Admiral in £200m bond issue

Admiral is to offer up to £200m of bonds in its first-ever bond issue.

The motor insurer will offer 10-year tier two subordinated bonds.

Chief executive Henry Engelhardt said: “I’m pleased to announce our first bond issue. 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.

“It is an opportune time to strengthen and diversify our capital resources as we make a prudent transition into Solvency II in 2016, with the attendant regulatory capital requirement and buffers. The additional capital also sets us up well for the growth we expect from all our businesses in the coming years, while being consistent with our existing dividend policy.”

The move comes after Admiral announced a 9% reduction in group turnover to £1bn for the first six months of 2014, down from £1.1bn for the same period in 2013.

This is despite an increase in customers to 3.9 million for the period, up from 3.6 million in H1 2013.

UK car insurance turnover was also down 8% to £850m, despite an increase in vehicles insured of 3%.

Engelhardt said that a decline in premiums had caused the decrease in turnover, despite favourable claims development.

“UK claims development on the back years (2012 and prior) has been positive and we continue to forecast good levels of reserve releases,” he said. “Our expectations for our UK business in 2014 therefore remain unchanged. However, as we’ve said previously, our margin expectations for business earned this year are lower than in recent years, in the main as a consequence of the decline in premiums. Much of the impact of the reduced margin will be reflected in earnings of subsequent years.”

He added that despite some evidence of premiums no longer falling, a return to premium growth had not yet materialised.

“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,” he said. “Admiral’s rates have been pretty flat over the first half of the year, though as a result of the reductions in 2013, total premiums are down around 9% compared to the first half of last year.”