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Brexit unease hits shares of car insurer Admiral as it gains 217,000 customers

Published 17/08/2016

Henry Engelhardt recently retired as chief executive of insurance firm Admiral (Admiral/PA)
Henry Engelhardt recently retired as chief executive of insurance firm Admiral (Admiral/PA)

Car insurer Admiral saw shares come under pressure as it revealed a Brexit hit and posted weaker-than-expected half-year profits.

The Cardiff-based group, which also owns price comparison website Confused.com, said market turbulence after the Brexit vote knocked its balance sheet strength and warned over a further possible impact of the decision to quit the EU.

Shares dropped as much as 8% despite assurances over its capital strength and as it revealed an extra £33 million for shareholders from a special dividend payout.

Admiral notched up record half-year results as it added another 217,000 UK motor customers and hiked the cost of cover further, with bottom line pre-tax profits up 4% to £189.5 million for the six months to June 30.

But the profits haul fell slightly short of City expectations.

The group said market volatility wiped around 20% off its so-called solvency ratio, which dropped sharply to 180% from 206% a year earlier.

It warned over the impact of potential further market turbulence, economic woes and fears over passporting rules in the EU from the Brexit vote, but added that it does not expect a "material adverse impact on day-to-day operations".

The group cautioned Brexit could see UK financial services firms lose the right to trade in Europe without a locally-regulated business if UK passporting arrangements are scrapped.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: "With insurance operations across Europe, the group could be hit hard if a loss of passporting rights materialises.

"Clearly this depends on what exit terms are negotiated with the trade bloc, although with a substantial operation in the USA, the group has already proven that it can develop businesses outside the streamlined rules of the single market."

Admiral - which also owns the Elephant, Diamond and Bell brands - said its UK car insurance profits rose 2% to £222.8 million in the half-year after boosting customer numbers by 11% to 3.52 million.

It revealed further increases in prices, with average written premiums up by around 3% in the first half.

Motor cover has been rising across the market as insurers look to cover the cost of personal injury claims and offset the recent rise in insurance premium tax.

Premiums in the UK rose by 14% year-on-year in the three months to the end of September, according to figures also out on Wednesday from price comparison site MoneySuperMarket.

Admiral's recently-appointed chief executive David Stevens, who took over from co-founder Henry Engelhardt in May, said: "In the core UK car insurance business, we've benefited from an increasingly rational motor market with evidence of a move towards a less violent cycle.

"Prices have been rising, and we've used this opportunity to grow our motor book strongly."

Its price comparison business remained in the red as ongoing investment in its fledgling US site compare.com offset a robust performance from Confused.com in the UK.

Confused.com hiked half-year profits to £8.3 million, up from £4.8 million a year ago, helping it narrow the division's interim losses to £1.1 million from £4 million a year earlier.

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