2 March 2010 2009 Full Year Results Questions, questions, - PDF document

2 March 2010 2009 Full Year Results

Questions, questions, questions... How long do you expect When will we see the maturing of the What is the reasoning behind internet and price comparison aggregator product cycle for motor, as average giving a 25% stake in Rastreator to sales to continue growing and discounts fall will customers stay with existing Mapfre? Do you expect an uptick in sales where do you see growth coming providers and how will confused react? as a result? Might you do the same g y from thereafter? in other countries? Greig Paterson, KBW Jelena Bjelanovic, Peter Eliot James Quin Paul Goodhind BoA ML Citi Redburn Partners Based on E&Y’s ultimate loss Dhruv Gahlaut, HSBC , ratios, how much reserve release ti h h l To what extent is your Can you compare and and profit commission has yet to ancillary income at risk from the How have ancillary contrast the marketing strategy flow into earnings? proposals in Lord Jackson’s revenues at the of your overseas operations with review of civil litigation international operations the UK strategy 5 years ago? costs? costs? developed? developed? Andrew Crean Autonomous Andrew Crean, Autonomous Jonathan Hekster, James Shuck, Jefferies At this moment in time, due The AA suggest Bernstein Research to market conditions, the increases in that rates hardened How is price premiums etc. is it worthwhile increasing g significantly in 09. What has g y What is Admiral’s split What is Admiral s split comparison affecting the the retention of underwriting? been the corresponding between standard and non- industry and what impact is it increase for Admiral? standard risks and how much having on your competitive of your loss ratio advantage is Fahad Changazi, UBS advantage? Rakshit Ranjan, due to this mix? Execution Noble Execution Noble Confused margins have fallen Paul Lloyd, Credit Suisse Have you been affected by Given the greater steeply, when will they become the recent rise in personal injury pricing information available untenable? How do you optimise claims that appears to have led in the US, will Admiral reach the profitability of the p y competitors to raise their p profitability here more profitability here more Hamish Chalmers, Macquarie business given the tension premium rates? quickly? between underwriting and ancillaries? Andy Broadfield, Morgan Stanley Tom Dorner, Oriel 2

Agenda Questions, questions, questions.... we will try to provide some answers Kevin Chidwick, Finance Director Highlights Results summary Results summary Price comparison David Stevens Chief Operating Officer David Stevens, Chief Operating Officer UK Car insurance market What’s happening now?  What might happen in the future?  Henry Engelhardt, Chief Executive Officer y g International Summary 3

Admiral is still different 2004 2005 2006 2007 2008 2009 ✔ ✔ ✔ ✔ ✔ ✔ Highly profitable ✔ ✔ ✔ ✔ ✔ ✔ Fast growing ✔ ✔ ✔ ✔ ✔ ✔ Low risk profits ✔ ✔ ✔ ✔ ✔ ✔ Strongly cash generative 4

Highlights  Profit before tax up 7% at £216 million (2008: £203 million)  Turnover up 18% at £1.08 billion (2008: £0.91 billion)  Vehicle count up 19% to 2.08 million (2008: 1.75 million)  Profit from UK car insurance up 15% to £207m (2008: £180m)  Profit from UK car insurance up 15% to £207m (2008: £180m)  UK ancillary income steady at £72 per vehicle  Confused.com profit £26 million (2008: £26 million) revenue increased 21%  New and extended reinsurance deals  Second interim dividend per share of 29.8p full 2009 dividend 57.5p 5

Strong growth Historical annual turnover (£m) Historical annual turnover (£m) (1) (1) 1,077 1 077 910 5 year CAGR = 15% 5 CAGR 15% 808 698 627 540 422 373 320 262 207 150 120 100 73 47 47 18 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 (1) Turnover comprises total premiums written + other revenue 6

Admiral Group profits Annual profit before tax (£m) Annual profit before tax (£m) Key drivers Key drivers £215.8m £202.5m Price comparison 11% £182.1m 13% 20% £147.3m UK car insurance 16% 96% 88% 82% 78% Non UK car insurance 2% 2% 1% -3% -2% -4% 2006 2007 2008 2009 7% UK car insurance Price comparison Overall result Other Non-UK car insurance 7

UK car insurance profit Key drivers Key drivers UK car insurance - UK car insurance - annual profit before tax (£m) annual profit before tax (£m) £206.9m Investment income Investment income 4% £179.9m 15% Underwriting margins 10% £142.2m 17% 26% Reserve releases 12% £121.1m 8% 19% 16% 16% 15% Profit commissions 16% 51% 49% 49% 53% 55% Ancillaries 4% 4% 4% 4% 5% 5% 5% 5% 2006 2007 2008 2009 Investment income Underwriting Profit commission 15% UK car insurance Other (instalment income) Other (instalment income) Ancillary Ancillary 8

UK Car insurance – how will reserves & profit commissions flow through into earnings? Conservative reserving (Dec 09) Conservative reserving (Dec 09) Increasing profit commissions Increasing profit commissions 83 2007 2008 2009 76 74 Reserve £29.5m £29.5m £38.0m £38.0m £31.3m £31.3m 72 release l 72 72 Profit 71 71 £20.4m £34.7m £54.2m commission PC as % of 69% 91% 173% 2006 2007 2008 2009 release E&Y projected accident year ultimate loss ratios (Dec 09) Admiral booked accident year loss ratios (Dec 09) 9

UK Car insurance – ancillary contribution up 18% to £126 million Ancillary contribution per active vehicle (1) Ancillary contribution per active Sources of UK ancillary income Sources of UK ancillary income 1. Compulsory : legal cover 2.Optional products : breakdown, car hire, & personal injury 3 Oth 3. Other Fees : Admin fees, wasted F Ad i f t d £72.0 £70.7 £69.0 £69.3 £68.5 leads, BI & car hire referrals Portfolio of income sources  Grows in line with vehicle base  2005 2006 2007 2008 2009 Contribution per vehicle stable  (1) Before allocation of overhead expenses 10

UK price comparison market – high media spend & growth continue Share of car insurance new business* Share of car insurance new business* Media Spend** (£m) Media Spend** (£m) In 2009, TV cost per thousand viewers was down 15% YOY 67% Total online £34m 62% £32m £31m £30m 9 22% 51% 51% 24% £23m 7 7 6 27% 5 5 5 5 £15m 45% 38% 24% 24% H1 07 H2 07 H1 08 H2 08 H1 09 H2 09 2007 2008 2009 Confused Moneysupermarket* Go Compare Price comparison ("PC") Compare The Market Uswitch* Tesco Compare Internet (Non PC) Beathatquote People's Champion Confidentcover Number of price comparison sites spending on advertising N b f i i i di d i i * Source: Management estimate ** Source: Nielson , 50% of Moneysupermaket and Uswitch allocated to car insurance 11

UK price comparison market... still slogging it out! 12

UK price comparison, 2009 was better than expected for Confused Confused market share of car insurance PC Confused market share of car insurance PC Confused profits (£m) Confused profits (£m) (% estimate) (% estimate) 60% 53% 62% 54% 45% 41% 41% 39% 39% 32% 32% 31% 32% H1 07 H2 07 H1 08 H2 08 H1 09 H2 09 H1 07 H2 07 H1 08 H2 08 H1 09 H2 09 36 7 36.7 Confused non Confused non- -car insurance revenues as car insurance revenues as 25.7 25.6 % total revenue % total revenue 23.1 6.9 24% 22% 22% 19% 19% 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 16% 14% Profits (£m) Profit margin H107 H207 H108 H208 H109 H209 13

Dividend Full year dividends Full year dividends H2 dividends H2 dividends 57.5p p 2007 2008 2009 52.5p £m £m £m 43.8p Total equity 238 275 301 31 0 31.0 36.1p Goodwill (62) (62) (62) 27.8 Solvency capital (85) (113) (129) 21.9 91 100 109 18.1 Buffer (25) (25) (25) 26.5 24.6 21.9 International International 18.0 18 0 Expansion (5) (5) (5) Dividend 61 70 79 2006 2007 2008 2009 Normal dividend Special dividend H2 2009 – 29.8p per share Ex-dividend – 10 March 2009, Record date – 12 March 2009 , Payment date – 1 April 2009 14

15 UK car insurance market

UK car insurance market What’s happening now?  Claims  Claims  Premiums  Market profitability  Market profitability What might happen in the future? 16

What’s happening now? Claims “To what extent have you been affected by the recent rise in bodily injury claims announced by several of your competitors?” Admiral’s 12 month rolling average claims frequency Admiral’s 12 month rolling average claims frequency Admiral’s bodily injury claims as % of total claims Admiral’s bodily injury claims as % of total claims (on12 month rolling average basis) (on12 month rolling average basis) total claims frequency Claims f y Injury as % of t Bodil an ‐ 06 pr ‐ 06 ul ‐ 06 ct ‐ 06 an ‐ 07 pr ‐ 07 ul ‐ 07 ct ‐ 07 an ‐ 08 pr ‐ 08 ul ‐ 08 ct ‐ 08 an ‐ 09 pr ‐ 09 ul ‐ 09 ct ‐ 09 an ‐ 10 Ju Oc Ju Oc Ju Oc Ju Oc Ap Ap Ap Ap Ja Ja Ja Ja Ja Jan ‐ 06 Jul ‐ 06 Jan ‐ 07 Jul ‐ 07 Jan ‐ 08 Jul ‐ 08 Jan ‐ 09 Jul ‐ 09 Jan ‐ 10 Total claims Bodily injury claims Non ‐ bodily injury claims “What was the impact of snow on claims?” What was the impact of snow on claims? 17