* UK motor premiums fall 9 pct
* Reserve releases higher by 40 pct
* No firm evidence of return to premium growth (Adds quotes, details, share reaction)
By Richa Naidu
LONDON, Aug 13 (Reuters) - British motor insurer Admiral Group Plc posted a 2 percent rise in first-half pretax profit, offsetting a decline in turnover by releasing reserves set aside to pay off claims.
The company also reiterated a bleak outlook for domestic premiums as it continues to cut prices to compete with rivals Direct Line and esure Group and increasingly popular price-comparison websites.
Admiral's shares were the biggest loser on the FTSE 100 index, falling as much as 5 percent early on Wednesday.
"In the UK there are some signs that premiums are no longer falling but we have yet to see firm evidence of an inflection point and a return to premium growth," Chief Executive Officer Henry Engelhardt said in a statement.
Premiums written fell about 9 percent to 776 million pounds ($1.3 billion) at Admiral's core UK car insurance business, dragging overall turnover down by 5 percent.
"Unless the market turns, Admiral's earnings are likely to come under pressure," UBS analyst James Shuck said, maintaining his "neutral" rating on the stock.
Admiral's adjusted pretax profit increased to 184.9 million pounds in the first-half ended June, due mainly to a 40 percent rise in reserve releases, the funds that had been set aside to cover claims losses.
"(Profit) was entirely driven by higher reserve releases and commutations," Shuck said, adding that it was important to note that without these funds, Admiral's UK motor loss ratio deteriorated to 85.3 percent from 81.5 percent.
Admiral said the loss ratio improved to 66 percent from 67.2 percent with the reserve releases.
A higher ratio means the insurer paid out more in losses and expenses than it earned in premiums.
Admiral also said its international car insurance business widened its pretax loss to 15.5 million pounds, while operating profit more than halved at its price comparison unit, which owns the Confused.com brand.
The insurer promoted deputy CFO Geraint Jones to chief financial officer with immediate effect on Wednesday. Jones replaces Kevin Chidwick who will focus on his role heading Admiral's Elephant Auto Insurance business in the United States.
Admiral raised its interim dividend by 1 percent to 49.4 pence per share. The company's London-listed shares were down about 4.5 percent at 1,385 pence at 1024 GMT. ($1 = 0.5945 British pounds) (Reporting by Richa Naidu; Editing by Nishant Kumar and William Hardy)