Admiral shares were sharply lower on Wednesday after the insurance group said profit before tax slumped 39% to £469m due to higher claims and costs.
The group turnover rose 5% to £3.68bn but it wasn’t enough to offset higher average claims and total insurance claims and claims handling expenses of £2.08bn, an increase from £1.5bn last year.
Admiral shares were down around 5% at the time of writing, have recovered from the worst levels of the session.
Discounting the impact of higher insurance claims, Admiral’s top line activities were far stronger than last year with growth in customer numbers to 9.28m.
However, the softer profit ultimately meant a lower full year dividend of 223p per share compared to 247p last year.
“Markets have punished Admiral shares after a 5% miss on profit before tax, and shares were down around 7% in early trading. Higher claims and an increase in the cost of servicing those claims weighed on performance, though to some degree that was already priced in,” said Matt Britzman, equity analyst at Hargreaves Lansdown.
“What spooked markets was the performance of the international business, which management described as having “very low” average premiums, specifically from Italy and Spain. The result for underwriting is an unprofitable position, with total costs exceeding premiums – though Admiral’s unlikely to be the only insurer navigating choppy waters.”