Admiral Group plc (LON:ADM) reported group revenue of £3.7bn, up 5%. That was helped by an 11% increase in customer numbers to 9.28m. Within that, net premiums rose 6.5% to £911m.
Profit before tax fell 39% to £469m, a bigger drop than analysts were expecting, mainly due to increased claims and the cost of servicing those claims. In response to higher costs, prices were increased “significantly” in the UK and the US. The group’s combined ratio, a measure of insurance profitability, rose to 101.7% (2021: 85.2%) – anything over 100% suggests underwriting was loss-making over the period.
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Free cash flow rose from £175m to £367m. The solvency ratio, a measure of balance sheet strength, decreased from 195% to 180%. Surplus capital sits at £540m over the regulatory requirement.
The Board has proposed a final dividend of 52.0p, which includes an ordinary dividend of 37.5p and a special dividend of 14.5p. That equates to a full year dividend of 112p, down 40%.
The shares fell 7.2% in early trading.
Admiral's Earnings
Matt Britzman, equity analyst at Hargreaves Lansdown
“Markets have punished Admiral shares after a 5% miss on profit before tax, and shares were down around 7% 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.”
