Admiral profits rising despite reversing premiums
Chief executive Henry Engelhardt said: “In the UK there are some signs that premiums are no longer falling, but we have yet to see firm evidence of an inflection point and a return to premium growth.”
The group, which also trades as Bell, Diamond and Elephant, said its UK premium income fell by 9 per cent in the first six months of 2014 to £776 million, but that this was offset by a 4 per cent rise in customer numbers to 3.15 million, as well as lower costs.
Over the past two years, the British car insurance industry has seen rates plunge as regulators have clamped down on fake whiplash claims as well as inflated hire car and garage repair bills that had pushed up premiums in the preceding years.
According to data by breakdown group the AA released, average car premiums fell 19.3 per cent in the year ending 30 June – the largest 12-month decrease since the group started compiling these figures 20 years ago. However, the AA added there was evidence insurers were starting to increase premiums again.
Engelhardt said the UK car insurance market remained “very competitive”, with about 40 players fighting for a share of the customer base. He said margin expectations for UK business earned in 2014 were lower than in recent years due to the decline in premium levels over the last three years. But he added: “Outside the UK, our international insurance operations continue to grow and make progress. Our European price comparison businesses had a profitable first half of the year and we’re encouraged by the very early indicators from comparenow.com in the US.
“We therefore plan to increase marketing investment behind comparenow.com during the second half of 2014.”
The company also owns comparison website Confused.com, which saw profits fall 11 per cent to £9.1m after revenues remained flat at £44.4m.
Across the group, profits were 2 per cent higher at £184.9m. UK car insurance profits were £207.7m, an increase of 8 per cent. The interim dividend was raised 1 per cent to 49.4p.
The performance means 7,000 staff at the Cardiff-based group will divide up £1.5m of shares through an employee share scheme. Eamonn Flanagan, an insurance analyst at Shore Capital, kept his “sell” rating on the company due to regulatory uncertainty and household budget constraints.
Garry White, at Charles Stanley, said: “Admiral is propping up its numbers by releasing reserves from previous years – this is something it cannot continue to do. A better pricing environment is needed sooner rather than later, but some investors are getting impatient awaiting a recovery. However, the potential for its overseas operations is a bright spot.”