Admiral Group Plc, the U.K. car insurer that owns the confused.com website, fell the most on record after the firm said a period of higher-than-expected personal injury claims would lower its reserves.
The stock dropped 30 percent to 840 pence a share, the biggest fall since the insurer’s initial public offering in 2004, at 8:36 a.m. in London trading. That cut Chief Executive Officer Henry Engelhardt’s personal holding by 135 million pounds ($217 million), according to data compiled by Bloomberg.
The company’s statement today shows “higher-than-historical levels of personal injury claims during 2011,” said Marcus Barnard, a London-based analyst at Oriel Securities Ltd. with a “sell” rating on the stock. “This leads to adverse expected development on projected loss ratios for 2010 and 2011 being negative for both reserve movements and profit commission.”
Admiral, which insures about 3 million U.K. vehicles, is the worst-performing stock in the Bloomberg Europe 500 Insurance Index over the last three months after the firm held back more cash to cover claims from previous years. Hedge funds including Odey Asset Management LLP and Steadfast Capital Management LLC have disclosed short positions in the stock over the past three months, meaning they’re betting the share price will fall.
Pretax profit “will be toward the lower end of the range of analysts’ estimates, or some 10 percent ahead of 2010, with no further reserve releases in the second half,” Cardiff, U.K.- based Admiral said in the statement.
The insurer has won market share by undercutting rivals on price over the last two years and posting better underwriting results. British insurers, including Admiral, make extra income by selling accident victims’ details to personal injury lawyers and car-rental firms. The U.K. government said in September it plans to ban referral fees, which analysts say will crimp Admiral’s earnings.
The insurer’s third-quarter revenue climbed 30 percent to 582 million pounds in the three months to Sept. 30, it said today. U.K. ancillary income per vehicle was “in line” with first-half results, the company said.
“Notwithstanding the continued higher level of large claims in the quarter, I expect us to once again report record profits for the full year, probably some 10 percent higher than last year,” Engelhardt said in the statement.