Broker snap: UBS downgrades Admiral to neutral

10th Nov 2011 11:10

UBS has downgraded insurance titan Admiral from buy to neutral and slashed the target price by a whopping 45%, from 1,610p to 890p, following the group's statement yesterday which resulted in over a quarter of its market value being lost.Shares plunged on Wednesday morning after the firm's statement which warned 2011 profits would be at the lower end of expectations (just 10% higher than 2010) due to a jump in personal injury claims. "Although we believe that Admiral remains among the best managed non-life companies in Europe, earnings transparency is low until the reasons for the acceleration in large bodily injury claims become clear," said UBS analyst James Pearce.The broker has therefore cut its earnings per share (EPS) and dividend per share (DPS) forecasts for the current year by 13%, in line with guidance, and for 2012-15 by some 20%. The stock was again the worst performer on Thursday, falling a further 6.99% to 825.5p by 11:02. After accounting for yesterday's sell-off, the share price has tumbled 31% since Tuesday's close.UBS notes that Wednesday's fall has de-rated the group's price-to-earnings multiple from 10.8 (on previous estimates) to 9.8 (on new forecasts), which is still a premium to the sector average multiple for UK non-life companies of 8.Other brokers have cut their ratings and/or targets today on the stock: Nomura kept its buy rating but reduced its target price from 1,900p to 1,100p; Credit Suisse downgrades from neutral to underperform, target cut from 1,500p to 1,100p. BC