Admiral Delivers Strong First-Half Results; Shares Undervalued

Admiral delivered a near 20% rise in operating profit to GBP 257.2 million in the first half versus the prepandemic comparable period of 2019. This was driven by a combination of business growth, pricing, and underwriting. While Admiral estimates around 11% claims inflation in the U.K. motor market, it raised prices by 16% for the back end of the second half. Yet, management expanded the business with a 3.4% rise in vehicles insured. Admiral looks to be well ahead of the market in terms of pricing and growth. The drivers of claims inflation have not changed, with a normalisation of U.K. driving patterns and a rise in the prices of used cars. Labour shortages and wage inflation are also adding pressure to the cost of claims and repairs. However, Admiral has outlined a policy of margin over growth for the second half and said there are signs that secondhand-car prices may start to decline in the second half. The broader U.K. business showed 10.6% growth in households insured, as we believe it continues to take share from others.