Admiral: ‘Mammoth’ price hikes to feed profits but dividend could be lowered
Admiral is set to report its full-year results next week, with analysts expecting price hikes throughout 2023 to feed into profits.
The UK’s largest private motor insurer has benefitted from a surge in the price of premiums, with car insurance costs at record levels due to inflation.
Profits rose to £233.9m in the first half of 2023 despite the FTSE 100 listed firm covering 380,000 fewer vehicles, after it hiked premiums by 20 per cent.
Shares are up over 25 per cent in the last 12 months.
Matt Britzman, equity analyst at Hargreaves Lansdown, said Admiral had a “strong track record of outperforming its peers.”
“Mammoth price hikes over 2023 should start to feed through to the profit line over 2024, as customers roll on to new contracts. It’s been a bit of a balancing act, pushing through price hikes and trying not to lose too many customers in the process.”
Investors will be watching customer volumes closely.
However, the expected rise in profits could be accompanied by a smaller dividend than expected.
Admiral pledged a 90-95 per cent payout ratio at the half-year mark, “but that was before the recent acquisition of the home and pet insurance operations of RSA, which is expected to cost north of £100m including potential add-ons,” Britzman said.
“That could mean a lower dividend than markets were expecting – one to watch.”