Britain’s two leading car insurers have this week announced yet more bumper pay-outs to shareholders after continuing their profits bonanza in 2014.
Annual results released by Direct Line and Admiral, which between them write one in four motor insurance policies in the UK, show both recording big profits yet again last year despite the insurance industry’s claim to be beset by fraudulent claims that are variously asserted to cost the industry anything between £811m and £2bn.
Direct Line, which was spun out of taxpayer owned RBS in 2012, plans to pay an 8.8p per share final dividend after seeing its operating profit for the year rise 14% to £497m.
The final dividend takes Direct Line’s total pay-out to shareholders for 2014 to 27.2p – 32% more than the 20.6p paid for 2013.
In total cash terms, Direct Line shareholders will get £407m, allowing chief executive Paul Geddes to boast: “I am delighted to report we have met or exceeded all (the targets set in 2012). After paying the regular and special dividends for 2014, we will also have returned a total of £836 million to shareholders since we began life as a public company.”
The results statement said Direct Line’s profits had been boosted by ‘favourable experience on bodily injury claims across recent accident years’ as well as the Government’s Legal Aid, Sentencing and Punishment of Offenders Act.
Admiral, meanwhile, delivered a profit from the UK car insurance market of £398m and announced a 49p final dividend worth £135m to shareholders. The company said this brings the total pay-out to shareholders in the ten years since Admiral went public to £1.75 billion.
And chief operating officer David Stevens promised shareholders they could look forward to more ‘jam tomorrow’ because an upward turn in premium prices was already delivering actual profitability that would be reported in the coming two or three years because of the company’s “cautious approach to recognising underwriting profit”.
Tom Jones, head of policy at Thompsons Solicitors, said the figures were yet more evidence that the scare stories about the scale and cost of fraud put out by insurers were misleading.
“The endless claims of fraud, from whiplash to cash for crash and the huge £ multimillion sums attributed to it have been exaggerated to get reforms that help insurers make ever-larger profits and motorists to think that premiums have to stay high.
“Direct Line and Admiral deserve some credit for operating publicly so that those who want to read the small print in their accounts can discover the truth.
“That’s not the case with Aviva and AXA, both of whom still refuse to publish separate trading figures for the captive UK car insurance market.
“This is a compulsory purchase and reform is urgently needed to make the market transparent.”