Engelhardt hails Admiral’s ‘return to form' in UK as profit rises 17%

Motor insurer Admiral made a profit of £258.4m in 2012, its 20th year of operation.

This was up 17% on the £221.1m it made in 2011.

Profit before tax was up 15% to £344.6 (2011: £299.1).

The group reported a 0.9 percentage point deterioration in combined operating ratio (COR) to 96.6% (2011: 95.7%). This was mainly caused by a 13-point jump in the COR of Admiral’s international business to 177% (2011: 164%).

UK motor

Admiral’s core UK motor business enjoyed a 19% increase in pre-tax profit to £372.8m (2011: £313.6m).

The UK motor combined ratio improved by 1.6 points to 89.7% (2011: 91.3%), helped by £17.6m of reserve releases (2011: £10.3m).

The company was hit by a spike in large bodily injury claims in the second half of 2011 which did not recur in 2012, allowing the company to release more reserves.

Admiral chief executive Henry Engelhardt said: “In 2012, the return to form of the UK business was heart-warming to all of us.

“We enjoyed substantial reductions in the actuarial view of best estimate for the [prior underwriting] years, which has in turn allowed us to release some reserves and increase the reserve stock for the future.

“The upshot of all this is a 15% increase in profits at Group level. Nice.”

Engelhardt described 2012 as “the year of the kangaroo”. He said: “It bounced around a little bit but it turns out to be pretty big, strong and energetic, with the babies protected in the mother’s pouch.”

He added: “We’re off to a good start. Let’s get on with the next 20 years.”

Growth slowdown

Admiral noted that the growth of its UK motor business had slowed. Total premium written, which includes the business assumed by Admiral, was almost flat at £1.75bn (2011: £1.73bn).

The company said: “The UK car insurance market became substantially more price competitive in 2012 than it had been during 2010 and 2011, over which period Admiral grew its business significantly.

“While the number of customers continued to grow, the rate of growth was slowed significantly as Admiral opted to preserve margin rather than chase growth.”

But Admiral said it cut its rates by 6% during the year across new and renewal business.

Ancillary income drop

Admiral’s UK motor net ancillary income fell 6% to £170.9m (2011: £181.5m), meaning it made up 46% of Admiral’s UK motor profit (2011: 58%).

The company noted that personal injury referral fees will be banned from 1 April this year. It made £18.6m from referral fees in 2012.

In addition, Admiral earned £13.6m from credit hire referral fees in 2012, which it said could be banned following the Competition Commission’s review of the motor market.