Analysis of Performance of Multinational Insurance Company - Desklib

This report provides a critical analysis of the financial performance of Admiral Group Plc, a UK-based car insurance company. It discusses the strategic position of the group within the UK insurance market, current and future challenges, and recommendations for potential investors. The report also covers the subject of product diversification, international insurance growth, and evolution of the motor book. Course code, course name, and college/university are not mentioned.

COURSEWORK 2:
ANALYSIS OF THE
PERFORMANCE OF A
MULTINATIONAL
INSURANCE COMPANY

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
a)Critical analysis of financial performance of Admiral Group Plc............................................3
b)Strategic position of Admiral Group in industry......................................................................6
c)Current and future challenges for the organisation..................................................................9
d)Recommendations..................................................................................................................11
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14
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INTRODUCTION
The report is on analysis of financial performance of a motor company of insurance. Admiral
Group is a car insurance company based in UK and group is listed on London Stock Exchange.
The financial performance of the Admiral Group has been discussed from underwriting and
overall earning perspectives. The strategic position of the group within UK insurance market has
been commented upon as to what makes the UK insurance company a unique player in the
industry. The future and current challenges of the group from perspectives of strategy and
underwriting. The recommendations of potential investor overcoming the future and current
challenges for succeeding in UK non-life insurance market have been discussed.
a)Critical analysis of financial performance of Admiral Group Plc
Operating Income
Seeing the operating income of the organisation, it was clocked at 403.5 million in December
2017, rose to 476.2 million in December 2018 and further gained momentum of rise to 503.1
million in December 2019 and then increase to 606.2 in December 2020. This sees a growth in
operating income and operating margin increase to 57.05% which is a considerable increase
compared to the industry standards (Maichel-Guggemoos, L. and Wagner, J., 2018).
Industry standards of operating margin were 22.53 however, the organisation achieved 38.29%
which is a remarkable achievement depicting that the organisation has controlled the costs to a
great standard and operational efficiency is high.
Total revenue
The total revenue was 1128.9 in December 2017, increased to 1261.6 million in December 2018
which decreased to 1208.8 million in December, 2019 and later increased to 1305.3 in
December, 2020.
Industry standards of revenue and that of organisation have exceeded with Admiral Group
clocking 4.75% and industry standards up to 4.12, observation made of past five years.
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Net income
The net income in December 2017 was 334.2, increased to 395.1 in December 2018 and rose to
432.4 in December 2019 and lastly to 528.8 in Dec,2020. Net profit margin has registered a
percentage increase of 46.41% which is a remarkable increase in net profit.
The net profit margin has been 31.31% of past five years of Admiral Group, compared to 18.52
of the industry standards.
Return on Equity
Return on Equity is measure of annual return of company divided by total value of shareholder’s
equity expressed in percentage. The return on equity was 50% of the organisation and the
industry standards were 27.6, which is much higher than industry standards.
Return on assets
This is a type of return on investment which measure profitability of business in relation to total
assets. This indicates how well organisation has been performing by profit comparison. The
ROA has been 3.96 of industry standards and ROA has been 5.96 of past five years for the
company. This shows the organisation has performed well comparing to the industry standards.
This shows the efficiency of operations of the organisation and also the benefit it makes towards
investors (Maichel-Guggemoos, L. and Wagner, J., 2018).
Turnover
On looking at the turnover, it can be seen that turnover has increased every year although in
pandemic, it has decreased in 2021 to 1.78 billion GBP compared to previous year of 3.55 billion
(Parise, T.V. and Shenai, V., 2018).
Earnings per share
It increased by 21% and came up to 179.5 pence which was in-line with growth of Admiral’s
share in pre-tax profit.
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Capital structure and financial position
The co-insurance and reinsurance arrangements for UK car insurance business are in place till
end of 2021. Net retained share of the business is 22%. Munich Re shall underwrite 40% through
reinsurance and co-insurance arrangements, till 2021 end. With some agreements with Group
reinsurance partners been concluded, remaining business extensions beyond 2021 are expected
for confirmation during 2021 first half. Also, similar arrangements for long-term are in place for
insurance operations internationally and the Van business and UK household.
Group Key Highlights of financial performance
Continued turnover growth (£3.55 billion, increase by 2% on 2019) and number of customers
numbers (7.66 million, increase by 10% on 2019).
• Pre-tax profits of group’s share £638.4 million (2019 reported £526.1 million) and earnings
before tax of Group is £637.6 million (2019 reported £522.6 million).
• The significant growth driver in Group profit was high than industry standards, which was
gained from frequency of reduced claims and continuation of firm prior year releases of
reserve • UK Insurance customers and turnover rose by 2% and 9% serial wise to £2.67 billion
and 6.0 million (2019 reported £2.63 billion and 5.5 million), as the organisation gave frequency
benefits of claims by refund of premium to customers and reduction in prices (Parise, T.V. and
Shenai, V., 2018).
• UK Household observed firm turnover growth and number of customers, with a improved
outcome of £15.4 million ( £7.5 million profit was reported in 2019) because of result of low
theft and water claims escape in the time (Charpentier, A., 2020).
• The European business insurance gave a profit higher of £13.6 million ( £8.7 million was
reported in 2019), and there was low loss in the business of US insurance (£4.8 million in 2020
reported £4.8 million v 2019 reported £9.6 million). The insurance profit internationally in
overall was £8.8 million ( £0.9 million loss was reported in 2019).
• The businesses’ of comparison showed record of profits aggregate (exclusion of share of
minority interests) of £31.0 million (2019 reported £18.0 million), with the rise driven mainly by
profit through Confused.com of £29.4 million (2019 reported £20.4 million).
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Solvency ratios
However slight low than year-end position of 2019 year-end , the Group has continuation of
maintaining a post-dividend ratio of solvency at 187% (2019 reported 190%). Capital surplus
over the requirement of regulatory capital rose by more than £100 million during the time,
primary because of the profits of the underwriting years recently (Rodríguez Cardona and et.al.,
2021). The requirement of solvency capital has too rose because of the improvement in
profitability of underwriting , to be specific in relation with the commission of profit which
Admiral gets in accordance with reinsurance and co-insurance contracts. With the rise in
requirement of capital solvency, it is low compared to the rise in Own Funds, which result in an
overall reducing of the solvency ratio.
Investment analysis
Interest income and investment in 2020 (net charges of impairment) was £52.9 million, a rise in
£17.6 million on 2019 (£35.3 million). The two years have got impact by adjustment in relation
to income of investment of cash hold by Admiral in relation to the reinsurance of motor
insurance portion of business under contracts of quota share. Income earned of £12.9 million in
2019 was made recognition of in profit and loss statement of 2020 as the 2019 result projection
of underwriting year rose to a level of profit-making. The positive impact was offset in partial
by charges of impairment higher in 2020 on assets comparing to the previous year. The rate of
return underlying of the year (exclusion of accrual relating with re-insurance contract fund
withheld) on the cash of Group and investment being 1.3% (2019 reported 1.4%).
Investments and net cash have risen to £341.5 million or 10% (2019 reported £169.7 million,
5%). The prominent drivers are a decline in the fund requirement for business of Admiral Loans,
offset through increase in 2020 in payment of tax (because of timing) and risen payments of
dividend (Charpentier, A., 2020).
b)Strategic position of Admiral Group in industry
The organisation is profit driven by a positive prior year development which is combined with
low claims on frequency. There is growth continuous across different business and geography in
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competitive markets. They are well executed and adapt with effectiveness to change in
uncertainty times. The progress against strategy with data improvements, tech and digital further
allows steps towards a diversified business.
The Admiral Group has strengthened core competencies and increased delivery speed on
consumer expectations. The key pillars include data, tech, digital first and analytics working for
the organisation. There is customer centric innovation and attraction of new talent (Rodríguez
Cardona and et.al., 2021).
Product diversification: Increase in business resilience and engaging with customers has helped
the organisation in product diversification. Customer proposition is strengthened and core
strengths are leveraged, exploration of opportunities in Pioneer team helped organisation in
increasing opportunities of insurance. There is innovation in product design which helped
product diversification.
Evolution of motor
Proposition is evolved for mobility changes and there are emerging propositions which shall be
relevant in future. Admiral group has launched Kooalys, which is a small insurance fleet in
France.
Admiral Group has core business improvements like:
a) Underwriting agility: The function is of decreased and then increased price ahead of
market for reflection of claim trends of Covid.
b) Claim efficiency: Triple total loss claims are settled online with making the time taken
for settlement to be halved.
c) Effectiveness in controlling of costs: The variable costs have been decreased of ‘cost to
serve customers’ by 30% in two years (Erceg, Ž., Kovačević, B. and Krunić, S., 2021).
Admiral Group has made its name in the insurance industry by starting a project named
as Admiral 2.0 which consists of:
a) Loans: Open banking and new decision-making policies have been adopted for
enhancement of risk selection.
b) Scaled agile has been implemented in UK and Italy and rolled out in other nations.
c) Enhanced interaction of customer can be done through chatbot, language processing
through natural means has been done and also other trials of technology are being
done.
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Product diversification
Product diversification in the insurance industry is done by the organisation in the following
ways:
a) Household: Increase in multi sales happens as share of new business has increased by
45%.
b) Pioneer: Admiral Group has launched Toolbox which is a micro SME product of
insurance.
Company’s position
There has been strong growth achieved in European operations, in particular France. There have
been market conditions that were competitive with premium pressure in Spain and Italy and have
achieved significant growth. The result have been impacted by reduction in positive covid claim
trends which have been returning towards normal levels. There have been increase in inflation
claims. There has been continued improvement in operational and digital efficiencies and
distribution channels’ expansion (Erceg, Ž., Kovačević, B. and Krunić, S., 2021).
There has been prudent return to growth and loan loss performance has been positive with no
change significant in default over period. The provision approach has been remarkable with
increased portfolio coverage. The gross loan balance are on track in the current year.
Things which set the company different from others and place it in a unique position is due to the
following points:
 Good profits driven by positive prior year development combined with frequency of low
claims.
 Continued growth across different business and geographies in markets that are
competitive.
 Organisation is well executed and effectively adapts to change in uncertainty times.
 Progress against strategy with data improvements, digital and technology and steps
towards diversified business.
 Strong commitment towards society’s sustainable future.
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 Admiral has track record of long term, Admiral focuses on long term sustainable
businesses in future. They have a prudent approach in running business which includes a
philosophy within Insurance operations and business of loan.
 Admiral has innovative culture for organic growth. Business have been bult from ground
level. Company continues for investigation of new opportunities for improvement in
businesses that are existing.
 Company has approach towards value creation for long term with commitment for
driving outcome positive for stakeholders (Borocki and et.al., 2019).
 There is belief of company in people doing better at what interests them and Admiral
being a place for commitment to inclusion and diversity.
c)Current and future challenges for the organisation
The challenges which the organisation faces are:
 Evolution of motor book
Maximising core business value by evolution of proposition of motor insurance,
identification of opportunities in current phase of trends and disruption and laying
foundation for future growth.
 International insurance growth
Developing profitable, growing and business that is sustainable which mirror in UK.
 New product diversification
Building and developing an advantage which is competitive in new product, that allows
for engaging more with customer and building resilience of business.
 People driven workplace
Ensuring a place great for working with engagement with high staff , and place where
employees feel being valued, developing and supported. Staying close with customer,
customer emerging needs and mobility trends that are new
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. • Continuing the diversification of product by experimentation in business that is core
and also putting on test customer propositions that are emerging. Continuing the path
toward value creation for long-term in Europe and beyond.
• Continuing to grow presence through comparing and distribution channels of
broker.
• Improving persistency of customer across businesses that are international
• Continuing for strengthening synergy and operations learnings across.
• In the US, continuing focus on long term customer retention for long term and
improving fundamentals of loss ratio (Borocki and et.al., 2019)
• Further developing Admiral Loans and offering customers of UK a better
product range and an online improved shopping experience.
• Test and learn approach to build new business with customer centric innovative
product technologies and design.
• Becoming a leader in inclusion and diversity.
• Attracting and developing top talent.
• Continuing developing employees with offering of opportunities for development
and training , as well as providence of career opportunities that are interesting.
• Continuing to provide encouragement and responding for employee feedback and
improvement.
• Ensuring people are enjoying work at Admiral (Hussain, R. and Zeadally, S.,
2018.).
• Investing for ensuring claim management effectively, risk selection being strong
for underwriting business that is profitable and culture which is cost conscious
and customer service being great.
• Profitably growing Household insurance operations and UK motor.
• Enhance digital, data and tech capabilities in line with adapting to customer and
business needs.
• Evolve ways of working through Admiral’s Smart Working approach – with a
focus on four pillars: Smart People, Smart Technology, Smart Spaces and Smart
Business Practices.
• Maintain strong performance of our UK Insurance business.
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• Leader in insurance risk selection and efficient claims management.
• Continue to be an efficient business with a focus on expenses.
• Continue to take advantage of growth opportunities in UK Motor and Household.
• Focus on MultiCover and MultiCar growth (UK).
 • Continue to strengthen customer retention
 Continued focus as a data, tech and digital first business.
 • Promote usage of the Admiral App. • Growth in number of transactions completed
online.
 • Enhance and encourage claims to be started online.
 • Ensure continued strength in operational resilience, IT and information security.
 • Improve AI capabilities across the wider portfolio (Hussain, R. and Zeadally, S., 2018).
 Continue to enhance our IT support services and to provide employees with all software
and hardware required to excel at their roles.
• Continue to monitor staff needs while working from home and adapt accordingly.
• Continue to protect our culture and values through collaborative, engaging
working practices.
d)Recommendations
The company can introduce a new cross-department Data and Analytics project. The strategic
project can aim for enhancement of use of analytic tools and Group-wide data, which ensures
ability for making decisions that are data driven which remain key driver behind the commercial
success. The project can have the following points for addressal:
a) Better data: They can move towards cloud-based solutions for housing the core insurance
data for ease of access. Data can be made available from cloud platform in real-time to
improve the view of business.
b) Better tooling: Maintaining leading data capabilities and getting away from legacy
systems that are restrictive for technology (Lamberton, C., Brigo, D. and Hoy, D., 2017).
c) Better decision-making: The project may aim for access improvement to pricing and
analytic tools for enabling to turn insight from reporting that is improved in actions that
are meaningful.
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Digital capabilities project of Admiral
This project can further address challenges in these ways:
a) Customers registering Admiral App have to be given offers and more and more people
can be got as references for registration.
b) Digital marketing techniques should be used for improving access to online portal log ins.
c) New features can be added to customer’s account which can include the ability for adding
car to policy through the portal and registering claim in digital mode as well.
Loan diversification
a) Admiral can give more loan access options in time of pandemic for managing loan
segment as has been the customer feedback received (Lamberton, C., Brigo, D. and Hoy,
D., 2017).
b) An online-self service portal can be started for ensuring the portal’s functions like
payment options and settlement quotes being designed around demand of customers and
user feedback.
Pioneering diversification
a) Group expertise and data can be used for providing guidance and sharing knowledge. The
business and products in identification can be expected for becoming growth propellers
for long period of time and ultimately long-term value source.
Employee being nurtured
a) Employees can be rewarded as they achieve targets and given support in ‘work from
home’ situation. This shall boost employees’ morale and they will do extra from their end
to get business for the organization, Scorecard matrix being used can be further aligned
for staff engagement for culture monitoring and also focus on further potential
development areas.
b) Employee Consultation Group can act as a link between employees, management and
the board of Admiral Group for free communication and addressal of grievances quickly
through a decentralized approach helping employees continue work efficiently.
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CONCLUSION
It can be summarised that the report laid focus on a car insurance company financials. It
discussed the financial performance of the company in past five years. The strategic position and
the factors which make the company unique were discussed. The current and future challenges of
the organisation were discussed. Recommendations were given on those challenges.
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REFERENCES
Books and Journals
Bader, L., Bürger, J.C., Matzutt, R. and Wehrle, K., 2018, December. Smart contract-based car
insurance policies. In
2018 IEEE Globecom workshops (GC wkshps) (pp. 1-7). IEEE.
Borocki, J., Radisic, M., Sroka, W., Greblikaitė, J. and Androniceanu, A., 2019. Methodology
for strategic posture determination of SMEs.
Inžinerinė ekonomika= Engineering
economics., 2019, vol. 30, no 3.
Charpentier, A., 2020. Big data, the tech giants, and insurance. In
Annales des Mines-Realites
industrielles (No. 1, pp. 53-57). FFE.
Erceg, Ž., Kovačević, B. and Krunić, S., 2021, July. The Importance of Innovation in Creating
the Strategic Position of the Company. In
International Scientific Conference Strategic
Management and Decision Support Systems in Strategic Management (pp. 287-293).
Gill, N.S., 2018.
Relationship between diversity on the Board of directors’ and firm financial
performance (Doctoral dissertation).
Hussain, R. and Zeadally, S., 2018. Autonomous cars: Research results, issues, and future
challenges.
IEEE Communications Surveys & Tutorials,
21(2), pp.1275-1313.
Lamberton, C., Brigo, D. and Hoy, D., 2017. Impact of Robotics, RPA and AI on the insurance
industry: challenges and opportunities.
Journal of Financial Perspectives,
4(1).
Lee, I. and Shin, Y.J., 2018. Fintech: Ecosystem, business models, investment decisions, and
challenges.
Business horizons,
61(1), pp.35-46.
Maichel-Guggemoos, L. and Wagner, J., 2018. Profitability and growth in motor insurance
business: Empirical evidence from Germany.
The Geneva Papers on Risk and Insurance-
Issues and Practice,
43(1), pp.126-157.
Parise, T.V. and Shenai, V., 2018. The value effect of financial reform on UK banks and
insurance companies.
International Journal of Financial Studies,
6(3), p.81.
Rodríguez Cardona, D., Janssen, A., Guhr, N., Breitner, M.H. and Milde, J., 2021, January. A
Matter of Trust? Examination of Chatbot Usage in Insurance Business. In
Proceedings of
the 54th Hawaii International Conference on System Sciences (p. 556).
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Woschkowiak, A., 2018. Board Diversity and Firm Financial Performance: Gender, Nationality
and Age Diversity in European Boardrooms.
Online:
https://admiralgroup.co.uk/sites/default/files_public/annual-report/2021/03/2020-full-year-
results-annual-report.pdf
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