RBC Capital has downgraded Admiral Group Plc (LSE:ADM)to sector perform, cutting its price target to 3,450p from 3,560p, as shares fell 4% to 3,227.83p on heightened caution ahead of first-half results on 6 August.
The broker cited weaker near-term sales volumes and profit margins in UK motor insurance, particularly in the first half, and took a more conservative view of current profit forecasts despite the stock's strong performance year-to-date.
RBC cut its earnings per share forecasts by 6%, 4% and 2% for financial years 2026, 2027 and 2028 respectively, reflecting insurance pricing increases that have lagged inflation for longer than expected and the impact of less profitable business written in 2025.
The cumulative earnings cuts total roughly 10% so far this year, including a 4% reduction made in March when the broker last flagged weakness in motor insurance pricing.
RBC now forecasts group profits will decline 8% in financial year 2026 versus 2025, much worse than management's guidance for roughly flat profitability, with motor insurance profits down 5% despite the market beginning to show price increases.
The weakness is concentrated in the first half, which RBC expects to represent the low point in the profit cycle before price increases implemented in early 2026 begin to help margins in late 2026 and into 2027.
Motor insurance pricing showed increases of only 4.5% year-to-date through May, likely still trailing the rising cost of claims and leaving little room for margin expansion.
RBC said it does not currently see conditions for Admiral to win market share, with competitor commentary at first-quarter updates emphasising cost control over growth as the market remains fiercely competitive.
The revised forecasts left the company's earnings growth over the next three years at 2.6% annually, down from 3.3%, and further below management's target to deliver faster growth than the historical 7.6% annual average.
At the group level, RBC also cut non-motor profits by 14% for 2026, reflecting headwinds in European insurance and personal loans from macro uncertainty, as well as weaker trading in travel and pet insurance.
The analyst maintained a 14 times price-to-earnings multiple on the unchanged target, arguing the stock now trades fairly against rivals despite recent strong performance.
