Admiral announces special dividend as revenues beat forecast

Car insurance giant Admiral has decided to pay a special dividend as it seeks to curb the number of high value bodily injury claims which have dented recent figures.

Admiral saw pre-tax profits rise 13% to £299m in 2011 with net revenue up 36% at £870.3m. Both those figures beat the consensus forecast of £291m and £849m, respectively.

Earnings per share came in at 81.9p, against a market expectation of of 81p.

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Admiral has also decided to pay a special dividend of 38.8p, raising the total dividend for the year to 75.6p, an 11% rise over 2010.

The problem for the company has been the number of high value (£100,000+) bodily injury claims through 2009 and 2010, which has seen the share price drop nearly 40% in the last 12 months.

In 2011 however, Admiral says: "a combination of benign weather, higher policy excesses, higher petrol prices and lower disposable income led to a fall in claims frequency of over 10% for the market as a whole...and helped slow the relentless rise in the cost of bodily injury claims in the UK market."

A key metric for Admiral, like most insurers, is its combined operating ratio, which divides total claims by total written premiums; in 2011 this worsened from 89.3% in 2010 to 95.7%. Any number below 100% indicates a profit but this was a significant movement the wrong way.

Nevertheless, Admiral's Chief Executive Henry Engelhardt was bullish, saying: "every year since we became a public company, Admiral Group has reported record turnover and record profits with a return on capital of 59%. If this is, as Dickens put it, the winter of despair, then I say: Please, Sir, may I have some more?"

Investors appeared to like what they saw, just after the open the stock was up 6%.

BS