Admiral Group Profit Rises on Reserve Releases; Shares Surge

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Chart: Admiral Shares

Admiral Group Plc reported an unexpected rise in first-half profit, boosted by reserve releases in the U.K. and lower claims. The shares advanced the most in three months.

Pretax profit rose 0.6 percent from a year earlier to 186.1 million pounds ($292 million), the Cardiff, Wales-based motor insurer said Wednesday. That beat the 151 million pounds estimate of Barclays Plc analysts including Alan Devlin. The firm said it released 92.6 million pounds set aside for claims in previous years, up from 73.1 million pounds in the first half of 2014.

Admiral is the last of the U.K.’s largest car insurers to report first-half earnings. Shares of rival Esure Group Plc tumbled last week after profit dropped 21 percent on insurance costs. Direct Line Insurance Group Plc boosted its operating profit 35 percent in the period on higher reserve releases.

“Reserve releases will continue to remain an important feature of results” for Admiral, Andreas van Embden, an analyst at Peel Hunt with a hold rating on the stock, said in a report to clients. “Management continues to focus on supporting U.K. underwriting margins as it pushes through motor rate increases.”

Shares Lead

The shares climbed as much as 5.7 percent in London trading. They rose 5.3 percent to 1,544 pence at 11:34 a.m., the biggest gain on the FTSE 100 Index. The company announced a 3 percent increase in the dividend to 51 pence a share.

Chief Financial Officer Geraint Jones said prices for motor insurance have started to rise after three years of declines.

“We expect price increases in the market, probably in the second half of this year and throughout 2016,” he said in a phone interview.

Admiral’s combined ratio, a measure of profitability, improved to 82.7 percent from 85.1 percent a year earlier, indicating that the insurer paid out less in claims and costs relative to premiums. That compared to 95.8 percent for Esure and 89.4 percent for Direct Line.

The number of customers increased 6 percent from the first half of 2014 to 4.19 million.

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