Admiral Group (LSE: ADM) is currently down 5.5%, following the release of a trading update for the six months period to 30 June 2014, in advance of its half-year results (due on 13 August). In the update, the Cardiff-based insurance group again warned that its full-year margins would be lower than in recent years, and added that “much of the impact of the reduced margin will be reflected in earnings of subsequent years.“
Although group customers increased by over 8%, compared with H1 2013, to 3.6m, group turnover fell by 9%, to £1bn. The group’s UK car insurance vehicle count grew by 3% to 3.1m, but turnover in that category dropped 13%, to £850m. There was better news in its international car insurance business, where vehicle count increased 20%, to 0.6 million, although turnover was flat, at £100m.
CEO Henry Engelhard attributed the decline in UK turnover to premium reductions in 2013. He also remarked that whilst there are “some signs that premiums are no longer falling“, there is no real sign of a return to growth in premiums. He did, however, say that the group’s international operations continue to grow, with a profitable first-half for its European price comparison businesses and encouraging “very early indicators” from its “comparenow.com” operation in the US.
Today’s update also included the announcement that Admiral intends offer up to £200m of ten-year subordinated notes (bonds), in a capital-raising exercise. Commenting on the forthcoming issue, CEO Henry Engelhardt said
“I’m pleased to announce our first bond issue. Since Admiral went public in 2004 we have been unleveraged, but we think that with a favourable market and rates that seem very reasonable, now is a good time to diversify our capital base. … The additional capital also sets us up well for the growth we expect from all our businesses in the coming years whilst being consistent with our existing dividend policy.”
At 1,483p, Admiral’s share price is up 13.5% so far in 2014, compared with a 0.5% dip in the FTSE 100. Admiral is also beating the index over the longer term, too, with a 67% rise in the past five years, versus a 59% rise in the FTSE 100 over the same period.
