Admiral Group Plc · LSE:ADM
Admiral — H1 2020 Earnings Presentation
51 slides from Admiral's earnings presentation, Aug 12, 2020
Slide 1: Admiral 2020 Half Year Results
Admiral 2020 Half Year Results 12th August 2020 Introduction and Covid update David Stevens, Group CEO Milena Mondini, Group CEO Designate Group Geraint Jones, Group CFO UK Insurance Cristina Nestares, UK Insurance CEO International Insurance Costantino Moretti, Head of International Insurance Compa
Slide 2: Covid update
Covid update Milena Mondini – Group CEO Designate ‘Replying to @AdmiralUK Thank you! I doubt I’ll be shopping around next year for insurance!! And all staff on full pay without furlough…’ ‘Yes @AdmiralUK you just won my loyalty for another years car insurance’ ‘Thank you @AdmiralUK for the £25 refun
Slide 3: Covid Impact: Short term disruption, business remains resilient
Covid Impact: Short term disruption, business remains resilient Market motor quote volumes1 Driving mobility trends2 (indexed to 100 Jan 20) (7-day rolling average) 160 120 140 100 120 80 100 80 60 60 40 40 20 20 0 0 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20
Slide 4: Admiral Covid Response: Good outcomes for all stakeholders
Admiral Covid Response: Good outcomes for all stakeholders Customers Staff ▪ UK premium rebate – lockdown ▪ Prioritised staff wellbeing and safety claims frequency benefit passed on ▪ Full salaries paid to customers ▪ Rapid shift to staff working from ▪ Prioritised business continuity and home custo
Slide 5: Covid Outlook: Some interesting opportunities and challenges
Covid Outlook: Some interesting opportunities and challenges Potential Opportunities ▪ Shift towards digital contact channels ▪ Global acceleration of online distribution ▪ Flexible working; access to wider talent pool ▪ Operational resilience Potential Challenges ▪ Potential adverse economic outloo
Slide 6: Group
Group Geraint Jones – Group CFO
Slide 7: Highlights
Highlights Customers Turnover1,2 11% 9% 6% 7.17m 4% £1.69bn H1 2019: 6.74m H1 2019: £1.76bn Profit before tax3 Solvency ratio Earnings per share 30% £287m 2% 186% xx% 32% xx% 82.9p H1 2019: £220m H1 2019: 190% H1 2019: 63.0p Return on equity Interim dividend per share4 7% 50% 12% 70.5p H1 2019: 47%
Slide 8: Growth impacted by Covid, though recent trends more positive
Growth impacted by Covid, though recent trends more positive Turnover Customers UK Motor Insurance1 8% £1,158m 2 2% 4.42m H1 2019: £1,255m H1 2019: 4.33m UK Household Insurance 9% £87m 16% 1.07m H1 2019: £80m H1 2019: 0.92m International Insurance 3% £330m 10% 1.49m H1 2019: £320m H1 2019: 1.36m Com
Slide 9: Strong increase in Group profit, partly flattered by Ogden hit in H1 2019
Strong increase in Group profit, partly flattered by Ogden hit in H1 2019 Group profit before tax1 ▪ £59.1m increase in UK Insurance profit: ▪ Motor profit £310.4m v £251.7m - continued very H1 2020 H1 2019 Change positive back year loss ratio development and higher investment income, non-repeat of
Slide 10: UK Motor – loss ratios and positive reserve releases
UK Motor – loss ratios and positive reserve releases Admiral projected ultimate loss ratio1 Releases on original Admiral net share Ogden impact (2%)4 79% (-4%) +4%3 68% (-1%) 70% (-3%) 66% (-1%) 63% (-3%) -4% -17% -14% -11% (9%)2 -13% 31% 25% 27% 24% 21% () - represents % movement from December 2019
Slide 11: Healthy solvency position maintained; interim 2020 dividend includes deferred special dividend
Healthy solvency position maintained; interim 2020 dividend includes deferred 2019 final special dividend Capital position (£bn)1 Interim Dividend 186% 190% 190% 20.7p £1.27bn £1.16bn £1.20bn £0.59 £0.55 £0.57 70.5p 60.0p 63.0p £0.61 £0.63 £0.68 H1 2019 H2 2019 H1 2020 H1 2018 H1 2019 H1 2020 Solven
Slide 12: Group summary
Group summary Top line progress in H1 negatively impacted by Covid, though recent trends are more positive Strong profit increase – partly impacted by Ogden hit in 2019, but also good results from most businesses Confirming payment of deferred special dividend alongside increased 2020 interim divide
Slide 13: UK Insurance
UK Insurance Cristina Nestares – UK Insurance CEO
Slide 14: UK Motor – income impacted by Covid uncertainty, but starting to pick up
UK Motor – income impacted by Covid uncertainty, but starting to pick up towards end of H1 UK Motor quote volumes Other revenue per vehicle1 (YoY change) 19% 10% 8% £67 £64 -2% -9% Q1 - 2020 Q2 - 2020 -12% Feb-20 1st-22nd 23rd-31st Apr-20 May-20 Jun-20 Mar-20 Mar-20 ▪ Turnover lower – premium rebate
Slide 15: UK Motor – dramatic drop in frequency followed by steady recovery
UK Motor – dramatic drop in frequency followed by steady recovery UK car transport usage1 Potential increase in frequency (change over lockdown period) 120% ▪ People choose local holidays rather than travelling abroad 100% ▪ Increased car usage to replace 80% public transport 60% Potential decrease
Slide 16: UK Motor – pricing uncertainty remains
UK Motor – pricing uncertainty remains Market average premium1 Factors influencing pricing (YoY change) 25% ▪ Claims inflation 20% ▪ Levy increases 15% 10% ▪ Covid: Higher/Lower claims frequency 5% – cars on road, WFH, second wave 0% -5% ▪ FCA pricing market study -10% -15% ▪ Whiplash reforms -20% -
Slide 17: Household continues to grow; Covid impact limited
Household continues to grow; Covid impact limited Active customer base (m) Household profit/loss (£m) 1.07m 0.92m 0.78m £5.5 £4.2 0.59m (£1.9) H1 2017 H1 2018 H1 2019 H1 2020 H1 2018 H1 2019 H1 2020 ▪ Storms (Ciara, Dennis and Jorge) – over 4000 claims, impact of c.£5m net of Flood Re recoveries ▪ C
Slide 18: Premium refund strengthens brand and Covid impact accelerates digital transformation
Premium refund strengthens brand and Covid impact accelerates digital transformation Brand consideration1,2 New Business online sales (Indexed to 100 May-19) (YoY change) 140 120 100 80 60 40 20 0 May-19 Sep-19 Jan-20 Apr-20 Jan-19 Jun-19 Jan-20 Jun-20 Admiral Industry peers3 ▪ Brand strengthened as
Slide 19: UK Insurance summary
UK Insurance summary Strong releases, a testimony to our underwriting capabilities UK Motor growth impacted by Covid but starting to recover; whilst retention improved Severe drop in motor frequency during lockdown Household continues to grow, with lower Covid impact but change in claims mix 12th Au
Slide 20: International Insurance
International Insurance Costantino Moretti - Head of International Insurance 20
Slide 21: International Insurance – sustainable growth
International Insurance – sustainable growth Turnover ($/€) Customers ConTe 1% €122m 9% 712k H1 2019 : €121m H1 2019: 656k L’olivier 24% €73mH1 2019 : €59m 28% 261k H1 2019: 204k Admiral Seguros 1% €47m 10% 302k H1 2019 : €46m H1 2019: 275k Elephant 6% $149m 2% 218k H1 2019 : $159m H1 2019: 222k 12t
Slide 22: International Insurance – strong prior year development
International Insurance – strong prior year development EU combined Whole account Admiral share of Whole account loss result (€m)1 profit/loss loss ($m)2 (% of turnover) (% of turnover) H1 2019 H1 2020 H1 2019 H1 2020 12% ($4.2) €11.2 4% ($8.0) (7%) €4.0 H1 2019 H1 2020 (13%) H1 2019 H1 2020 ▪ LR im
Slide 23: International Insurance summary
International Insurance summary International growth temporarily impacted by Covid Slightly higher European profit driven by both prior year releases and Covid Elephant continues to focus on LR improvements and improving business fundamentals 12th August 2020 23
Slide 24: Comparison
Comparison Elena Betes – Online Comparison Portals Director 24
Slide 25: European comparison sites remain resilient despite major Covid disruption
European comparison sites remain resilient despite major Covid disruption Turnover (£m) Profit before tax (£m) Profit before tax2 (£m) £83.7m £14.2m £76.0m £0.7 £20.0 £10.8m £21.8 £2.1 £13.5 £63.7 £54.2 £8.7 June & July - 19 June & July - 20 H1 2019 H1 2020 H1 2019 H1 2020 ▪ Strong start to 2020, fo
Slide 26: Comparison beyond Europe – challenge and opportunity
Comparison beyond Europe – challenge and opportunity 59.25% Admiral share 51.25% Admiral share Admiral share of loss1 ($m) Admiral share of loss1 (£m) H1 2019 H1 2020 H1 2019 H1 2020 ($0.6) (£0.1) (£0.3) ($3.5) ▪ Substantially reduced losses despite Covid ▪ Rastreator.mx (Mexico) impact ▪ Strong per
Slide 27: International Comparison summary
International Comparison summary Comparison businesses have remained resilient, despite Covid challenges Strong growth, particularly in recent months Continue to build on synergies across Comparison businesses 12th August 2020 27
Slide 28: Loans
Loans Scott Cargill - Admiral Financial Services CEO 28
Slide 29: Strong controlled growth in balances over time
Strong controlled growth in balances over time Loans Stock Balance (£m) Average Loan Profile Loan sales paused in March £515 £421 £455 £455 1 ▪ Mainly unsecured fixed term loans, with minor portion of secured used car finance also offered £300 £214 ▪ Average loan size: £7k ▪ Average APR: 8-9% ▪ Aver
Slide 30: Rapid response to Covid crisis leaves us well placed for future growth
Rapid response to Covid crisis leaves us well placed for future growth Loans profit/loss (£m) Coverage ratio1 H1 2019 H1 2020 H1 2019 H1 2020 H1 2018 H1 2019 H1 2020 8.1% 3.7% 4.0% (£4.3) (£6.4) 1.3% (£9.4) Portfolio Up to date ▪ Small portion of book on payment holidays vs competitors – confirmed p
Slide 31: Admiral Loans summary
Admiral Loans summary Admiral continues to invest in Loans capabilities Rapid response to Covid resulting in deferred growth and very prudent provisions Remain highly cautious about the next 6 months – high level of economic uncertainty 12th August 2020 31
Slide 32: Wrap up
Wrap up David Stevens – Group CEO Milena Mondini – Group CEO Designate 2018: ConTe 10th year anniversary 32
Slide 33: Appendix
Appendix
Slide 34: Group key performance indicators
Group key performance indicators1 KPI 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 H1 17 H1 18 H1 19 H1 20 Group Financial Turnover £m 1,585 2,190 2,215 2,030 1,971 2,119 2,576 2,958 3,283 3,463 1,446 1,662 1,756 1,6902 Customers m 2.7 3.4 3.6 3.7 4.1 4.4 5.2 5.7 6.5 7.0 5.5 6.2 6.7 7.2 1 Group
Slide 35: Summary income statement
Summary income statement1 UK Insurance International Insurance Price Comparison Other Admiral Group H1 18 H1 19 H1 20 H1 18 H1 19 H1 20 H1 18 H1 19 H1 20 H1 18 H1 19 H1 20 H1 18 H1 19 H1 20 2 Turnover 1,319.1 1,338.8 1,248.4 260.1 319.5 329.5 76.6 83.4 90.7 6.2 14.5 21.0 1,662.0 1,756.2 1,689.6 Tota
Slide 36: Balance sheet
Balance sheet Jun-19 Dec-19 Jun-20 £m £m £m ASSETS Property, plant and equipment 163 154.4 150.7 Intangible assets 158.9 160.3 162.2 Reinsurance contracts 1,885.9 2,071.7 1,891.6 Financial assets 2,945.6 3,234.5 3,352.5 Deferred income tax 5.3 - 2.1 Insurance and other receivables 1,192.4 1,227.7 1,
Slide 37: Group profit before tax reconciliation
Group profit before tax reconciliation Reconciliation from statutory to adjusted profit before tax (£m) (£0.6) ▪ Admiral has four operations with shared ownership: Rastreator (75.0%); Compare.com (59.25%); Admiral Law (95.0%); Preminen (50.0%) ▪ Profit or losses in period accruing to minority £286.7
Slide 38: Investment update
Investment update Dec ‘19: £3,516m June ‘20: £3,749m Cash Deposit Fixed Income Investments Money Market Funds GILTS AAA AA A BBB Other 1 12th August 2020 Note: (1) ‘Other’ comprises of sub-BBB ratings and unrated securities. Unrated securities consists of an AAA rated money market fund 38 backed by
Slide 39: Analysis of Other Group Items
Analysis of Other Group Items H1 2020 H1 2019 ▪ Admiral Loans – higher loss largely driven by increased Other interest & provisions due to Covid uncertainty 3.0 2.7 investment income ▪ Share scheme charges – decrease driven by a reduced Share scheme charges (22.8) (26.2) number of awards following c
Slide 40: 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 79% 68% 70% 66% 63% 17% 18% 16% 16% 16% 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Admiral ultimate combined ratio 97% 82% 84% 79% 87% ▪ Recent accident year p
Slide 41: 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% 87%87% 88% 87% 83% 84% 83% 81% 82% 77% 77% 75% 80% Ultimate loss ratio by 72% 73% 74% 70% 71% underwrit
Slide 42: Solvency ratio movements
Solvency ratio movements 28% (6%) (29%) 20% (17%) 190% 186% FY 2019 Solvency II Prior year loss ratio Generation of capital - Impact of widening Dividend Other changes HY 2020 Solvency II Ratio improvements current period credit spreads on the Ratio Group’s bond portfolio 12th August 2020 42
Slide 43: Adjusted profit before tax breakdown
Adjusted profit before tax breakdown £5.7 (£5.1) £14.6 (£4.9) £9.2 (£6.0) £3.7 £16.1 £33.2 £286.7 £253.4 £220.2 H1'19 Ogden Impact H1'19 (excl. UK Motor UK Motor UK Motor International Price Loans Covid support Other (mainly H1'20 Ogden ) Insurance investment commuted Insurance comparison fund share
Slide 44: UK Car insurance: Booked loss ratio sensitivity
UK Car insurance: Booked loss ratio sensitivity Sensitivity of booked loss ratio (£m) Underwriting year 2015 2016 2017 2018 2019 Booked loss ratio 70.0% 71.0% 73.5% 79.5% 82.0% ▪ The impact includes the change in net insurance claims along with the associated PBT impact of +1% move -12.0 -14.2 -15.2
Slide 45: 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 46: 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 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: 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 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 12th August 2020 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