Admiral posts mixed results

Admiral Group has unveiled its annual 2014 results, calling it ‘the year of the Baked Alaska – hot and cold in a single bite’.

On the announcement of its full year results today, Henry Engelhardt, Admiral’s chief executive officer stated, ‘Admiral Group’s 2014 was the year of the Baked Alaska – hot and cold in a single bite.’

Group profit before tax was £357m for the year to December 2014, down four per cent from £371m in 2013. Group turnover also decreased by three per cent from £2.03bn in 2013 to £1.97bn in 2014.

Conversely, group customers increased from 3.70 million to 4.05 million in 2014, representing a 10% surge. International car insurance also saw a surge for the group. International car insurance turnover was up 10% to £206m from £188m, whilst customers too increased by 15% to 592,600 from 515,300 in 2013. The group also posted a rise in vehicles insured at year end, increasing from 3.02m in 2013 to 3.15m in 2014.

Alastair Lyons, chairman of Admiral said, ‘In my statement last year I listed what I regarded to be the top ten attributes that had contributed in great measure to Admiral’s success over the last ten years that it has been a listed company. I spoke of management; our culture; our employees; focus; pricing; claims management; controlled test and learn; low cost; low capital employed; and low risk.

‘Admiral has applied these consistently to deliver against a straight-forward highly focused strategy – to make the most of the market-leading positions we have developed in the UK in direct motor insurance and price comparison and apply our learning in these sectors in overseas markets of appropriate scale, structure and stage of development. Applying the tenets of controlled test and learn, low capital employed and low risk the Admiral team has set about building private motor businesses in five countries, price comparison businesses in four, and a household insurance business in the UK. We have then sought to embed in these new businesses our management capability, our culture and the quality of our employees.

‘Organic growth, whilst slower, requires much less capital than growth by acquisition and avoids the significant risk associated with buying where one has little or no knowledge. By taking incremental steps one is able to construct, in all important respects, the platform one wants for the future, taking advantage to the degree relevant to each specific market of our differentiation in areas such as pricing and claims management.

‘Notwithstanding this step by step approach of test and learn, whilst each of our overseas businesses began life as a business plan Admiral now has nearly 600,000 customers outside the UK. It will, however, still be some years before these businesses, all at varying stages in their growth and required investment, make the material contribution to group profits of which we believe they are capable. As now the second largest insurer of private cars in the UK Admiral’s fortunes will, therefore, be driven for the foreseeable future by the UK motor insurance cycle.

‘We recognise that in a cyclical business there are periods for growth, and periods for consolidation, seeking purely to maintain one’s existing market position and focus on building capability to support growth when conditions render that both profitable and sustainable. 2014 was such a period of consolidation for three out of our five motor insurance businesses.

‘As a consequence our pre-tax profits, before reflecting our first material investment in our new US comparison business, were broadly flat on the previous year, and our overall Group profits were £14m lower at £357 million.

‘The UK motor insurance market was again characterised by falling prices, albeit that the sustained reduction since the market turned in 2010 now appears to be running out of steam. Our aim through this period has been to maximise value rather than volume, maintaining our book at around three million customers and focusing on a major systems upgrade that is scheduled to complete in 2015. When delivered, this will enable us to retain our flexibility and responsiveness when it is right to resume the growth of our UK business.’

For the full statement please click here:

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