FTSE 100 insurer Admiral (ADM) impresses with its better-than-expected rise in pre-tax profits for the first half of the year. The market had pencilled in £207.8m but the company reports a beat with £211m for the six months to 30 June.

Investors reacted well to the news, the company’s share price enjoying a 4.3% lift to £20.84. The 9% rise in half year profits were driven by its car insurance business which saw profits increase 11.3% to £249.5m.

The company has been increasing its customer base as well, numbers up 14% to 6.23m which in turn has boosted revenues 14% to £1.66bn.

BEWARE THE BEAST

As seen with other insurers releasing their results this week, weather had a big impact on Admiral’s business, especially its home insurance division. Due to events such as the ‘Beast from the East’ - a cold spell that swept across Europe in February dropping temperatures to -30C - the company’s home division recorded a loss of £1.9m.

Aside from home insurance, Admiral is engaged in a very competitive UK motor insurance market. The market is said to be ‘soft’ at moment which means that pricing for premiums is lower than it would be in a ‘hard’ market.

This said, Admiral has trounced its peers in terms of growing its motor insurance business. UK motor turnover grew by 13.8% year-on-year to £1.32bn, and increased number of UK vehicles insured by 13% in the UK. According to a note from Barclays, the company recorded 'the fastest growth of any player we’ve seen in this reporting season, beating LV by 6% and Esure (ESUR) by 4%’.

EUROPE FINE BUT PLANS IN PLACE

Admiral says in its results that it doesn’t currently foresee an adverse impact from Brexit on its day to day operations. That said, it is concerned if Britain leaves the EU without a deal in place, unsurprising for a global business with divisions in France, Spain and Italy (as well as the US).

The company will run its European businesses from Madrid from 2019, and says entities for its European price comparison operations, such as France’s LeLynx, will be set up in the second half of this year.

Admiral trades on 15.2-times 2019’s 126.35p of earnings using investment bank UBS’s forecasts. It is also paying a prospective dividend yield of 5.8%.


Issue Date: 15 Aug 2018