Market keel-hauls Admiral despite record results

24th Aug 2011 07:18

The share price of car insurer Admiral was showing a few dents on Wednesday morning despite unveiling record interim results.The share price fell 74p to 1,461p at the outset of trading, despite a 27% increase in half-year pre-tax profit to £160.6m from last year's £126.9m.Turnover jumped 53% to £1.1bn from £720.5m the year before, prompting a jubilant chief executive officer Henry Engelhardt to comment that "it wasn't so long ago that we were pleased to report over £1bn turnover for a full year."The board was so pleased with the first half performance it decided to give every member of staff £1,500 in shares, worth over £8m in aggregate.The market was in less generous mood, focusing on the group's loss ratio - the percentage of premiums received that is paid out in claims - which surged to 77.5% from 67.8% in the first half of last year and 69.4% for the whole of 2010.The combined ratio, which measures how well the underwriting operations are doing (a lower number is better), rose to 94.2% from 89.3% in 2010. "The increase is a result of lower levels of prior year reserve releases (continuing the pattern emerging in the second half of last year), in part offset by a lower expense ratio and a lower loss ratio on business earned in the period," the company said.Despite the increase in the combined ratio, profit before tax climbed to £160.6m from £126.9m at the interim stage last year, while earnings per share improved to 43.3p from 33.7p last year. Net revenue advanced to £425.1m from £296.4m the year before, while the number of customers topped three million, at 3.15m - up from 2.37m at the halfway stage of 2010.The company's price comparison web site, Confused.com, saw its market share hold steady, while its turnover increased by 10%. The company has previously tried to offload this division, even before the market came to be dominated by talking meerkats and trilling cod-opera singers, and the group said the sector remains "fiercely competitive", as indicated by the decline in the unit's pre-tax profit to £8.2m from £8.8m last year."In the UK the momentum of vehicle growth and price rises from 2010 and Q1 [first quarter] 2011 carried us through the first half of 2011, although injury claims and their related costs continue to rise in the UK market, something to which we are not immune. As one of the lowest cost providers in a commoditised market we are well placed for a future which is shaping up to be the survival of the fittest," Engelhardt said.The interim dividend has been hiked by one-fifth to 39.1p from 32.6p last year. --jh