But insurer continues to warn that lower rates will squeeze future profit margins

Admiral’s core UK motor business made a profit before tax of £207.7m in the first half of 2014, up 8% on the £192m it made in last year’s first half.

This was despite an 8% drop in turnover to £849.8m (H1 2013: £924.5m), mainly caused by falling personal motor rates in the UK.

The result was boosted by a two-percentage-point improvement in Admiral’s UK motor combined operating ratio (COR) to 80.2% (H1 2013: 82.2%), which in turn increased profit commissions by 15% to £125.4m (H1 2013: £109.1m).

The COR benefited from £73.1m of reserve releases, up 40% on the £52.2m reserve releases in the first half of 2013.

Squeezed profits

Despite the improved results, the company continued to warn that future profit margins and underwriting profitability would be squeezed by depressed UK motor rates.

Admiral group chief executive Henry Engelhardt said: “UK claims development on the back years (2012 and prior) has been positive and we continue to forecast good levels of reserve releases. Our expectations for our UK business in 2014 therefore remain unchanged.

“However, as we’ve said previously, our margin expectations for business earned this year are lower than in recent years, which is unsurprising considering the decline in premium levels over the last three years.”

He added: “In the UK there are some signs that premiums are no longer falling but we have yet to see firm evidence of an inflection point and a return to premium growth.”

Admiral said that its UK motor loss ratio excluding reserve releases worsened by 3.8 points to 85.3% (H1 2013: 81.5%) which it said was “in line with Admiral’s expectations that business earned in 2014 is less profitable than in recent years, primarily due to the decline in premiums.

It added: “Much of the impact of the higher loss ratios will be reflected in earnings of subsequent years.”

Admiral said its projected COR for the 2013 accident year is 86%.

International loss

Admiral as group reported profit before tax of £183.3m in the first half of 2014, up 1% on the £181.4m it reported in the first half of 2013.

The company’s international motor business made a loss of £15.5m, £4.7m worse than the £10.8m loss it made in the first half of 2013.

The group’s price comparison business made an operating profit of £4m, less than half of the £9.9m it made in the first half of 2013,. This was caused by a drop in revenue and increased expenses.

Engelhardt said: “Outside the UK, our international insurance operations continue to grow and make progress.

“Our European price comparison businesses had a profitable first half of the year and we’re encouraged by the very early indicators from comparenow.com in the US. We therefore plan to increase marketing investment behind comparenow.com during the second half of 2014.”