The insurer expects to post bigger profits in its 2019 figures, but issues warning on claims inflation
Admiral is set to be the latest insurer hit by rising claims costs after Hastings’ reported dire results last month.
In a trading statement, it said that ”current year profitability continues to be impacted by higher levels of claims inflation during 2019 and as a result, Admiral expects its 2019 loss ratio to be higher than recent years.
Its UK motor insurance business grew marginally in customer numbers during 2019, it added.
Despite the warning on claims inflation, the group expects profit before tax to be in the £510m-540m range, 6-18% higher than the previous year’s results, it said today.
This is down to ”higher reserve releases due to a fall in the cost of UK motor bodily injury claims from a number of prior underwriting years”, it added.
”This has led to elevated reserve releases and profit commission revenue”, Admiral said.
”Clarity over the new Personal Injury Discount Rate (the ‘Ogden’ rate) in July 2019 led to an increase in the number of large claims settling in 2019 compared to recent years which contributed to the level of releases.
”There has been no change to Admiral’s prudent approach to reserving, it added.”
Yet Insurance Times’s analysis of the latest set of Solvency and Financial Condition Reports from nine of the leading motor insurers in the UK revealed in November that Admiral is top of the pack when it comes to motor underwriting, reporting a market-leading COR of 67.3% for 2018.
Of the nine insurers analysed, Admiral was one of seven to report an improved COR compared with 2017, knocking off 5.8 percentage points.
It was also one of just three insurers to report profitable growth during 2018 after also growing its motor net earned premium (NEP) by 6.8% to £594.3m.
Admiral’s improved underwriting performance was driven by a 6.1 percentage point improvement in its group motor loss ratio, buoyed by the pre-emptive reserve releases ahead of the Ogden discount rate change, which more than offset a 0.3 percentage point increase in its expense ratio.
Nevertheless, investors appeared to be focused on the long term risks of claims costs, with the share price taking a moderate hit in early trading, down between 1-2%.
Admiral will release its full year results on 5 March.
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Current year profitability continues to be impacted by higher levels of claims inflation during 2019 and as a result, Admiral expects its 2019 loss ratio to be higher than recent years. The Group’s UK motor insurance business grew marginally in customer numbers during 2019.
On the basis of these preliminary results and strong solvency position, the proposed final dividend for 2019 is expected to be in the range of 73 to 78 pence per share.
To recognise the contribution of Admiral’s employees to the strong results, all Group staff will receive a special cash bonus of £500 (approximately £6 million in total) in the first half of 2020.
Figures shown in this release are preliminary and subject to completion of internal governance processes and external audit. Admiral will publish its final 2019 results on Thursday 5th March 2020.