Admiral Group PLC on Wednesday reported a much lower profit for 2022 than for 2021, citing higher claims costs due to high inflation, amid high energy costs due to Russia’s war in Ukraine.
The Cardiff-based insurer said it delivered ‘resilient’ results in 2022, against a backdrop of high inflation, as it reported a steep fall in annual profit.
The insurer reported a pretax profit of £469.0 million last year, down 39% from £769.0 million in 2021. Net revenue totalled £1.49 billion, down from £1.55 billion.
Admiral shares were 4.9% lower at 1,985.50 pence each in London on Wednesday morning.
‘The UK experienced the largest spike in inflation in 40 years following the start of the war in Ukraine and alongside this, a severe supply and demand post-pandemic shortage significantly impacted claims inflation for insurers. Global supply chain shortages of car spare parts, subsequent delays to car repairs, limited availability of new cars and labour shortages have all led to higher damage repair and second-hand car costs, with inflation at double digits,’ the company said.
‘Projections showed an increase in average ultimate claims cost in the first half of 2022 compared to
2021 of around 11%, and this remained similar for the second half of the year as claims inflation persisted,’ Admiral said.
It added: ‘Within the context of an uncertain macroeconomic outlook and increasing interest rates, Admiral Money took a prudent approach to growth and risk selection, tightening underwriting criteria and raising prices. Provisions for credit losses remain appropriately prudent, though no significant increase in the level of arrears and defaults has been seen to date.’
Net insurance premium revenue rose to £911.0 million in 2022 from £855.0 million in 2021. Net interest income grew 60% to £44.6 million from £27.8 million. The company return on equity was 35% compared to 56% in 2021.
Its solvency ratio, post dividend, was 180%, down from 195%.
Admiral proposed a final dividend of 52.0p per share, down 28% from 72.0p the year prior, during which it also had paid a special dividend of 46.0p from the sale of Penguin Portals. This brought the total 2022 dividend to 112.0p, down 40% from 187.0p paid for 2021.
In addition, Admiral reiterated that Mike Rogers will take over Annette Court’s role as chair after six years in the role. Rogers was appointed as non-executive director in January and is set to become chair on April 27, at the company’s annual general meeting.
Looking ahead, Admiral said customer payment performance was positive with low arrears and defaults, in line with expectations. In 2023, the company anticipates to benefit from its ‘strong position’ in a growing market. ‘We see a continued shift to comparison and credit score marketplaces,’ it said.
Chief Executive Officer Scott Cargill said he expects growth in gross loan balances towards the £950 million to £1.1 billion range, compared to £890 million in 2022, which was a 46% growth from £610 million in 2021.
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