JPMorgan upgrades Admiral on potential for growth and capital returns

JP Morgan Cazenove has upgraded Admiral to an 'overweight' recommendation to reflect the non-life insurer's strong growth potential recent share price weakness.

Identifying the recent share price as an "attractive entry point into what remains a best-in-class insurer", the broking arm of the bank increased its December target price to 2,100p from the previous 1,900p.

Results from Admiral on Wednesday showed good underlying performance, Caz analysts felt, with strong 11% growth in UK motor customers and 16% for turnover.

The solvency ratio at 212% was also ahead of their expectations, particularly given the hit taken by rivals from the government's changes to the 'Ogden' rate that personal injury claims are discounted.

This is well in excess of the 125-150% target range and potential improvement is expected, including from a possible Ogden review later in the year.

"In our view this again raises the prospect of additional capital return beyond the ~6% yield from ‘ordinary special’ dividends."

Acknowledging that on a headline basis the valuation remains high versus peers, Admiral's premium is seen as warranted "given the currently loss making international businesses and long term track record".