Admiral takes £33m hit from personal injury compensation reforms
But around 10,000 staff landed shares windfalls worth up to £1,800 each after half-year profits rose 4% to £218m.
Car insurer Admiral has revealed a £33 million hit due to reforms to personal injury compensation and warned that the total impact could be as much as £60 million.
The blow was revealed in half-year results and follows a recent decision to alter the so-called Ogden discount rate used to calculate compensation paid out for personal injury claims.
Admiral said the total impact could be between £50 million and £60 million.
Despite the charge, it reported a 4% rise in profits to £218 million over the six months to June 30, with customer numbers rising 8% to 6.7 million.
Around 10,000 Admiral staff have landed shares windfalls worth up to £1,800 each as a result of the half-year profits.
The Cardiff-based group announced the bonus as part of its employee share scheme, which comes after workers were handed £3,600 in March after bumper 2018 results.
The group’s performance was helped by a turnaround in its UK home insurance business, which swung to a £4.2 million profit against losses of £1.9 million a year earlier thanks to better weather conditions than a year earlier.
Shares in Admiral lifted 4% after the interim figures.
Turnover up mid-single digits, profit up low-single digits. Hardly ‘hold the front page’ David Stevens, Admiral CEO
But chief executive David Stevens branded the results a “bit dull”.
He said: “Turnover up mid-single digits, profit up low-single digits. Hardly ‘hold the front page’.
“However, for dedicated aficionados who look behind the headlines, there’s some reward for reading on – profit growth, even if modest, is more exciting considering the £33 million Ogden headwind.”
The company’s motor insurance division saw the number of vehicles insured remain flat at 4.3 million, which Mr Stevens said “reflects a consciously reduced competitiveness, as we price rationally in the face of any rising claims costs across the market as a whole”.
Motor insurance profits lifted 1% to £251.7 million as premiums rose in line with the wider market, which helped offset the Ogden rate hit.
Lord Chancellor David Gauke announced changes to the scale used to determine the size of payouts for those involved in accidents – amending the rate to minus 0.25% from minus 0.75% – but insurers had been hoping for between zero and 1%.
The insurance sector had been lobbying for a bigger review of the rate, which was slashed from 2.5% to minus 0.75% in 2016, leading to an outcry in the industry, and a consultation was launched in response.