UPDATE: Admiral '08 Net Profit Up 14%; Plans US Expansion

Admiral Group PLC (ADM.LN) Tuesday posted a 14% rise in 2008 net profit, helped by continued good underwriting business in the U.K. as well as higher sales from its ancillary services.

After entering several markets in Europe, the company said it is planning to enter the U.S. market to help boost revenue.

The Wales-based motor insurer said net profit was at GBP144.9 million, up from GBP127.4 million in 2007.

Pretax profit was up 11% at GBP202.5 million from GBP182.1 million previously. The pretax profit was inline with the GBP199 million average forecast from 12 analysts.

"For the fifth year out of five since becoming a listed company, Admiral delivered record profits and the 2008 dividend will be the biggest in our history," said Chief Executive Henry Engelhardt.

"As the U.K. business goes from strength to strength, we are planting the seeds of our long-term future by taking what we know and do well - Internet and phone delivery of car insurance to other countries," Engelhardt said.

In a briefing, Engelhardt said he was "not bullish or bearish" about prospects for the U.K. business because higher insurance premiums could be offset by possible higher claims.

The company is recommending a final dividend of 26.5 pence a share, making a total dividend of 52.5 pence a share for 2008, up from 43.8 pence in 2007.

At 0938 GMT, Admiral shares were up 1.4% at 888 pence, slightly outperforming the FTSE 100 index.

"This is a good set of results, ahead of already high expectations," Oriel Securities analyst Tom Dorner said.

"Admiral's business model of providing cheap motor insurance in a very price sensitive market should ensure that the group continues to grow strongly," Dorner said, keeping his add rating on the stock.

On the other hand, Shore Capital analyst Eamonn Flanagan kept his sell rating, saying that Admiral's ancillary sales could be hit by the economic downturn.

"We remain concerned that there is a greater element of discretionary aspect about these sales which could negatively impact as the recession begins to bite," Flanagan said.

Total net revenue rose 16% to GBP422.8 million, supported mainly by a 29% rise in insurance premium revenue GBP301.5 million.

Revenue from ancillary services, which involve offering extra services like breakdown coverage on top of core car insurance services, rose 17% in 2008 to GBP109.8 million.

Meanwhile, revenue from the Confused.com price-comparison Web site fell 4.4% to GBP66.1 million as "fierce competition" squeezed margins, the company said.

In a briefing, Engelhardt said the company is planning to enter the U.S. market either later this year or early next year by launching initially in two U.S. states, with the head office in Richmond, Virginia.

He said other details of the plan are still being worked out.

The company also has operations in Spain, Germany and Italy.

Company Web site: www.admiralgroup.co.uk

-By Vladimir Guevarra, Dow Jones Newswires, Tel. +44 (0) 2078429486, vladimir.guevarra@dowjones.com

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