Admiral shares jump 6% as profits and dividend jump past expectations

Investing.co -- Admiral Group ’s (LON:ADML) stock surged more than 6% on Thursday following the release of its latest financial results, which significantly outpaced market expectations. 

The UK-based insurer reported a record-breaking performance for the second half of 2024, with profits, dividends, and growth figures all exceeding analyst projections. 

Barclays (LON:BARC) analysts described the results as “very strong,” noting that net profit was 52% higher than their estimates, while earnings per share surpassed consensus expectations by 32%.

The company’s pre-tax profit came in at £839.2 million, up 90% from last year, largely driven by the robust performance of its UK motor insurance segment. 

Even when factoring in the benefit from the Ogden rate change, the division’s pre-tax profit was 25% higher than expected. 

Admiral’s combined ratio—a key measure of underwriting profitability—stood at 74.9% in the second half of the year, improving by 2.5 percentage points compared to previous forecasts. 

Meanwhile, net insurance revenues grew by 5%, and UK turnover saw an 18% rise, though this fell slightly short of Barclays’ projections.

Admiral’s UK motor insurance business recorded stronger-than-anticipated policy growth of 4 percentage points, surpassing Barclays’ forecast of 2.5 percentage points. 

The company maintained a positive outlook on the sector, characterizing it as "attractive and rational," with pricing declines offset by lower claims frequency. 

However, it acknowledged potential uncertainties heading into 2025, signaling a likely moderation in growth appetite and a reduced ability to support results through quota share releases.

The insurer also announced a dividend of 192 pence per share, up from 121 pence per share—supported by a strong Solvency II ratio of 203%.

Barclays analysts noted that the company had taken steps to strengthen its risk adjustment to the 95th percentile, the upper end of its typical range, in an effort to manage potential volatility in the market.

Regulatory factors also played a role in Admiral’s strategy. The firm reduced its premium finance rate to 17% from 19%, a move that Barclays believes will help mitigate regulatory risks stemming from the Financial Conduct Authority’s ongoing review of premium finance practices.

Admiral’s strong results and cautious optimism for 2025 come at a time when the UK insurance market remains competitive but stable. 

Barclays maintains an “overweight” rating on the stock, with a price target of 3,153 pence, suggesting further potential upside.