Admiral Shares Rise On Extension Of Reinsurance Agreements
February 03 2012 - 6:16AM
Dow Jones News
Shares in Admiral Group PLC (ADM.LN) rose strongly Friday after
the U.K. car insurer said it is extending its existing U.K. car
reinsurance partnerships with several foreign reinsurers until
2014, showing continued support for Admiral despite it facing some
challenges in its U.K. business.
At 1031 GMT, Admiral shares were up 8% at 1039 pence, making it
the best performer among FTSE100 stocks. Meanwhile, the FTSE100
index was up 0.47%.
Admiral said it extended its partnerships with Hannover Re AG
(HNR1.XE), Mapfre Re, New Re and Swiss Re AG (SREN.VX) into 2014
and that the costs of these arrangements have not changed.
It said these are in addition to a current co-insurance
agreement with Munich Re AG (MUV2.XE), which covers 40% of the U.K.
business and which runs until at least the end of 2016.
"We are happy to announce these extensions to our underwriting
arrangements into 2014. Reinsurance has been at the core of
Admiral's successful business model since 2000 and we look forward
to continuing our mutually beneficial relationships with our
partners for many years to come," said Chief Executive Henry
Engelhardt.
The announcement comes after Admiral issued a profit warning in
November, saying that its 2011 pretax profit will be at the lower
end of expectations due in part to record levels of personal injury
claims.
Analysts have also said Admiral is exposed to the U.K.
government's effort to introduce major changes in the way car
insurance is being sold in Britain.
The U.K. Office of Fair Trading in December launched a market
study on how car insurers provide third-party repairs and
replacement vehicles to claimants, as part of efforts to weed out
possible anti-competitive practices in the industry.
In September, the Ministry of Justice said it was looking into
banning the payment of referral fees in personal injury claims.
Such referral fees contribute to Admiral's sales.
"This morning's announcement, while not hugely significant, does
highlight the continuing support that Admiral enjoys from its
reinsurance partners," said Peel Hunt analyst Mark Williamson, who
kept his buy rating on the stock.
Oriel Securities analyst Marcus Barnard said: "This announcement
is good news for Admiral as it removes some uncertainty over the
future of these arrangements."
Shore Capital analyst Eamonn Flanagan said the agreement with
the reinsurers is "likely to be taken well by the market."
"However, our concerns over both the bodily injury issues and
the threat to the ancillary income line from the Ministry of
Justice and OFT investigations remain," Flanagan said, keeping his
sell rating on the stock.
-By Vladimir Guevarra, Dow Jones Newswires; +44 (0) 2078429486,
vladimir.guevarra@dowjones.com
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