Admiral Group Plc · LSE:ADM
Admiral — FY2011 Earnings Presentation
42 slides from Admiral's earnings presentation, Mar 7, 2012
Slide 1: 2011 Full Year Results
2011 Full Year Results 7th March 2012
Slide 2: Agenda
Agenda Henry Engelhardt, Chief Executive Officer 2011 Overview Kevin Chidwick, Finance Director Results David Stevens, Chief Operating Officer UK Car Insurance Henry Engelhardt, Chief Executive Officer International Q&A 2
Slide 3: 2011 Overview
2011 Overview Henry Engelhardt
Slide 4: Admiral is still different
Admiral is still different Focussed on delivering profit growth Highly profitable Three-fold increase in profits to £299m (2004-2011) 100% organic, controlled growth Three-fold increase in number of customers to 3.4m (2004-2011) Consistently growing Flexibility to adjust growth according t
Slide 5: 2011 Overview
2011 Overview Profit before tax up 13% at £299.1 million (2010: £265.5 million) Return on capital employed 59% (2010: 59%) Turnover up 38% at £2.19 billion (2010: £1.58 billion) Group vehicle count up 22% to 3.36 million (2010: 2.75 million) Group combined ratio 96% (2010: 89%) Final div
Slide 6: We have achieved profitable scale wholly through organic growth
We have achieved profitable scale wholly through organic growth Admiral Group Turnover £2,190m £1,585m £1,077m £910m £808m £698m £627m £540m £422m £373m £320m £262m £207m £120m £150m £47m £73m £100m £18m 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 *
Slide 7: Results
Results Kevin Chidwick
Slide 8: Group Profit Before Tax
Group Profit Before Tax £299.1m 5% The Group’s core UK Car Insurance £265.5m operation accounted for £314m of Group 6% profit before tax £215.8m £202.5m Confused.com performed well in a highly 12% competitive environment contributing 13% £16m to profit before tax 105% 104% The Group continued
Slide 9: Group Return on Capital Employed
Group Return on Capital Employed Admiral Group Return on Capital Employed* Underwriting arrangements Co and reinsurance enables Admiral to generate a very high 59% 59% 56% return on capital employed 56% 54% 52% 52% UK reinsurance arrangements have been extended to at least the end of 2014 UK
Slide 10: Group Balance Sheet
Group Balance Sheet Admiral Group Cash & Investments Admiral Group Solvency £1,384m 16% £910m 22% 27% £332m Coverage ratio 304% 33% 62% £109m 40% 2010 2011 2011 Money market funds Long-term cash deposits Cash Tangible equity Required capital (IGD) 10
Slide 11: Admiral's Dividend Policy is Unchanged
Admiral’s Dividend Policy is Unchanged Admiral Group Full Year Dividend H2 Dividend Calculation 75.6p 2010 2011 68.1p £m £m 57.5p Total equity 351 394 52.5p 38.8 35.7 Goodwill -62 -62 31.0 Solvency capital -164 -203 27.8 125 129 Buffer -30 -30 32.4 36.8 Dividend 95 99 24.6 26.5 2008 2009 2010 2011 H
Slide 12: UK Car Insurance
UK Car Insurance David Stevens
Slide 13: Price comparison market - business as usual
Price comparison market - business as usual UK Market Car Insurance New Business Distribution Channels 27% 23% 33% 38% 49% 19% 21% 22% 24% 27% 58% 52% 45% 38% 24% 2007 2008 2009 2010 2011 Price comparison ("PC") Internet (Non PC) Off-line Source: management estimates 13
Slide 14: Market rate changes – end of rapid price increases
Market rate changes – end of rapid price increases 2011 Quarterly Rate Movements (New Business Only) 6% 5% 5% Cumulative Rate 5% 2011 4% Movements 4% 4% 4% Confused / 5% 3% Towers Watson AA 15% 1% IGO4 4% 0% Average 8% 0% -2% -2% -3% -3% Q1 Q2 Q3 Q4 Average Confused / Towers Watson AA IGO4 14
Slide 15: Regulatory developments
Regulatory developments Personal injury referral fees Implementation of ban in April 2013 Earlier change possible due to government intervention on legal costs Credit hire referral fees OFT work focussed on credit hire Report due in May / June 2012 Implications for Admiral Likely red
Slide 16: Admiral UK Car Insurance Results
Admiral UK Car Insurance Results UK Profit Before Tax up 14% at £313.6 million (2010: £275.8 million) Turnover up 38% at £1.97 billion (2010: £1.42 billion) UK vehicle count up 21% to 2.97 million; Q4 vehicle count growth of 2% Ancillary income per vehicle: £76* Combine with instalment inc
Slide 17: Ultimate loss ratio movement from Q2 to Q3
Ultimate loss ratio movement from Q2 to Q3 Accident Year Basis Ultimate Loss Ratios in June 2011 and September 2011 76 (+1) 77 (+3) As we announced in Q3 2011 IMS 74 74 (+6) 71 75 Improvement on aggregate for 73 74 72 (-2) back years 63 69 (-2) 68 Adverse development on 2010 62 (-1) and 2011 ( )
Slide 18: Ultimate loss ratio movement from Q3 to Q4
Ultimate loss ratio movement from Q3 to Q4 Accident Year Basis Ultimate Loss Ratios in September 2011 and December 2011 73 77 76 74 72 71 (-2) 69 62 57 ( ) shows changes Dec 11 v Sep 11 2004 2005 2006 2007 2008 2009 2010 2011 Admiral UK projected ultimate loss ratio (Sep 11)* Admiral UK projected ul
Slide 19: Actions taken
Actions taken Undertaken detailed reviews Including additional independent actuarial review which further supports ultimate loss ratios at end of Q4 Independent “large claims” review by external lawyers confirms • robustness of large claims reserving, and • indication of a degree of increased
Slide 20: We continue to focus on keeping costs low
We continue to focus on keeping costs low Expense Ratio Admiral vs Market 30% 29% 29% 29% 28% 27% 27% 17% 17% 17% 16% 15% 15% 14% 13% 2004 2005 2006 2007 2008 2009 2010 2011 Market (earned basis)* Admiral UK (written basis) *Source: Towers Watson analysis of FSA returns as at 31 December 2010 exclud
Slide 21: Ultimate combined ratio Admiral vs market
Ultimate combined ratio Admiral vs market Combined Ratio Admiral vs Market 127% 121% 118% 119% 110% 99% 96% 93% 91% 89% 88% 87% 85% 77% 72% 2004 2005 2006 2007 2008 2009 2010 2011 Market (excl Admiral) loss ratio plus expense ratio* (Dec 10) Admiral projected ultimate loss ratio plus expense ratio**
Slide 22: Next time, we will focus on the reported ratios
Next time, we will focus on the reported ratios Admiral Reported Combined Ratio 91% 87% 85% 85% 83% 84% 82% 81% 2004 2005 2006 2007 2008 2009 2010 2011 Admiral reported combined ratio 22
Slide 23: 2012 Admiral UK Outlook
2012 Admiral UK Outlook Slower vehicle growth; changing mix of “new business vs renewal” Anticipate ongoing reserves releases Continue to refine rates, risk selection, claims management innovation and “test and learn” Ranked 6th place in Sunday Times Best Companies to Work For 23
Slide 24: International
International Henry Engelhardt
Slide 25: International Progress
L/ or International Progress —_ Eonleit gf 30 Pastreator. com 1 5 Tu Comparador de Seguros Bete phant. = = toliVier wl I “€ pl Eee balumba = Seguros de coche assurances We Comparateur dassurance fr 25
Slide 26: International Car Insurance
International Car Insurance International Car Insurance Results Number of Vehicles Insured 2010* 2011 Movement 306,000 Total £71.0m £112.5m +£41.5m +58% Premiums 195,000 Loss 85% 104% +19pp +22% Ratio Expense 88% 60% -28pp -32% Ratio Result (£8.0m) (£9.5m) -£1.5m -19% 2010* 2011 *2010 includes Admir
Slide 27: International Price Comparison
International Price Comparison International Price Comparison Results 2010 2011 Movement Turnover £3.9m £12.8m +£8.9m +228% Result (£4.8m) (£5.6m) -£0.8m -17% Number of Quotes Generated 3,840,000 1,730,000 12 months to 31 December 2010 12 months to 31 December 2011 27
Slide 28: International Investment
International Investment Total Investment in Price Comparison and Car Insurance as % Group PBT £15.1m £14.3m £12.3m £9.5m £8.6m £10.5m £4.9m £5.7m £5.6m £2.1m £4.5m 5.7% 5.4% 5.0% £0.6m 2.4% 0.4% 1.2% £1.8m 2006 2007 2008 2009 2010 2011 Investment in International Price Comparison Investment in Inte
Slide 29: The Future
The Future Growth Continued profitable growth in UK Trajectory for success internationally Expansion Medium term focus on existing operations Opportunistic 29
Slide 30: 2011 Recap
2011 Recap Profit before tax up 13% at £299.1 million (2010: £265.5 million) Return on capital employed 59% (2010: 59%) Turnover up 38% at £2.19 billion (2010: £1.58 billion) Group vehicle count up 22% to 3.36 million (2010: 2.75 million) Group combined ratio 96% (2010: 89%) Final divide
Slide 31: We are very proud to sponsor another Welsh success!
We are very proud to sponsor another Welsh success! 31
Slide 32: Q&A
Q&A
Slide 33: Appendix
Appendix
Slide 34: Appendices
Appendices Admiral Group Key Performance Indicators Summary Income Statement Balance Sheet UK Underwriting Arrangements UK Booked Loss Ratio Development UK Reported Combined Ratio – Admiral vs Market Admiral’s Brands Disclaimer Notice 34
Slide 35: Admiral Group Key Performance Indicators
Admiral Group Key Performance Indicators KPI 2004 2005 2006 2007 2008 2009 2010 2011 Turnover £m 540 627 698 808 910 1,077 1,585 2,190 Group Financial Customers 1,040,700 1,141,000 1,284,700 1,490,800 1,745,800 2,076,000 2,748,400 3,360,000 Group pre-tax profit £m 98.1 119.5 147.3 182.1 202.5 215.8
Slide 36: Summary Income Statement
Summary Income Statement International Car UK Car Insurance Insurance Price comparison Other Admiral Group 2009 2010 2011 2009 2010 2011 2009 2010 2011 2009 2010 2011 2009 2010 2011 Turnover 939.1 1,419.7 1,966.0 47.2 77.6 122.1 80.5 75.7 90.4 10.6 11.8 11.7 1,077.4 1,584.8 2,190.2 Total premiums wr
Slide 37: Balance Sheet
Balance Sheet Dec-11 Dec 10 Dec-09 £m £m £m ASSETS Property and equipment 17.6 15.1 12.1 Intangible assets 87.5 82.9 77.0 Deferred income tax 10.3 12.4 - Reinsurance contracts 639.8 357.0 212.9 Trade and other receivables 52.1 47.9 32.7 Financial assets 1,583.0 1,004.7 630.9 Cash and cash equivalent
Slide 38: UK Underwriting Arrangements
UK Underwriting Arrangements 2.5% 2.5% 2.5% 4.0% 10.0% 2.5% 3.0% 3.0% 11.25% 13.25% 13.25% 13.25% 10.0% 8.75% 8.75% 7.5% 8.75% 8.75% 7.5% 7.5% 7.5% 9.0% 45% 40% 40% 40% 40% 27.5% 27.5% 25.0% 25.0% 25.0% 2010 2011 2012 2013 2014 Admiral Munich Re Swiss Re Hannover Re New Re Mapfre Re XL Re 38
Slide 39: UK Booked Loss Ratio Development By Underwriting Year
UK Booked Loss Ratio Development By Underwriting Year 90 89 88 85 87 84 82 82 79 79 80 79 7877 76 75 757574 7472 7577 72 69 7069 676666 63 64 57585857 2004 2005 2006 2007 2008 2009 2010 2011 2004 2005 2006 2007 2008 2009 2010 2011 Note: underwriting year basis, therefore direct comparison to ultimat
Slide 40: UK Reported Combined Ratio – Admiral vs Market
UK Reported Combined Ratio – Admiral vs Market Admiral vs Market UK Reported Combined Ratio 124% 121% 107% 105% 104% 103% 101% 91% 87% 85% 85% 83% 84% 82% 81% 2004 2005 2006 2007 2008 2009 2010 2011 Market (excl Admiral) reported combined ratio* (Dec 10) Admiral reported combined ratio *Source: Towe
Slide 41: Admiral's Brands
A or Adnmiral’s Brands Fes Tu Comparador de Seguros © etep hant ad Insurance we — Admiral Conleit ® Admiral Group plc UK Confused.com ) elephant.co-uk pl y_| B e TT “Le fr Comparateur d'assurance auto CIi\/i balumba oli ler Ge LADIATOR Seguros de coche
Slide 42: 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