Shares in motor and household insurer Admiral (ADM) sailed to a new all-time high of £26.81, up 6.2% after the firm posted a 30% increase in first half pre-tax profits and reinstated its deferred special dividend.

For the six months to 30 June, pre-tax earnings were £286.7 million against £220.2 million last year thanks to strong prior-year reserve releases, higher investment income and a reduction in motor insurance claims due to travel restrictions.

This allowed the firm to declare an interim dividend of 70.5p per share - an increase of 12%, made up of a normal dividend of 55p and a special dividend of 15.5p - and to pay the 2019 special dividend of 20.7p per share which it had previously deferred.

ANYTHING BUT DULL

Reflecting on trading in the first half, chief executive David Stevens said, ‘A year ago I described our results as “frankly a bit dull”. With the benefit of hindsight there’s a lot to be said for “dull” if the alternative is a global pandemic.’

Group turnover was £1.69 billion, down 4% on the previous year as the firm paused sales of travel insurance and lending products in March and lockdown resulted in fewer new drivers looking for car insurance.

Also, turnover was reduced by the ‘Stay at Home’ premium refund which the firm issued to its UK motor insurance customers, which net of insurance premium tax impacted the top line by £97 million. Net of the refund, turnover actually rose 2% on last year.

Moreover, the favourable publicity generated by the £25 per vehicle refund helped to increase UK customer numbers by 260,000 to 5.58 million and the number of vehicles insured by 90,000 to 4.42 million, so in terms of generating new business it was money well spent.

The UK insurance business generated profits of £313.8 million in the first half, an increase of £59.1 million or 30%, while the international business finally generated a profit, chipping in £6.5 million of earnings against a prior-year loss of £2.7 million with growing profits in the European division offsetting lower losses in the US.

The Comparison business - which includes price comparison website confused.com - generated first half profits of £13.1 million against £7.4 million last year thanks to strong growth in the UK.

Analyst Alan Devlin at Shore Capital observed, ‘Admiral has been one of the best performing insurance stocks in 2020, one of the few insurance stocks above their pre-COVID levels, and today’s results showed why.’

READ MORE ABOUT ADMIRAL HERE

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Issue Date: 12 Aug 2020