Admiral ends 2013 with 7% profit rise

Admiral ends 2013 with 7% profit rise

Group profit at UK-based motor specialist Admiral, whose business model relies heavily on a panel of reinsurers, increased 7% in 2013 with its UK arm proving resilient in the face of rates that continue to decline drastically.

The increase in profit to a record £370.2m left group chief executive Henry Engelhardt calling 2013 "the year of the baked potato" for Admiral.

"It was a good, solid year, something on the plat that is appreciated but doesn' really grab the spotlight. This is a comfort food set of results.

"Why the baked potato? Because the year was solid, but not flashy. We made more money than ever before, we grew customer numbers a little bit, we launched one new overseas business (, but there was no growth surge, there were no claims shocks; we just went about our business."

According to Engelhardt, rates fell by about 13% in 2013.

Admiral's car insurance arm generated profit of £393.9m in 2013, up 6% year on year. This figure helped offset a loss of £22.1m from its international car insurance business. However, even this marked an improvement on the loss of £24.5m this segment of its operations posted in 2012.

Overall, the business made a return on capital of 58%, compared with 60% in the previous year. Admiral believes its extensive use of co-insurance and reinsurance across the group is a key aspect of this continued strong performance.

In the last 18 months, Admiral has made several changes to its reinsurance purchasing habits to further improve its profitability potential. These new arrangements last until 2016 and see Munich Re, via its Great Lakes arm, commit to underwriting 40% of its business until at least the end of 2018.

As reported in February, last month Admiral announced an extension of its wide-ranging reinsurance agreements, although in reality these changes are minimal with regards to the allocated proportions.

Admiral retains only 25% of the risks that it writes, with 40% going to Munich Re, 13.25% to New Re, 9% to Swiss Re, 8.75% to Hannover Re and 4% to Mapfre Re.

Similar long-term arrangements are in place in the Group's international insurance operations and UK household business.

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