Admiral: no reserve releases in H2

Motor insurer Admiral has warned that it will not be able to release any reserves in the second half of the year if bodily injury claims trends persist.

The company said in its third quarter interim management statement that the frequency and expected loss of new large personal injury claims remains above its historical experience.

As a result, Admiral expects its loss ratios for 2010 and 2011 to be worse than initial projections, which it said would affect both overall reserve movements and recognised profit commission.

Admiral said that if there is no reversal of the higher-than-normal level of large claims in the fourth quarter, it expects full-year pre-tax profits to be below analysts’ range of estimates - or 10% higher than 2010 - and that there would be no further reserve releases in the second half.

Admiral made a profit before tax of £265.5m in 2010. Shore Capital had projected a profit increase of around 17% on 2010 profit levels, while fellow stockbroker Jefferies said Admiral’s new 10% profit growth forecast was 14% below its expectations.

Jefferies analyst James Shuck described the Admiral interim management statement as “worrying” in a note to clients this morning. “Importantly, the miss [of analysts’ forecasts] will be driven by new guidance that there will be no further reserve releases in H2 and this will be taken very poorly today.”

Admiral first reported the effects of rising bodily injury claims in the first half of the year. First half 2011 reserve releases on UK business plummeted to just £4m from £17.3m in the same period of 2010 because of higher-than-expected claims levels.

Admiral’s group turnover for the third quarter of 2011 increased 30% to £582m (Q3 2010: £446m). Group vehicle count increased 27% to 3.3m (Q3 2010: 2.6m).

Without providing precise figures, Admiral said that it had achieved “modest” increases in UK premium rates, and that its combined ratio remains “significantly lower than the market”.