Shares in insurer Admiral (ADM) top the FTSE 100 on Wednesday, rising 5% to £21.17 after it releases an upbeat first half earnings report and announces it will pay out 100% of earnings in dividends this year.

Concerns over rising claims and claims inflation across the industry saw the shares trading close to their lows for the year at the start of the week.

While the results aren’t exactly a ‘page-turner’, as chief executive David Stevens puts it, they show a modest improvement in profit for the six months to 30 June on the back of a more competitive UK car insurance market.

The firm also coped with the change in the Ogden rate at a cost of £33m in the first half and an estimated total cost for the year of £50m to £60m.


Group operating profit was up 3.8% to £224.4m in the half thanks mainly to a 22% jump in ‘profit commission’, or profits generated by agreements with other insurers who underwrite the majority of the risk on shared business leaving Admiral to retain ‘a significant portion of the profit generated’.

However the company cautions that going forward the impact of the Ogden rate will be to reduce the amount of profit commission it books through these deals.

The core UK insurance business generated £254.7m of profit while the comparison site generated £7.4m of profit, more than double the amount of the first half 2018.

Offsetting this was the international business where losses deepened, the loans business which also continues to book losses, and the costs of provisions for the change in Ogden rate which raises the cost of claims for personal injury.

In a departure from its normal policy of paying out 65% of retained earnings as dividends, Admiral’s interim dividend of 63p for 2019 – which includes a 21.2p special dividend – represents a 100% pay-out ratio.

The company puts the increased pay-out down to the group’s ‘strong capital position’. After the payment its solvency ratio will be 190% thanks to the implementation of IFRS 16 which covers the treatment of operating leases.

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Issue Date: 14 Aug 2019