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Insurance group Admiral has taken advantage of stronger underwriting conditions in its key UK motor division to boost customer numbers and deliver better than expected interim profits.
The FTSE 100 group, which also offers home and pet policies and other financial products, increased its overall customer base to 10.5mn at the end of June, up 12 per cent from a year earlier, after reducing the cost of premiums.
Overall, Admiral’s pre-tax profits in the first half rose by a third on the same period last year, to £310mn, narrowly beating consensus analyst estimates of £304mn and sending shares up 7 per cent in early trading on Thursday.
After cutting motor premiums at the start of the year to attract new customers, it now covers 5.5mn vehicles in the UK, a record for the group, boosting first-half turnover in its motor insurance division by almost 60 per cent to £2.4bn.
Chief executive Milena Mondini de Focatiis told the Financial Times that Admiral begun cutting its prices quite early in the year, by a mid-single digit percentage. “We’ve started earlier [than peers], as we often do.”
Industry-wide price decreases had continued in the third quarter, she added, but it was too “early to say” whether that would continue or even speed up.
Motor insurance prices have risen sharply in recent years in response to surging inflation in the cost of insurers’ payouts, as used cars, labour and other costs rose. But there is a sign that is now reversing in a highly competitive market where a large part of the population shops around on price comparison websites.
At the end of last year, UK motorists were being quoted a record sum of almost £1,000 for their average insurance policy, but quotes have since begun to fall.
The new government had promised in its manifesto to tackle the “soaring cost of car insurance” after prices reached an all-time high.
“In general, we welcome the attention to the sector,” Mondini de Focatiis said, adding it was happy to support initiatives that reduced pressures on customers.
The Cardiff-based insurer, which also operates in countries including Italy and France, announced an interim dividend of 71p, against the 67.3p that analysts had forecast.
“Whilst remaining higher than its long-term average, the elevated [claims] inflation observed over the course of 2022 and 2023 appeared to be reducing in the first half of the year,” the group said.
Its motor combined ratio — a key measure of underwriting profitability that measures claims and expenses as a proportion of premiums — improved from 82.3 per cent in the prior comparable period to 73.8 per cent in this year’s first half.
Analysts at Citigroup said the company’s performance was better than the small beat to profits suggested, owing to a drag from Admiral’s reinsurance arrangements that reflected experience in previous years.
Jefferies said the group’s guidance that claimed inflation was slowing was also a “positive read-across for peers”.
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