Car insurer Admiral slashes dividend after profits plunge

Insurer Admiral has revealed annual profits slumped by 39 per cent after it was hit by soaring inflation and the rising cost of motor claims in one of its most “challenging years” for decades.
By Greg Wright
Published 8th Mar 2023, 10:54 BST

The group reported pre-tax profits of £469m for 2022, down from £769m in 2021. Admiral slashed its full-year dividend payout by 40 per cent to 112p a share on the profits tumble, sending shares lower in morning trading on Wednesday.

It comes as insurers across the sector have been impacted by surging motor repair, parts and labour prices, which have sent claims costs rocketing.

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The industry has also been under pressure amid regulatory scrutiny on renewal rates and car damage valuations.

Insurer Admiral has revealed annual profits slumped by 39% after it was hit by soaring inflation and the rising cost of motor claims in one of its most “challenging years” for decades.Insurer Admiral has revealed annual profits slumped by 39% after it was hit by soaring inflation and the rising cost of motor claims in one of its most “challenging years” for decades.
Insurer Admiral has revealed annual profits slumped by 39% after it was hit by soaring inflation and the rising cost of motor claims in one of its most “challenging years” for decades.

Cristina Nestares, Admiral’s chief executive of UK Insurance, said: “2022 has certainly been one of the most significant and challenging years the insurance industry has navigated in recent decades.”

“In motor insurance, elevated used car prices continued to drive inflation, which together with higher repair costs, longer repair timescales and higher projections of future wage inflation, contributed to significantly higher claims inflation across the countries in which Admiral operates,” the group added.

Admiral has responded to steep cost rises in motor claims by hiking its car insurance premiums by more than 20 per cent since March last year, which impacted demand from new customers.

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Weather damage has also led to hefty payouts for home insurers, with Admiral revealing a £31.6m hit from last year’s storms and freezing weather.

Direct Line saw its shares plunge in January when it scrapped its shareholder dividend and revealed that a weather impact pushed up its cost of claims to around £90m.

Penny James stepped down as chief executive of Direct Line just weeks later. Aviva also revealed a claims bill of around £50m from December’s freezing weather.

Milena Mondini de Focatiis, group chief executive of Admiral, said: “We implemented price increases ahead of others in response to higher inflation.

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“We are aware that this has also been a challenging year for our customers and our people, and looking after them is our core purpose.”

Matt Britzman, equity analyst at Hargreaves Lansdown, said: “Markets have punished Admiral shares after a 5 per cent miss on profit before tax, and shares were down around 7 per cent in early trading.

"Higher claims and an increase in the cost of servicing those claims weighed on performance, though to some degree that was already priced in. What spooked markets was the performance of the international business, which management described as having ‘very low’ average premiums, specifically from Italy and Spain. The result for underwriting is an unprofitable position, with total costs exceeding premiums - though Admiral’s unlikely to be the only insurer navigating choppy waters.”