Inflation and other market challenges continue to bite general insurer Admiral, as the group reported a pre-tax profit of £469m for 2022, presenting a 39% drop from the 2021 year-end. 

The decline was mainly due to increased claims and the cost of servicing those claims.

The company said it took “strong action” and maintained discipline in response to higher costs such as double digit rate increases in all countries to protect margin. 

Group chief executive officer Milena Mondini de Focatiis said: “We have yet again shown focus and discipline, reacting quickly to emerging trends – we implemented price increases ahead of others in response to higher inflation whilst maintaining a conservative approach to reserving and capital management.”

Admiral’s UK insurance business reported a profit of £615.9m but its European and US insurance segments were hit with losses of £4.9m and 48.9m respectively. 

Investment platform Hargreaves Lansdown noted Admiral’s shares fell 7.2% in early trading.

Matt Britzman, equity analyst at Hargreaves Lansdown, said Admiral is unlikely to be the only insurer “navigating choppy waters”, adding: “Higher claims and an increase in the cost of servicing those claims weighed on performance, though to some degree that was already priced in. What spooked markets was the performance of the international business, which management described as having ‘very low’ average premiums, specifically from Italy and Spain.”

The company increased prices by mid-single digits for motor insurance since the start of this year and expects prices to continue increasing in 2023. For household insurance, Admiral has already increased prices by low single digits. 

Asked by an analyst today whether the insurer’s profitability will return to “normal levels” in 2023, Mondini de Focatiis said the company does not normally provide profit guidance but added: “What is important to notice is that from an underwriting point of view, we do expect the business to be more profitable than the industry.”

She warned there could still be uncertainties in the market but said: “We feel we are very prudently and conservatively reserved for the development of the inflation.”

Asked whether the company would change its advertising budget at a separate call, chief financial officer Geraint Jones said Admiral does not normally have a huge expenditure for TV advertising, therefore no changes have been made in the UK and European businesses. 

However, he admitted cutting back on advertising and acquisition spending for the US business “where we were seeing a slightly worse results in 2022”. 

Mondini de Focatiis said many of the company’s policies were sold through price comparison sites and cross-selling across its customer database. 

“That has been progressing very nicely. So we're very pleased we can offer more products to the same customer, offering a better service, a better journey and a better experience,” she concluded.