The insurer is ‘happy’ with its progress during the first half of the year, against the ‘backdrop of a more turbulent cycle than usual’, says chief executive
Admiral Group has posted a combined operating ratio (COR) of 96.7% for the six months to 30 June 2022, according to its half-year financial results published today (10 August 2022).
This represented a 22 percentage point increase compared to the same period in 2021, when the group’s COR sat at 75.2%.
Admiral also made £321.8m of profit from its UK insurance business in H1 2022, down 41% from the £543.5 it made in the equivalent period in 2021.
Group profit before tax sat at £251.3m at the end of June 2022, with international insurance (-£21.6m) and other combined expenses (-£49.1m) representing costs for Admiral Group.
Despite a deterioration in COR and profit, Admiral increased its customer count to 9.11 million in H1 2022, up 35% from a figure of 8.02 million last year.
The group’s UK insurance business also saw year-on-year growth in both turnover (3%) and customer numbers (12%) between H1 2021 and H1 2022, despite “significant rate increases in UK motor in response to UK claims inflation”.
Milena Mondini de Focatiis, Admiral’s chief executive, said: “Admiral has delivered a solid set of results and good customer growth in the first half of the year.
“We are happy with this progress against the backdrop of a more turbulent cycle than usual and high levels of inflation.”
Mondini de Focatiis added that while profit had decreased from last year, the “unique conditions” of the pandemic years made 2019 a “better comparison”.
Since 2019, Admiral’s customer numbers have increased by 35%, while UK insurance profits have risen by 26% - from £255m.
Describing Admiral’s response to inflationary pressures, Mondini de Focatiis said: “We have remained disciplined, adapting our rates in response to the higher inflation environment earlier than the market and maintaining a cautious approach to reserving, as we always do.
“We continue to focus on good execution through the cycle. Our strong balance sheet and focus on profitability over growth puts us on a strong footing for when conditions improve.”
Admiral’s H1 2022 results follow a prediction by Bloomberg Intelligence earlier this month (August 2022) that the insurer would face profit margin reductions in the face of increased claims costs.
Motor focus
Admiral Group’s motor line accounted for £317.3m of the group’s total UK insurance profits (£321.8m) for the first half of 2022, representing the vast majority.
Last year, motor insurance profits for H1 hit £530.4m, while in 2019 they were just £252m.
Mondini de Focatiis was keen to emphasise that the motor insurance market was cyclical – with rate increases used to account for higher levels of inflation.
She explained: “As we’ve done in the past, we’ve been quite close to the trend and have tried to spot and react faster than the rest of the market.
“We increased our rate to account for the inflationary environment – we believe that will put us in a strong position for when conditions improve.”
Admiral Group chief financial officer Geraint Jones said that claims inflation had impacted on its motor line, despite speedy rate reactions.
“The outlook for claims inflation is a tricky one to predict,” he said. “We’ve gone with an estimate of plus 11% in the first half and don’t see inflation coming off generally, or for car insurance, so we can expect more of the same in the second half.”
Jones added that Admiral has a “track record of managing the car insurance cycle very well”.
He explained: “Car insurance is a very cyclical industry with periods of reduced profitability and sometimes industry losses – that’s a feature we’ve seen over several decades.
“Our group strategy is about managing that business as well as we can, but also growing other businesses to be more diversified in the future.”
Household and travel insurance are examples of areas Admiral is growing, Jones noted. In H1 2022, household insurance accounted for £6.9m of the total UK insurance profits, while travel accounted for £2.4m.
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