Admiral alert to Brexit risks
Admiral has reported record half-year profits, but has highlighted concerns of the impact of a “no-deal” Brexit.
Wales’ only FTSE 100 business reported a 9% rise in pre-tax profit to £211m in the six months to June 30 this year. Turnover on the year grew 14% to £1.66bn, while customer numbers were also up 14% to 6.23 million.
Admiral has a global workforce of 10,000, employs around 7,000 at offices in Cardiff, Newport and Swansea, and owns brands including Elephant and Confused.com
Chief executive David Stevens said: “The core UK car insurance business continues to grow both in terms of profit and customer numbers. Moreover, the European insurers delivered overall profitability whilst growing the business by almost a fifth in a year.”
He added: “Early in 2018 we passed the four million mark for cars on cover... All of this is underpinned by our strong culture and hardworking, customer-focused staff, and we are proud to have been named the third-best company to work for in the UK, as well as the 10th-best workplace in Europe and third in Italy.”
The strong results mean around 10,000 staff will each get £1,800 in free shares under Admiral’s employee share scheme – the maximum performance-related bonus it can award its employees.
Admiral’s UK household division swung to a £1.9m loss versus a £1.6m profit the year before, as it was hit by the Beast from the East.
Its international insurance businesses grew strongly, with customer numbers surpassing the one million mark, 17% higher than a year earlier. And its insurance businesses in Spain, Italy and France collectively moved into profit for the first time at £2.5m, having booked losses of £5m in the previous year – although its relatively new and expanding US business is still loss-making.
Despite operating in a fiercely competitive marketplace, its Cardiff-based price comparison business Confused.com reported a rise in half-year revenues on the previous year of 6% to £47.7m, with pretax profits of £5.8m.
The board confirmed a half-year dividend to shareholders of 60p per share.
On Brexit, the company said it “brings additional risk,” particularly the possibility of a no-deal between the UK and EU. It said these risks include potential market volatility, particularly in interest and exchange rates, as well as from potential changes to – or withdrawal of – UK financial services firms’ right to trade in Europe without the need for local regulated entities (known as passporting).
Admiral also raised concerns about potential changes to the free movement of people between the UK and Europe.
It added: “The group does not currently foresee a material adverse impact on day-to-day operations, whilst recognising that other issues may emerge over time.”
As part of its contingency planning, Admiral has secured approvals to establish insurance and intermediary companies in Spain. Its European businesses will operate from the start of next year, through these newly licensed entities in Madrid. Similar arrangements are also being put in place for Admiral’s price comparison businesses in mainland Europe. From next year it will entirely trade in Europe through these new entities, which will still be part of the Admiral group.
Its US car insurance business, which now operates in six states, grew substantially in the first half, hitting 200,000 customers – up 10% on the end of last year.
Mr Stevens said: “It is still lossmaking, but with a further substantial reduction in the level of losses for the business. The biggest state we operate in is Texas and we are now delivering better results than the average Texas insurer. So that kind of progress bodes well, and we have also expanded into Indiana and Tennessee.”
Admiral also has a price comparison site business in Mexico, which recently started TV advertising.
Mr Stevens said: “It is very early days, but a very encouraging start.”
With many predicting car insurance will be affected by safer driverless vehicles, Mr Stevens said: “Autonomous cars could make a big difference in 15-20 years’ time and that is partially why we are diversifying with things like household [insurance], travel, which is a growing market, and lending.
“Even if cars are autonomous, it is quite likely that people will have to borrow to fund them. So we are looking to the long-term future and other options, as and when car insurance begins to plateau and maybe tails off.”