Medium term
Trade view / 27 June 2016 at 12:27 GMT

UK's Admiral expected to exhibit steady growth

Director / PIA First
United Kingdom

UK car insurer Admiral Group (ADM:xlon) looks to be well-positioned against a backdrop of increasing car ownership and a shift towards online sales of insurance. The share price has been hammered in the wake of the Brexit vote (down 4.4% today), which suggests a trade in its stock.


February 2016 brought a bullish engulfing formation, and this has been backed by last week's bullish outside week.

Most recent support saw heavy rejection at the £16.70/share level (early February), indicating support in this area. Recent weeks have seen the price move higher, trying to break £20 resistance.

The weekly moving average convergence divergence (MACD) continues to trade near its highs and is nearing a further cross to the upside.

The stock is trading above its 50-day and 200-day simple moving averages. Recent trading has seen volumes marginally below the stock's averages (609k 50-day, 750k 200-day) .

Admiral Group plc share price
admchart Source: Saxo Bank

Anchor industry / Company thematics

In the medium term, Admiral enjoys a positive operating backdrop with an expense ratio below that of the wider market (source – Admiral) and rising UK car ownership rates (see chart below). In the longer term, household insurance is a relatively stable market which is increasingly moving online.

Professional Insurance Agents expect that the global vehicle insurance market should continue to exhibit steady growth over the coming years on the back of increasing car ownership rates.  

Latest numbers

For the full-year 2015 Admiral Group Plc posted a pretax profit of £377 million (up 6% year-on-year), and the company paid out a record dividend as a result. Admiral says it has an 11% share of the UK car insurance market, and customer numbers are trending higher.
Full-year 2015 earnings per share rose 4% from the previous year. Revenues are moving higher once again, with 2015 turnover up 8% to £2.12 billion.

Full-year 2015 dividend was 114.4p (98.4p 2014).

For the full year 2016 the company sees continued premium increases likely, and a continuing shift towards relatively low-risk premiums (source FY2015 earnings release).
Stock sentiment: Institutional investor consensus is currently a "hold" on the name (source PIA Research). In terms of competitor and iIndustry valuations, Admiral's stock trades at a premium to its peer group on a number of forward metrics.

The company is scheduled to report its next set of interim numbers on August 17. 

Management and risk description


Entry: Buy at market (M) 1,892 pc
   For breakout buyers (B) we would highlight 2,025 (last week's high) 
   For pullback buyers (P) we would highlight 1,810 (early March 2016) and at 1,750

Stop: As low risk market participants we would recommend a hard stop loss at 1650 

Target: 2,200, 2,390 and 2,700 pc

Time horizon: 3-9 months

— Edited by John Acher

Non-independent investment research disclaimer applies. Read more


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