British motor insurer Admiral
Admiral, which insures one in 10 cars on Britain's roads, made a pretax profit of 299 million pounds last year thanks to steady growth in customer numbers, it said on Wednesday, beating the 289 million pounds expected by analysts in a company poll.
Admiral shares were up 11.3 percent at 1,158 pence by 10:00 a.m., making them the top riser in the FTSE 100 <.FTSE> share index, which was 0.1 percent higher. The stock is still down 31 percent compared with a year ago, underperforming a 4 percent fall for the FTSE.
Analysts had initially pencilled in a 22 percent profit rise for 2011 but slashed their forecasts in November when Admiral warned it had been hit by a jump in personal injury claims in the third quarter, an industry-wide trend it had previously avoided.
The results should prove relatively reassuring with some evidence that the spike in high-value, bodily injury claims has peaked, analysts at stockbroker Peel Hunt wrote in a note.
Admiral finance chief Kevin Chidwick told reporters the increase was driven by a small number of big payouts to cover long-term care for injured customers and was not repeated in the final three months of 2011.
Q4 was more normal in its behaviour than Q3, he said.
We were talking about the occurrence of very large claims, and we don't get very many of those - they can be volatile.
Analysts said overall claims still were rising faster than Admiral's own expectations, pointing out that the surplus in its cash reserves to cover payouts had fallen by two thirds between 2009 and 2011.
What these numbers are telling us is that claims costs are getting ever closer to Admiral's best estimate of the worst case scenario, said Investec analyst Kevin Ryan.
The company said it had launched a review of its claims and would raise its prices by more than originally planned to counteract the rising claims trend.
Admiral also said fees from services not related to car insurance, which are seen as vulnerable to regulatory intervention, accounted for 60 percent of its profit last year, or about 76 pounds per vehicle.
They include referral fees paid by lawyers to Admiral in return for details of its customers affected by accidents, a form of income that the government plans to ban, which accounted for about 7 pounds of this, Chidwick said
Referral fees paid by replacement car hire firms, currently under investigation by the Office of Fair Trading, accounted for a further 6 pounds, he said.
Cardiff-based Admiral, which also trades under the Bell, Diamond and Elephant brands and owns price comparison site Confused.com, is paying a dividend for the year of 75.6 pence per share, an increase of 11 percent.
That includes a special dividend of 19.1 pence and represents 92 percent of the company's post-tax profit. ($1 = 0.6354 British pounds)
(Reporting by Myles Neligan, Editing by Rosalba O'Brien and Jane Baird)