Admiral shares slide despite profit rise

Car insurance group Admiral has posted a bullish 27 per cent increase in its profit in the first half of the year as it said the outlook for the UK car insurance market was improving.

Admiral, an internet-based insurer and owner of comparison site, saw group turnover jump 53 per cent to more than £1bn in the first half of the year, while pre-tax profits increased to £160.6m.

But despite beating most analyst forecasts, the group saw its shares slide more than 12 per cent as investors focused on changes to how insurers sell their data to legal claims firms to gain referral fee revenues.

A surge in personal injury claims and lawsuits that has resulted in 40-50 per cent leaps in motor insurance premiums has led to calls for a ban on such fees, but such a ban is believed to disproportionately hurt Admiral over peers such as Aviva or Ageas.

Admiral has moved to dismiss such fears but some analysts said they were unsure if the group could continue to grow at such pace if the ban is implemented.

Admiral made £173.2m in ancillary revenues from the sale of products alongside car insurance, and services such as referral fees, up from £130.3m in the first half of 2010.

The group disclosed to analysts that referral fees made up about 5.6 per cent of its UK car insurance profit before tax, or £9.4m in the first half of the year.