Motor insurer Admiral (ADM) slides 4.5% to £13.84 as falling car premiums continue to cap profits growth. The £4 billion company today unveiled interim pre-tax profits just 2% higher at £184.9 million despite customer numbers swelling 9% to 3.9 million. Turnover slumps 5% to some £1.04 billion.
Admiral’s problems stem from its UK vehicle business where it wrote 8.8% less premiums than in the first half of 2013, and collected 7.7% less in premium revenues at £197.9 million. Growth has been generated from its international business, which recorded a slight rise in premium values at £27.8 million.
UK premiums have been under pressure since 2012 due to the Competition and Markets Authority (CMA) regulator implementing rules aimed at boosting competition among insurers and cutting the cost of vehicle policies. Limiting the cost of replacement vehicles and ensuring comparable charges for products on comparison websites are among the new dictats.
There could be worse to come when the CMA reports its findings next month of a two year review of vehicle insurance charges. This could erode Admiral’s figures further if, as expected, the regulator outlaws insurers from receiving referral fees from claims management companies. The practice added £7.9 million to Admiral’s revenues in the first six months of the year.
The remainder of the year looks just as bleak with expectations unchanged. Admiral warned last month that pricing pressure will hit its margins in the coming years.
However, there is some light at the end of the tunnel. Chief executive Henry Engelhardt says he is seeing signs that premium rates at bottoming out, although he has little idea when they might start rising again.