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Admiral warns of rising car insurance cost
Motorists could have to get used to higher car insurance premiums, the owner of Elephant.co.uk and Diamond said yesterday.
Admiral, which has more than 1.5 million UK customers, said there was a "real prospect" of premiums rising faster than claims for the first time in seven years due to a stronger pricing environment across the wider market.
In the first half of 2008, its premiums were 3 per cent higher than a year ago – although this is around half the 5-6 per cent increases seen more widely.
Premiums have been virtually flat in the past five to six years as insurers have used more of their reserves to help keep a lid on prices.
But the industry has seen sharp rises since April although these were not passed on by Admiral, helping it to boost the number of UK cars insured by more than 11 per cent to 1.48 million.
In the first half of the year, Admiral said pre-tax profits rose 16 per cent to a record 100.3m – ahead of the 95.5m expected – pushing shares up 6 percent.
Cardiff-based Admiral is better placed than most firms to cope with a potential recession due to the reliance on cars.
The board does not expect growth and profitability "to be significantly impacted" by the tougher economic climate.
David Stevens, the group's chief operating officer, said: "A car for most people is a necessity, not a luxury, so demand is not going to fall off a cliff as it will in other sectors."
Mr Stevens added that factors such as dearer petrol prices – leading to lower car usage – were also a boon for the firm as they led to fewer claims.
But Admiral struck a cautionary note over its price comparison website, Confused.com, which is facing heavy competition from rivals.
Although the website gave a record number of motor quotes and grew revenues, operating profits fell from 19.7m to 15.6m as the group upped marketing spend to defend its position.
But the overall strength of the results meant that more than 2,300 staff with the group over the period will gain more than 3m in free shares – around 1,500 each.
Citigroup analyst Andrew Crean said: "The shares have trod water for 18 months waiting for a cycle turn to provide greater earnings impetus – this is now at hand."
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Wednesday 23 May 2012
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