Shares in Admiral (LON:ADM) have fallen deep into the red in today’s session, as JPMorgan turned bearish on the stock. The analysts have pointed to the government’s U-turn on the Ogden rate cuts which the broker argues will weigh on pricing in motor insurance.
As of 10:53 GMT, Admiral’s share price had given up 4.56 percent to 1,840.50p, underperforming the broader UK market, with the benchmark FTSE 100 index having climbed into positive territory and currently standing 0.34 percent higher at 7,722.03 points.
JPMorgan bearish on car insurer
JPMorgan lowered its rating on Admiral from ‘neutral’ to ‘underweight’ today, and cut its price target on the stock from 1,980p to 1,900p.
“We downgrade Admiral to ‘underweight’ in part on valuation but also due to our more cautious view on the motor pricing cycle,” the analysts pointed out, as quoted by Proactive Investors. “Admiral has industry-leading margins and leverages its returns through extensive use of quota share reinsurance. In our view, it may be difficult to further improve these margins, while a more competitive motor market could easily lead to some erosion.”
While the government cut the Odgen rate, used to determine the compensation awarded to those who have injuries from a car accident, it subsequently reversed its decision following a backlash from insurers.
Deutsche Bank meanwhile lifted its price target on Prudential (LON:PRU) yesterday, issuing an upbeat note on the European insurance sector.
Other analysts on Admiral
The 16 analysts offering 12 month price targets for Admiral for the Financial Times have a median target of 1,945.00p, with a high estimate of 2,145.00p and a low estimate of 1,530.00p. As of December 30, the consensus forecast amongst 15 polled investment analysts covering the blue-chip group advises investors to hold their position in the company.