Direct Line’s profits rise 33% AXA UK’s profits rise 32%
The 2013 results announcements by Admiral tomorrow (Wednesday 5 March) and AVIVA on Thursday are expected to confirm the ongoing profits bonanza being enjoyed by the big car insurers, says leading law firm Thompsons Solicitors.
The last two weeks have seen AXA UK and Direct Line announce 32% and 33% increases in profits respectively. Later this week it's expected that Admiral and AVIVA will delight shareholders and shock motorists with news of how lucrative this captive market is.
“It is shocking. The car insurers have claimed they face a crisis. They've screamed about whiplash and they've alleged widespread fraud and yet here we have them turning in huge profits. Their audacity is staggering,” says Tom Jones, head of policy at Thompsons.
“Close examination of the financial results shows they have over-stated ‘bodily injury claims’ and are actually making fabulous profits while also releasing millions from reserves for extra dividends.”
Last week, Direct Line not only announced a 5% increase in its normal final dividend pay-out to £126m but also said it will make a special dividend payment of £60m as a result of ‘improved claims experience’.
The former RBS owned business reported that the operating profit of its motor division had risen 32.8% from £261.8m in 2012 to £347.7 million last year. Meanwhile, its premiums fell by only 3%.
AXA does not divulge trading figures for car insurance separately but two weeks ago it reported a 32% rise in its overall UK profits to £178m and said this included ‘improvements’ in profits and ‘claims experience’ in motor insurance.
In its report for the first half of 2013, Admiral reported a 5% rise in UK car insurance profits for the period from £183.3 million in 2012 to £192.7 million with chief executive Henry Engelhardt saying: “We were able to increase profits largely due to excellent claims experience”.
Like AXA, AVIVA does not publish figures specifically for car insurance. However, its 2012 annual report said it had generated £448m in operating profit from selling general insurance in the UK, which included ‘good profitability in personal lines’ (motor and homeowner insurance).
Tom Jones added: “We await the Admiral and AVIVA results with interest fully expecting them to confirm that the car insurers are making a killing.
“Given the secrecy of some of them, it is difficult to be certain how much profit motor insurance generates, but it is somewhere north of £2 billion - with the four market leaders accounting for about half of that.
“The car insurers have been complaining endlessly about ‘compensation culture’ and ‘whiplash fraud’ and demanding government impose ever harsher measures that hit access to proper justice for injured people with genuine claims.
“Yet it is shareholders through massive dividend payments who are benefiting from what they now – in the small print – admit are much lower numbers of claims than they had previously said there would be.
“Given that car insurance is a legal requirement, motorists need a watchdog to protect them against this blatant profiteering.”
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