RBC Capital Markets hikes target price on Admiral

Analysts at RBC Capital Markets upped their target price on insurer Admiral Group from 2,100.0p to 2,400.0p on Thursday following the firm's interim results.

RBC Capital said Admiral's first-half results had led it to increase its earnings estimates for 2020 by 15%, with its 2021-22 estimates also increasing by an average of 10%.

The Canadian bank said the moves were largely driven by higher reserve releases and had resulted in a 9% increase to both its 2020-22 book value per share and dividend estimates.

RBC said risks to its thesis included higher reserve releases, signs of earlier-than-expected profitability in the group's international insurance and price comparison operations and higher-than-expected claims inflation eroding profitability in Admiral's UK motor business.

"In the upside scenario, we assume that Admiral achieves growth of 20% in its UK business with no reduction in other revenue per vehicle. In addition, we factor in a sharp turnaround in the International operations with it achieving break-even from 2018," added the analysts, which also maintained their 'sector perform' rating on the stock.