Broker snap: Admiral hitting sweet spot

8th Dec 2009 10:48

Morgan Stanley sees Admiral hitting a sweet spot and raised its price target for the car insurer by 6% to 1,344p.The broker reiterates its 'overweight' stance on Admiral, citing the group's improving underwriting margins, its growth as policyholders shop around more and improved profit commission terms from its reinsurers coming online. Trading on a 12.9x 2011e P/E with 20% EPS CAGR over the next three years and with a very defensive balance sheet, Morgan Stanley views Admiral's risk-reward as highly attractive and sees 25% upside to its new price target.'The company maintains it low risk profile by using reinsurance to reduce downside underwriting risk and largely pays for this on a flat fee basis, retaining much of the upside,' the broker said.