Insurance stocks benefit from rising rates

(Video Transcript)

Insurance sector shares boosted

The insurance sector here in the UK has been one of the upside surprises today. We've seen some good numbers coming through from the likes of Admiral Insurance, one of the biggest motor insurers across the UK, and also Aviva, and this has lifted the whole sector.

Let me just quickly run through what Aviva said because it's one of the larger insurers here in the UK today. It's half-year figures: operating profit of 8% to £715 million. General insurance gross written premiums, now it's up 12% to £5.25 billion.

Claims reflect overall inflation

The company says it's seen general overall inflation rise 7%. So claims inflation is running at 7%. But they've been able to increase premiums by a margin of 12%. So there's an increased margin there in terms of profitability. Interim dividend, as a result, up 8% to £11.01.

I want to show you the Aviva share price chart because it is up today. We've got the FTSE 100 down. We've got the FTSE 250 down. But we've got the insurance companies on the way up.

Now the particular picture for Aviva is not pretty. In fact, in the last couple of weeks, we've seen it dip below or rather down to a line not seen since 13 October 2022. So we've seen new lows for the year.

Aviva takes a turn for the better

But in today's session, you can quite clearly see the upside surprise that we've had here on earnings has lifted the shares up 2%. Not a massive move up, but nonetheless, in a market which is on the way down, it's been pretty good.

Somewhat better off for Admiral, one of the largest motor insurance companies in the country. And this too is seeing an increase in rates of premium, which means that they're able to increase the amount of money that goes into their insurance pot, because insurance companies bring money onto the balance sheet at the start of the year for any written premium, and then they go ahead and invest that into the markets.

And the rate of claims, same sort of thing we're seeing from Aviva, around about 7% up, but they're able to harden rates. And you'll have seen this in your motor insurance, your household insurance, that rates have gone up.

Admiral has been bubbling along the bottom here, failing to break through this line at £24.04. Today, it tried again, but failed. But nonetheless, the stock is up in what is otherwise a down market.

FTSE 350 index up today

I ust want to quickly show you the FTSE 350 financial services index, which is where these insurance companies trade. It has been a move on the way down recently. In fact, as of Tuesday's trade, we saw the lowest print we've seen since 24 March 2023, but up on the session in today's trade.

Just to show you the context in which we're operating, this is the FTSE 100 on the way down. So you can see those rises of 2% and 3% apiece is actually outperforming the market by quite some degree. And so far as the other market is concerned, the FTSE 250, which houses a lot of insurance companies, also on the way down at the moment.

So, broadly speaking, it's a day of positivity for these insurance companies. The big question is, can they keep it up?

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