Admiral Shares Rise On Extension Of Reinsurance Agreements

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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