Admiral Group PLC (LON:ADM) has been forced into a U-turn on its dividend, saying it was bowing to guidance from regulatory to insurers “urging restraint” on the payments of dividends because of the effects of the coronavirus pandemic.
The FTSE 100 home and motor insurer has pulled its special dividend of 20.7p per share that was planned for June, though will still pay a final dividend of 56.3p.
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Management plan to pay the special dividend later in the year “unless there is a significant deterioration in the company’s financial position, trading or outlook”, with August’s interim results the next likely point.
Admiral, which earlier this month refunded customers a total of around £110mln due to the impact of the virus lockdown on car travel, said its liquidity and solvency positions are well above its target level and regulatory thresholds.
“However, the board is mindful of the call for heightened prudence from its regulators and has concluded that suspending the payment of the special dividend is appropriate at this time.”
After issuing guidance to the main high street lenders not to pay dividends, the Bank of England's Prudential Regulatory Authority wrote to insurers last week conveying a similar message.
Admiral shares were up almost 1% at 2,328p on Monday morning.
Broker Peel Hunt noted that the company's final dividend yield will be brought down from 3.3% to 2.4%.
As well as the £110mln worth of premium rebates offered by Admiral, analysts noted that the company is also committing £80mln or £18 per vehicle to reduce prices and support customers, including NHS staff.
“This further confirms that the trends we are seeing in the US and Canada are being picked up by ADM, and it will be interesting to see which insurers might follow," the analysts said, pointing out that some like Sabre (LON:SBRE) have ruled it out, whilst Hastings (LON:HSTG) is keeping its options open.
“We believe ADM is not passing on the full benefit of declining claims inflation as less cars drive on the road and is keeping some buffers in case claims spike once the UK comes out of lockdown."
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