Admiral staff share in success as group breaks £1bn barrier

STAFF at motor insurer Admiral pocketed another £1,500 share bonus yesterday after half year revenues broke the £1bn mark.

The firm, which owns Diamond, elephant.co.uk and Confused.com, grew turnover by 53 per cent to £1.1bn in the six months to June 30 after insuring 3.15m vehicles in the period, an increase of 33 per cent. Premiums rose by around 11 per cent.

However, chief executive Henry Engelhardt said that the company was not immune to the rising level of no-win no-fee injury claims as higher payouts clipped profits growth to 27 per cent at £160.6m.

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Comparison website Confused.com also continues to face tough competition in its sector.

The cost of a relaunched advertising campaign to take on rival Go Compare’s opera singer and Compare the Market’s talking meerkats, meant Confused’s profits fell seven per cent to £8.2m despite a 10 per cent increase in revenues.

Mr Engelhardt added: “All in all we’re pleased with the numbers for the first half of 2011. As a result, every member of staff will receive £1,500 of free shares in the group, worth over £8m in total.”

He warned, though, that the car insurance market was increasingly becoming a commodity-type product.

He predicted that Admiral was in good shape to cope.

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“Injury claims and their related costs continue to rise in the UK market, something to which we are not immune. As one of the lowest cost providers in a commoditised market we are well placed for a future which is shaping up to be the survival of the fittest,” Mr Engelhardt added.

“Outside the UK we are continuing the tough job of building sustainable, profitable and growing businesses from scratch.”

The group said the 11 per cent increase in premium prices reflected the market-wide trend of poor insurance results and lower investment income, though its rates may have increased faster than the market overall.

Overseas customers now account for 15 per cent of new UK business, with the combined international business turnover rising by 45 per cent to £53.9m.

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Cardiff-based Admiral, which paid out a similar-sized bonus to staff at the same time last year, also upped the interim dividend, a move that should impress shareholders.

Kevin Ryan, an analyst at Investec, said the UK insurance underwriting result was worse than forecast, although profit commission from reinsurers of £45.3m was better than expected.

He added that the sharp rise in the UK combined operating ratio – the ratio of claims and expenses to premiums – at 90.4 per cent was evidence that Admiral’s ability to significantly outperform the market was diminishing.

Admiral was launched in January 1993 with just one brand, no customers and 57 members of staff.

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By December 2010, the group had 2.75m customers and more than 4,500 members of staff worldwide.

In 1990 Hayter Brockbank, a medium-sized managing agent at Lloyd’s, wanted to generate more sterling income through insurance. It decided the best way to achieve this goal was through direct response personal lines business. According to Admiral’s website, selling private motor insurance direct to the customer was still a relatively new idea at the time.

In 1991, the Admiral group’s current chief executive, Henry Engelhardt, was chosen to head the new operation and formulate the business plan.

He was working at the time as sales and marketing manager at Churchill Insurance.

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In October 1995, Admiral’s website went live, making it the first UK direct insurer with an internet presence.

In December 2007, Admiral became the second Welsh company to join the FTSE 100.

Alastair Lyons, the company’s chairman, said yesterday: “This August also marks the 20 year anniversary of our CEO and COO (David Stevens) working together to create Admiral.”

Mr Lyons added: “With a further advance in first half profits we are delighted once again to be able to declare an increase in our interim dividend, up 20 per cent to 39.1p per ordinary share. “This represents 90 per cent of after-tax profits for the first six months of 2011, testament to the strength of Admiral’s business model.”

ALASTAIR LYONS PROFILE

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The Admiral Group’s board includes Alastair Lyons, the company’s chairman, who was appointed in July 2000.

Mr Lyons is also non-executive chairman of Serco, deputy chairman of Bovis Homes, senior independent director at the Phoenix Group, and a non-executive director of the Towergate Insurance Group.

He has held a number of senior management roles with major companies.

He was chief executive of the National Provident Institution and the National & Provincial Building Society.

He is a fellow of the Institute of Chartered Accountants, and was awarded a CBE in the 2001 Birthday Honours for services to social security.

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