Berenberg lowers Admiral to 'hold'

Berenberg said Admiral has been one of the strongest performers in the insurance sector in 2023, up by 29% year-to-date, and it believes the stock will continue to have earnings per share upgrades primarily due to "very strong re-pricing" of the UK motor insurance market.

However, the German bank believes the complexity of Admiral's accounting leads to "some risk" and the high valuation multiple the company already trades on may limit the upside in the near term.

"In our view, Admiral's reserving position is still under-appreciated and we consider it as a key strength of the group. This confidence comes in part from the risk adjustment which is set to the 94th percentile, the most conservative among the insurers within our coverage," said Berenberg.

The analysts noted that one risk comes from a 'mixed injuries' court case, due to be heard in the UK Supreme Court in the first quarter of 2024, which will decide how whiplash and non-whiplash claims are to be combined in a claim settlement.

"Admiral is typically very conservative in its booking of claim reserves and we note that a negative outcome for the insurers would likely keep pricing momentum up," added Berenberg.

Reporting by Iain Gilbert at Sharecast.com