Berenberg has turned cautious on Admiral Group PLC (LON:ADM), downgrading its rating to ‘sell’ from ‘hold’ as it thinks there are ‘challenges ahead’ for the blue chip motor insurer.
The German broker, however, raised the target price for Admiral to 1,723p from 1,635p, albeit with the stock trading well above that new level at 1,916p, down 0.2%, or 3p in morning trading.
READ: Admiral sees shares sink as half-year results raise concerns over UK motor insurance business
In a note to clients, Berenberg’s analysts said: “Although Admiral’s H1 2017 results were in line with consensus, we thought the results highlighted some concerning trends for earnings.”
They added: “Our main concern was that both UK motor premium and policy number growth increased by 7% yoy despite the 11% premium inflation in the market.
“International operations continue to show good growth; however, losses continue and the valuation of these operations appears increasingly stretched.”
The analysts concluded: “With negative trends affecting Admiral’s core business, the continued run-off of its most profitable accident years and our scepticism about its international segment, we downgrade to Sell”.