2014 Half Year Results 13 August 2014
Agenda Henry Engelhardt, CEO Financial Results Geraint Jones, CFO David Stevens, COO UK Car Insurance Lorna Connelly, Head of UK Claims US Car Insurance Kevin Chidwick, Elephant Auto CEO US Price Comparison Andrew Rose, comparenow.com CEO Q&A All 2
H1 2014 at a glance Earnings per share 52.7p +2% +5% H1 13: 50.1p Interim dividend Customers 49.4p 3.94m +1% +9% H1 13: 3.60m H1 13: 48.9p Return on equity 54% -5% -5% H1 13: 57% Note: (1) Profit before tax adjusted to exclude minority interests’ share 3
Group Turnover £1,089m £941m £1,037m 1% 2% 2% 9% 10% 10% 5% 6% 6% 85% 82% 82% H1 13 H2 13 H1 14 UK Car Insurance Price Comparison International Car Insurance Gladiator and UK Household Insurance 4
Group Customers 3.60m 3.70m 3.94m 3% 4% 6% 13% 14% 14% 84% 82% 80% H1 13 H2 13 H1 14 UK Car Insurance International Car Insurance Gladiator and UK Household Insurance 5
UK Car Insurance continues to contribute over 100% of profits Group Profit Before Tax £189m £183m £181m • UK Car Insurance profit up 8% at £208 million 2% 6% 6% (H1 13: £193 million). • Price comparison profit down 60% at £4 million (H1 13: £10 million) due to investment in comparenow.com. • 113% Continued investment and progress in 106% 106% expanding International Car Insurance. Higher investment in H1 to be offset during H2. • Other Group Items includes employee share scheme costs, and £0.5 million profit from UK Household Insurance. -6% -6% -8% -6% -6% -7% H1 13 H2 13 H1 14 UK Car Insurance Price Comparison International Car Insurance Other Group Items 6
Group Profit Before Tax reconciliation Reconciliation from Statutory to Adjusted Profit Before Tax -£0.8m £2.4m • Admiral has four operations with shared ownership: Rastreator; comparenow.com; Admiral Law; and BDE Law. • Profit or losses in period accruing to our minority parties reduce or increase the results respectively. £184.9m £183.3m • comparenow.com is 32% owned by third parties. Total loss was £7.5 million, therefore £2.4 million is added back to Group Profit Before Tax. Profit before tax comparenow.com Other minority Profit before tax (statutory) interests (adjusted) 7
Admiral’s inaugural bond issue was a success Bond: £200 million ✔ • Opportune time to strengthen and diversify our capital resources. Coupon Rate 5.5% ✔ • Make a prudent transition into Solvency II in 2016, with the attendant capital requirements Investment Return 2.8% and buffers. ✔ • UK Corporation Tax 21.5% Sets Admiral up well for the growth expected from all businesses in the coming years. ✔ • Bond market conditions were favourable. Estimated post-tax annual cost: £4.3 million 8
Debt contributes to a very material buffer against capital requirements H1 14 H1 14 (Including Bond) £674m IGD coverage, including debt: Bond • Pre-dividend 552% £474m • Post-dividend 440% £200m £287m £287m £122m £122m Total solvency Solvency capital IGD capital Total solvency Solvency capital IGD capital capital requirement requirement capital requirement requirement *1 *1 • • Solvency capital requirement is the sum of the Bond issue diversifies capital structure and individual capital requirements of the Group materially increases surplus above requirements. companies. • Group would have >£300 million surplus if 2015 • IGD capital requirement is the minimum legal capital requirements are applied now. capital requirement for the Group’s insurers • (mostly Solvency I). Forecast significant surplus above Solvency II requirements. Note: (1) Solvency capital is equity less goodwill 9
Significant increase to post dividend surplus H1 2014 Dividend Calculation • Admiral’s dividend policy is to distribute available surpluses to shareholders after retaining appropriate buffers. £200m £287m • Expect to hold a very significant buffer as Group Bond Solvency Capital transitions to Solvency II. £474m £250m Total £387m Equity Buffer Less Available Goodwill For Dividend £137m H1 14: Dividend 49.4p per share 10
Admiral is paying an interim dividend of 49.4p per share Admiral Group H1 14 Dividend Per Share Interim Earnings and Dividend Per Share 49.4p 25.7p 98% 93% 94% 23.7p 54.5p 52.7p 50.6p 50.1p 49.4p 48.9p Normal Special Dividend Dates Ex-dividend date – 10 September 2014 H1 13 H2 13 H1 14 Record date – 12 September 2014 EPS DPS Payment date – 10 October 2014 Payout ratio 11
International Car Insurance Results Turnover Customers Results Before Tax 556,000 H1 13 H2 13 H1 14 £104.3m 515,000 481,000 £95.5m £92.3m -£10.8m -£11.3m H1 13 H2 13 H1 14 H1 13 H2 13 H1 14 -£15.5m TODAY’S HEADLINES... Con onTe mainta maintains ins veh ehic icle cou le count nt as as mar market et pr premium emium rates f tes fall all L’olivier insourcing on track 12
Price Comparison Results International Price Comparison Results *1 Confused.com Profit Before Tax £11.5m £10.2m £2.3m £9.1m £1.3m £0.6m -£0.8m -£2.1m -£5.1m H1 13 H2 13 H1 14 H1 13 H2 13 H1 14 Rastreator and LeLynx comparenow.com TODAY’S HEADLINES... Strong ong profit it growth wth for market et leaders ers Rastreator eator and LeLynx nx Note: (1) Adjusted for minority interests’ share 13
UK Car Insurance David Stevens, COO Lorna Connelly, Head of UK Claims
UK Car Insurance Results (1/2) Profit Before Tax Turnover and Total Premiums Written £208m £925m £850m £852m £201m £774m £776m £701m £193m Turnover Total Premiums Written H1 13 H2 13 H1 14 H1 13 H2 13 H1 14 Vehicle Count 3.15m 3.02m 3.02m • Admiral’s rates during H1 2014 have been flat. Flat • Average premium decreased to £495 (FY 13: £505, H1 13: £555). H1 13 H2 13 H1 14 15
UK Car Insurance Results (2/2) Reported Expense Ratio *1 Reported Loss Ratio 68.0% 66.0% 16.4% 15.0% FY 13 H1 14 FY 13 H1 14 Other Revenue per Vehicle £67 £67 • Other revenue per vehicle net of internal costs £58 (FY 13: £57). • Credit hire referral fees may be reduced or eliminated from 2015 (H1 14: £7.9 million; c.£5 per vehicle). FY 13 H1 14 Gross of internal costs Note: (1) H1 14 reported expense ratio was 14.2%, however this benefitted from a one-off adjustment to levy costs as a result of a change in accounting standards. Excluding the adjustment the earned motor expense ratio would have increased to 16.4%. 16
Claims trends support continued reserve releases Claims reserve releases (Admiral net share *1 ) • Increase in reserve releases in 2014 24% due to positive developments on back years. 19% 14% • Despite releases in the first six 12% 12% months of 2014 the size of the claims margin remains the same. 2% • If claims develop as expected, there will be scope for material reserve Lowest Highest Average H1 13 H2 13 H1 14 releases going forward. (2011) (2008) 2004-2012 Note: (1) Claims reserve releases calculated as Admiral’s original net share reserve releases divided by motor net earned pre mium (H1 2014: £35.4 million / £183.5 million) 17
LASPO one year on: after initial positive impact, frequency benefits seem to be eroding After initial positive impact, frequency Average general damages costs settled through the benefits seem to be eroding portal continue to increase *1 *1 (Market Data) (Market Data) 100,000 £3,000 90,000 £2,500 80,000 70,000 £2,000 60,000 LASPO introduction April 2013 LASPO introduction April 2013 50,000 £1,500 Portal Extension July 2013 Portal Extension July 2013 40,000 £1,000 30,000 20,000 £500 10,000 0 £0 May June May June 2012 2014 2012 2014 Source: (1) Road Traffic Accident Portal Management Data (Market Data) 18
Small bodily injury claims are only a small part of the picture Frequency of BI and Non-BI claims *1 BI BI BI Non-BI Non-BI Non-BI 2007 2010 2013 Market overall claims frequency YoY/QoQ movement *2 Split of claim costs between Non-BI, Small-BI, and Large BI claims *3 5% 3% 2% 2% Non-BI Small BI (<£10k) -3% -6% Large BI -10% -10% 2013 2014 2010 2011 2012 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Source: (1) Management information (Admiral) Source: (2) ABI Motor claims frequency (Qtr 1 versus Qtr 1) Source: (3) Management information (Admiral) 19
The cost of large bodily injury has increased significantly, and it continues to increase Illustrative Claim Schedule A young claimant who suffered a severe brain injury, a dislocation of the right hip, fractured ribs, and punctured lungs. The claimant suffers with right sided weakness, impaired cognitive functioning, restrictions on mobility and cannot live independently. 2007 2014 Claim Schedule Claim Schedule Damages for pain and suffering £150,000 Damages for pain and suffering £200,000 Past Losses £255,000 Past Losses £300,000 Future Losses Future Losses Future loss of earnings £450,000 Future loss of earnings £700,000 Future care £2,200,000 Future care £3,400,000 Future case management £235,000 Future case management £400,000 Future deputy costs £205,000 Future deputy costs £450,000 Future miscellaneous losses £240,000 Future miscellaneous losses £870,000 Total £3,735,000 Total £6,320,000 Legal Costs £125,000 Legal Costs £500,000 20
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