Edited Press Release
Alastair Lyons, Group Chairman, said, "With higher profits, a
capital-efficient cash-generative business model, and a most
conservatively managed balance sheet, we are very pleased to be
able to propose a 20% increase in total dividends for the year to
52.5 pence per share. This represents a yield of 6.1% based on the
closing share price on Feb. 27, 2009 and follows our principle of
returning all available surpluses to shareholders."
He said, "Our sustained growth in the U.K., now accounting for
some 6% of the U.K. private motor market covering 1.6 million
vehicles, provides the basis for our continuing investment in the
longer-term development of our business through our overseas
start-ups. I am delighted that last year ConTe.it followed our
earlier launches in Spain and Germany and I look forward to our
starting to do business in the U.S."
Lyons added, "Amid all the market turbulence it is pleasing to
be able to report another year of sustained growth in turnover,
profits, and dividend. Also that in the gloom of widespread job
losses Admiral has been able to create 326 new jobs in Wales over
the past 12 months, not to mention 290 posts outside the U.K. 2008,
therefore, marked another year of successfully advancing our
strategy, being to grow our share of the U.K. private motor market
and exploit the knowledge, skills and resources attaching to our
core business to promote our expansion overseas and our position in
price comparison."
It estimates that the company now accounts for some 6% of the
U.K. private motor market covering 1.6 million vehicles, 15% up on
December 2007 and placing it third in terms of premium in this
market. Since the business floated in September 2004 its vehicle
count has grown by over 12% p.a. compound, testament to the
relevance of its customer proposition; the effectiveness with which
the business has seized the opportunities presented by the internet
and the rise of aggregators; and continuing innovation such as
Admiral MultiCar. This growth in its book in 2008 was accompanied
by a 17% increase in profit derived from ancillary products and
services.
The upward trend in pricing that started to emerge a year ago
has been sustained during 2008. The company increased its rates by
around 4%, generally in line with the market as a whole, whilst
claims frequency continued to fall. Its established reserving
methodology under which it makes a prudent assessment of claims in
their early stages engendered further significant releases as these
prior year claims aged.
With another enormous increase in marketing expenditure in the
price comparison sector, it was inevitable that the market share
held historically by Confused would reduce, albeit that the overall
market has continued to expand rapidly, growing by an estimated 60%
in 2008. In determining how much to commit ourselves it sought to
balance its margin of profitability and defence of its leadership
position.
Across 2008 as a whole Confused's turnover held broadly steady,
being down 4% on the year, but at a significantly higher marketing
cost such that Confused profits fell from GBP37 million to GBP26
million. Price comparison now accounts for 38% of the private motor
market, up from 24% in 2007, and shows no sign of stopping its
growth which is good news both for Confused and for the Admiral
brands, for which it represents the principal source of new
business. The company would, however, anticipate that this sector
will remain highly competitive whilst some players continue to be
prepared to incur losses to attempt to build share.
The result for the year was a pre-tax profit of GBP202.5
million, an 11% increase on 2007 off a 13% growth in total written
premiums.
Lyons said, "As a principle we return all available surpluses to
shareholders after taking into account our required solvency, our
overseas expansion plans, and a prudent margin - currently GBP25
million - against contingencies. We, therefore, commit to pay a
standard normal dividend that has grown in line with our growth in
profits based on a 45% pay-out ratio, and pay whatever remains as
available surplus as a special dividend which will, therefore,
fluctuate from year to year."