Insurer cuts UK motor COR by 8.6 points despite falling rates

Henry Engelhardt

Motor insurer Admiral made a profit after tax of £137m in the first half of 2013, up 7% on the £128.2m it made in the same period last year.

Profit before tax improved by 6% to £181.4m (H1 2012: £171.8m) and the group combined operating ratio (COR) improved by 7 percentage points to 89% (H1 2012: 96%).

Admiral said the improvement was mainly caused by “positive claims experience” in its core UK car insurance business.

Admiral chief executive Henry Engelhardt (pictured) said: “Any time you can increase profits by 6% when competitors are cutting prices you’ve got to be happy.

“We were able to increase profits largely due to excellent claims experience. In addition, had a great first half, increasing its profits by over 20%.

 “All in all it has been a busy, exciting and profitable first half of 2013 and we are poised to meet our expectations for the full year.”

Reserve releases boost UK motor

Profit before tax in the UK motor business increased by 5% to £192.7m (H1 2012: £183.3m).

The total UK motor COR, which includes Admiral’s additional products, improved by 8.6 percentage points to 81.1% (H1 2012: 89.7%).

The improvement was driven by a sharp jump in reserve releases to £29.7m (H1 2012: £9m), which Admiral attributed to “positive claims experience during 2012 and the first half of 2013, which resulted in improvements in the projected ultimate loss ratios, especially for the 2010 to 2012 underwriting years.”

The improving COR helped Admiral boost its profits from underwriting and profit commission by 38% to £109.1m (H1 2012: £78.9m).

Shrinking book

Despite the improvements, Admiral’s UK motor book continued to shrink. Turnover was down 10% to £924.5m, while net insurance premiums retained by Admiral dropped 5% to £214.6m (H1 2012: £226.8m).

However, Engelhardt said the shrinking UK motor book was “great news because of the competitive environment”.

The company’s other UK revenue, derived from selling add-ons to its core motor policies, fell 16% to £87.3m (H1 2012: £104.4m).

The drop in other revenue was partly caused by Admiral shifting revenues from its motor legal expenses insurance into its underwriting income, and partly from changes to the underwriting arrangements for additional products, which affected the timing of revenue coming in.

Admiral H1 2013 UK motor results in £m (compared with H1 2012)

  • Turnover: 924.5 (1,030)
  • Net premium income: 214.6 (226.8)
  • Underwriting profit: 68.7 (31.1)
  • Profit commission: 40.4 (47.8)
  • Profit before tax: 192.7 (183.3)
  • Reserve releases: 29.7 (9)
  • COR: 81.1 (89.7)