Admiral to raise motor premiums

The car insurer Admiral, which went public last September, is raising premiums to counter an expected downturn in profitability in the insurance market.

The car insurer Admiral, which went public last September, is raising premiums to counter an expected downturn in profitability in the insurance market.

The company, which said it would meet profit forecasts this year, said profitability in the UK motor insurance market continued to worsen from the peaks of 2001-2, as premium rates failed to keep up with rising claims.

Yet it was cautiously optimistic that the downturn in the market would be relatively shallow, and was confident it would meet analysts' forecasts for 2005 pre-tax profits, which range from £100m to £102.1m.

Admiral lifted its share of the private car insurance market from 3 per cent to more than 4 per cent in the past year, and reported that premiums written rose 27 per cent to £470m last year. Given the softening market, it does not expect the number of new policies to grow by more than 11 per cent this year - down from 30 per cent last year. Admiral has already implemented the first of a series of rate increases for 2005, seeking to widen margins relative to the rest of the market.

Analysts at Merrill Lynch and Numis welcomed the statement as a "positive" trading update. Zenon Voyiatzis, at Merrill Lynch, said: "We applaud that the company's emphasis is to protect underwriting margins rather than top-line growth." He said Admiral's rates declined by 2 per cent last year, in line with his expectations and modestly better than the average drop in the market price of 3 per cent.

Henry Engelhardt, the chief executive of Admiral, said: "We are trading exactly in line with our expectations at this point in the cycle and as communicated at the time of our initial public offering in September 2004."

The shares closed down 10p at 331.5p yesterday.