Shares in insurance firm Admiral tanked by 25% this morning after it warned 2011 profits would be at the lower end of expectations due to a jump in personal injury claims.
In its third quarter statement the firm said it expected to report record profits for the full year, around 10% higher than the previous year.
But the firm said that the frequency and expected cost of new large personal injury claims had remained above historical levels of experience.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Admiral said it expected this trend would hit projected ultimate loss ratios for 2010 and 2011, which would in turn affect both overall reserve movements and recognised profit commission.
"If there is no reversal [in the fourth quarter] of this higher than normal level of large claims, we anticipate that full year pre-tax profits will be towards the lower end of the range of analysts' estimates, or some 10% ahead of 2010, with no further reserve releases in the second half," chief executive, Henry Engelhardt, said.
Trying to highlight the positives, Engelhardt said Admiral now insured over three million vehicles.
"Across 2011 as a whole we are likely to have grown our UK vehicle count by more than 20%," he said.
"Our international insurance business also continues to achieve strong growth and further improvement in operating results."
Admiral's third quarter figures showed group turnover increased by 30% to £582m, while International car insurance turnover was up 45% to £27m.
The total number of vehicles it insured increased 27% to 3.3 million, with the company's international car insurance vehicle count up 53% to 267,000.
-
Thousands of Neil Woodford investors sue Hargreaves LansdownMore than 5,000 people who invested in Woodford's collapsed equity income product are taking Hargreaves Lansdown to court
-
Is now a good time to invest in gold?In the current market conditions, is gold a good investment? We explore the reasons why now might be a good time to put some money into gold.
