The Simple Truth: Why Admiral is the Antidote to AI Hype
Get an extensive, boardroom-level overview of Britain’s most disciplined insurer in record time.
I recently published an 18-page deep dive on Admiral ($ADM). What follows is a snack-sized 3-minute version of it.
1. The Napkin Pitch
Admiral is a boring, cash-printing machine that sells car insurance to British drivers and gives almost all the profit back to you as dividends, making it a potential antidote to today’s expensive tech hype.
The “Back of the Napkin” Thesis:
The Business is Mandatory: People will always crash their cars, and the law says they must have insurance. It is a forever market.
They Print Money: Admiral runs a “Combined Ratio” of 77.7%. In plain English, for every £1.00 of premium they collect, they keep roughly 22 pence as pure underwriting profit. That is elite.
They Are Cheap: While tech stocks trade at 50x or 70x earnings, Admiral trades at roughly 11.4x earnings.
They Pay You: They have a strict policy of returning cash to shareholders rather than hoarding it. The interim dividend alone was 115 pence per share.
2. Business Model
Let’s strip away the corporate speak. Admiral runs a very simple shop with three aisles, but only one of them really matters right now.
What They Sell
They sell financial protection. Mostly, they insure cars in the UK.
The Big Engine (UK Motor): This is the “nuclear reactor” powering the company. It generated £559 million in profit for the first half of 2025.
The Side Hustles: They also sell Home Insurance (profit: £25m) and have a lending business called Admiral Money (profit: £16m).
Note: Don’t get distracted. 95% of the UK Insurance profit still comes from cars. The rest is just noise or future bets.
The Customer
Their customers are regular drivers—11.4 million of them across the group. These customers pay monthly or annual premiums into a pot. Admiral holds that money, invests it safely to earn a little interest, and pays it out when someone has an accident.
The “Magic Trick”
Most insurance companies struggle to break even on the insurance itself (the premiums) and only make money on their investments. Admiral is different. They actually make a profit on the insurance before they even touch the investment income.
That is rare.
3. The Moat (Why They Win)
Why can’t a competitor just steal their customers? In insurance, the lowest price usually wins. To offer the lowest price and make a profit, you have to be smarter and cheaper than everyone else.
1. The “Steph Curry” of Underwriting
The most critical number in insurance is the Combined Ratio.
If the number is 100%, you are breaking even.
If it is over 100%, you are losing money on every policy sold.
Admiral’s Group combined ratio is 77.7%.
Translation: They are exceptionally good at pricing risk. They know exactly who is going to crash and price them accordingly.
2. The Cost Discipline
They are cheap to run. Their “Expense Ratio” (how much they spend on staff, rent, and computers vs. premiums) dropped to 20.3%. As they get bigger, their costs get relatively smaller, allowing them to undercut competitors on price while still making a margin.
3. The Balance Sheet Fortress
They hold a Solvency Ratio of 194%16. Think of this as their “rainy day fund.” Regulators require a certain amount; Admiral holds nearly double that. This allows them to weather storms that sink smaller insurers.
4. The Price Tag (Valuation)
Is the stock on sale? We are treating this like buying a used car—looking under the hood for value.
Current Price: ~£30.30 per share.
Earnings Per Share (EPS): 132.5p (Half-Year) annualized to roughly 265p.
What You Get For Your Money
1. The P/E Ratio (Years to Break Even)
The Number: ~11.4x
Translation: If Admiral’s earnings stay exactly the same (no growth), it will take about 11.4 years for the company to earn back the money you paid for the stock.
Context: In a market where tech companies are trading at 50x or 70x, this is priced for skepticism, not perfection.
2. The Dividend (The “Rent Check”)
The Number: 115.0p (Interim)
Translation: This is the cash payment they sent to shareholders for the first half of the year alone. They have a policy of paying out 65% of their post-tax profits. If you own the stock, you get paid to wait.
3. The Solvency Ratio (The Safety Net)
The Number: 194%
Translation: This measures how much extra cash they have versus what regulators say they need to pay claims. 100% is the minimum requirement; 194% is a fortress balance sheet.
The Verdict: You are paying a “skeptical” price for a high-performance machine. The market is pricing this stock at ~11x earnings because they believe the good times won’t last. If the business simply stays “boring and steady” rather than crashing, you likely win.
5. The Money (Financial Health)
Profitability
They are undeniably making money. Group profit before tax was £521 million for the first half of the year. This covers their dividend payments with room to spare.
The Balance Sheet (Solvency)
They have £5.4 billion in cash and investments sitting on the books to cover £5.2 billion in insurance liabilities.
The “Containment Vessel”: The structure is sound. The assets are safe and liquid enough to pay the bills when they come due.
The Watch Item: Keep an eye on the Solvency Ratio. If it drops significantly below 194% while they keep paying huge dividends, that is a warning sign that the “safety net” is thinning.
6. Skin in the Game (Management)
The Philosophy: “Boring is Good”
The management team behaves like the legendary investor Shelby Cullom Davis. They don’t chase “hot” trends or try to grow too fast.
They focus on the “boring stuff”: answering phones, processing claims quickly, and saving £5 on a bumper repair.
Evidence of Discipline: Even though the market is “softening” (prices dropping), they are not chasing bad business just to show growth. They are letting the decline slow down naturally.
The Alignment (Dividends)
Management’s strategy is explicitly shareholder-friendly. They don’t hoard cash to build an empire; they give it back. The 115p interim dividend is proof that they work for the owners of the stock.
That said; to me, I would rather see that money reinvested than distributed as dividends for both tax reasons and growth reasons.
7. The Bear Case (Risks)
Even good companies can be bad investments if things go wrong. Here is how you lose money on Admiral.
The Kill Switch: Pricing Collapse
Insurance is cyclical. Right now, prices for car insurance are falling (down 10-14% year-over-year). If prices fall faster than inflation (the cost to fix cars), Admiral’s profit margins will get crushed. If the Combined Ratio goes back above 100%, the profit machine stops.
The “Worry List”
The “Total Loss” Cleanup: Admiral had to spend about £50 million to clean up a messy operational issue regarding total loss claims. If this number grows, or if they find more “skeletons in the closet,” it suggests management isn’t as disciplined as we thought.
The Lending Trap: They have loaned out £1.28 billion through “Admiral Money.” If the UK economy tanks and people lose jobs, those loans could go bad. Lending money is much riskier than insuring cars.
Dividend Rigidity: The market loves the high dividend. The risk is that if profits drop, management might feel pressured to keep paying a high dividend just to keep the stock price up, essentially “eating their own seed corn” and weakening the balance sheet.
8. Summary
I like this stock because it is the opposite of a casino. It is a disciplined, boring business that generates massive amounts of cash and hands it directly to shareholders. At ~11x earnings, you aren’t paying for a dream; you are paying for a proven machine. It is a “Get Rich Slowly” play.
There is a “hidden spice” in the numbers called the Ogden benefit. This is a complex accounting adjustment related to injury claims discount rates. In H1 2025, it boosted profits by about £15-20 million.
This isn’t “fake” money, but it’s a one-off bonus, not a permanent income stream. You need to understand this to know what the real recurring profit looks like.
This was just the appetizer. For the full deep dive into how Admiral’s “Ogden benefit” impacts their long-term earnings power, read the full report here.
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Disclaimer:
I Am Not Your Financial Advisor: I am a researcher sharing my homework, not a wealth manager giving you a plan. This is for education, not a recommendation to buy or sell.
The Golden Rule: It is your money. Do your own due diligence, read the actual filings, and never invest money you cannot afford to lose.