: 190%; FY 2018: 194%) £0.57 £0.52 £0.55 ▪ Basis of calculation remains standard formula plus add-on £0.61 £0.
Slide 9: Higher profits lead to significantly higher final dividend
Higher profits lead to significantly higher final dividend Proposed 2019 final dividend Dividend policy and guidance Ogden 77.0p ▪ Admiral will pay 65% of post-tax profits as impact a normal dividend each half-year 66.0p 11.0p ▪ Admiral expects to continue to distribute all earnings not required to
Slide 10: Group key messages
Group key messages Group continues to grow strongly, UK motor business only marginally bigger Very positive 12 months for back year claims was key driver of significantly higher profits Stable and strong solvency position after accounting for significantly higher proposed final dividend 5th March 20
Slide 11: UK Insurance
UK Insurance Cristina Nestares – UK Insurance CEO Our UK Household business reaches 1,000,000 customers
Slide 12: UK Insurance – an overview
UK Insurance – an overview Customers Turnover Profit Motor1 Customers (m) Motor Turnover (£m) Motor Profit (£m) £2,455 £591 4.3 4.4 £2,423 £461 £562 £2,247 4.0 2017 2018 2019 2017 2018 2019 2017 2018 2019 Household Customers (m) Household Turnover (£m) Household Profit (£m) £7.5 1.0 £171 £4.1 0.9 £1
Slide 13: Market prices continued to increase in H2…
Market prices continued to increase in H2… Market average premium1 Admiral ‘Times Top’2 50% (YoY change) (Indexed to 100 Jan 2017) 140 40% 120 30% 100 20% 10% 80 0% 60 -10% 40 -20% 20 -30% - 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Nov-17 Nov-18 Nov-19 Jan-17 May-17 Jan-18 May-18
Slide 14: …However, there are still uncertainties that may influence market pricing
…However, there are still uncertainties that may influence market pricing Pricing uncertainties FCA Pricing Market Study Potential pricing decreases Potential pricing increases Whiplash reforms Claims inflation Excess of loss changes 5th March 2020 14
Slide 15: Expense ratio driven by levies; investment in online capabilities for the future
Expense ratio driven by levies; investment in online capabilities for the future Expense ratio movements Elephant brand (UK): % of customer 2018 to 20191 contact via a digital channel2 0.7% 0.3% 17% 18% 2018 Levies Other 2019 Q1 2019 Q4 2019 ▪ Expense ratio increase due to: ▪ Increase in levies ▪ In
Slide 16: Continued growth in UK Household
Continued growth in UK Household Active customer base (m) Household profit/loss (£m) 1.01m 0.87m 0.66m £7.5 0.47m £4.1 £2.7 -£3.0 2016 2017 2018 2019 2016 2017 2018 2019 ▪ Reached 1 million customers ▪ 2019 results improved after adverse weather in 2018 ▪ Growth across all distribution channels 5th
Slide 17: UK Insurance summary
UK Insurance summary Strong UK Motor profit Market pricing uncertainty continues Expense ratio increase due to levies and investment for the long term Continued growth in Household 5th March 2020 17
Slide 18: UK Motor Claims Deep Dive
UK Motor Claims Deep Dive Alistair Hargreaves – UK Insurance COO Our Employee Consultation Group (ECG) meets for the first time
Slide 19: Large BI settlements are the key driver of increased reserve releases
Large BI settlements are the key driver of increased reserve releases Large BI claims settled1 as proportion of open large BI claims (Indexed to 100 in H2 2016)2 August 2019 March 2017 September 2017 March 2019 Ogden rate change 120 Ogden rate change Government Government from from 2.5% to announces
Slide 20: Bodily Injury costs remain significant despite market wide increase in damage costs
Bodily Injury costs remain significant for Admiral despite market wide increase in damage costs Admiral claims cost by claim type1 2016 2019 Damage Bodily Injury ▪ Market claims costs have a higher proportion of damage costs: Split ~40% bodily injury vs ~60% damage2 ▪ Admiral damage costs are a larg
Slide 21: Early signs that very rapid damage inflation may reduce despite increased theft
Early signs that very rapid damage inflation may reduce despite increased levels of theft Market repair inflation1 Theft: Market claim cost (YoY) per vehicle year2 7% 7% £15 6% £15 £11 4% 4% 4% £9 £8 £8 2014 2015 2016 2017 2018 2019 2008 2010 2012 2014 2016 2018 Top theft models in 2019 Prestige car
Slide 22: Small BI has remained stable, whiplash reforms will be positive
Small BI has remained stable, whiplash reforms will be positive though uncertainties remain Volume of market portal Whiplash reforms timeline notifications1 Official Injury Claim Portal launch planned August 2020 900,000 800,000 2019 2020 700,000 Civil Liability Bill Rules around the reforms and the
Slide 23: We provide great claims outcomes for customers
We provide great claims outcomes for customers Proportion of claims settled Great Culture within the same accident year1 ▪ Passionate about outcomes ▪ Significant experience 106 100 ▪ Embrace test and learn Market Admiral Our Good outcomes people for customers Claim related complaints per Effective
Slide 24: UK Claims Deep Dive summary
UK Claims Deep Dive summary Larger reserve releases driven by large BI: Both faster settlements and a few unusually positive developments 2019 loss ratio: Evidence of slowdown in damage inflation Whiplash reforms will be positive, but uncertainties remain 5th March 2020 24
Slide 25: International Insurance and Comparison
International Insurance and Comparison Milena Mondini – Group CEO Designate Penguin Portals, our new home for our Comparison businesses
Slide 26: Strong performance from Confused.com
Strong performance from Confused.com Turnover (£m) Profit before tax (£m) £113 £20.4 £87 £95 £14.3 £10.1 2017 2018 2019 2017 2018 2019 ▪ Strong result with main contributors to performance: ▪ Customer experience improvements ▪ Product diversification ▪ Improved brand awareness and marketing efficien
Slide 27: European comparison sees increased profits; reduced losses for Compare.com
European comparison sees increased profits; reduced losses for Compare.com Turnover (€m) Profit before tax (€m) Admiral share of loss ($m)1 ($5.6) € 52.1 € 57.1 € 6.0 ($9.1) ($9.5) € 50.7 € 5.3 € 2.8 2017 2018 2019 2017 2018 2019 2017 2018 2019 ▪ Good performance at LeLynx: ▪ Lower loss reflects mid
Slide 28: Elephant loss ratio under pressure, slightly offset by expense ratio improvements
Elephant loss ratio under pressure, slightly offset by expense ratio improvements Admiral share of Turnover ($m) loss ($m) $286 $298 ($10) ($12) 2018 2019 2018 2019 ▪ 2019 loss ratio deterioration – Elephant response: ▪ Introduced base rate increases, and vehicles on cover flat ▪ Strengthened pricin
Slide 29: European Insurance continues to grow profitably
European Insurance continues to grow profitably 2019 EU Result on an Admiral Turnover (€) Customers share1 and whole account basis ConTe (€m) 16% €233m 0% 18% 688k 2018 : €201m 2018 : 585k Admiral Seguros 16% €89m 0% 16% 291k 2018 : €77m 2018 : 250k € 22 L’olivier 33% €122m 0% 32% 230k € 10 2018 : €
Slide 30: European strategy continues to build upon economies of scale
European strategy continues to build upon economies of scale EU written expense ratio1 EU customer base (m) 1.21m 1.01m 40% 0.85m 33% 32% 0.69m 30% 2016 2017 2018 2019 2016 2017 2018 2019 EU active policy base per ▪ Improving economies of scale while leveraging FTE underwriting advantages 789 868 71
Slide 31: Comparison and International Insurance summary
Comparison and International Insurance summary Good result for Comparison, led by Confused.com Elephant result impacted by loss ratio deterioration Continued growth and strong performance in European operations 5th March 2020 31
Slide 32: Strategy Update
Strategy Update David Stevens – Group CEO Participants in the ‘Festival of Rugby’ hosted by Admiral and Welsh Rugby Union
Slide 33: Admiral continues to deliver on its long term strategy…
Admiral continues to deliver on its long term strategy… International Beyond UK Insurance Insurance Insurance Ensure that Admiral Demonstrate that Develop sources remains one of the Admiral can be a great of growth and profit best insurers in the UK insurer beyond the UK beyond insurance 5th March 2
Slide 34: …and in 2019 we made good progress on each element
…and in 2019 we made good progress on each element International Beyond UK Insurance Insurance Insurance Ensure that Admiral Demonstrate that Develop sources remains one of the Admiral can be a great of growth and profit best insurers in the UK insurer beyond the UK beyond insurance Market-leading c
Slide 35: Loans – improving risk selection as we build experience
Loans – improving risk selection as we build experience Loans stock balances (£m) Loans profit/loss (£m) £455 £300 (£8.4) (£11.8) 2018 2019 2018 2019 Cumulative relevant risk experience X10 risk ▪ Growing scale, increasing cost-efficiency experience ▪ Better data and experience improves risk selecti
Slide 36: …and in 2019 we made good progress on each element
…and in 2019 we made good progress on each element International Beyond UK Insurance Insurance Insurance Ensure that Admiral Demonstrate that Develop sources remains one of the Admiral can be a great of growth and profit best insurers in the UK insurer beyond the UK beyond insurance Market-leading c
Slide 37: European insurance demonstrates long term sustained growth
European insurance demonstrates long term sustained growth - top & bottom line European customer growth 1,400,000 1,200,000 1,209k ▪ Controlled growth, driven through operational 1,000,000 1,009k and pricing improvements 800,000 854k ▪ Expansion beyond car insurance (niche household 600,000 696k pro
Slide 38: …and in 2019 we made good progress on each element
…and in 2019 we made good progress on each element International Beyond UK Insurance Insurance Insurance Ensure that Admiral Demonstrate that Develop sources remains one of the Admiral can be a great of growth and profit best insurers in the UK insurer beyond the UK beyond insurance Market-leading c
Slide 39: Maturing loss ratios confirm market leading competence
Maturing loss ratios confirm market leading competence Admiral projected ultimate loss ratio (development by year) 85% 80% 75% 70% 65% 60% Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Years since first pick Years since first pick 1 2014 2015 2016 2017 2018 2019 ▪ Superior risk selection and claims mana
Slide 40: Appendix
Appendix Staff march in the Pride Cymru’s Big Weekend parade
Slide 41: Group key performance indicators
Group key performance indicators1 KPI 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Group Financial Turnover £m 1,585 2,190 2,215 2,030 1,971 2,119 2,576 2,958 3,283 3,463 Customers m 2.7 3.4 3.6 3.7 4.1 4.4 5.2 5.7 6.5 7.0 Group pre-tax profit1 £m 265.5 299.1 344.6 370.7 356.5 376.8 284.3 405.4
Slide 42: Summary Income Statement
Summary Income Statement1 International Car £m UK Insurance Insurance Price Comparison Other Admiral Group 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 Turnover 2,354.0 2,575.7 2,635.0 449.8 538.7 623.6 143.6 151.0 171.6 10.8 17.6 33.3 2,958.2 3,283.0 3,463.5 Total prem
Slide 43: Balance Sheet
Balance Sheet Dec-17 Dec-18 Dec-19 £m £m £m ASSETS Property, plant and equipment 31.3 28.1 154.4 Intangible assets 159.4 162.0 160.3 Reinsurance contracts 1,637.6 1,883.5 2,071.7 Financial assets 2,697.8 2,969.7 3,234.5 Deferred income tax 0.3 0.2 - Insurance and other receivables 939.7 1,082.0 1,22
Slide 44: Group profit before tax reconciliation
Group profit before tax reconciliation Reconciliation from statutory to adjusted profit before tax (£m) £3.5 ▪ Admiral has four operations with shared ownership: Rastreator (Admiral share of ownership 75.0%); Compare.com (59.25%); Admiral Law (95.0%); Preminen (50.0%) £526.1 £522.6 £522.6 ▪ Profit o
Slide 45: Investment update
Investment update Dec ‘18: £3,347m Dec ‘19: £3,516m Cash Deposit Fixed Income Investments Money Market Funds GILTS Equity AAA AA A BBB Other 1 (1) ‘Other’ comprises of sub-BBB ratings and unrated securities. Unrated securities consists primarily of an AAA rated money market 5th March 2020 fund backe
Slide 46: Analysis of Other Group items
Analysis of Other Group items1 2019 2018 ▪ Share scheme charges increased by £3.7 million reflecting improved Share scheme charges (52.7) (49.0) vesting outcomes resulting from the increased level of profit in 2019 and a higher share price. Admiral Loans loss ▪ Other interest and investment income i
Slide 47: Whiplash reforms: Background information
Whiplash reforms: Background information Proposed Tariff1 ▪ The whiplash reforms are due to come into Current Whiplash Fixed Tariff Industry Industry force in August 2020. Once the reforms go live, Injury Damages Saving per Average most personal injury claims valued at under Duration Post Reform Cla
Slide 48: 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 83% 73% 70% 69% 67% 66% 18% 17% 16% 16% 16% 16% 2014 2015 2016 2017 2018 2019 2014 2015 2016 2017 2018 2019 Admiral ultimate combined ratio 101% ▪ Recent accident yea
Slide 49: 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% 92% 89% 88% 87% 87% 87% 84% 83% 84% 83% 81% 81% Ultimate loss ratio by 76% 77% 77% 74% 72% 73% 75% unde
Slide 50: UK Motor profit recognition
UK Motor profit recognition Underwriting Year Prior 2014 2015 2016 2017 2018 2019 Total Total Written Premium, net of XoL cost (£m) 1,424 1,488 1,755 1,941 2,071 2,083 Total net premium, original share (£m) 356 372 439 428 459 462 Combined Ratio, Booked basis 89% 88% 89% 91% 100% 111% Profit commiss
Slide 51: 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 52: UK co- and re-insurance arrangements
UK co- and re-insurance 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 sha
Slide 53: Admiral UK Car co- and re-insurance
Admiral UK Car co- and re-insurance1 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 ra
Slide 54: 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 55: Admiral brands
Admiral brands 5th March 2020 55
Slide 56: 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