UK’s Admiral to sustain price hikes, sees better 2nd half for car business

By Eva Mathews

(Reuters) -British insurer Admiral will continue to increase prices to mitigate the ripple effects of high inflation, its chief executive said on Wednesday after the company posted a marginal rise in half-year profits.

Shares in the FTSE 100 firm were up 7.2% by 0800 GMT, with analysts and investors betting on price hikes to offset the impact of higher costs of servicing claims.

Admiral has had a tumultuous time as the war in Ukraine, high inflation and supply chain pressures from the pandemic pushed up the costs of auto repairs.

The insurer has managed to absorb some of the negative impact through price hikes, albeit at the cost of losing customers as costlier insurance will add to cost of living pressures facing consumers.

“Costs are now somewhat stabilizing and we expect we can return to growth soon as the market catches up with price increases,” CEO Milena Mondini de Focatiis told Reuters in an interview.

“We’ve seen inflation more stubborn than we thought in the first half of the year, so it’s difficult to make a prediction, but we are more positive about the outlook.”

Admiral is also expecting a small decrease in cost inflation in motor insurance, it’s biggest unit, for the second half of the year, Mondini de Focatiis added.

Admiral’s group profit before tax rose to 233.9 million pounds ($297.50 million) in the six months to June 30, from 224.6 million pounds a year earlier.

The group reported 9.41 million customers in the first-half, up from 9.28 million at the end of 2022.

It declared an interim dividend of 51 pence, compared with 60 pence last year, which was about 2% higher than what Jefferies analysts were expecting, according to a note.

“Conditions are likely to remain tough over the rest of the year, but Admiral should be able to continue its string of outperformance versus peers with selective underwriting and strong pricing power,” said Matt Britzman, an analyst at Hargreaves Lansdown.

($1 = 0.7862 pounds)

(Reporting by Eva Mathews in Bengaluru; editing by Sherry Jacob-Phillips, Jason Neely and Tomasz Janowski)