Admiral navigates tricky waters in UK car market

Car insurance specialist Admiral said competition in the UK vehicle insurance market has gone crazy-bad in 2012, but it still managed a handy increase in profits from this source in the first half of the year,

Headline profit before tax for the whole group in the first half of 2012 rose 7% to £171.8m from £160.6m the year before. The UK Car Insurance business result was £183.3m, up 9% from £168.2m in the first half of 2011, driven by higher net premium revenue and an improved combined ratio; the combined ratio measures how wisely a company has taken on insurance risk, with a lower number being better.

The international car insurance business continues to lose money, with Admiral's share of losses widening to £8.9m from £3.2m the year before, reflecting investment in further growth in Italy and a significant increase in premium and vehicles in the US, but the group's price comparison web site business saw profits surge to £8.1m from £5.0m the year before. The group has been trying to get shot of its Confused.com price comparison business for some time, but even this achieved an increase in profits - £8.4m versus £8.2m the year before.

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Group turnover improved to £1,169.3m in the first half of 2012 from £1,104.4m in the first half of 2011, while net revenue grew to £488.4m from £425.1m. The number of vehicles insured shot up to 3.50m at the end of June from 3.15m a year earlier and 3.36m at the end of 2011.

The group's combined ratio deteriorated to 95.2% from 94.2% but for the UK car insurance business alone it improved to 88.9% from 90.4%.

Earnings per share climbed to 47.3p from 43.3p the year before, paving the way for a very generous 15% increase in the interim dividend from 39.1p last year to 45.1p this time round.

"Admiral has delivered a further increase in both turnover and profit in the first half of 2012, and a record dividend for our shareholders. In the UK, following the very significant growth in 2010 and 2011, we continue to slow our rate of growth to a more modest level, which we believe is a sensible response to the increased competition in the market," said Admiral's Chief Executive Officer, Henry Engelhardt.

Admiral was clearly quite pleased with its record interim dividend payment as Chairman Alastair Lyons chipped in: "We are delighted once again to be able to declare an increase in our interim dividend, now at 45.1 pence per ordinary share. This represents 95% of after-tax earnings for the first six months of 2012, testament to the strength of Admiral's capital-efficient, cash-generative business model."

Engelhardt added that the company is on track to meet its expectations for 2012.

JH