Admiral shares soar on strong H1 results

Investing.com -- Admiral Group PLC (LON:ADML) has seen its shares climb after reporting its first-half 2024 results, which have exceeded expectations across several key financial metrics.

At 4:23 am (0823 GMT), Admiral was trading 7% higher at £3,006.

Admiral reported a pre-tax profit (PBT) of £310 million for 1H24, beating consensus estimates by 2%. The earnings per share (EPS) came in at 77.5p, surpassing forecasts by 3%, and the interim dividend per share (DPS) of 71p was 5% higher than consensus. 

This performance was driven by a notable revenue increase, particularly in the UK Motor segment, which saw gross written premiums (GWP) grow by 60% year-over-year (YoY). 

This outpaced UBS’s expectations by 23%, with net insurance revenue increasing by 50% YoY, also exceeding UBS's estimates by 11%.

In the UK Motor segment, Admiral achieved a PBT of £359 million, slightly ahead of consensus by 1%. The core motor combined operating ratio (COR) improved to 78.9%, significantly better than RBC’s forecast of 82.7%. 

The 2024 undiscounted booked loss ratio was exceptionally strong at 79%, compared to UBS’s estimate of 84%, indicating a robust underwriting performance. This was helped by a better-than-expected initial booked loss ratio for underwriting year 2024 and a favorable shift in business mix towards higher-premium customers and a larger share of young drivers.

The solvency ratio of 198% exceeded RBC’s estimate of 182% and highlights Admiral’s strong capital generation and favorable capital market impact. This solvency position provides significant comfort regarding the company's financial stability and capacity to support future growth. 

The interim DPS of 71p reflects a payout ratio of 92%, reinforcing Admiral’s commitment to returning value to shareholders.

Other segments:

• UK home: The UK Home segment delivered a PBT of £11 million, beating consensus by around £4 million, driven by favorable margin releases.

• International: Admiral reported a minor pre-tax profit of £2 million in its international operations, surpassing consensus expectations of breakeven. 

Cost control in the US and positive developments in France and Spain were offset by a deterioration in the combined ratio in Italy, which included a reserve charge related to a Milan court table.

Future outlook

The strong 1H24 results and significant revenue upgrades have driven a positive response from investors, as reflected in Admiral's rising share price. 

Analysts from UBS, Jefferies, and RBC Capital Markets expect further upward momentum, driven by Admiral’s solid earnings performance, enhanced solvency metrics, and the notable revenue growth in the UK Motor segment.

Given the double-digit revenue beats and strong margin performance, it is expected that consensus estimates will be revised upwards. UBS and Jefferies both project that Admiral’s forward estimates will need to account for these substantial revenue and margin upgrades.