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Admiral Group PLC on Wednesday reported a first-half profit fall, hurt by accelerating claims inflation in its motor insurance arm.
The FTSE 100 listing's offering includes, home, car, pet and travel insurance. Its shares were up 3.3% at 2,029.00 pence each in London on Wednesday morning.
Revenue in the six months to June 30 rose 5.7% year-on-year to £1.85 billion from £1.75 billion. Total UK premiums written, which comprises its motor, home and travel insurance units, was 2.8% higher year-on-year at £1.27 billion from £1.23 billion.
Group pretax profit fell 48% year-on-year to £251.3 million from £482.2 million. Compared to pre-Covid times, however, pretax profit was up 19%. Pretax profit was in line with consensus, broker Peel Hunt noted.
‘Admiral has delivered a solid set of results and good customer growth in the first half of the year. We are happy with this progress against the backdrop of a more turbulent cycle than usual, and high levels of inflation. Although, as expected, profit has decreased against last year, the unique conditions of the pandemic years make 2019 a better comparison - with profit and customer numbers increasing by 19% and 35% respectively since then,’ Chief Executive Milena Mondini de Focatiis said.
‘We have remained disciplined, adapting our rates in response to the higher inflation environment earlier than the market and maintaining a cautious approach to reserving, as we always do. We continue to focus on good execution through the cycle. Our strong balance sheet and focus on profitability over growth puts us on a strong footing for when conditions improve.’
Admiral declared a 60.0p per share ordinary interim dividend, down 48% from 115.0p a year prior. Including special dividends, stemming from the sale of its Penguin Portals comparison site, the total interim dividend was down 35% at 105.0p. The special dividend linked with the disposal amounted to 45p in the first half of 2022, down a touch from 46p a year earlier.
Admiral in December 2020 came to an agreement to offload its Penguin Portals and Preminen price comparison sites for a total value of £508 million to the owner of Zoopla.
The firm reported a first half combined ratio of 96.7%, worsening from 75.2% a year earlier. The higher figure shows Admiral is making less profit from its underwriting operations.
Elevated claims inflation was an ‘important issue’ during the half.
‘The main drivers of claims inflation are higher used car prices, higher repair costs, longer repair timescales and higher expected levels of wage inflation impacting the projected costs of bodily
injury claims,’ Admiral said.
‘Admiral continues to manage these challenges with a disciplined, long term approach to pricing and business volume and continues to take a very conservative approach to reserving for insurance claims.’
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