MOTOR insurer Admiral is to give £4.5m of shares to staff after the company’s low-cost products led to an 11% increase in profit to £202.5m in 2008.
The payout to more than 3,000 employees – worth an average of £1,500 – was accompanied by a 20% rise in annual dividend as Admiral delivered a record profits haul and said turnover rose 13% to £910m.
Admiral’s UK business, which includes the brands Diamond, Bell and elephant.co.uk, drove the improvement after customer numbers increased 15% to 1.59m and profits from car insurance lifted 27% to £179.9m.
Chief executive Henry Engelhardt said the business was well placed despite the recession: “I don’t think any industry is airtight, recession-proof, but this one is recession resistant. It’s a compulsory purchase product.
“I don’t see people giving up their cars en masse and so they’ll have to buy the insurance. I do see consumers shopping around even more to ensure they get the best deal.”
The Cardiff-based company said it created 326 jobs in Wales over the past 12 months, as well as 290 outside the UK as it expanded in Spain, Germany and Italy. Staff will be entitled to the maximum payout in shares through the company’s employee share scheme.
Admiral said its insurance rates increased 4% in line with the market as a whole, whilst claims frequency continued to fall.
Mr Engelhardt added it was not yet clear how rates will trend in 2009: “On the ’rates moving up’ side, there is the decline in interest rates and therefore investment income. With firms earning less investment income there is added pressure to produce a better underwriting result.
“In addition, lower petrol prices might spur more driving, which would result in more accidents, which in turn should lead to price increases.”
On the ’rates stable or moving down’ side he argued that further growth of price comparison sites meant more consumers will get the lowest rate, pinning the industry to rate increases as dictated by the slowest mover.
Admiral said confused.com’s profits fell 30% to £25.6m as the price comparison website required significantly higher marketing costs in order to tackle fierce competition in the sector.
Numis Securities said: “We think Admiral’s low-cost online model is ideally suited to the current rising price environment and ever-increasing popularity of price-comparison websites.”