2008 Half Year Results July 2008
Agenda � Henry - Highlights � David - UK car insurance results, the UK market & Confused � Kevin - International, reinsurance, dividends � Henry - Long-term strategy 2
Highlights • Profits in the half-year of £100.3m - an all-time, half-year high for the Group. 16% higher than the first half of 2007 • Vehicle count - 1.63m - up 16% from 30 June 2007 - 9% up from 31 December 2007 • UK vehicle count - 1.56m - up 12% from 30 June 2007 - 8% up from 31 December 2007 • Total premium - £363.2m, up 12% from 30 June 2007, UK Premium growth - 9% from 30 June 2007 • Confused profits - down from £19.7m in H1 07 to £15.6m in H1 08 3
More Highlights • Ancillary revenue per vehicle in the UK up from £69 for all of 2007 to £71 for the year to June 2008 • Dividend recommended of 26.0p per share, £69 million in total • Vehicle count in Spain increased to 60,000, up 258% from end of June 2007 and 27% from end December 2007 • Italy successfully launched on 30 May 2008! • Reinsurance arrangements in place for 2009 and beyond • Top 10 in the UK in FT Best Workplaces league table, 34 th in Europe 4
Highly Profitable Profit before tax (£ £m) m) Profit before tax ( £182.1m £100.3m £147.3m £119.5m £86.3m 20% £98.1m 17% £74.0m 14% £68.7m £50.3m 11% 20% £55.6m 16% 23% 14% 27% (1) (2) 2002 2003 2004 2005 2006 2007 13% 10% Non-underwriting result Confused Profit commission Underwriting profit 50% 49% 53% 59% H1 05 H1 06 H1 07 H1 08 (1) £6m Munich Re profit commission re-allocated from 2004 to 2003 result. (2) Figures up to 2004 also adjusted for goodwill amortisation, ESOT transactions and bonuses in lieu of dividends. 5
Highly Profitable Profit before tax (£ £m) m) Profit before tax ( 200 £182.1m 180 160 £147.3m 140 £119.5m 120 £98.1m 100 £74.0m 80 60 £50.3m 40 £33.3m 20 £8.1m 0 '00 '01 '02 '03 '04 '05 '06 '07 2000 – 2004 figures adjusted for non-recurring items such as goodwill amortisation. £6m Munich Re profit commission re-allocated from 2004 to 2003 result 6
Highly Profitable Profit before tax (£ £m) m) Profit before tax ( £182.1m £100.3m £147.3m £119.5m £86.3m 20% £98.1m 17% £74.0m 14% £68.7m £50.3m 11% 20% £55.6m 16% 23% 14% 27% (1) (2) 2002 2003 2004 2005 2006 2007 13% 10% Non-underwriting result Confused Profit commission Underwriting profit 50% 49% 53% 59% H1 05 H1 06 H1 07 H1 08 (1) £6m Munich Re profit commission re-allocated from 2004 to 2003 result. (2) Figures up to 2004 also adjusted for goodwill amortisation, ESOT transactions and bonuses in lieu of dividends. 7
Low Risk Profits - Growing UK Ancillary Income m) (1) (1) Ancillary Contribution (£ £m) Ancillary Contribution ( Average active vehicles (000s) 1,412 1,334 1,256 1,173 1,058 893 £92.0m £81.5m £72.5m 2004 2005 2006 2007 H107 H108 Contribution per average active vehicle £59.2m £53.0m £71.10 £69.30 £69.00 £68.50 £68.40 £44.7m £66.30 £40.1m 2004 2005 2006 2007 H1 07 H1 08 2004 2005 2006 2007 H1 H1 H1 06 07 08 (1) Before allocation of overhead expenses 8
David Stevens
Ho-hum. Another Record Year For Releases. Combined Ratio Before Releases (% Premium) Combined Ratio After Releases (% Premium) 115 113 125 111 123 123 120 120 119 114 113 115 110 105 105 104 103 102 104 105 104 104 11.5 103 102 101 100 94 91 8.4 % % 6.5 4.2 4 3.9 3.6 3 2.3 1.3 1.3 0.2 -1.8 -1 '94 '95 '96 '97 '98 '99 '00 ’01 '02 '03 '04 '05 '06 ‘07 '94 '95 '96 '97 '98 '99 '00 ’01 '02 '03 '04 '05 '06 ‘07 = Reserve Releases (% Premium) Market: 1994-2004 Motor Market, 2005-2007 Private Motor Market.. 10
Subdued Underlying Claims Cost Inflation Frequency (%)* 2007 v 2006 17.7 -2.2% 17.4 16.9 16.5 Cost per Vehicle Year (£) 2007 v 2006 15.9 15.8 15.4 +1.3% 310 306 303 '01 '02 '03 '04 '05 '06 '07 289 287 276 275 2007 v 2006 Average Claim (£) +3.5% '01 '02 '03 '04 '05 '06 '07 2003 1936 1906 1740 1710 1586 1554 '01 '02 '03 '04 '05 '06 '07 * Frequency & average claim data sourced from EMB analysis of treasury returns from 01-05 (comp only) & then derived from ABI frequency & treasury cost per vehicle data for 2006/7. 11
Price Comparison Sites Offsetting Price Rises Earned Premium Per Vehicle Year (£) 2007 v 2006 -0.3% 378 373 372 369 366 365 355 '01 '02 '03 '04 '05 '06 '07 12
Expense Ratio (1) +1.5 percentage points 29% 28% Market 27% 29% 28% 27% 27% 18% Admiral 17% 16% 15% 17% 16% 15% 15% 2001 2002 2003 2004 2005 2006 2007 2008 Total Market (Earned Basis) Admiral UK (Earned Basis) 13
Market Expense Ratio Rises – Rising Acquisition Costs % GWP 2005 2006 2007 CHG ‘07 V. ‘05 Acquisition Costs 10.7 11.5 12.7 +2.0 Admin Cost 14.2 14.2 13.6 -0.6 2.9 2.9 +0.1 Levies* 2.8 Total 27.7 28.6 29.2 +1.5 * Assuming market levies = AGL levies Source: EMB analysis of Treasury Returns 14
Price Comparison Sites – Driving Acquisition Costs Up In Short-Term Marketing Spend (£m) 156 Cost of Sales Via 106 104 PC Sites* 100 TV & Press Spend** 76 52 2008E 2006 2007 * Management estimate ** Nielsen TV & Press Spend (2008 = H1 multiplied by 2) 15
Relentless Distribution Switch Share By Distribution Channel* 63 61 52 On-line as % of NB 46 45 PC Sites as % of on-line 38 PC Sites as % of NB 31 24 14 2006 2007 2008 E *Management estimate partly extrapolated from ebenchmarkers. 16
PC Sites – Increasing Marketing Spend (TV and Press Spend, Price Comparison Sites, £m) Confidentcover +221% v YAG Tesco Compare 19.6 +72% v YAG Beathatquote Compare The Market 15.2 14.7 Uswitch Go Compare 8.5 People's Champion 7.8 Moneysupermarket* 6.1 Confused Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 * 50% of MSM’s overall Nielsen spend allocated to insurance. 17
Confused Turnover by half year Profit by half year £m £m 37 35 34 23 20 17 16 14 15 9 9 6 H2 05 H1 06 H2 06 H1 07 H2 07 H1 08 H2 05 H1 06 H2 06 H1 07 H2 07 H1 08 18
Insurance PC Market – Overall Economics 2008 H1 Expense & Income (£m) Expense Income 81 11 70 69 26 9 34 Nielsen H1 Under recording Non-TV** Total Motor Non-Motor*** Total of TV* Costs * Assumed to be circa 20% not captured. ** Assumed to be 60% of TV costs. *** Assume 15% of Motor. 19
Insurance PC Market – Overall Economics (cont) 2008 H1 Profit (£m) 13 17 16 12 Profit To Confused Profit To MSM*** “Loss” To Others Overall profit *** Management estimate of insurance profit 20
Relentless Distribution Switch – Impact On Car Business Share of NB Sales Admiral Share of NB Sales 14 24 14% 38 PC Site Winners PC Sites 31 • Low Expense Ratios 28 Other On-line 7% 25 • Good Ancillary Sales Off-line • Good Risk Selection 55 48 37 2% 2006 2007 2008 E 21
Loss Ratio v. Market (As at Dec 07) 86 84 (-1) 77 (-3) 77 74 (-2) 73 (-2) 71 (-1) Change v. Dec ‘06 69 (-2) 68 (-1) 64 (-6) 59 (-5) 54 Market* (excl. Admiral) 52 (-2) 50 (-1) reported loss ratio Admiral projected Accident Year 2001 2002 2003 2004 2005 2006 2007 ultimate loss ratio (EY) Out-performance* 18 18 17 11 10 9 Dec ’06 Out-performance* 17 18 17 14 13 10 9 Dec. ’07 22 * Market Loss Ratio – Admiral Loss Ratio
Loss Ratio - July ‘08 (As at June 08) Change v. Dec ‘06 74 (-3) 73 (-1) 72 64 58 (-1) 52 Admiral projected 54 ultimate loss ratio – June 08(EY) 50 2001 2002 2003 2004 2005 2006 2007 2008 Accident Year 23
Pricing 2006 2007 2008H1 Admiral Lagging Rate Increases Slightly +2.5% AA Shoparound* +0.8% +4.3% • RBSI on PC sites • Improved underwriting +0.2% Admiral* +4.0% +4.4% profitability • Profitable vehicle growth (+7.4% H1) Q1 -1.2% Q2 +3.8% * AA=Comprehensive, New Business Admiral=All New Business 24
Combined Ratio v Market 113 115 105 100 99 96 95 89 91 Conclusions 89 79 73 • Rapid Distribution Switch 72 68 65 • Core Business Well Positioned To Benefit • Maintaining Key Combined Ratio Advantage 2001 2002 2003 2004 2005 2006 2007 2008 Outperformance 27 30 28 27 26 24 24 (% points) Market Share ** 1.5% 5.0% Market (excl Admiral) reported loss ratio as at Dec 07 plus expense ratio. Admiral projected ultimate loss ratio* plus expense ratio. * Projected ultimate loss ratios as at July ’08 (08) ** % Vehicles insured. 25
Kevin Chidwick
Admiral Goes International The obvious targets: Number of Vehicles GWP 12bn 26m 22m 10bn UK UK Spain Spain 45m 15bn Germany Germany 85bn 250m 34m Italy Italy 17bn France France 31m USA USA 14bn £153 billion 408 million 27
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