Admiral Share Discussion Threads

[spob] 30/4/2009 11:08

Barclays Share of the Week


Admiral symbol: ADM

The outlook for the UK's car industry may be grim, but car insurance is proving rather more resilient. Admiral Group's results, released in March, demonstrate how an efficient and innovative firm can still make headway. Profits in 2008 were up by 11% on the previous year, with those from UK car insurance up by 27%. Turnover (i.e. premiums and other revenue) rose by 13%. Customer numbers increased by 17% to 1.75 million. The 2008 dividend was the biggest in the company's history.


The reasons for Admiral's success are easy to identify. The company has a very strong business model. It leads the market in a number of areas – including its underwriting track record, its flexible reinsurance agreements and its low ratio of expenses to earnings, due to an effective direct distribution approach. And the company is well positioned to benefit disproportionately from an increase in motor insurance rates, which appears now to be underway.


Admiral also offers the potential for international growth. Turnover from overseas operations rose by 80% in 2008, although the company admits that there is plenty of work to be done here. Admiral is also aware that competition in the internet aggregator market is fierce, and that profits at its Confused.com operation could be squeezed. We are however confident in the management's ability to generate shareholder value from overseas operations in the medium term, and believe that 'first mover' advantage, and lower advertising spend, will allow Confused.com to continue to prosper.


At a more fundamental level, Admiral has none of the solvency issues that affect larger, more complex insurers. This is a cash-generative business, with low capital requirements. Most of its funds are invested in short-term, liquid securities.


There are a number of risks surrounding Admiral. The most obvious is that motor insurance rates do not continue to rise. Although Admiral might fare better under this scenario than its peers, its high price/earnings (P/E) multiples could come under pressure. The terms of the company's reinsurance agreements could also prove important, but these have been renegotiated on favourable terms. So we continue to find Admiral admirable, and think that the shares are currently undervalued.

Last updated: 27 April 2009

[poppa07] 31/3/2009 12:32

....Hmmm, and whos first on the list of insurers on the first page? ;-)

[nicksoj] 30/3/2009 13:02

I see ADM's Spanish equivalent of confused.com has gone live today:

www.rastreator.com

[nicksoj] 13/3/2009 09:32

lets remember the share price won't fluctuate too much between 870p and 930p. It will have to stay within this range up until the Ex-Div date with the Divi @ 26p. Then we should see a healthy drop to normality. Keep leveraging your shorts - imo

[poppa07] 13/3/2009 09:04

Bowena - 12 Mar'09 - 09:54 - 252 of 253

What on earth is sustaining this price?


A fantastic managment team...something sadly lacking in many FTSE100 companies.

[alexx] 12/3/2009 14:19

Just put on a short and the price up 10p in a few minutes. I'm sure it wasn't me making a difference.

[bowena] 12/3/2009 09:54

What on earth is sustaining this price?

[sat69] 12/3/2009 07:28

Heading back to 850p?

[kibes] 04/3/2009 08:18

poppa07 - yes impressive results for the current situation, better than I was expecting. And an interesting write up by the CEO, I like his comment that the market capitalisation of Admiral is now higher than General Motors (although GM is bust as we know). I think it might be possible to justify a p/e ratio of 15 in normal circumstances which with eps of 54.9p would give share price of 823p. However, in the current market other insurance companies are on p/e ratios more like 5. It looks fully valued at the current price certainly.

[ramas] 03/3/2009 08:25

Poppa lol - i will be increasing my short - better results than i expected but today is the pat on the back for yesterdays work - lets see what tomorow brings (dont get me wrong Admiral is a survivor - my beef is the valuation)

[poppa07] 03/3/2009 07:39

ramas - 25 Feb'09 - 18:28 - 239 of 247


good business but massively overvalued - also appears a 'protected share' making it ripe for massive short action. lots of 'tarts knickers' moves by this stock. this logically cant move up on the results but hey who cares about logic in the current crazy world - however i remain short £6 here we come
===========================
nicksoj - 25 Feb'09 - 20:22 - 241 of 247


We saw a 200+ pence drop off the back of solid results last March (the sloth!), so deffo on a short for me. Agreed - there is no upside here with UKX in turmoil. Better to look for longs in oils - imo.

p.s Moneysupermarket have posted negative trading data re: falling customer spend forcing them to curtail advertising expenditure etc.. dyor
===========================

Hope you guys closed your shorts. I really mean it, I hate anyone losing money at the moment.

[poppa07] 03/3/2009 07:37

Results looks pretty good considering whats going on in the market.
Another £1500 for each of us (staff) too. Shame the divi is less than last time, but hopefully the share price will recover a bit to compensate.

[poppa07] 27/2/2009 09:29

Your right, it pays to be the cheapest. In the current climate, there are always people willing to go for the cheapest "no frills" option.
Our Bell brand is quite popular, as it lets you get a really cheap no frills quote, then pick and choose the extras that would normally be included in other brands/insurers policies. I guess you get what you pay for.

I can see a time when even the comparison sites are going to go belly up though....surley theres an oppertunity for someone like Google to create a price comparison portal and pay for it using paid for advertising.

Regarding risk, beleive me, alot of the risk on our books is palmed of to reinsurers.

[kibes] 27/2/2009 09:18

poppa07 - thats interesting, thanks. I also wonder what effect comparison sites are having on the industry as a whole. As an insurance company is not going to get any business unless they have the best quote it seems to me they are all being forced down a death spiral of price cutting against each other. When you look at a results page from Confused.com there seem to be far too many of them as well. Even the Post Office has jumped on the bandwagon! My own car insurance has more than halved over the last year or two.

And a lot of the people offering quotes are brokers rather than insurance companies. So that is one lot of commission to them and another lot to Confused.com, what money is left for the real insurance company actually taking the risk?

[poppa07] 26/2/2009 16:05

Whenever I've done a quote, one of the brands (usually Elephant) is always at/near the top.

The fact you never get one of our brands when you go on Confused means your not desirable enough when matched against our underwriting criteria. In that case, it makes sense for us to send you to someone else (cheaper) for your insurance, and still get the commission (with no risk to us) when you insure with them.

I work in the IT department, and beleive me, there are far more leads coming in from other aggregators than we're sending away.

[kibes] 26/2/2009 15:53

poppa07 - Confused.com is an excellent website yes. But as it is directs your customers away from Admiral towards cheaper competitors it seems like a bit of a double edged sword to me. I have never had Admiral come up as the cheapest quote. I suppose Admiral gets a commission for the business passed through but even so how much is Confused worth? I have seen optimistic estimates of £500 million but even that is not even a quarter of ADM's current market capitalisation. And there seems to be an awful lot of competition building up eg comparethemarket.com which always seems to be advertising on TV.

I don't really understand the logic of running an insurance company and then also a comparison site which undercuts your prices. Why would anyone want to insure with Admiral if they can buy cheaper from someone else?

I can see some sense in insurance companies having specialist niche areas eg for people who have 11 points on their licence or 20 year old footballers who want to drive 6 litre sports cars. These people can be charged almost unlimited amounts for insurance if they can find it at all.

[poppa07] 26/2/2009 08:07

Yeah, I'm already long on oil (some stocks not out of choice), seems way oversold.

Agree with the point about the last results. Henry seems to have a knack of spoiling a good set of results, maybe I should visit his office with a gag!

Re MS, I suppose we're in a better position than most seeing as we own Confused.com. Guess we'll have to wait and see whats what next week though.

[nicksoj] 25/2/2009 20:22

We saw a 200+ pence drop off the back of solid results last March (the sloth!), so deffo on a short for me. Agreed - there is no upside here with UKX in turmoil. Better to look for longs in oils - imo.

p.s Moneysupermarket have posted negative trading data re: falling customer spend forcing them to curtail advertising expenditure etc.. dyor

[poppa07] 25/2/2009 18:35

LOL, I work for them, so got a big share alloaction when we floated and get free shares every 6 months, so up or down its all free money. ;-)

[ramas] 25/2/2009 18:28

good business but massively overvalued - also appears a 'protected share' making it ripe for massive short action. lots of 'tarts knickers' moves by this stock. this logically cant move up on the results but hey who cares about logic in the current crazy world - however i remain short £6 here we come

[poppa07] 25/2/2009 10:51

Results are due on March 3rd, so they'll probably be looking to close their positions in the next few days to be on the safe side.

[betie] 24/2/2009 20:19

Lot of shorting here

[father o toole] 18/2/2009 12:07

arternoon

ive shorted this share jsut now at just under 870 because its a nonsense IMO.

[stu31] 02/2/2009 21:49

It looks good at the moment nick

"A genuine diamond pattern is signified by a decrease in volume during the second half of the price pattern"

it is clear that volume has been lower since November :)