Admiral Group Plc · LSE:ADM
Admiral — H1 2018 Earnings Presentation
51 slides from Admiral's earnings presentation, Aug 15, 2018
Slide 1: Admiral 2018 Half Year Results
Admiral 2018 Half Year Results 15th August 2018 Introduction David Stevens, Group CEO Group Geraint Jones, Group CFO UK Insurance Cristina Nestares, UK Insurance CEO Alistair Hargreaves, UK Head of Service Price Comparison and International Insurance David Stevens, Group CEO Wrap-up David Stevens, G
Slide 2: Group
Group Geraint Jones – Group CFO Egg roulette 2
Slide 3: Highlights
Highlights Customers Turnover1 14% 11% 6.23m 14% 15% £1.66bn H1 2017: 5.46m H1 2017: £1.45bn Profit before tax2 Solvency ratio Earnings per share 9% £212m 196% xx% xx% 8% 61.6p -8% H1 2017: £195m H1 2017: 214% H1 2017: 57.3p Return on equity Interim dividend per share -2% xx% 54% 7% 60.0p H1 2017: 5
Slide 4: Pace of growth continues
Pace of growth continues Turnover Customers UK Motor Insurance1 14% £1,247m 12% 4.26m H1 2017: £1,096m H1 2017: 3.79m UK Household Insurance 42% £68m 42% 0.78m H1 2017: £48m H1 2017: 0.55m International Insurance 17% £260m 17% 1.12m H1 2017: £222m H1 2017: 0.96m Price Comparison 6% £77m H1 2017: £73
Slide 5: Analysis of group profit
Analysis of group profit Group profit before tax1 ▪ 9% increase in UK Insurance profit fuelled by UK Motor profit of £250m (vs £224m H1 2017) H1 2018 H1 2017 Change ▪ Household result impacted by weather, H1 18 loss UK Insurance £247.0m £225.8m +£21.2m of £2m (vs £2m profit H1 2017) ▪ International
Slide 6: Elevated solvency position maintained pre model approval
Elevated solvency position maintained pre model approval Capital position1 ▪ Post-dividend solvency ratio 196% (H1 2017: 214%) ▪ Main movements in own funds in the six month £0.17bn period are economic profit and dividend ▪ Increased solvency capital requirement due to growth in premiums and reserve
Slide 7: Higher proposed interim dividend
Higher proposed interim dividend Interim 2018 dividend Dividend policy and guidance ▪ Admiral will pay 65% of post-tax profits as 60.0p a normal dividend each half-year 56.0p Special dividend: ▪ Admiral expects to continue to distribute 19.2p all earnings not required to be retained for solvency and
Slide 8: Beyond insurance – Admiral Loans
Beyond insurance – Admiral Loans Loan stock balances1 ▪ Continued growth in H1 2018, focus remains on Unsecured Personal Loans and Car Finance £214m ▪ Bank warehouse funding facility completed, securing funding well into 2019 ▪ Newly licensed entity created and loan book migration £66m completed £11
Slide 9: Group key messages
Group key messages Sustained growth throughout the Group Significant improvement in International Insurance result Continued progress in Household and Loans operations; Household H1 result impacted by weather Record interim dividend and sustained strong solvency levels 15th August 2018 9
Slide 10: UK Insurance
UK Insurance Cristina Nestares – UK Insurance CEO Alistair Hargreaves – UK Head of Service Innov8 hackathon
Slide 11: UK Insurance - Summary
UK Insurance - Summary Customers (m) Turnover (£bn) Profit (£m) 6.0 1.4 290 5.0 1.2 240 1.0 4.0 190 0.8 3.0 140 0.6 2.0 90 0.4 1.0 0.2 40 0.0 0.0 -10 H1 2016 H1 2017 H1 2018 H1 2016 H1 2017 H1 2018 H1 2016 H1 2017 H1 2018 Motor Household Note (1): From 2017, UK Car and UK Van Insurance will be repor
Slide 12: Positive development of prior years in Motor
Positive development of prior years in Motor Admiral projected ultimate loss ratio1 ▪ Continued positive back year development in H1 18 ▪ Uncertainty around Ogden rate change still 78% (-2%) remains; impacts settlements patterns 74% 75% (-1%) 74% (-2%) ▪ Reserves remain on -0.75% Ogden 59% (-1%) 58%
Slide 13: Reserve releases remain a strong feature of our results
Reserve releases remain a strong feature of our results Releases on original Admiral net share1 26% 24% 21% 18% 14% 2014 2015 2016 2017 H1 2018 ▪ H1 18 reserve releases above the long-term average of c.15% ▪ Continued positive prior year development and also modest reduction in reserve margin ▪ The
Slide 14: UK Motor market outlook
UK Motor market outlook Market average premium1 – YoY change Admiral ‘Times Top’2 Indexed to 100 June 2017 25% 140 20% 15% 120 10% 100 5% 0% 80 -5% 60 -10% -15% 40 -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 0 2013 2014 2015 2016 2017 2018 Confused ABI ▪ Market pre
Slide 15: Claims frequency
Claims frequency UK Car market claims frequency1 Claims cost by claim type2 (Average of previous 5 accident years) 14% 13% 12% 11% 10% 9% 8% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Small BI <20k Large BI Damage 2013 2014 2015 2016 2017 2018 ▪ Frequency shows a long term downwa
Slide 16: Long-term claims market trends continue
Long-term claims market trends continue UK Car market portal notifications1 UK Car market cumulative change in damage severity2 140 900,000 130 850,000 120 800,000 110 750,000 100 90 700,000 80 650,000 70 600,000 60 Apr-13 Apr-14 Apr-15 Apr-16 Dec-16 Apr-17 Apr-18 Dec-13 Dec-14 Dec-15 Dec-17 Aug-13
Slide 17: Claims legislation changes
Claims legislation changes Civil Liabilities Bill Committee First reading stage First review of Ogden rate w/c 15th Oct – Royal Assent must start by the end of 28th June 2018 w/c 29th Oct Q1 2019 April and be completed by mid September 2019 2018 2019 2020 Assuming royal assent on 1st February 2019 S
Slide 18: Expense Ratio - Admiral continues to outperform the market
Expense Ratio - Admiral continues to outperform the market Admiral vs Market expense ratio Expense ratio advantage 32% 31% 31% 31% 29% 4% 8% 17% 16% 16% 16% 16% 15% 29% 17% 2013 2014 2015 2016 2017 H1 2018 Market expense Impact of higher Impact of lower Admiral expense 1 2 3 ratio than market cost p
Slide 19: Expense Ratio - An important part is that customers stay with us
Expense Ratio - An important part is that customers stay with us Persistency: Admiral vs Market1 (Indexed to Market) 110 +6% ▪ Admiral has higher persistency than the market 100 despite: 90 ▪ More customers coming to us from price comparison; typically they have ~7% lower 80 persistency than direct
Slide 20: Improving the customer experience
Improving the customer experience Customer feedback Customers who call the call centre (Indexed to 100 in 2017) 2016 2017 H1 2018 Number of customers who would renew following a claim/total claims received >90% Average of SMS feedback about service provided >9.1 out of 101 2017 H1 2018 ▪ Customers c
Slide 21: Household growth continues
Household growth continues Household customers Market price comparison share of new business sales 900,000 800,000 75% 700,000 65% 600,000 500,000 55% 400,000 45% 300,000 200,000 35% 100,000 0 25% 2012 2013 2014 2015 2016 2017 H1 2018 Feb-14 Feb-15 Feb-16 Feb-17 Feb-18 Oct-13 Oct-14 Oct-15 Oct-16 Oc
Slide 22: Household results impacted by weather
Household results impacted by weather Reported loss ratio Household profit/loss 87.6% Profit 25.3% excluding £1.6m weather £1.2m £5.6m 72.4% 68.8% 62.3% H1 2016 H1 2017 H1 2018 £(1.9)m Attritional loss ratio Extreme weather H1 2016 H1 2017 H1 2018 ▪ H1 2018 loss ratio impacted by weather losses ▪ At
Slide 23: Household expense ratio advantage continues
Household expense ratio advantage continues Reported expense ratio 6.8% 7.3% 7.5% 30.5% 29.5% 24.6% H1 2016 H1 2017 H1 2018 Expense Ratio Flood Re ▪ Expense ratio advantage continues to improve ▪ Market expense ratio c45% 15th August 2018 23
Slide 24: People who like what they do, do it better
“People who like what they do, do it better” ▪ The only company to be named in Sunday Times Best Companies to Work For since inception in 2001 – 3rd in 2018 ▪ 3rd Best large employer for women in the UK1 ▪ Lowest gender pay gap among major UK Insurers (-5.1% median)2 Note: (1) Awarded by the Great P
Slide 25: UK Insurance summary
UK Insurance summary Strong growth in both Motor and Household Household result impacted by weather More stable UK Motor pricing outlook 15th August 2018 25
Slide 26: Price Comparison and International Insurance
Price Comparison and International Insurance David Stevens – Group CEO European Insurance does Master Chef
Slide 27: Price Comparison overview
Price Comparison overview Turnover (£m) Profit before tax (£m) Turnover (€m) Profit before tax (€m) £47.7 £44.9 € 26.1 € 25.5 £5.8 £4.5 € 2.3 € 1.0 H1 2017 H1 2018 H1 2017 H1 2018 H1 2017 H1 2018 H1 2017 H1 2018 ▪ Reallocation of media spend towards more ▪ Price comparison markets remain competitive
Slide 28: Compare.com - Cyclical turn brings increased appetite to participate
Compare.com - Cyclical turn brings increased appetite to participate US Market combined ratio1 Top 25 – Insurers represented 108% 103% 105% 105% 15 11 12 12 2014 2015 2016 2017 H1 2016 H1 2017 H1 2018 H2 2018 (Forecast) Admiral share of loss ($m) Top 4 – Insurers represented H1 2016 H1 2017 H1 2018
Slide 29: US Insurance - Continuing improvement in underlying economics
US Insurance - Continuing improvement in underlying economics Customers Admiral share of loss ($m) Whole account loss (% of turnover) 200k H1 2016 H1 2017 H1 2018 H1 2016 H1 2017 H1 2018 178k 182k 168k ($3.9m) -11% ($6.3m) -16% ($15.4m) -34% H2 2016 H1 2017 H2 2017 H1 2018 ▪ Higher persistency now f
Slide 30: European Insurance – Profitable overall
European Insurance – Profitable overall Customers Profit/(loss) – Admiral share (m) 925k 783k €3 152k 112k 233k 208k 540k 463k (€2) H1 2017 H1 2018 (€5) ConTe.it Admiral Seguros L'olivier 2016 2017 H1 2018 ▪ Continued growth in customers and turnover ▪ European operations reporting profit overall ▪
Slide 31: Price Comparison and International Insurance summary
Price Comparison and International Insurance summary Increased profit from Confused.com Return to growth and lower losses in Elephant European Insurance profitable 15th August 2018 31
Slide 32: Wrap-up
Wrap-up David Stevens – Group CEO 10 Year Lunch and staff awards for long service
Slide 33: Core UK Car Insurance – Business long-term view
Core UK Car Insurance – Business long-term view UK Car Insurance - market share of listed focused UK personal lines 2010 2014 2017 43% 28% 9% 2010 2014 2017 Admiral Esure Direct Line Hastings Sabre Saga 15th August 2018 33
Slide 34: Diversification beyond Car
Diversification beyond Car 2010 2014 2018 Household Household Loans Travel Van UK Car UK Car UK Car International International International Car Car Car Results beyond -£12.8m -£32.2m -£9.0m to -£12.0m UK Car1 Bubble size indicates relative customer numbers Note (1): Profit beyond UK Car includes I
Slide 35: Q&A
Q&A Admiral Group Headquarters – Ty Admiral 35
Slide 36: Appendix
Appendix ConTe celebrates reaching 500,000 customers
Slide 37: Group key performance indicators
Group key performance indicators1 KPI 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 H1 16 H1 17 H1 18 Group Financial Turnover £m 910 1,077 1,585 2,190 2,215 2,030 1,971 2,119 2,576 2,958 1,261 1,446 1,662 Customers m 1.7 2.1 2.7 3.4 3.6 3.7 4.1 4.4 5.2 5.7 4.8 5.5 6.2 Adjusted1 Group pre-tax pr
Slide 38: Statutory summary Income Statement
Statutory summary Income Statement International Car UK Insurance Insurance Price Comparison Other Admiral Group H1 16 H1 17 H1 18 H1 16 H1 17 H1 18 H1 16 H1 17 H1 18 H1 16 H1 17 H1 18 H1 16 H1 17 H1 18 Turnover 1,028.5 1,144.1 1,319.1 159.2 221.9 260.1 64.0 72.5 76.6 9.0 7.2 6.2 1,260.7 1,445.7 1,6
Slide 39: Balance Sheet
Balance Sheet Jun-17 Dec-17 Jun-18 £m £m £m ASSETS Property, plant and equipment 31.4 31.3 28.1 Intangible assets 158.3 159.4 162.8 Reinsurance contracts 1,460.9 1,637.6 1,608.5 Financial assets 2,595.2 2,697.8 2,876.3 Deferred income tax 6.3 0.3 4.4 Insurance and other receivables 953.6 939.7 1,124
Slide 40: Group profit before tax reconciliation
Group profit before tax reconciliation Reconciliation from statutory to adjusted profit before tax ▪ Admiral has five operations with shared ownership: Rastreator (Admiral share of ownership 75.0%); compare.com (71.1%); £1.0m Admiral Law and BDE Law (90.0%); Preminen (50.0%) ▪ Profit or losses in pe
Slide 41: Investment update
Investment update Dec ‘17: £3,025m June ‘18: £3,186m Cash Deposit LDM MMF GILTS AAA AA A BBB Not Rated 1 (1) Unrated securities consists primarily of an AAA rated money market fund backed by government securities. 15th August 2018 41
Slide 42: Analysis of Other Group items
Analysis of Other Group items H1 2018 H1 2017 ▪ UK commercial vehicle - represents Gladiator broking business which is now fully migrated to being underwritten within UK UK Commercial (0.4) 0.7 Insurance. vehicle ▪ Admiral Loans - the Group expects the business to make losses in Admiral Loans (6.4)
Slide 43: 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 (at June 2018) Admiral expense ratio2 (at June 2018) 78% (-2%) 16% 16% 16% 16% 15% 74% 75% (-1%) 74% (-2%) 13% 13% 59% (-1%) 58% 58% (-1%) () – represents % movement from Dec 2017 to June 2
Slide 44: 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% 89% 87% 87% 88% 87% 85% 84% 84% 83% 82% 83% 81% 79% 79% 80% Ultimate loss ratio by 76% underwriting year 70
Slide 45: 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 Booked loss ratio 79% 79% 80% 83% ▪ The impact includes the change in net insurance claims along with the associated PBT impact of +1% move (8.5)m (12.8)m (14.8)m (3.8)m profit
Slide 46: UK Reinsurance arrangements
UK Reinsurance arrangements Motor Household Admiral Munich Re Other Admiral Quota share 35% 38% 38% 38% 70% 70% 70% 70% 40% 40% 40% 40% 30% 30% 30% 30% 25% 22% 22% 22% 2016 2017 2018 2019 2016 2017 2018 2019 ▪ Fully placed reinsurance arrangements until the end ▪ Similar long term quota share contra
Slide 47: 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 48: 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 49: 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 50: Admiral brands
Admiral brands 15th August 2018 50
Slide 51: 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