Admiral staff receive £1.8k shares as profits hit £193m
Admiral has reported an increase in pre-tax profits of 2% to £193m for the first half of 2017.
The Cardiff-based insurance group also reported a rise in turnover of 15% to £1.45bn for the six months to June 30.
The results mean that more than 9,000 staff across the group’s UK and international operations will each get £1,800 in free shares under the group’s employee share scheme.
The profit rise was helped by an increase in charges for drivers as the company sought to reduce the impact of a change in the way personal injury claims are calculated.
Admiral employs more than 6,000 people in Wales, including 3,339 in Cardiff, 1,923 in Swansea and 934 in Newport.
Group chief executive officer David Stevens said: “The first half of 2017 saw Admiral ambitious in pursuit of both immediate and longer term growth opportunities.
“We’ve grown turnover and customer numbers in our existing businesses by over 13% while also delivering a first half of important firsts – the first loans originated on our new dedicated lending system, the first cars sold on Confused.com, the first vans directly underwritten in the UK and Spain.
“Most of the adverse impact from the increase in the costs of large injury claims, resulting from the change in the Ogden discount rate, was captured in our 2016 second half result.
“However, some extra costs carry into 2017. In these circumstances, we are happy to report a marginal increase in profitability and to deliver a more material increase in the underlying dividend.”
The car insurance industry has been affected by the decision in February by then Lord Chancellor Liz Truss to change the so-called Ogden discount rate on insurers’ compensation on personal injury claims from 2.5% to minus 0.75%.
The decision meant motor insurance firms such as Admiral, which is Wales’ only FTSE 100 firm, having to pay out more in claims. The company responded by raising average premiums to compensate.
In its statement of results yesterday, the firm said: “The UK car insurance business benefited from continued success in attracting and retaining customers in the competitive UK market and this, together with higher average premiums, contributed to an increase in turnover of 9% to £1.08bn.
“The number of vehicles insured also grew by 7% to 3.77 million with volumes improving in the second quarter.
“The UK market saw sustained rate increases during 2016 which have continued into the first six months of 2017, particularly in the second quarter following the change in Ogden discount rate.
“Admiral increased its rates in December 2016 in advance of the Ogden change and has continued to do so throughout the first half.”
The company said the estimated cost to it from the Ogden rate change was £150m, unchanged from six months earlier.
Most of the impact was recognised in reduced 2016 profits, but the remainder is being carried over into this year’s results and the next two to four financial years.
Shares in the insurance sector plunged earlier in the year after the changes to the discount rate calculation, which is expected to increase payments given to victims of lifechanging injuries through medical negligence, car crashes and other incidents. The Government is now consulting on the move.
Admiral, which also owns price comparison website Confused.com, saw its annual profits tumble by a quarter in March after accounting for the change.
Shares in Admiral plunged nearly 6% in morning trading yesterday to 2,051p as observers pointed to “sluggish” bottom-line growth.