Broker snap: Admiral results ahead of expectations, Nomura says buy

7th Mar 2012 10:14

Shares in car insurance group Admiral raced 11 percent ahead on Wednesday morning following the release of its full-year figures, with Nomura giving a lift after saying that the results give comfort on prospective forecasts.Admiral saw pre-tax profits rise 13% to £299m in 2011, some 5% above consensus estimates and 4% ahead of Nomura's. The dividend was also 5% better than consensus were expected (+8% vs Nomura). Importantly, Nomura says that the ultimate loss ratio (ULR) of 74% was in line with its forecast and slightly better than consensus. "Recall that the development of the ultimate loss ratios affects prospective profits via reserve releases and profit commissions," the broker said.It also highlights that claims trends are appearing to stabilise. While there still remains some uncertainty regarding bodily injury claims - something that has plagued the stock over the last 12 months - the broker says that things have improved since the third quarter update."The focus of today's results was primarily on claims experience, and we feel there have been encouraging developments in this regard. All else being equal, the slightly better than consensus ULR for 2011 should mean earnings upgrades," the broker said.Nomura has reiterated its buy recommendation and 1,100p target price following this morning's statement.BC