CAR insurer Admiral should reveal on Thursday whether its attempt to resist being dragged into an industry-wide price war has paid off when it reports half-year results.
The owner of the Bell and Elephant brands posted a 6 per cent fall in revenues during the opening three months of the year, saying it was not chasing market share as rivals cut the cost of their premiums by as much as 10 per cent.
Admiral said that first-quarter UK car insurance turnover was down 9 per cent to £470 million, with its overseas expansion reducing the overall decline to 6 per cent at £551m.
But, while revenues are suffering, its profit margins are being given a boost.
Redburn analyst David Bracewell is expecting to see an increase in margins over the half-year, despite a predicted 7 per cent drop in half-year UK turnover.
Bracewell added: “Admiral has been targeting margin over volume for 12-18 months and part of this strategy is to increase retention rates and write less new business.”
Many of its rivals have been hit by sliding car insurance premiums, which comes after three years of soaring costs for drivers.
UK consumers have faced some of the biggest premium increases ever recorded, with sharp hikes in personal injury claims, fraud, uninsured drivers and regulatory changes among the factors.
But this trend is now reversing following various legislative moves, including a crackdown on fraudulent whiplash injury claims.
Yet Admiral appears to be looking at offering cash-back on some policies.
Mark Williamson, an insurance analyst at Peel Hunt, noted: “An e-mail dropped into my inbox from Confused – an incumbent price-comparison website (PCW) owned by Admiral – offering cash-back on life policies and, on further investigation, it appears that up to £30 cash-back is being offered on car insurance.
“These offers are currently for a limited period but it looks to me as if Confused is starting to take the cash-back threat seriously and are trialling the model.
“If it does adopt the cash-back model, it is likely that the entire PCW industry would have to follow.”
Williamson warned that such a move by Admiral’s Confused website could put operating margins at PCW Moneysupermarket under “significant pressure”.