The insurance group Admiral has raised its half-year profit forecasts after Covid lockdowns forced more customers to stay home and off the road, resulting in fewer car accident claims.
The British insurance company said the “unusually positive development” meant pretax profits would probably total £450m-500m for the first six months of the financial year.
That is nearly double the £286m it reported for the same period in 2020, and is significantly higher than analysts had previously forecast. Deutsche Bank had been expecting profits of about £270m.
“The stronger result is due to unusually positive development in the cost of UK motor bodily injury claims,” Admiral said in a trading update on Monday, adding that motor claims were “lower than expected due to extended lockdown restrictions”.
The higher guidance comes despite Admiral having slashed premium rates for customers over the past 12 maande. It also handed £110m back to policyholders inin May 2020, resulting in a £25 refund for each car and van it covered, totalling 4.4m vehicles.
The update sent Admiral shares to the top of the FTSE 100, having jumped as much as 4% in early trading on Monday to more than £32.50.
Egter, analysts at RBC said that the positive impact of lockdown measures was unlikely to continue into the second half of the year. “We expect the loss ratio in Motor to gradually normalise as the traffic levels return back to normal assuming no further lockdowns,” RBC said.
But investors are still likely to cheer news that Admiral is planning to hand £400m to shareholders after the sale of its comparison website business, which included Confused.com, to the owner of its rival Uswitch.
The bulk of the proceeds – about £400m of the £460m earned from the sale, after costs – will be distributed to shareholders through a series of special dividends throughout 2021 en 2022, starting with an interim dividend of between 110p to 125p a share, linked to its half year results, due in August. The group said it would give more detail on the payouts next month.
Deutsche Bank had been expecting just £360m to be handed back to shareholders. “We don’t think the market was fully expecting this quantum of returns,” the bank’s analysts said.