RBC has raised its price target for Admiral Group Plc (LSE:ADM) to 3,800p from 3,550p, citing strong earnings momentum in its UK motor insurance business.
The bank reiterated its 'outperform' rating, highlighting that the group shows “no signs of slowing down.”
A record year in 2024 saw UK motor insurance profits surge 61% to £955 million. Excluding a one-off boost from the Ogden rate adjustment, the increase was still a hefty 44%.
Premiums jumped 16% on average, helped by a 15% rise in policy numbers. Lower claims frequency also played a role in keeping margins strong. RBC now expects Admiral’s earnings to continue growing, lifting its 2025 and 2026 profit forecasts by 8% and 6%, respectively.
The insurer’s home division also stood out, posting a £34.1 million profit on a 77.4% combined ratio, meaning it was highly profitable. Admiral’s Italian motor business was a drag, losing £23 million, but overall, the group almost doubled its net income compared to 2023.
Looking ahead, Admiral plans to focus on protecting its margins, especially as the rate of price increases slows. Policy growth is expected to be more modest in 2025 at around 3%, down from last year’s rapid expansion.
RBC also sees potential upside from Admiral’s profit-sharing agreements with co-insurers. Due to previous underwriting losses, only £2 million was recognised from recent strong years. That could change in 2025, unlocking further earnings.
With a dividend yield of 6%, RBC believes Admiral remains an attractive investment despite recent share price gains.
In afternoon trading, the shares were up 1% at 3,022p.