Broker snap: Goldman downgrades Admiral after recent outperformance

10th Feb 2014 09:13

Goldman Sachs has downgraded its rating for Admiral from 'buy' to 'neutral' ahead of the car insurance group's annual results next month after the stock's recent outperformance.The bank said that Admiral's share price suffered excessively from negative sentiment in the third quarter of 2013 on the back of concerns over softening motor premium rates and negative readacross from others in the sector as peers cautioned on growth prospects for the second half."Since then, Admiral shares have risen 19%, outperforming the broader European insurance index by 16%," Goldman said."We now see only limited upside potential, and downgrade Admiral to 'neutral' from 'buy'."Nevertheless, the bank said it still expects to see "favourable outcomes" in terms of reserve releases, pricing and growth when Admiral reports its full-year results on March 5th."Through a further step-up in reserve releases and profit commissions, we forecast total underwriting earnings of circa £200m per annum or greater for the next five years."Meanwhile, Goldman expects that pricing cycle to turn back up again at the end of 2014.The bank left its 1,440p target price for the stock unchanged.The stock was down 1.5% at 1,397p by 09:51 on Monday.BC