Broker snap: Sound investment case at Admiral, says Nomura

24th Aug 2011 12:42

Despite the tumble in Admiral's share price on Wednesday, Nomura has reiterated its positive stance on the stock, saying that headline results from the car insurer came in more or less in line.In the first half, the firm reported a pre-tax profit of £161m, ahead of consensus of £159m but below Nomura's forecast of £163m. The dividend per share of 40.5p beat both consensus and broker estimates. "The highlight is strong group policy growth of 33% in the first half, where first quarter momentum has been carried forward," said Nomura.However, the market on Wednesday seemed to focus on Admiral's combined ratio (which measures how well the underwriting operations are doing - a lower number is better) which rose to 94.2%, from 89.3% in the first half of 2010. As such, shares were 8.86% under at 12.41."The combined ratio came in worse due to lower reserve releases. Although this was to be expected given the mix was moving towards profit commissions, it is more marked than we anticipated," the broker said.Nevertheless, Nomura says that the investment case - "predicated on continued earnings growth" - remains sound and keeps its buy rating and 2,000p target price.BC