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UPDATE 2-Admiral extends co-insurance deals
January 18, 2010 / 7:40 AM / 8 years ago

UPDATE 2-Admiral extends co-insurance deals

* Munich Re, Hannover Re each take one third of U.S. risks

* Extends Munich Re reinsurance deal in Italy to 15 years

LONDON, Jan 18 (Reuters) - British motor insurer Admiral (ADML.L) said it had negotiated a deal to share the risks it takes on at its new U.S. operation, and had extended similar agreements already in place at its European businesses.

Cardiff-based Admiral, which insures about 6 percent of the cars on Britain’s roads, said reinsurers Munich Re (MUVGn.DE) and Hannover Re (HNRGn.DE) had each agreed to take on one third of the risks it underwrites in the U.S.

The company also said it had extended its existing reinsurance deal in Britain with Munich Re by two years to 2016 and had prolonged its contracts with the company in Spain and Italy.

Munich Re, which holds over 10 percent of Admiral’s shares, will take a 40 percent share of the company’s British insurance book for each of the additional two years, compared with 45 percent in 2010.

Admiral’s co-insurance deals allow it to occupy a bigger share of the market than it could on its own, and reduce its overall capital requirement, enabling it to write business more profitably.

“The impact of extending the scope of Admiral’s reinsurance agreements is positive for the group,” Oriel Securities analysts wrote in a note.

“Using significant amounts of reinsurance has allowed Admiral to generate industry-leading returns on equity.”

Admiral generates over 95 percent of its sales in Britain, but has set up small-scale operations in Spain, Germany, Italy and the U.S. over the last four years.

The company’s U.S. business, launched in October 2009, is based in Richmond, Virginia, and trades under the Elephant brand.

Admiral shares were flat at 1,150 pence by 1007 GMT, valuing the company at about 3 billion pounds ($4.89 billion). ($1=.6132 pounds) (Reporting by Myles Neligan; Editing by Mike Nesbit)

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