Shares in FTSE 100 car and van insurer Admiral (ADM) jumped as much as 6% to a new all-time high of £33.16 after the firm increased its forecasts for half-year earnings and dividends thanks to a lower level of claims.
Due to an ‘unusually positive development’ in the cost of UK motor personal injury claims in prior underwriting years, which has led to higher reserve releases and commissions, pre-tax profits for the half-year to June are expected to be between £450 million and £500 million.
This compares with full-year forecasts of £750 million in profits, so analysts are scrambling to upgrade their forecasts this morning.
FEWER CLAIMS
The firm also said motor claims frequency had been lower than expected in the six months to June, resulting in a favourable current-year loss ratio, in spite of lower premium rates.
On the basis of its preliminary results forecast and its strong current solvency position, the insurer has raised its interim dividend guidance to between 110p and 125p per share compared with 70.5p last year, which was made up of a normal dividend of 55p and a special payment of 15.5p.
The firm was keen to stress that the release of prior-year provisions and the hike in the interim dividend was a one-off event and investors shouldn’t expect a repeat performance in the second half.
DISPOSAL GAINS
That said, in addition to the raised interim dividend Admiral expects to pay out £400 million in special dividends over the course of this year and next year from the sale of Penguin Portals, starting with a payment at the same time as the interim dividend.
Penguin Portals, which comprised online comparison sites Confused.com in the UK, Rastreator.com in Spain and LeLynx.fr in France, together with Admiral Technologies, was sold at the end of 2020 to the RVU comparison business which is part of ZPG, jointly owned by US-based investor Red Ventures, private equity firm Silver Lake, Singapore sovereign wealth fund and PSP Investments.
The deal completed at the end of April with Admiral receiving £460 million, of which it kept £60 million aside to reinvest in its business.
