Admiral reports record H1 profit as it avoids rival's claim pain

Admiral has bucked the trend of motor insurance groups by reporting that it has seen no "unusual trends in bodily injury or damage claims" as it unveiled a record half year profit.

A number of insurers including Equity Red Star and Royal Bank of Scotland Insurance have bolstered their reserves over the summer after highlighting the issue of surges in the value of these claims.

In a statement the group said: "A number of insurers have reported an unexpected surge in bodily injury claims costs as a key reason for the worsening results. Admiral's claims experience over the past 18 months has not included any unusual trends in bodily injury or damage claims.

"Claims frequency overall has continued a long-term downward trend, though bodily injury frequency being relatively flat has led to these claims constituting a larger proportion of the total than historically.

"Admiral's reported loss ratio for the first half of 2010 is 65.9% (H1 ‘09: 64.2%), improved by positive prior year development of around 14.8% or £17.3m (H1 ‘09: 19.4%, £18.4m). The loss ratio with the effect of prior year movements excluded, improved to 80.6% in H1 2010 compared to 83.6% in H1 2009."

Admiral's explained its policy is initially to reserve conservatively, above independent actuarial projections of the ultimate outcomes. It added this results in a significant margin being held in reserves to allow for unforeseen adverse development in open claims and creates a position whereby Admiral makes "above industry average reserve releases".

Overall Admiral has reported profit before tax at £126.9m for the first six months of 2010, up 21% on the same period last year. Turnover rose 33% to £720.5m.

It added that group customers were also up 23% to 2.37m (H1 2009: 1.92m), UK ancillary income per vehicle increased 5% to £74.50 (H1 2009: £70.80) and non-UK car insurance turnover was up 51% to £37.1m and customers up 53% to 154 100.
In other news Admiral noted Balumba, its Spanish car insurance operation, made a profit for the first time (of €25 000).

Henry Engelhardt, group chief executive, said: "2010 is shaping up to be a year of great opportunity and I'm extremely proud of how everyone at Admiral has stepped up to the challenge. Their hard work has resulted in a decent set of numbers: turnover was up by a third, profits have grown by over 20% and we will soon be paying a record dividend.

"The UK car insurance business continues to be the driving force behind our success and in the first half of 2010 we shifted up yet another gear. We increased premium rates by around 14% in the first half and increased customer numbers by 23% year-on-year. The combined effect was an increase in total premiums written of 37%. These results demonstrate the strength of our UK model, which combines competitive prices with great service.

"Of course there are challenges; our operations outside the UK and the Confused price comparison business are not as strong. Yes, Balumba, our insurance operation in Spain, made its first half-yearly profit (€25,000), but it still has work to do as an underwriter to build a sustainable, profitable, growing business. In sum we now insure more than 150 000 vehicles outside the UK covering four countries.

"In the first part of next year we plan to launch an insurance operation in France as the final part of our five-year strategic plan. We also have three fledgling price comparison businesses outside the UK, two of which launched this year."

Alastair Lyons, group chairman, added: "With a further advance in first half profits we are delighted once again to be able to declare an increase in our interim dividend, up 18% to 32.6 pence per ordinary share. This represents 97% of after-tax earnings for the first six months of 2010, testament to the strength of Admiral's business model of strong growth, profitability and a high return on capital."

CONFUSED LOSES TOP SPOT IN AGGREGATOR MARKET. FOR MORE CLICK HERE