Rising claim costs are elephant in the room for Admiral

A RISING tide of no-win no-fee personal injury claims yesterday overshadowed a record half-year for sales and profits at car insurer Admiral.

The group, which owns Diamond, elephant.co.uk and Confused.com, increased turnover 53 per cent to £1.1 billion in the six months to 30 June after the number of vehicles on its books jumped by a third to 3.15 million and its premiums rose by about 11 per cent.

However, shares tumbled as investors focused on a sharp rise in claim costs while the company signalled some relief for motorists amid signs the recent surge in premiums may ease.

Premiums have soared after a rise in fraudulent cash-for-crash claims, rising by some 30 per cent on average across the market in 2010, but Admiral said recent surveys had indicated a slowdown in the second quarter as the cycle starts to turn.

The increased claims payouts held profits to £160.6 million, a rise of 27 per cent. A record interim dividend of 39.1p was declared, up 20 per cent.

As a proportion of premiums, claims jumped from 67.8 per cent to 77.5 per cent, while the combined ratio, which includes expenses, rose from 89.3 per cent to 94.2 per cent. The lower the figure the higher the profit.

Chief executive Henry Engelhardt said the company was “not immune” to the rising level of no-win no-fee injury claims and their related costs. “As one of the lowest cost providers in a commoditised market we are well placed for a future, which is shaping up to be the survival of the fittest,” he added.

Kevin Ryan, an analyst an Investec, said the UK insurance underwriting result was worse than forecast and Admiral’s ability to significantly outperform the market was diminishing.