February 28, 2018 / 7:25 AM / 24 days ago

British insurer Admiral picks Madrid for EU base

LONDON (Reuters) - British motor insurer Admiral (ADML.L) will set up a regulated subsidiary in Madrid to serve its clients on the continent following Britain’s vote to leave the European Union, it said on Wednesday.

FILE PHOTO: Traffic flows along the M56 motorway as the sun sets near Manchester, Britain, February 15, 2016 REUTERS/Phil Noble

Insurers have been announcing EU subsidiaries in recent months, with favoured locations being Brussels, Dublin and Luxembourg, in the event that Britain loses access to the European single market after Brexit.

Admiral, which reported a 43 percent rise in 2017 pre-tax profit, already has operations in Madrid and Seville, employing several hundred staff. It also has businesses in Italy and France.

“Spain is a good choice for us - we know the place, we’ve got a lot of employees in Spain, including in Madrid,” Chief Financial Officer Geraint Jones told Reuters by phone, adding that the firm had applied for three Spanish licences for different parts of its business.

“We know the regulator there, the regulator knows us, it made sense for us.”

Jones said Admiral would probably move some staff in Spain to the new subsidiary and added that “it will definitely involve a few more employees for the group”.

While a number of commercial and life insurers have announced plans for EU subsidiaries, most UK motor insurers only have domestic customers and do not need to be regulated in the EU.

Admiral's shares rose towards the top of the FTSE 100 index .FTSE after its pre-tax profit climbed to 405 million pounds, helped by higher premiums and releases of reserves set aside for prior claims and above a company-supplied forecast of 387 million pounds.

The motor insurance sector has been buffeted by government changes to the “Ogden rate” dictating personal injury claims payments, which dented insurers’ profits last year but has since led to a rise in premiums.

    “Price increases that the market put through..offset the impact of that reduced Ogden rate, reflecting the fact that claims were becoming more expensive,” Jones said.

    Admiral proposed a final dividend of 58 pence per share, including a special dividend of 18.5 pence, and a total dividend of 114 pence per share, above a forecast 107.2 pence.

    Rival FTSE 100 motor insurer Direct Line (DLGD.L) also said this week it would pay a special dividend after posting a 51 percent rise in 2017 operating profit.

    “We expect further strong dividends in 2019,” Bernstein analysts said in a note on Admiral, pointing to the company’s strong solvency position.

    Admiral’s shares rose 1.45 percent to 19.59 pounds at 0920 GMT.

    Reporting by Carolyn Cohn, editing by Maiya Keidan and Tom Balmforth

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