19th Aug 2015 07:14
LONDON (Alliance News) - Admiral Group PLC on Wednesday beat analyst forecasts to declare an 'up' first half, as the FTSE 100 company lifted its interim dividend by more than expected after a strong profit in its UK car insurance business drove its overall earnings performance.
Admiral said it made a GBP181.7 million pretax profit in the six months to the end of June, slightly down on the GBP183.3 million reported in the corresponding period the prior year. Excluding minority interests, pretax profit was up 1% to GBP186.1 million. Customer numbers increased by 6% to just shy of 4.2 million.
The insurer increased its interim dividend per share to 51.0 pence from 49.4p, while earnings per shares increased by 4% to 54.8 pence. Thirteen analysts polled by the company had expected a dividend of 45.6p and earnings per share of 47.0p.
Chief Executive Henry Engelhardt, who is spending his last 12 months in the role after giving notice in May, said it was a good first half. He is to be replaced by Chief Operating Officer David Stevens.
"A good start to a challenging year. Profits are up, customer numbers are up, earnings per share is up, the dividend is up...you might say it was a pretty 'up' first half!" Engelhardt said in a statement.
Net insurance premium revenue, which takes into account premiums ceded to reinsurers, was cut to GBP228.9 million in the half, down from GBP231.7 million in the corresponding period the prior year.
Other revenue, largely from insurance products sold alongside car insurance, fell to GBP165.0 million from GBP170.4 million, while profit commission was up to GBP44.2 million from GBP35.8 million, which combined with higher income from investments and interest helped to drive up overall net revenue.
Lower net insurance claims, which fell to GBP101.4 million from GBP124.5 million, helped the overall result.
Car insurance has been a tough market to navigate in the UK, with intense competition and years of premium declines putting pressure on the industry. Admiral said there were indications of "small" price increases in the UK Car insurance market in the first half, and said it has maintained its focus on protecting its margins.
The UK car insurance business is the biggest driver of Admiral's profit, and that was no different in the first half, up 6% to GBP219.2 million, mainly a result of higher releases of reserves held to pay for insurance claims made in previous years.
"The UK business turned in a very solid result helped by positive claims cost development, with modest growth accompanying price increases," Engelhardt said.
Losses at the group's international car insurance business narrowed to GBP11.2 million in the half from GBP15.5 million in the corresponding period the prior year.
Admiral's efforts to diversify from car insurance in the UK have led to increased investment in its price comparison businesses, which swung to a GBP4.0 million loss in the half from a GBP5.9 million profit in the prior year period.
The group said that investment in compare.com in the US offset profits in its European price comparison operations - Rastreator in Spain, LeLynx in France - and lower earnings at compare.com in the UK due to tough competition.
Admiral shares were up 2.5% at 1,503.00 pence early on Wednesday morning, the best performers in the blue-chip index. The stock is up about 14% to date in 2015.
By Samuel Agini; [email protected]; @samuelagini
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