Shares in Admiral fell 6% after the insurer said the rising cost of personal injury claims hit profits.
The firm's pre-tax profits rose 2% to £193m in the six months to the end of June 2017, as the number of UK insurance customers rose 11%.
However, changes to the way payments are made to accident victims - the Ogden rate - meant higher costs.
The changing rate weighed on profits last year, and Admiral said the impact had continued into 2017.
"Most of the adverse impact from the increase in the costs of large injury claims was in our 2016 second half result," said its chief executive David Stevens in a statement.
"However, some extra costs carry into 2017. In these circumstances, we are happy to report a marginal increase in profitability and to deliver a more material increase in the underlying dividend," he said.
The company estimated that the cost of the Ogden rate changes would be £150m, unchanged from six months earlier.
The government has been consulting on how the Ogden rate should be set, although a final decision has been delayed.
Admiral also reported a 15% rise in group turnover to £1.45bn, and net revenue of £550m, up 8%.
Mr Stevens said: "The first half of 2017 saw Admiral ambitious in pursuit of both immediate and longer-term growth opportunities."
However, investors were disappointed at the figures.
Admiral's shares fell as much as 7% in early trading, making the stock the worst performer on the FTSE 100. They finished 6% down on the day at £20.55.