RBC Capital downgrades Admiral Group to 'sector perform'

(Sharecast News) - RBC Capital Markets downgraded insurance outfit Admiral Group from 'outperform' to 'sector perform' on Friday and cut its price target on the stock to 3,450p from 3,560p, saying it was taking a more cautious stance ahead of the insurer's halfyear results on 6 August.

The Canadian bank said Admiral shares have already performed well this year and that the recovery in UK motor remains steady but slow, noting that it has now taken a more conservative view on volumes and margins in the first half, with only modest knockon effects to outeryear forecasts.

RBC noted that UK motor pricing has turned positive but remains modest, with CPI data showing only a 4.5% rise yeartodate, likely still below claims inflation. However, it expects H1 to be too early to see any meaningful margin benefit, with last year's rate cuts still earning through.

The broker cut UK motor profit forecasts by 5% for FY26, with smaller reductions for FY27 and FY28. At group level, it now expects FY26 profit to fall 8% yearonyear, compared with a previous forecast of a 2% decline. Nonmotor profit for 2026 has been reduced by 14%, though later years were largely unchanged. As a result, RBC trimmed earnings per share estimates by 6%, 4% and 2% for FY26-28, leaving its FY25-28 compound annual growth rate at 2.6% - below management's ambition for faster growth.

RBC kept its 14x FY27 target multiple, supported by a multistage DCF and said Admiral now trades broadly in line with peers after recent outperformance, with a further rerating requiring clearer evidence of a stronger turn in UK motor or a bigger contribution from nonmotor lines, which it does not expect before 2028.

Reporting by Iain Gilbert at Sharecast.com