Broker snap: CS admires Admiral's defensive properties

29th Jun 2009 12:36

Car insurer Admiral has moved back towards the bottom of the trading range it has occupied since August of last year, prompting Credit Suisse to recommend dipping back into the shares. The Swiss bank believes Admiral's shares may be supported at around its current level by its dividend; the shares are currently yielding around 5.92%."We expect markets to remain range bound in the near term and Admiral offers a defensive alternative within the insurance sector with a track-record of delivery and cash growth," Credit Suisse (CS) suggests. The bank has upgraded the stock from "neutral" to "outperform" but has left its price target unchanged at 1097p.CS reckons Admiral is well placed to benefit from an improvement in the pricing trends in the UK motor insurance market. Rates for personal car insurance rose 9% in the first quarter of 2009."Its distribution model is focused on the highest growth segments of the UK market with vehicles insured by Admiral, a key driver of earnings power, up 16% year on year at the first quarter of 2009 stage. This reflects management's track record of delivery and the resilience of selling a 'compulsory' product in a recessionary environment," CS said, adding that it expects Admiral's interim results to reflect the resilience of the market.