Admiral Group Plc (LSE:ADM) shares rose to a new all-time high despite the insurer reporting an 18% fall in first-half profit and cutting its interim dividend by 39% amidst conditions in the UK motor insurance market it said were becoming more challenging.
Group pre-tax profit from continuing operations fell to £429.2 million in the six months to 30 June, from £521 million a year earlier. Earnings per share dropped by the same percentage to 109p.
The decline follows the record annual profit reported by Admiral in March, when the insurer acknowledged that the UK motor market had remained softer for longer than expected.
Chief executive Milena Mondini de Focatiis said the group had increased motor insurance rates ahead of the wider market following a “softer period in the cycle”, as it priced for sustainable long-term growth.
Analysts have recently noted how the group has been drip-feeding small inflation-adjusted premium increases to gradually strengthen margins and earnings, as conditions in UK motor insurance were likened to the "boiling frog" description once used by Admiral co-founder Henry Engelhardt two decades ago.
The interim dividend was reduced to 70.5p per share from 115p but the board also announced a £45 million share buyback, taking total shareholder distributions for the period to £258.8 million, down 26%.
Turnover was broadly flat at £3.1 billion, while insurance revenue declined 1% to £2.4 billion.
Customer numbers continued to grow, with total insured risks rising 5% to jsut over 12 million. UK insurance risks increased 5% to 9.73 million, with European risks also up 5% at 2.01 million.
Admiral Money expanded more rapidly, with gross loan balances climbing 39% to £1.88 billion.
The group’s return on equity fell to 45% from 57%, while its post-distribution solvency ratio remained strong at 190%.
Shares rose 4.8% to 3,884p, up 23% since the start of the year.
Broker Peel Hunt said the decline in PBT to £429 million was in line with its estimate but below the consensus forecast of £435 million, with the solvency ratio in line and the dividend cut less than expected.
** UPDATE: Adds share price and broker comments **
