5th Mar 2014 08:47
LONDON (Alliance News) - Admiral Group PLC Wednesday reported a 7% increase in 2013 pretax profits despite a fall in net revenue as it faced significantly lower costs, mainly because of a reduction in the cost of net insurance claims.
The FTSE 100 motor insurer, that is also famous for owning price comparison website Confused.com, said it made a GBP370.2 million pretax profit, compared with GBP344.6 million in 2012. According to consensus estimates provided by the company, analysts had been forecasting a GBP363.9 million pretax profit.
Net revenue fell to GBP924.4 million from GBP984.3 million, as insurance premium fell marginally. Net insurance claims fell to GBP303.0 million from GBP404.5 million in 2012, meaning it was the driver as total expenses dropped to GBP554.2 million from GBP639.7 million.
The motor insurance market has become notoriously competitive in the UK, but with Admiral's combined ratio, a measure of underwriting profitability, falling to 89.1% from 96.9% in 2012, Chief Executive Henry Engelhardt said that even if pricing doesn't go up soon, competitors will be hurt "earlier and harder".
"Medium-term profitability will be greatly influenced by the eventual turn in the UK cycle and what we can do with it. We've made it clear that we don't think the current declining price environment is the optimal time to grow the business. It becomes an optimal time when competitors start putting their rates up," Engelhardt said.
"We too will put our rates up, just as we've taken our rates down in the current, declining price, part of the cycle. But in both instances, our move is/will be more gradual than the competition. Very simply, this means that we don't grow when rates are falling but we should grow when rates are rising," Engelhardt said.
"2013 was the year of the baked potato. It was a good, solid year, something on the plate that is appreciated but doesn't really grab the spotlight. This is a comfort food set of results," Engelhardt said in a statement.
"Why the baked potato? Because the year was solid, but not flashy. We made more money than ever before, we grew customer numbers a little bit, we launched one new overseas business (comparenow.com), but there was no growth surge, there were no claims shocks; we just went about our business," Engelhardt added.
Admiral said it will pay a 99.5 pence full-year dividend, up from 90.6 pence in 2012.
Admiral shares were Wednesday quoted at 1,474.62 pence, up 3.9%.
By Samuel Agini; [email protected]; @samuelagini
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