Admiral gives cautious outlook as lower premiums dent first half - UDPATE

9th Jul 2014 07:39

- Turnover down 10% as premiums fall- Customer numbers up 8.3%- First bond issue announced to raise £200mCar insurer Admiral disappointed the market with a gloomy outlook on Wednesday as it reported a decline in revenues in the first half, saying that a return to growth in premiums remains elusive.Customer numbers rose to 3.9m in the six months to June 30th, from 3.6m the year before, with more people taking its products in both the UK and international regions.However, group turnover fell to £1bn from £1.1bn the year before. While rates have been pretty much flat during the half, reductions in 2013 meant that total premiums were down 9% year-on-year."In the UK there are some signs that premiums are no longer falling but we have yet to see firm evidence of an inflection point and a return to premium growth," said Chief Executive Henry Engelhardt.Admiral said that while the outlook for the UK in 2014 remains unchanged, margin expectations for business earned this year are lower than in recent years due to falling premiums and much of this impact will be reflected in earnings of subsequent years.Broker Canaccord Genuity said the firm's "cautious outlook" prompted it to downgrade its rating for the insurer from 'hold' to 'sell', saying that it sees downside risks to its forecasts."The cautious outlook for margins beyond 2014 underlines the difficulty in improving margins even as pricing stabilises, as prior year reserve releases reduce," said Canaccord analysts Ben Cohen and Ming Zhu.In other news, Admiral also announced its first bond issue and plans to offer up to £200m of 10-year, tier-two subordinated notes."Since Admiral went public in 2004 we have been unleveraged, but we think that with a favourable market and rates that seem very reasonable, now is a good time to diversify our capital base," Engelhardt said.BC