New legislation hits Admiral Insurance profts
Share price dips after the Government opt to cut Ogden rate
by Abi Moses on 29th August, 2017
Car insurance giants, Admiral, have seen their share price continue to fall following the news that the Government is to cut the personal injury discount rate, also known as the Ogden discount rate.
Naturally, a reduction in the discount rate will see the cost of personal injury claims rise. The FTSE 100 firm have explained that the they will feel the impact of the decision for the next two to four financial years.
Admiral Group chief executive, David Stevens, said "Most of the adverse impact from the increase in the costs of large injury claims, resulting from the change in the Ogden discount rate, was captured in our 2016 second half result. However, some extra costs carry into 2017.
Company shareholders aren't the only people who will be adversely affected by the legislation change as an increase in personal injury pay-outs is likely to see a rise in insurance premiums.
The Group's annual pre-tax profits are up 1% to £195m with dividend pay-outs to shareholders confirmed at 56p per share.
Mr Stevens added, "In these circumstances, we are happy to report a marginal increase in profitability and to deliver a more material increase in the underlying dividend."
The discount reduction has seen an increase in the company's loss ratio – one of the most important metrics for measuring an insurance firm's sustainability. Whilst analysts at Bernstein had forecast a loss ratio of 83%, the loss ratio at Admiral actually jumped from 85.9% to 87.5%.
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