Insurance group says it’s prepared for all Brexit scenarios, reassuring investors.
Admiral (ADM) results defy choppy market conditions
- Market ignores CEO calling results ‘a bit dull’ with shares rising 6% in early trading.
- Group reports rises in turnover, pre-tax profit and customer numbers.
- As the dividend rises to 5% and shares yielding close to 6% we continue to recommend the shares as a ‘Hold’.
The insurance group’s latest results have beaten market expectations, reporting a 6% rise in turnover to £1.8bn alongside a 4% increase in pre-tax profit to £220mn. Customer numbers rose 200,000 to 6.7m but the key underwriting measure, the combined ratio, worsened from 87.4% to 92.3% and the loss at the international business increased to £2.7m.
The chief executive may have described the results as “a bit dull”, but the market clearly found them quite exciting given the 6% rise in the shares in early trading. That may be due to the company reassuring the market it has prepared for all Brexit scenarios, including No Deal, although it admits a drop in sterling would increase the cost of claims for its car insurance business. The company said it had deliberately not been as competitive in the UK car insurance market and suffered a £33m hit caused by the government’s change in the Ogden rate, which determines how much companies need to put aside to cover injury claims.
Our view on Admiral - Hold
The fact that profits still rose 1% in that area is good news for investors. The dividend was raised 5% and with the shares yielding close to 6% we continue to recommend them as a medium risk ‘hold’ for investors seeking a balance of growth and income.
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