Insurer Admiral hurt by rising claims costs as profits halve

Insurance company Admiral has said its half-year profits halved amid soaring claims costs, but shares lifted as the business exceeded pre-Covid earnings.

The London-listed firm, which provides home, car, pet and travel insurance, saw its pre-tax profits plunge by 48% to £251.3 million in the first half of the year, down from £482.2 million a year earlier.

The insurer retained more cash in 2021 as the national lockdown forced people to stay in their homes, causing a sharp decline in car accidents and claims.

But claims costs have risen this year due to restrictions lifting, higher used car prices, steeper repair costs and slower repairs, and wage growth impacting the expected costs of injury claims, Admiral said.

The company said it increased its new business and renewal prices significantly and more than the market average, up by around 16% from March to the end of July, to keep up with the increased cost of claims.

But claims inflation grew at a lower rate of about 11% compared to 2021, it reported.

It comes as rival insurer Direct Line warned this month that insurance premiums would be pushed up to match the rising cost of claims, as it also reported half-year profits halving.

However, Admiral’s pre-tax profits exceeded pre-Covid levels, increasing by 19% compared to the first half of 2019, and customer numbers rising by 35%.

The unusual conditions of the pandemic years make 2019 a better comparison, bosses said.

Milena Mondini de Focatiis, Admiral’s group chief executive, said: “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.”

The group announced an interim dividend of 60p per share and a special dividend of 45p per share in its half-year results on Wednesday.

Shares in the company rose more than 6.6% following the trading update.

Victoria Scholar, head of investment at Interactive Investor, said: “When measured versus pre-pandemic 2019 earnings, Admiral reported robust profit and customer growth figures, despite the headwinds from inflation.

“Admiral is far from sheltered from the macro backdrop with inflation, labour shortages and supply chain issues set to continue to be key challenges in the second half of the year.”