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The chief executive of FTSE 100 group Admiral, one of the biggest UK car insurers, said its motor insurance prices had peaked, signalling the end of a surge in premiums across the industry that sent the cost of cover to a record high.
Car insurance prices have soared in recent years, reaching an all-time high last year according to one industry index, as insurers tried to reprice their policies to absorb spiralling inflation in the cost of claims that created the worst underwriting conditions in a decade.
Milena Mondini de Focatiis told the Financial Times on Thursday that price rises had, for now, caught up with inflationary trends.
“There was a lot to recover but I think we are in a very different situation now,” she said. Admiral had even put through a “small price decrease” in the past few months as it sought to win more business.
“We remain vigilant . . . but at this moment we are not increasing prices and we are very committed to trying to be competitive.” The sector should “try to limit price increases” as much as possible to take pressure off customers, she said.
Admiral posted group pre-tax profits of £443mn for 2023, up almost a quarter on rising car insurance premiums but below analysts’ expectations. Its group combined ratio — a key measure of underwriting profit that shows claims and costs as a proportion of premiums — improved by 8 percentage points to 88.7 per cent. Anything below 100 per cent represents a profit.
The insurer’s motor customer numbers ended the year flat having shrunk earlier in the period as it sought to be disciplined on price at a time of rapid inflation in costs. Admiral’s share price was unchanged in early trading on Thursday.
FTSE 100 peer Aviva also released full-year numbers on Thursday, announcing a new £300mn share buyback and upgrading its dividend guidance. It reported an annual operating profit of £1.5bn, slightly ahead of expectations.
Private health sales rose 41 per cent in 2023, as Aviva continued to benefit from strains on public healthcare. Premiums from its general insurance division, which includes car insurance, also grew.
Aviva’s chief executive Amanda Blanc said the group had acted early to adjust for claims inflation in its pricing when conditions began to deteriorate at the beginning of 2022.
“Clearly we have seen some big rating increases go through in those areas for a number of reasons,” said Blanc. She cited industry data showing theft costs and repair costs had risen a third in a year, and the cost of replacement vehicles had jumped because vehicles were taking longer to repair.
Aviva has now returned £9bn to investors in capital and dividends in the past three years after a series of disposals under Blanc. The company set a new target to generate £2bn of operating profit by 2026, and new guidance that the cash cost of its dividend should grow by a mid-single-digit percentage.
