Higher premiums boost Admiral’s profit bonanza as surge in new clients boosts business

Admiral shares soared yesterday as the insurance group benefited from rising motor premiums.

The company said profit rose 32 percent in the first half of the year as a surge in new customers boosted business.

The Cardiff-based firm (Wales’ only FTSE 100 group) has increased insurance premiums in 2022 and 2023 in response to high levels of inflation.

But earlier this year, the insurer cut its coverage costs, leading to a 12 percent increase in customer numbers to nearly 11 million in the first six months of 2024.

The time lag between price reduction and revenue recognition means that Admiral’s average premiums have continued to rise and boosted earnings and dividends for shareholders.

Admiral shares rose 6.5 per cent, or 183 pence, to 2,993 pence yesterday after posting profits of £310m for the six months to the end of June and a 43 per cent rise in sales to £3.2bn.

The group now has a record 5.5 million vehicles covered in the UK and almost half a million more customers across its other products.

Admiral CEO Milena Mondini de Focatiis said: ‘Given our pre-inflation pricing response in previous years, we have been able to be more competitive in the first half and this helped grow our customer base by 12 per cent to 10.5 million.

“We continue to develop our core technical competencies by leveraging new data and technologies.”

Admiral raised its interim dividend from 51p to 71p a share just days after rival insurer Aviva said it would increase its payout to shareholders.

Chris Beauchamp, chief market analyst at online trading platform IG, said: ‘Another day, another dividend rise from a FTSE insurer.

‘It seems that good times have returned for insurers and also for their investors.

‘While another rate cut is not yet expected in the UK, a gradual decline in interest rate revenues will keep the sector on investors’ radar.’

Derren Nathan, head of equity research at Hargreaves Lansdown, said: ‘Given the time lag between pricing actions and revenue recognition, group average premiums have continued to rise.

‘It’s a delicate line to tread, but Admiral is judging the market astutely, writing 60 per cent more in insurance premiums than the same period last year.

‘A declining combined rate among core motor customers means Admiral is paying out a smaller amount in claims and insurance expenses relative to premiums, helping to boost profitability.

‘That and a comfortable financial position have allowed for a generous increase in the dividend.’

Danni Hewson, director of financial research at AJ Bell, added: “The prudent way in which Admiral manages its insurance operations is also reflected in a lower combined ratio – in other words, it is paying out proportionately less in claims than it attracts in premiums.”