- Annual dividend cut by 40%
- Pre-tax profit down 39%
- Company suffers higher costs and claims
Home and motor insurance business Admiral (ADM) produced a disappointing set of results with news of a cut to its dividend hitting sentiment.
At least unlike rival Direct Line (DLG) the company is not cancelling its payout altogether and the sell-off was relatively modest with the shares falling 4.1% to £20.03.
The Cardiff-based business announced a pre-tax profit of £469 million for 2022, down 39% year-on-year. Net revenue fell from £1.55 billion to £1.49 billion.
The company observed an increase in average claims cost in double digits and said the frequency of accidents had increased coming out of the pandemic. The home insurance arm was hit by bad weather.
Net insurance premium revenue was up from £855 million in 2021 to £911 million in 2022. Net interest income was up 60% to £44.6 million. The company’s solvency ratio, post dividend, was at 180% and down from 195%.
A 40% CUT TO THE DIVIDEND
Admiral proposed a final dividend of 52p per share, down 28% from 72p the year prior, during which it also had paid a special dividend of 46p from the sale of the Penguin Portals comparison business. This brought the total 2022 dividend to 112p, down 40% from 187p paid for 2021.
AJ Bell investment director Russ Mould said: ‘After Direct Line’s shocking profit warning and dividend cancellation earlier this year, it’s fair to say that expectations were low ahead of Admiral’s latest results. However, they still make for ugly reading, which is why the share price has slumped on the news.
‘In light of what happened with Direct Line, Admiral’s shareholders should thank their lucky stars they’re getting any cash at all.
‘Part of the reason why Admiral is still able to return money to shareholders is that it is better capitalised and argues that it was quicker than most to react to changing market conditions.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Tom Sieber) and the editor of the article (Daniel Coatsworth) own shares in AJ Bell.
