Admiral says ‘cycle is turning’ as prices for motor cover surge
UK motor insurer Admiral has said the “cycle is turning” in the sector as surging prices catch up with a sharp rise in the cost of repairing cars.
Motor insurance prices are at a record high after insurers raised their premiums to match the cost of meeting claims, which have been driven higher by parts and labour shortages.
“The market increased price quite substantially in the first half of the year, a bit over 20 per cent, and particularly in the second quarter, the price increase actually accelerated,” Admiral chief executive Milena Mondini de Focatiis told the Financial Times.
Price increases were expected to continue in the second half, but inflation should “ease a bit”, she added. The cost of second-hand cars was stabilising and repair costs, though elevated, were not rising as fast as they had been, Mondini de Focatiis said.
The group expects inflation to return to normal levels as soon as next year, with the expectation that further price increases “will just match that”.
“We are very aware there is lots of pressure on our customers,” she said, acknowledging that “insurance prices going up definitely doesn’t help” with the cost of living squeeze, and stressing the company’s services for vulnerable customers.
Admiral, one of the country’s largest motor insurers, said on Wednesday that a series of big price rises had helped revenues climb by a fifth to £2.2bn. Its underwriting margins weakened slightly, though, in what it said remained a “challenging” market.
The group’s shares were up 6 per cent in early trading in London.
Consumer groups and politicians have raised concerns about sharp rises in car insurance prices, with senior executives having to justify them before MPs in parliament. Some analysts forecast rates will continue to rise until 2025.
Separately, insurer Aviva said “strong rate increases” in general insurance had helped it manage higher costs. In its first-half results on Wednesday, the group said it expected to exceed its medium-term targets for cash generation.
Chief executive Amanda Blanc said the group remained “focused on pricing appropriately for the ongoing inflationary environment”.
“Overall, we expect the rating environment to remain favourable across both commercial and personal lines,” she added. Blanc acknowledged, however, that favourable weather conditions in the first half that had helped underwriting profitability were unlikely to be repeated.
Aviva’s private health sales continued to advance at a time of record waiting lists for public sector health services, with sales up more than a half compared with the prior period. Blanc said the business was seeing “very strong demand”.
The group posted £715mn in first-half operating profit, up 8 per cent on the previous year’s first half and ahead of consensus analyst expectations.
Its solvency coverage ratio — the amount of capital it holds as a percentage of the regulatory minimum — was 202 per cent, a few percentage points higher than the average forecast. It increased its interim dividend from 10.3p to 11.1p, broadly in line with expectations.
Its shares were up by 2.6 per cent in morning trading.
This story originally appeared on: Financial Times - Author:Ian Smith
