Numis says Admiral sell-off overdone, upgrades to 'buy'

11th Sep 2014 10:08

The recent share-price weakness at Admiral has overlooked the positives at the insurance firm, according to Numis Securities which has upgraded its rating on the stock from 'add' to 'buy'.The broker said that the market has become "overwhelmingly bearish" on Admiral over the last two months, with the shares down 20% since July and the price-to-earnings valuation multiple dropping from 15 to 12.6.Numis explained that the main concern surrounds the company's comment that recent margin reductions would be reflecting in future earnings. It also highlighted increased claims frequency and ongoing inflation for large injury claims."We think fears of margin pressure are somewhat overdone," said analyst Nick Johnson."Admiral says it is currently putting through rate increases in the UK and subsequently [sector peer] LV has also said that it expects rates to improve later in the year. The claims trends experienced by Admiral are likely to be felt by others in the market and we would therefore expect an upward adjustment in rates over time."He said that after recent falls there is an "attractive entry valuation" for potential investors and customer growth at the company highlights its long-term prospects.Numis has trimmed its target price by 90p to 1,630p.The stock was up 0.7% at 1,242p by 10:47 on Thursday.