Admiral Group Plc (LSE:ADM) has slashed its full-year dividend by 40% as it unveiled a sharp fall in profit hit by a weak showing in its motor division.
“This year has, once again, been challenging for the sector due to the macro-economic environment,” the company commented in its results statement. “The Ukrainian-Russian war impacted energy costs, high inflation led to higher claims costs and, in the UK, the market adjusted to the FCA’s pricing reforms.”
But despite the challenging backdrop the Cardiff-based insurer said the UK motor insurance marketplace is now close to the bottom of the current cycle.
Pre-tax profit in the 12 months to December 31, 2022, totalled £469.0mln, down 39% from £769.0mln in 2021, reflecting a heavy fall in UK insurance profit which tumbled 278% to £616mln.
The reduction from 2021 is “very predominantly motor insurance related” and “mainly due to the combination of the unwind of the positive covid related impacts and the higher inflation in 2022,” Admiral said.
Those effects led to higher current-year claims and lower profit commission, the firm added.
The FTSE 100-listed insurer said: “If there are no big shocks in claims development moving forward, we expect significant reserve releases to feature as an important part of profit.”
For 2022. Admiral's earnings per share fell by 41% to 124.3p from 212.2p and a final dividend of 52p left the total payout to shareholders at 112.0p, down 40% from last year’s 187p. A special dividend from the sale of Penguin Portals comparison businesses of 45p was paid in 2022 against 92p in 2021.
Admiral said with the impact of the pandemic fading, spiking inflation across its markets was the big story in 2022.
“This had a number of impacts around the group, but most important was probably the notable increase in average claims costs, especially to damage claims,” it noted.
Admiral's outgoing group chair Annette Court commented: “Despite the challenging backdrop, our customer numbers are up 11% to 9.28mln and our solvency remains strong at 180%. The UK Motor insurance marketplace is cyclical and we believe we are now close to the bottom of this cycle.”