Citi double upgrades Admiral to 'buy'
Citi upgraded Admiral on Tuesday to ‘buy’ from ‘sell’ as it said its ‘Deep Dive’ report had suggested consensus is too conservative on the impacts of recent pricing on topline estimates and the implications of the Ogden discount rate changes in 2024.
"We are now buy-rated on the UK motor sub-sector as pricing and Ogden tailwinds put us circa 17% ahead of Admiral FY24E consensus earnings per share whilst we are circa 7% ahead of Direct Line’s FY25E consensus OPBT due to continued motor margin recover to a NIM of 11%," it said.
Citi said its own motor claims inflation index points to material improvements since 1H23 as it sees claims inflation at only 5.5% in October following material decelerations in damage related repair costs and improvements in repair cycle times.
"This points to a much better starting point for claims inflation in 2024E compared to +12.7% we estimated in December 2022 and is ultimately positive for 2024 margins," it said.
Citi hiked its price target on Admiral to 2,941p from 2,057p.
At 1100 GMT, Admiral shares were up 3% at 2,699.68p and Direct Line was 2.6% higher at 189.25p.