Admiral Group plc

To Admiral 2024, half-year results. It's another year of strong results combined with sustained growth, increased margins and continuous progress against our strategic objectives. I start with the key highlights, followed by Geraint, Cristina and Constantino, who will tell us more about the key financials. UK insurance and international business respectively. Scott, Admiral Money's CEO, is also in the audience if you want to grab him after the presentation and ask a question on our lending business that had another very strong semester. So last year we celebrated our 30 years anniversary. So soon we'll be celebrating our 20 years anniversary on London Stock Exchange. It has been a story of profitable growth with 10 times the number of customers and 5.6 billion of dividends shared with our shareholders since floating. And this is a story underpinned by a mix of technical competence, agility, but most of all, a unique culture. Six months ago, we anticipated to be in a good position to capture more market share and margins. Today, we report 43% growth in turnover and 32% in pre-tax profits. Customer number increased 12% year on year to an eight digit figures of 10.5 million. UK motor insurance is the main driver of both these achievements, leveraging on a stronger and earlier response than market to inflation. We've also improved results in international business, but with a different mix than previous years. Beyond motor, we're continuing to build on a strong momentum and growing contribution to the bottom line. We made good progress on our strategic agenda too. We're strongly capitalized with a solvency ratio of 198%. And looking ahead, we continue to be in a good position in a softening market with inflation still elevated, but reducing. As already mentioned, UK motor insurance was the biggest driver of our improved performance. In the last six months, we added more than half a million motor policies to our book, leveraging on strong competitive position on price comparison sites. This combined with substantially higher average premiums resulted in turnover growth over 50%. As price and inflation decrease, the market is becoming more competitive and we expect slower growth in the second half. Overseas, our results were mixed. In Europe, the market is taking longer than UK to recover. We believe anyhow market condition will improve and reiterate our confidence for continuous profitable growth in the future. In Italy, there has been a higher than anticipated increase in the court values of reference for BI settlements. This impacted CONTE results that reported a small loss for the first time in the last 10 years. The team adopted a prudent approach in reserving and we expect to return to profitability soon. On the other side, very strong performance in France, increasing margins and growing to more than half a million customers. Spain continued to make good progress too. Last, as a result of strong focus on loss ratio and expenses and strong execution of our elephant team, our US business reported a profit in the first half. In terms of the way forward for Elephant, we are considering the right outcome for the business and our team and will update you as soon as possible. But in the meantime, we remain very focused on protecting the bottom line. Looking now beyond motor, diversifying our portfolio is very important to us, not only to improve the resilience of the business to external trends, but also to better support the customers and to strengthen the core business. Customers with more product indeed have higher persistency and substantially higher lifetime value. Let's take a closer look at our more established business in the UK beyond motor, so household lending and travel. In the last two years, we almost doubled the turnover from 160 to 310 million and added almost 1 million customers. They delivered jointly 18 million of profits in the last six months with around 6% margins while growing at the same time almost 40% year on year. Cristina will tell us more later about the progress in household. Admiral Money also had a positive half year, proving its ability to adapt across different market conditions and continue to be on a strong path for further growth and increasing profitability. Our main focus looking ahead is on unlocking more commercial and pricing synergies with a single view of the customer and for the customer. At the same time, we continue to grow our younger business like PET and small business insurance. PET almost tripled customers in the last year to more than 100,000 and we are continuing to focus on transferring technical competence from the core to these newer lines of business. More than acquisition has now been completed and we're happy to see how the teams are working together. And now we're starting the integration phase. This transaction has the potential to bring us close to double digit market share, both in household and pet. For Contest, it took Admiral 17 years to reach the same goal in motor. So as mentioned, we continue to make progress at pace on our strategic objective. Just a few examples here. I already touched on diversification in the previous slide. We continue to stay close to key trends in mobility. Our electric vehicle book continues to grow and perform well. We also continue to evolve our offering for temporary insurance apps and subscription for the younger generations with our VEGO brand. And we sign a partnership with Flock to bring real-time risk management to fleet insurance. Our foundational pillar is Admiral 2.0 to evolve our core and technical competence, leveraging on new data and technology. We're massively proud of how much we've evolved our capabilities in the last three, four years. Our focus now is on unlocking the benefit of scale agile implementation for faster delivery and an investment done in data foundation, mainly for predictive AI applied to pricing and underwriting. We double indeed the number of machine learning models released, and having seen the strong benefit of new pricing model in UK, we're implementing it in our European business too. Next frontier will be Gen-AI, where we're training, testing, learning, and moving in production successful pilots. Overall, we feel we have a very efficient, flexible platform to continue to evolve our business. But as you can see in the slide, anyhow, at the core of our strategy is our customer and our people. So we're very pleased to continue receiving great feedback from our customers. We top two place in Trustpilot score across UK and continental Europe and the Net Promoter score across the group over 45. Our people and culture remain the key competitive advantage of the group. We recognition such as great place to work in all geography and additional awards for wellbeing, diversity and innovation. Our targets for climate change have been approved by SBTI, and we confirm our commitment to reduce emissions for Scope 1 and 2 by 70% by 2030. I'm pleased to report that a few days ago, our MSCI rating also improved to triple A. And together now to deep dive in our key financial results.

Thanks, Milena. Good morning, everyone. So I'll cover some of the main features of the results from a quite positive first half. I'll look at some of the highlights, the group and UK income statements, the key loss ratios, very healthy half year capital position and an increased interim dividend. These are some of the highlights to start us off. As you've seen, profit was up quite significantly. We see continued positive back-year development, materially better current year combined ratio, and higher net investment income. Pre-tax profit and earnings per share were both up around a third to £310 million and 77.5 pence per share. Solvency remains strong, just under 200%, and we're declaring a nearly 40% increase in the interim dividend to 71 pence per share, following our usual approach to dividends. Return on equity increases nicely to 45%, in line with the increased profits, despite some growth in the equity as the business has grown. On the bottom, we show the main turnover and customer metrics. Turnover in UK Motor and Home was up very strongly. In Motor, we saw a combination of a further increase in average premium, coupled with a strong market share gain in H1, and a similar, but slightly less dramatic story in Home. Outside the UK, we saw modest reductions in turnover and customer numbers as price increases impacted volumes. And in Admiral Money, our loans balances were back in line with the level of a year earlier. In aggregate across the group, customer numbers were up 12% and increased by more than a million over the last year to 10.5 million. As usual, we'll cover these metrics in more detail as we move throughout the presentation. Moving now to look at the positive first half profit. This slide shows the results by business versus the last H1. Starting in the UK where we see the biggest change. Motor profit was 60 million higher. I'll cover that shortly. Home profit was up to 11 million with an improved current period combined ratio and positive reserve releases. And remember that effectively all of the H1 profit last year was a one-off reinsurer profit commission. And so the improved performance is bigger than it seems. Turnover was nearly 40% higher and good growth in home continues. Across the international businesses, the total results improved by just under 10 million, though the mix was a bit different, as you can see. Starting in Europe, the result there was impacted by a disappointing loss ratio in H1 in Italy, a big part of which was due to the update to the Milan court tables, which govern most injury claim settlements. The net impact of that was around £12 million. Conte made a loss in the first half. More positively, L'Olivier in France grew turnover quite nicely, and the motor business more than doubled its profit. And in Spain, the business continues to grow and diversify distribution, whilst the P&L was near break-even. Positive performance. Moving to the US, the elephant result was significantly better than in H123, our team very much delivering on the objective to materially improve the bottom line, though the business is smaller. Admiral Money enjoyed another positive six months, making a profit of around $7 million. It's more than double last half year. Loan balances grew again in the first half after reducing in H2 last year, and all is generally very satisfactory. Good cost-income ratio, positive arrears trends, prudent credit loss provisions. Fuller detail is set out in the appendix. The loss from Admiral Pioneer more than halved as the result in Vago improved whilst that business continues to grow impressively. And we continue to invest modestly in Admiral business. There are some notes on the page on the right hand side on share scheme costs and the other items. And as usual, we include a fuller breakdown of the other items in the appendix. And we do call out one or two non-recurring items, as you can see. Next, we'll look at UK Motor in more detail. So this is a summarized income statement observations on the main changes. Firstly, as we saw earlier, turnover was up very significantly, and that results from a combination of higher volumes and much higher average premiums. Secondly, as the investment portfolio is reinvested at higher yields, we see a further increase in the average rate of return on the assets, just under 4% for the first half, but also higher discount unwind, which partly offsets. Third, co-insurer profit commission. The lower amount this half is mainly because we're not recognising profit commission on 23 or 24 years yet. And that's due to the still high booked ratios on 21 and 22. And then onto the ratios. We see good improvement in the reported loss and expense ratios. And that's predominantly driven by higher premiums offsetting the high claims inflation of the past couple of years. And then on the bottom right, we show the split of the reported loss ratio into the current year and the releases. There's quite a notable change here with a significantly lower current year ratio versus last half. And then despite being quite consistent in absolute terms, the contribution in percentage terms from releases is lower because of the much higher premiums. Let's look in a bit more detail at UK motor loss ratios. Here we show our usual two charts, both are on underwriting year basis and they're discounted. Best estimate on the left, booked on the right. And we show the undiscounted ratios are in the appendix, and they show consistent movements. My observations would be, firstly, we see very good improvement in the best estimate of 23. That's in line with our expectation for that year in this half, given the pattern and the scale of the rate increases. And the book ratio has also moved down and we expect further improvement to come in 23, possibly not to the same extent that we saw in the first half, which was very strong. Years before 2023 have continued to develop in line with our expectations and 2020 and prior underwriting years should now be quite stable. Quick word on 2024. Obviously, it's quite early to comment on 2024, but you might observe on the right hand side in the bullet that the first booking on that year is quite low. Don't extrapolate from it. It's likely to increase in the second half. And actually, right now, based on what we see today, we don't expect much difference in the ultimate loss ratios for the 23 and the 24 underwriting years. On severity, we see signs of it easing in the first half, but we don't expect big changes this year. We haven't changed our view of 23 and we expect high single digits inflation in the first half of 24. Christina will cover more on claims trends shortly. We have held the level of risk adjustment in the booked reserves flat at the half year in line with 23 year end. And so we still sit in the upper end of our policy range. That's a very prudent position. And then finally, reserve releases, as I mentioned, in absolute terms of strong, quite comparable with the first half of 23. And as usual, all being well, we expect significant releases to continue, including from some gradual reduction in the risk adjustment strength. The percentage, though, is very likely to be lower than in past years because of the very large increase in premiums. Moving now to look at capital and dividend. On the left, we show the bridge of the solvency ratio from full year 23 to half year 24. We see very significant capital generation in the first half due to the much improved current year performance. The impact of the higher capital requirement due to growth was around 25 points. As flagged, there was an 11-point reduction in the ratio as a result of completing the more than acquisition. And then the final step is accounting for the interim dividend. And all that means quite a consistent and really healthy position at just under 200%. On the internal model, we have entered the pre-application process with our regulators, and that's a positive step towards making the full application for approval in due course. And then on the right, these are the dividend details. We've declared a dividend of 71 pence a share. It's about £230 million in total, and it's roughly 92% of the first half profit after tax. And there's no change to report on our approach to dividends. To wrap up with a few key messages from the financials, after a challenging couple of years for claims costs, our strong pricing response has led to much improved loss and combined ratios and higher profitability. In the UK, comfort with margins enabled us to reduce prices around the start of the year and take share. We've maintained a very cautious reserve position, and we end the half with a very healthy capital position, having declared a 40% increase in the interim dividend. Over to Christina now to talk us through the UK.

Good morning, everyone. I'm going to talk about the UK insurance results in more detail. Let me start by saying that we have had very good growth in all our products in the first half of the year. And having more products in the UK insurance is proving very positive for our customers. We're seeing strong retention and very healthy year-on-year growth. Also for Admiral, having more data points per customer allow us to do a better reselection. In this context, the more than acquisition of the renewal rights for household and pet, I'm pleased to say it's going well. We have welcomed around 300 new colleagues at the start of the year, and we have started with renewing these customers. In household, we started a couple of weeks ago, and in pet, we will start in a few days. So as you can tell, very early days. Moving to motor pricing, for the market we have included two graphs this time. The first graph in blue, this is ABI data that includes new business and renewal premiums, and the comparison that we're making is year-on-year. The second graph, it's for confused, and it only includes new business prices, and the comparison we're making is quarter-on-quarter. to be able to show you better the trends we're seeing in the first half. So as you can see, the confused data indicates that prices have started to decrease in the first half of the year. The graph on the right, that is a graph that we saw many times. It's time stop, which is the percentage of times we are cheapest on aggregators. And it's indexed to the beginning of 2022. If we start focusing on the second half of 2023, The market continued to increase its prices while we remained broadly flat, and that allowed us to become very competitive. Also, at the start of the year, we decreased rates by mid-single digits, reflecting improved claims experience. And then from March this year, we're seeing competitors decreasing prices while we have stayed broadly flat, which meant we are becoming less competitive. Also, it's worth to highlight that the growth in the first half has been held by strong retention and also by a very healthy new business market. Let's now move to motor claims and start by looking at the different aspects of damage inflation. In terms of frequency for the market, it continues to be around 10 to 15% below pre-pandemic levels, even though when you look at miles driven, it's already very close to where we were before COVID. The reasons why frequency is as small as there are three. The first one is increased technology in vehicles. It's a constant trend that we've seen for many years, but it is frequency. The second one is the change in driving habits. And then the third one, it's the whiplash regulation, which has reduced the frequency for small BI claims. In terms of claims inflation for the market, it remains elevated, although we're seeing certain signs that it is softening. For example, second-hand vehicle values have reduced in the last 12 months and have now stabilized. In terms of repair inflation, it also remains high, but it has reduced slightly thanks to increased repair capacity and parts availability. For the future, we expect repair inflation to continue high as vehicles increase the technology. And then for Admiral, our repair network is performing very well and is helping us to further strengthen our advantage versus the market. Moving to bodily injury, Inflation is in line with our expectations and is largely restricted to increases to pain and suffering awards. We were pleased with the Supreme Court decision on whiplash and it was within our forecast, so we made no changes to our reserves. We hope settlements will increase, given that we have now more certainty. We also anticipate an uplift in the whiplash tariff in the coming six to 12 months. However, this will need government legislation. Also, we expect under-octane clarity by no later than January 25, but we have not adjusted our reserves or our prices so far. And we continue to monitor large BI trends, particularly commercially carried costs and increases to general damages, and we remain prudently reserved for potential inflationary pressures in this area. And now a few words on total loads. In line with the FCA multi-firm review on these claims, we have been reviewing and refining our processes. The work is still ongoing, but we don't expect it to have a significant impact on our accounts, and we have included an appropriate provision in our H1 results. Let's move to the household business. The market has started to see elevated inflation already in 22, driven by increases in the cost of raw materials. And that was, you know, there was even more pressure because of the freeze event in December 22. And that put a lot of pressure in our capacity for those claims, but also for the cost of freeze claims. sorry, for the claims which are similar, like escape of water. The market responded by increasing rates after a long time of being broadly flat, leading to elevated levels of customer switching. Admiral increased rates slightly ahead of the market, both in 23 and in the first half of 24. And despite these strong increases, we continue to grow with a strong retention. We're very pleased with the development of our current loss here with our current year loss ratio. It has improved six points year on year driven by higher premiums earning through and weather development. And all of this has resulted in a good profit of 11 million in the first half, and it puts the household business in a strong position for the remainder of the year. Now to finalize, let's look ahead. starting with motor. We're seeing prices to continue to decrease in the market in Q3, and we expect this trend to continue. However, it's hard for us to tell for how long as we're seeing different strategies across competitors. For Admiral, we expect to continue growing for the rest of the year, but at a lower rate than in the first half. We're comfortable with our current margin and we're very happy with the business we have written in the first half. We will continue, as always, monitoring trends in our own claims development and also in the market and adapt our rates accordingly. We anticipate that inflation could improve slightly over the second half. However, some volatility still remains. And for household, during the second half, we expect both market and admiral to increase prices, although at a lower rate than in the first half. Our pricing, as in motor, will continue to reflect inflation, our internal and external views, weather and other factors. And we expect inflation to remain high in the second half, but to slow down a bit, always subject to weather uncertainty. As always, We remain focused on pricing discipline, prioritizing medium-term profitability, and maintaining a prudent approach to claims reserving. And now over to Kosti to talk to us more about our international results.