Admiral Group plc · LSE:ADM
Admiral — H1 2021 Earnings Presentation
47 slides from Admiral's earnings presentation, Aug 11, 2021
Slide 1: Admiral Group plc 2021 Half Year Results
Overview & Strategic Outlook Milena Mondini, Group CEO Group Financials Geraint Jones, Group CFO UK Insurance Cristina Nestares, UK Insurance CEO International Insurance & Loans Costantino Moretti, Head of International Insurance Milena Mondini, Group CEO Whether online or offline, Admiral’s culture
Slide 2: Overview & Strategy
Highlights from this year’s ‘Smart Working’ selfie staff competition Overview & Strategy Milena Mondini, Group CEO 2
Slide 3: Group highlights: Strong results and continued business evolution
Group highlights: Strong results and continued business evolution • Strong profit driven by very positive prior year development combined with lower claims frequency • Continued growth across different businesses and geographies in very competitive markets • Executed well and effectively adapted to
Slide 4: We continue to make progress on our strategy
We continue to make progress on our strategy To provide more products to happier customers: Accelerate evolution Product Evolution of 1 2 3 towards “Admiral 2.0” Diversification Motor WHY? Strengthen core competencies and increase Increase business resilience and Evolve our proposition speed of deli
Slide 5: Solid execution and customer focus are fundamental in a time of uncertainty
Solid execution and customer focus are fundamental in a time of uncertainty… Examples of good execution in our core business and implementation of strategic priorities in the last year Core Business Improvements • Underwriting agility – Decreased and • Claims efficiency – Tripled total loss • Cost e
Slide 6: Effective execution, agility and adaptability remain key to navigate changes ahead
… And effective execution, agility and adaptability remain key to navigate changes ahead Changes ahead Covid FCA remedies New ways of working Strong underwriting skills Engaged and loyal workforce Success enablers Speed to respond to market conditions Operational agility Operational resilience and f
Slide 7: Underpinning this execution is our people and culture
Underpinning this execution is our people and culture Now focusing on... Engaging Caring • Talent in data, technology and Staff feel well supported Best Big Company for Wellbeing, 95% by the business1 #1 UK 2021 advanced analytics Fun Inclusive UK staff feel they are treated fairly, 96% regardless o
Slide 8: Group Financials
Admiral’s senior management has been providing regular business updates via our staff intranet since the start of the pandemic Group Financials Geraint Jones, Group CFO 8
Slide 9: Very strong H1; continued growth & large increase in profit and dividend
Very strong H1; continued growth & large increase in profit and dividend £482m 132.9p 8.02m £1.75bn Profit before tax1 Earnings per share1 Customers Turnover1,2,3 H1 2020: £274m H1 2020: 79.7p H1 2020: 7.17m H1 2020: £1.60bn + 76% + 67% + 12% + 9% 209% 68% 115.0p 46.0p Solvency ratio4 Return on equi
Slide 10: Good growth across the Group in the first half
Good growth across the Group in the first half UK Motor £1,266m 4.93m UK Household £105m 1.23m Insurance1 Turnover2 Customers Insurance Turnover Customers H1 2020: £1,158m H1 2020: 4.42m H1 2020: £87m H1 2020: 1.07m + 9% + 12% + 20% + 15% International £347m 1.71m Admiral £426m Insurance Turnover Cu
Slide 11: Substantial increase in Group profit results from higher releases and lower loss ratio
Substantial increase in Group profit results from higher releases and lower current period loss ratio in UK Motor ● UK Insurance profit up by £230m, 73% Group profit before tax1 higher than H1 20 ● UK Motor profit increased to £530m (H1 20: £311m) – higher reserve releases and much H1 2021 H1 2020 C
Slide 12: Higher releases & profit commission and lower current loss ratio drive higher UK profit (1)
Higher releases & profit commission and lower current loss ratio drive higher UK profit (1) UK Motor H1 2021 H1 2020 Change (£m) (£m) (£m) Drivers of profit change Net premium revenue 242.4 208.5 +33.9 1 Higher premium: Investment return 20.7 30.6 -9.9 + non repeat of H1 20 rebate Current year claim
Slide 13: Higher releases & profit commission and lower current loss ratio drive higher UK profit (2)
Higher releases & profit commission and lower current loss ratio drive higher UK profit (2) ● Higher releases in H1 21 across multiple Admiral booked loss ratio1 underwriting years 74% (-4%) 73% (-3%) ● Larger moves in booked ratios than 67% (-3%) 69% (-3%) 66% (-2%) normal – consistent 3%/4% releas
Slide 14: Very healthy half year solvency position
Very healthy half year solvency position Capital position (£bn)1,2 ● Very strong solvency position maintained 187% 186% 209% Solvency Capital ● £55m increase in post-dividend £1.47bn £1.41bn Requirement surplus, 22 points solvency ratio £1.27bn Solvency Capital increase £0.68 £0.73 Surplus £0.59 ● C
Slide 15: Big increase in interim dividend; Comparison disposal proceeds plans confirmed
Significantly higher profit leads to big increase in interim dividend; plans for Comparison disposal proceeds confirmed ● ‘Regular’ interim 2021 dividend of 115p Interim dividend per share; 87.9p normal and 27.1p special elements Comparison disposal proceeds – 1st payment ● 63% growth v interim 2020
Slide 16: Summary
Summary • Positive growth across the Group during H1 • Very large profit increase driven by positive back and current year loss ratios in UK Motor • Very healthy solvency position despite a very large increase in interim dividend 16
Slide 17: UK Insurance
In response to the crisis our colleagues faced in India, staff from Admiral UK and Canada walked over 4,800 miles and raised £13,000 in support UK Insurance Cristina Nestares, UK Insurance CEO 5th Best Big Company to 2nd Best Workplace For Awarded Best Big Company Work For in 2021 (UK) Women in 2021
Slide 18: Highlights: UK Insurance
Highlights: UK Insurance • Significant growth in Motor book, particularly in H2 2020 • Claims frequency increasing, underlying claims inflation continues • Admiral continues to outperform the market in claims outcomes • Good Household growth and record profit • Market outlook: Market prices expected
Slide 19: Significant growth in Motor book, particularly in H2 2020
Significant growth in Motor book, particularly in H2 2020 Admiral ‘Times Top’1,2 Motor customer growth (Indexed to 100 Jan-19) (H1 20 to H1 21) + 8% + 4% 130 120 110 100 90 4.75m 4.93m 4.42m 80 70 60 50 H1 20 H2 20 H1 21 ● ABI Motor premiums3 down 8% YoY4 and down 7% QoQ5 in Q1, ● H1 20 to H1 21 gro
Slide 20: Claims frequency increasing; underlying claims inflation continues
Claims frequency increasing; underlying claims inflation continues ● Claims frequency increasing with increased road usage ABI – quarterly claims trends1,2 ● Change in driving hours leading to 160 less peak-hour accidents 140 ● Higher claims inflation 120 ● Shorter term Covid impact e.g. cleaning fe
Slide 21: Admiral continues to outperform the market in claims outcomes
Admiral continues to outperform the market in claims outcomes ● Continued strong performance in 2021 total claims cost1 Admiral costs by claim type2 (2020) (indexed to market) total claims costs 100% ● Several underlying contributors 89% to claims advantage • Experienced claims team • Faster speed o
Slide 22: Good Household growth and record profit
Good Household growth and record profit ● Significant volume growth Active customer base (m) supported by ● Continued price competitiveness ● Strong and improving retention 1.23 1.07 ● Increased share of multicover 0.92 ● Large increase in profits in the last H1 2019 H1 2020 H1 2021 12 months due to
Slide 23: Market outlook: prices expected to increase in H2; FCA reforms in 2022
Market outlook: Market prices expected to increase in H2 as frequency rises; further NB increases in 2022 due to FCA reforms Pricing outlook – H2 2021 FCA review impact UK Motor UK Motor • Expect market prices to increase in H2 as • Market estimates vary - New Business frequency continues increasing
Slide 24: International Insurance & Loans
Our International Operations are true ‘Great Places to Work’ International Insurance & Loans Costantino Moretti, Head of International Insurance and Milena Mondini, Group CEO 24
Slide 25: EU: Double digit turnover growth achieved in a challenging market
EU: Double digit turnover growth achieved in the context of a challenging market ● Strong growth in our European European Motor turnover1 (€m) & customers operations, particularly in France 1.49m 1.27m ● Competitive market conditions 1.13m with premium pressure in Italy and Customers Spain, yet achi
Slide 26: US: Continued focus on improving fundamentals
US: Continued focus on improving fundamentals ● Improvements in our fundamentals Elephant profit/loss ($m)1 have been partially offset by ● Reduced frequency benefit v H1 20 H1 2019 H1 2020 H1 2021 as restrictions continued to ease ($4.2) ● Severe weather in Texas ($5.8) ($8.0) ● Digital continues t
Slide 27: Loans: Prudent return to growth, with positive underlying performance
Loans: Prudent return to growth, with positive underlying performance ● Prudent return to growth, whilst New business and stock (£m) strengthening underlying £552 £496 £469 fundamentals £443 £402 £404 ● Positive loans loss performance; no significant change in defaults over the £127 £124 period £58
Slide 28: Looking After the Future
Admiral is a purpose-driven organisation that cares about doing what is right for all our stakeholders Looking After the Future Milena Mondini, Group CEO 28
Slide 29: Admiral is focused on long-term sustainability
Admiral is focused on long-term sustainability - this is embedded in our DNA Our Customers Best price on Our People >10% Comparison for UK Great place to work #14 • Competitive prices, large footprint car1 • Genuine, caring and empowering worldwide • Inclusive products 50%+ NPS2 in all culture Great
Slide 30: Strong commitment to help combat climate change
Looking ahead: Continuous strong commitment to help combat climate change Operations Ambition Investments Net Zero across scope 1 and 2 Net Zero across all emissions by 2040 Net Zero across our portfolio1,2 by emissions by 2030 • Reducing emissions within our operations 2040 • Further improvements i
Slide 31: Group highlights: Strong results and continued business evolution
Group highlights: Strong results and continued business evolution • Strong profit driven by very positive prior year development combined with lower claims frequency • Continued growth across different businesses and geographies in very competitive markets • Executed well and effectively adapted to
Slide 32: Appendix
2021 marked the end of an era as Admiral Group said goodbye to all our friends and colleagues in Penguin Portals Appendix 32
Slide 33: Group Key Performance Indicators
Group Key Performance Indicators KPI 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 H1 16 H1 17 H1 18 H1 19 H1 20 H1 21 Group Financial Turnover £m 2,190 2,215 2,030 1,971 2,119 2,576 2,958 3,283 3,463 3,550 1,261 1,446 1,662 1,756 1,690 1,814 Turnover (continuing ops) £m 3,299 3,366 1,676 1
Slide 34: Summary Income Statement
Summary Income Statement1 UK Insurance International Insurance Loans Other Admiral Group H1 19 H1 20 H1 21 H1 19 H1 20 H1 21 H1 19 H1 20 H1 21 H1 19 H1 20 H1 21 H1 19 H1 20 H1 21 Turnover 1,338.8 1,248.4 1,372.0 319.5 329.5 347.2 14.5 21.0 16.2 3.6 3.1 11.1 1,676.4 1,602.0 1,746.5 Total premiums wri
Slide 35: Balance Sheet
Balance Sheet Jun-20 Dec-20 Jun-21 £m £m £m ASSETS Property, plant and equipment 150.7 140.4 131.6 Intangible assets 162.2 166.7 177.4 Corporation tax asset - 22.9 - Reinsurance assets 1,891.6 2,083.2 1,911.9 Financial investments 3,352.5 3,506.0 3,879.3 Deferred income tax 2.1 - 7.3 Insurance and o
Slide 36: Investment update
Investment update Dec ‘20: £3,858m Jun ‘21: £4,275m Cash Deposit Fixed Income Investments Money Market Funds GILTS AAA AA A BBB Other1 Notes: (1) ‘Other’ comprises of sub-BBB ratings and unrated securities. Unrated securities consists of an AAA rated money market fund backed by government securities
Slide 37: Analysis of Other Group items
Analysis of Other Group items1 H1 2021 H1 2020 • Share scheme charges increased by £9.3 million reflecting improved vesting outcomes resulting from the increased level of profit and a Share scheme charges (30.6) (21.3) higher share price and dividend compared to H1 20 Other interest & • Compare.com
Slide 38: UK Motor profit recognition: H1 2021
UK Motor profit recognition: H1 2021 Prior 2014 2015 2016 2017 2018 2019 2020 2021 Total Total earned premium, net of XoL cost (£m) 1,424 1,488 1,755 1,941 2,071 2,030 1,916 270 Total net premium, original share (£m) 356 372 439 428 459 450 426 60 Combined Ratio, booked basis 86% 84% 82% 83% 92% 93%
Slide 39: 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 74% (-3%) 68% (0%) 67% (-1%) 19% 61% (-1%) 61% (-5%) 17% 18% 16% 16% () % movements since December 2020 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 Admiral proj
Slide 40: 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% 88% 87% 84% 83% Ultimate loss ratio by 81% 77% 75% 78% 74% 76% underwriting year 73% 73% 72% 68% 66% 70
Slide 41: 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 42: UK co- and re-insurance arrangements
UK co- and re- insurance arrangements Car Household Admiral Munich Re Other Admiral Quota Share 38% 38% 38% 38% 70% 70% 70% 70% 40% 40% 40% 40% 22% 22% 22% 22% 30% 30% 30% 30% 2019 2020 2021 2022 2019 2020 2021 2022 ▪ 2021 arrangements in line with 2020, similar contract ▪ Long-term quota share cont
Slide 43: Admiral UK Car co- and re-insurance
Admiral UK Car co-and re-insurance1, 2 Proportional reinsurance (quota share) – 48% Type Munich Re Proportional 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 r
Slide 44: 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 45: 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 46: Admiral brands
Admiral brands Admiral | Loans SFAdmiral @Pavapiator 53 i Compare | Qualitas Qramand veygo & = Flaareare, ete olivier Admiral eT Admiral ASSURANCE balumba apparent CA elephant nomebrele conteit Admiral assicurazioni ‘Group Pic 46
Slide 47: 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