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Admiral raises forecasts and dividends despite lower insurance rates
Given the downward trend in insurance premiums this year, car and van insurer Admiral (ADM) surprised the market on 12 July when it raised its half-year earnings and dividend guidance, sending its shares to an all-time high.
Research group Consumer Intelligence says there has been a downward trend in insurance premiums across the board over the past 12 months with car premiums falling by 8.4% on average.
It put the decrease in rates down to increased competition due to fewer drivers on the road, especially younger drivers, which translates into a lower level of claims, as well as the increased use of telematics in quoting for cover and the Financial Conduct Authority banning firms from gradually increasing prices for loyal customers who renew each year.
Admiral admitted it had seen significant reductions in premium rates over the past year, added to which it refunded £110 million to customers in May 2020.
However, due to what it called an ‘unusually positive development’ in the cost of UK motor personal injury claims in a number of prior underwriting years, it was able to release higher than expected reserves this year leading to a sharp jump in earnings.
The firm also raised its interim dividend on the strength of its results and its ‘very strong solvency position’, on top of which it is paying a special dividend from the sale of its comparison businesses including Confused.com.