Admiral reviews options for ‘disappointing’ US insurance business
Insurer Admiral is “evaluating the options” for its US arm which disappointed in 2022, but said it still believes its strategy to hike premiums instead of “chasing unprofitable volumes” will pay off in the long-term elsewhere.
However, it added that it believes its strategy to hike prices instead of “chasing unprofitable volumes” will pay off in the long-term elsewhere.
Pre-tax profit for the group fell by 39% to £469 million, which CEO Milena Mondini de Focatiis said was down to “FCA’s pricing reforms, increased claims frequency post Covid, supply chain challenges, adverse weather and high levels of inflation”.
Mondini de Focatiis said Admiral was quicker than rivals to react to changing market conditions, raising premiums for customers.
“Although the premium increases impacted our rate of growth in the short term, we continued prioritising sustainable growth over chasing unprofitable volumes,” she said.
Performance was worse in the US, where the business lost £49 million, which the Admiral CEO said was “disappointingly high” as the business hiked premiums by 25% and cut ad spend.
As a result, Admiral will said it is “continuing to assess the options” for its US-facing arm Elephant, but a spokesperson said Admiral could not comment on whether it was up for sale.
Admiral shares dropped by as much as 7.6% to 1,937p in the first 15 minutes of trading this morning, before recovering to 2,037p.
Matt Britzman, equity analyst at Hargreaves Lansdown said the negative share reaction was mainly due to Admiral’s performance in international markets, where Admiral’s weaker performance was not expected.
“Higher claims and an increase in the cost of servicing those claims weighed on performance, though to some degree that was already priced in,” he said. “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.”