Admiral Record

Mar 6, 2007

By Sion Barry

Motor insurance group Admiral yesterday reported record end-of- year profits of pounds 147.3m. The Cardiff and Swansea-based London Stock Exchange-listed company also confirmed a move into the lucrative German car insurance market, after successfully launching in Spain last year.: FROM BUSINESS IN WALES: Admiral overtakes rivals on profits super-highway:Motor insurance group Admiral yesterday confirmed its place in the fast lane of business after reporting record end-of-year profits yesterday. The London Stock Market listed company, which has its headquarters in Cardiff, announced a 23% increase in pre-tax profits to pounds 147.3m for the financial year to the end of September 2007. A key driver was its subsidiary, Confused.com, which provides consumers with online price comparisons to find the most competitive deals on motor insurance. Since floating in September 2004 at 275p a share, Admiral has been one of the best performers on the London Stock Market. Its share price closed yesterday at just over pounds 10, with investment bank Merrill Lynch upgrading its price objective to 1240p. The company, which employs 1,800 in Cardiff and Swansea, also reported a 11% year- on-year hike in revenues to pounds 708.2m, as well as proposing a final dividend for the year of 24p a share.

Its vehicle insurance level rose from 1.1 million to 1.3 million on 2005, while Confused.com gave nine million quotes and made a profit of pounds 23.1m - pounds 8.8m for 2005.

Its employee share scheme will mean that most staff will receive free shares with a value of pounds 3,000.

Admiral's Chicago-born chief executive Henry Engelhardt said, 'We're are delighted again to be reporting record profits and strong growth in turnover, despite the challenging market place. Confused.com. our automated care insurance shopper has again achieved an excellent result.

'I believe that the group's performance continues to demonstrate the strength of our model and hard work of all our staff.'

Last October the company successfully launched into the Spanish car insurance market with Balumba.es.

And as revealed in the Western Mail last week, Admiral confirmed yesterday that its next move into the mainland Europe market will be Germany.

So why Germany next? Mr Engelhardt said, 'First of all we can only choose one and it's the biggest European market with some 45 million vehicles

'It is also moving gradually towards the internet, which fits with the thrust of our international strategy which recognises the internet as being the irresistible force.'

Mr Engelhardt said he hoped to have the German operation up and running by the end of the year, or early next at the latest. Research is on-going as to the brand for the German market.

Mr Engelhardt said it was feasible that Confused.com could also be rolled out internationally.

'We are currently looking at all our options for Confused,' he said and added that any roll-out would necessarily have to follow the route of Admiral into Spain and Germany first.

When Admiral floated pounds 3 shares seemed like a mountain, let alone pounds 10, Mr Engelhardt said.

'The shares have enjoyed fantastic growth,' he said.

Mr Engelhardt said he was also pleased that Admiral would be making a full reward on its staff share scheme. Every employee that was with the company throughout 2006, will receive pounds 3,000 worth of shares.

'We hope to continue that into the future. We are very keen for staff to own part of the company,' he said.

It was also important more companies Wales aimed to emulate the success of Admiral, Mr Engelhardt said. 'I am very pleased that we can continue to fly the Welsh flag. Hopefully there will be other companies in Wales that can emulate our success and grow the Welsh business community -bigger and better - into the future.'

Mr Engelhardt said the rationale in the car insurance market, where claims and inflation were eating away at premiums, suggested that rises in insurance rates were likely.

'The market dynamics resemble a classic game of chicken,' he said. 'This seems to be a market full of James Deans.

'Who will blink first? Who will knowingly raise their rates, make themselves uncompetitive, shed share and reduce volumes in an effort to enhance or protect profits?

'And if one firm gives up the game of chicken, will the others follow suit?'

Mr Engelhardt said it appeared that rates had moved up a touch, after changes by Norwich Union and Churchill owner Royal Bank of Scotland. But he believed the rises had not been as much as claims inflation, which is running well ahead of inflation - meaning the 'game of chicken continues'. However, he said that a move by the big boys would not necessarily mean that the whole market would follow suit. 'It used to be that if the big firms like Norwich Union and Royal Bank of Scotland - which together have 50% of the market - were to move their rates up or down the market would follow. 'Now you go onto Confused and the consumer is exposed to a much wider array of prices than ever before. 'If the lowest guy hasn't moved his rate, now the consumer can see that. As a result you are being more and more anchored, although not completely, by the lowest rates - which was not the case before Confused.com took over the world.' On the prospects for Confused.com this year ,he added, 'It can certainly have greater success. But whether it grows its profit by 162%... well that is a tough target. 'But it is going like a freight train and even in January we set a monthly record for the number of quotes and profit... and it's not slowing down.'

(c) 2007 Western Mail. Provided by ProQuest Information and Learning. All rights Reserved.

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