By Charlie Conchie
Insurance group Admiral ramped up its prices by 20 per cent in the first half of the year to stave off the worst impact of rampant inflation on its profits margins.
In its half year results today, the London-listed motor insurance specialist posted a four per cent bump in profits in the six months to the end of June after rapidly hiking its prices in the period to boost revenues.
In its core motor insurance business, Admiral saw revenues rise 20 per cent to £1.5bn from £1.3bn while turnover across the group rose 21 per cent to £2.24bn.
Milena Mondini de Focatiis, group chief of Admiral, said today inflation was continuing to impact the business but it had “navigated the cycle well”.
“We recognise that these are challenging times for many people and we are committed to being there for them when they need us the most, delivering good service and competitively priced products while also actively managing our costs,” she said.
“Our UK Motor business delivered a profit of £298m in the first half of 2023. As we increased prices well ahead of the market last year, our active vehicle base reduced over the period, but we are on a strong footing to leverage improving market conditions.”
The firm said it had increased prices by some 20 per cent across new business and renewals in the six month period to reflect continued above expectation claims inflation. Price would remain lofty will “if the current level of claims inflation persists”, Admiral warned.
The price hikes reflect the rocketing claims inflation hitting the insurance industry as the price of settling claims surges.
The Bank of England recently warned insurers must rigorously assess the impact on their solvency of the rising cost of settling car, property and other claims and ensure they have sufficient reserves.
Matt Britzman, equity analyst at Hargreaves Lansdown, said this morning it was a “tough time to be a UK motor insurer as claims cost inflation continues to run hot”.
“To its credit though, Admiral is managing the challenging backdrop well with some pretty serious price hikes now starting to feed through to improved performance,” he added. “The bad news for consumers is that car insurance is now another inflated cost to try and manage as part of the ever-increasing pressures on income.”
The price rises have fed through to Admiral’s customer numbers, with the firm notching a seven per cent dip in customer numbers over the latest quarter.
Britzman added that it was a “loss worth taking” as the firms focuses on profitable insurance contracts rather than quantity.
Admiral cut its interim dividend by some 15 per cent on last year to 51 pence, compared with 60 pence last year.
The market reacted warmly to the numbers today, with shares rising six per cent in early trading.
