Admiral Group Plc · LSE:ADM
Admiral — H1 2015 Earnings Presentation
55 slides from Admiral's earnings presentation, Aug 19, 2015
Slide 1: 2015 Half Year Results
2015 Half Year Results 19th August 2015
Slide 2: Agenda
Agenda Group Overview Henry Engelhardt, CEO Italy Geraint Jones, CFO US Spain Cristina Nestares, Admiral Seguros CEO France Pascal Gonzalvez, L’olivier assurance auto CEO David Stevens, COO UK Alistair Hargreaves, Head of Operations Wrap Up Henry Engelhardt, CEO Q&A All 2
Slide 3: H1 2015 highlights
H1 2015 highlights Customers +2% +8% 4.2m m H1 14: 3.9m Profit before tax1 Earnings per share +1% £186m +4% 54.8p H1 14: £185m H1 14: 52.7p Return on equity +3% 51.0p -7% 50% H1 14: 54% Note: (1) Profit before tax adjusted to exclude minority interests’ share 3
Slide 4: Group turnover
Group turnover UK Car Turnover International Car Turnover £858m £110m +1% +6% H1 14: £850m H1 14: £104m Price Comparison Other Turnover Turnover £55m £34m -4% +31% H1 14: £57m H1 14: £26m 4
Slide 5: Group customers
Group customers UK Car Insurance International Car Insurance 3.18m 632k +1% +14% H1 14: 3.15m H1 14: 556k Other 381k +61% H1 14: 236k 5
Slide 6: Group profit before tax
Group profit before tax UK Car Insurance International Insurance Group PBT +6% £219m +31% £(11m) H1 14: £208m H1 14: £(16m) +1% £186m Price Comparison Other £(4m) £(18m) -170% -38% H1 14: £185m H1 14: £6m H1 14: £(13m) Strong UK Car Insurance performance mainly due to positive prior years claims e
Slide 7: Record interim earnings per share
Record interim earnings per share Earnings per share, half year Earnings per share, full year 54.5p 54.8p 52.7p 50.1p 50.3p 104.6p 95.1p 103.0p 81.9p 72.3p 54.9p 59.0p 48.6p 39.8p 32.7p 28.4p H1 13 H2 13 H1 14 H2 14 H1 15 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 H1 2015 earnings per
Slide 8: Solvency II and capital requirements
Solvency II and capital requirements 2015 Group capital requirements for 2015 determined under UK ICAS ICAS regime IGD coverage Surplus position, after accounting for interim dividend, is in excess of 384% 1 £300m (similar level to 2014 year-end) 369% Appropriate to carry large surplus until 2
Slide 9: Interim dividend of 51.0p per share
Interim dividend of 51.0p per share Dividend Per Share Interim 2015 dividend of 51.0p 50.6p 49.4p 51.0p per share 48.9p 49.0p 45.1p 45.5p Payout ratio of 93% 39.1p Total dividends paid (including H1 36.5p 35.5p 2015) since flotation £1.9bn 32.6p 29.8p 27.7p Dividend Dates 26.0p 26.5p 24.0p 23.
Slide 10: Interim dividend of 51.0p per share
Interim dividend of 51.0p per share Dividend Per Share Interim 2015 dividend of 51.0p per share DPS EPS Payout ratio of 93% Total dividends paid (including H1 2015) since flotation £1.9bn Dividend Dates Ex-dividend date: 10 September 2015 Record date: 11 September 2015 Payment date: 9 Oc
Slide 11: Solid UK car insurance performance
Solid UK car insurance performance Profit Before Tax Profit increased by 6% mainly due to very positive claims experience and higher than average reserve releases Despite the large release, reserve margin slightly £193m £208m £219m increased in H1 2015 Pleasing modest vehicle count growth in H
Slide 12: Price comparison continues to develop...
Price comparison continues to develop... >200k of UK environment remains very competitive Brian Awareness1 me have a new owner for Confused.com but Brian is proving 89% popular with a strong link to brand 82% 72% Signs which should increase shopping behaviour and have a positive impact on UK pri
Slide 13: Compare.com panel continues to grow
Compare.com panel continues to grow Launched: Mar 2013 Marketing spend slower than planned Insurer adoption accelerates to >50 insurers Compare.com performance Significant improvement in acquisition economics < half 2014 levels 2015 loss1 projected to be in the £20m-£30m range Managed growth is proj
Slide 14: Growth in international car insurance presence
Growth in international car insurance presence Vehicles 632k 593k 556k 14% increase in vehicles from H1 2014 298k 285k 279k Progress made in all insurance operations Growth in customer numbers across 122k 109k all operations 95k 34k 43k 31k International vehicles represent 15% of group vehic
Slide 15: Elephant Auto
Elephant Auto Market rates edging up: • Frequency up - lower gas prices and Turnover unemployment and more miles driven Market Update • Severity up - car sales up 5% and growing $63m proportion of repairs of cars < 3 years old $54m $55m No change in competitive landscape - significant TV spend on ca
Slide 16: ConTe.it
ConTe.it 91% 2014 market COR Market stable with first signs of a volume Turnover Market Update upturn €52m €53m €50m Strong price reductions continue to be a market trend - 6% down on H1 2014 First earned profit in 2014 H1 14 H2 14 H1 15 ConTe Good development of past underwriting performance years
Slide 17: ConTe underwriting year
ConTe underwriting year Total premiums written €103m €103m €95m Combined Ratio1 €72m 117% €49m 109% 109% 109% 106% 106% 2011 2012 2013 2014 H1 2015 107% 101% 103% Vehicles 103% 99% 298,000 279,900 285,100 265,800 186,400 2011 2012 2013 2014 Reported combined ratio at Dec 2013 Reported combined ratio
Slide 18: Agenda
Agenda Group Overview Henry Engelhardt, CEO Italy Geraint Jones, CFO US Spain Cristina Nestares, Admiral Seguros CEO France Pascal Gonzalvez, L’olivier assurance auto CEO David Stevens, COO UK Alistair Hargreaves, Head of Operations Wrap Up Henry Engelhardt, CEO Q&A All 18
Slide 19: Spain and France
Spain and France Launched: Oct 2006 Launched: Mar 2009 Launched: Jan 2010 Launched: Dec 2010 Launched: Mar 2013 Cristina Nestares Pascal Gonzalvez Admiral Seguros CEO L’olivier assurance auto CEO 19
Slide 20: Spanish market overview
Spanish market overview Market growing after 7 years of decreases Profitability continues with a COR of 97% in 2014 Change in baremo, a rating system to assess BI damages, will increase BI costs significantly Market hardening expected New car sales (000s) Fuel consumption 20
Slide 21: Rastreator
Rastreator Launched: Mar 2009 Break-even: 2011 Launched: July 2015 Focus on achieving objectives: Preferred Brand Strategy: strong media investment is delivering Rastreator an increase in quote base and brand recognition performance Multiproduct: 20% of revenue from products other than car insur
Slide 22: Admiral Seguros
Admiral Seguros Break-even in sight for 2015 but loss ratio dependent Turnover Good and encouraging results for the €28m Admiral Seguros €27m 2015 LR in the first half of the year €26m performance Policy growth continues H1 14 H2 14 H1 15 Vehicles Leverage market growth to increase the 169k book 164
Slide 23: A new law since January 2015 to help customer switching
A new law since January 2015 to help customer switching Before 2015 Since 2015 OLD REGULATION “LOI CHATEL” NEW REGULATION “LOI HAMON” Switching process was a burden Switching process becomes easy Cancellation at the latest 2 months Cancellation possible any time after 1 year before renewal d
Slide 24: As a consequence, price comparison websites are growing
As a consequence, price comparison websites are growing Market aggregator car quotes YTD June 2015 vs last year 800,000 700,000 Car quotes on aggregators 600,000 +17% 500,000 400,000 Car insurance Google queries 300,000 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec +16% 2013 2014 2015 24
Slide 25: Regulatory changes coupled with pressure on profitability creating a new opportunity
Regulatory changes coupled with pressure on profitability is creating a new opportunity OPPORTUNITY NEW PC WEBSITES REGULATION GROWTH CUSTOMERS SHOP AROUND ---------- MORE SWITCHING PRESSURE ON CYCLE TURN & PROFITABILITY PRICE INCREASES ---------- Price increases have been limited in the past year
Slide 26: LeLynx
LeLynx Launched: Jan 2010 Break-even: 2013 Increased marketing investment: new TV campaign (+100% investment on TV) and significant PR activity to take advantage of the law change LeLynx performance LeLynx is clear leader of market LeLynx quotes +50% in 2014 Further communication to educate market o
Slide 27: L'olivier assurance auto
L’olivier assurance auto Built solid business foundations - from in-sourcing of operations to modernisation of IT infrastructure Turnover €13m Improvement in operational efficiency L’olivier €9m €9m performance Clear competitive advantage in pricing (sophisticated tariff and very flexible processes)
Slide 28: Agenda
Agenda Group Overview Henry Engelhardt, CEO Italy Geraint Jones, CFO US Spain Cristina Nestares, Admiral Seguros CEO France Pascal Gonzalvez, L’olivier assurance auto CEO David Stevens, COO UK Alistair Hargreaves, Head of Operations Wrap Up Henry Engelhardt, CEO Q&A All 28
Slide 29: Solid UK car insurance performance
Solid UK car insurance performance Profit Before Tax Profit increased by 6% mainly due to very positive claims experience and higher than average reserve releases Despite the large release, reserve margin slightly £193m £208m £219m increased in H1 2015 Pleasing modest vehicle count growth in H
Slide 30: UK Car insurance market cycle may be turning
UK Car insurance market cycle may be turning ABI Motor Insurance Premium Tracker 2.9% 1.0% 0.3% Market in the process of -2.9% turning, but bumping along the bottom -5.5% Market claims frequency -6.7% increased by 3% in Q1 2015 -7.1%-7.1% -8.2% -8.5% -8.4% -9.1% Admiral price increases from -1
Slide 31: End of price reductions may indicate unsustainability of market-wide reserve releases
End of price reductions may indicate unsustainability of market-wide reserve releases Private Motor Net Combined Ratio Private Motor Reserve Releases as % of premium 90.0% 16.0% 14.0% 95.0% 12.0% 100.0% 10.0% 105.0% 8.0% 6.0% 110.0% 4.0% 115.0% 2.0% 120.0% 0.0% -2.0% 125.0% -4.0% 130.0% -6.0% ‘Bre
Slide 32: Further improvements in historic ultimate claims ratios during H1 2015
Admiral has seen further substantial improvements in historic ultimate claims ratios during H1 2015 Projected Ultimate Loss Ratio (Admiral vs Market) 95% (-1%) 87% (-1%) 86% (-1%) 87% (-2%) 82% Improvements largely driven by 76% (-3%) better evolution of large BI 76% (-3%) claims, notably from 201
Slide 33: Movements in ultimates allow increased releases
The movements in ultimates in the last six months allow increased releases Admiral releases as % of premium Record reserve releases reflect very 29% positive evolution of ultimates 24% Reserves margin slightly increased 21% versus end 2014 18% 14% 16% A similar level of reserve release in 13%
Slide 34: Other Revenue per vehicle slightly lower
Other Revenue per vehicle slightly lower due to changes in Reinsurer Vehicle Commission 2015 drivers of change Other Revenue per vehicle 1 Reinsurer Vehicle Commission removed for new business policies from January 2015 £67 Offset by increased future profit commissions £64 £6 £3 Approach to add-
Slide 35: Admiral is maintaining a strong expense ratio advantage
Admiral is maintaining a strong expense ratio advantage Admiral 1 and Market 2 expense ratios 31% 32% 30% 29% 28% 29% 29% 29% 27% 26% 26% 24% 13% 12% 17% 16% 16% 15% 14% 13% 13% 2009 2010 2011 2012 2013 2014 H1 2015 Market (earned basis incl UKI) Market (earned basis excl UKI) Admiral UK (written ba
Slide 36: Admiral is efficient at servicing a higher premium mix of customers
Admiral is efficient at servicing a higher premium mix of customers Expense ratio reconciliation Market 1 versus Admiral Market Admiral 2014 H1 2015 8% Average premium 2 £358 £481 8% 32% Average expense £113 £73 per policy 16% Market Average Average Admiral premium expense per policy Source: (1) Ana
Slide 37: Customers stay with us
An important part of Admiral’s expense ratio advantage is that customers stay with us Persistency1 by premium band Persistency 1 : Admiral versus Market (Indexed £350 - £400 = 100) (Indexed Market, Year to June 14 = 100) 112 105 100 104 94 100 £350 - £400 £475 - £525 Year to June 14 Year to June 15
Slide 38: So why do Admiral's customers stay?
So why do Admiral’s customers stay? 2013 2014 H1 2015 SMS feedback received 110,000 270,000 230,000 ✔ ✔ ✔ Following a claim, I would renew with Admiral ‘Yes’ response > 90% How satisfied were you with our service? Average > 9/10 ✔ ✔ ✔ Reportable complaints per 1,000 policies 4.1 3.5 3.5 3.1 3.0 H1 2
Slide 39: Agenda
Agenda Group Overview Henry Engelhardt, CEO Italy Geraint Jones, CFO US Spain Cristina Nestares, Admiral Seguros CEO France Pascal Gonzalvez, L’olivier assurance auto CEO David Stevens, COO UK Alistair Hargreaves, Head of Operations Wrap Up Henry Engelhardt, CEO Q&A All 39
Slide 40: A great place to work!
A great place to work! European Business Awards 2015 - Finalist - Employer of the Year European Business Awards 2015 - National Champion United Kingdom (Employer of the Year) 5th Sunday Times Best Companies To Work For (2014: 2nd) Sunday Times Best Companies To Work For 50th Virginia Business Best P
Slide 41: H1 2015 highlights
H1 2015 highlights Customers +2% +8% 4.2m m H1 14: 3.9m Profit before tax1 Earnings per share +1% £186m +4% 54.8p H1 14: £185m H1 14: 52.7p Return on equity +3% 51.0p -7% 50% H1 14: 54% Note: (1) Profit before tax adjusted to exclude minority interests’ share 41
Slide 42: Agenda
Agenda Group Overview Henry Engelhardt, CEO Italy Geraint Jones, CFO US Spain Cristina Nestares, Admiral Seguros CEO France Pascal Gonzalvez, L’olivier assurance auto CEO David Stevens, COO UK Alistair Hargreaves, Head of Operations Wrap Up Henry Engelhardt, CEO Q&A All 42
Slide 43: Appendix
Appendix
Slide 44: Admiral Group Key Performance Indicators
Admiral Group Key Performance Indicators KPI 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 H1 12 H1 13 H1 14 H1 15 Group Financial Turnover £m 627 698 808 910 1,077 1,585 2,190 2,215 2,030 1,971 1,169 1,089 1,037 1,058 Customers m 1.1 1.3 1.5 1.7 2.1 2.7 3.4 3.6 3.7 4.1 3,502 3,610 3,940 4,190 S
Slide 45: Summary Income Statement
Summary Income Statement International Car UK Car Insurance Insurance Price Comparison Other Admiral Group £m H1 13 H1 14 H1 15 H1 13 H1 14 H1 15 H1 13 H1 14 H1 15 H1 13 H1 14 H1 15 H1 13 H1 14 H1 15 Turnover 924.5 849.8 857.9 95.5 104.3 110.3 57.5 57.1 55.2 11.6 25.9 34.1 1,089.1 1,037.1 1,057.5 To
Slide 46: Balance Sheet
Balance Sheet December June 2014 2014 June 2015 £m £m £m ASSETS Property, plant and equipment 28.4 32.3 32.3 Intangible assets 98.6 107.2 119.3 Reinsurance contracts 697.6 829.8 720.5 Financial assets 2,332.9 2,547.4 2,641.1 Deferred income tax 19.8 22.9 29.5 Trade and other receivables 91.2 82.0 10
Slide 47: Group profit before tax reconciliation
Group profit before tax reconciliation Reconciliation from statutory to adjusted profit before tax Admiral has four operations with shared ownership: Rastreator (Admiral share of £5m (£1m) ownership 75.0%); compare.com (67.8%); Admiral Law and BDE Law (90.0%) Profit or losses in period accruing
Slide 48: UK Car Insurance: Admiral vs Market Loss, Expense and Combined Ratio
UK Car Insurance: Admiral vs Market Ultimate Loss Ratio, Expense Ratio and Combined Ratio Projected Ultimate Loss Ratio: Admiral vs Market Expense Ratio: Admiral vs Market 95% (-1%) 31% 30% 29% 29% 29% 87% (-1%) 27% 26% 26% 86% (-1%) 87% (-2%) 82% 73% (-3%) 76% (-3%) 76% (-3%) 17% 17% 17% 16% 14% 15
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 (%) Sensitivity of booked loss ratio Development by financial year (colour-coded) Split by underwriting year (x axis) Underwriting 2011 2012 2013 2014 year Booked loss 92% 65% 70% 77% 89% 89% rati
Slide 50: UK Car Insurance: underwriting arrangements
UK Car Insurance: underwriting arrangements Reinsurance arrangements pre-commutations Post-commutations (at 30 June 2015) 2.5% 3.0% 2.5% 3.0% 4.0% 5.0% 5.0% 4.00% 5.00% 8.75% 8.75% 8.75% 8.75% 8.75% 8.75% 8.75% 7.5% 7.5% 9.0% 9.0% 9.0% 40% 40% 40% 9.00% 9.00% 13.25% 13.25% 13.25% 12.25% 12.25% 13.25
Slide 51: Admiral's investment strategy is low risk
Admiral’s investment strategy is low risk Investments Breakdown Investment and Interest Income FY 14: £2,450m H1 15: £2,459m £10.8m Gilts 8% Gilts £8.7m Money 8% Money Cash market Cash 11% market funds 9% funds £6.7m 25% Cash 27% CASH+ deposits 12% 10% Fixed Cash income Fixed deposits and short- inc
Slide 52: International Car Insurance market statistics
International Car Insurance market statistics (2014) (2014) (2014) (2014) Gross Written Premium £8bn £11bn £117bn £14bn Direct insurer share of 21% 3% 25% 9% market of total market of total market of total market of total market Vehicles 22m 35m 220m 43m Combined Ratio 97% 107% 102% 90%-92% 52
Slide 53: Key definitions
Key definitions Term Definition The year in which an accident takes place. It is also referred to as the earned basis or the calendar year basis. Accident Year Claims incurred are allocated to the calendar year in which the accident took place. The year in which the policy was incepted. It is also r
Slide 54: Admiral's brands
A or Admiral’s brands balumba Seguros de coche | sQualitas VES Auto Q el comparador de seguros —__ Contfe.it aye > <| GRUPPO ADMIRAL @ Elephant P ivier assurance auto [- ( Admiral *Bell @FAdmirallaw BDELaw 9evapiator Confused / cOmparenow com Carfused &> by Confused.com ‘yao Restreator.com LeLynx.fr
Slide 55: Disclaimer Notice
Disclaimer Notice 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 her