Berenberg raises target price on Admiral, expects 'amazing' 2021 performance

Analyst at Berenberg hiked their target price on insurance firm Admiral Group from 2,758.0p to 2,938.0p on Thursday, stating 2021 would be an "amazing" year for the stock.

Admiral, which released a trading update on Monday that contained "a positive profit warning" going into its interim, estimates that 2021 interim pre-tax profits will be between £450.0m and £500.0m versus the £286.0m seen in the first half of 2020.

As a result of the announcement, which Berenberg said also "clearly provides a positive read-across to other motor insurers", it opted to raise its first-half estimates by "more than 40%", up to £453.0m.

"Ultimately, Admiral will report amazing numbers for H1 2021 as the company has benefited even more from the pandemic than it was perceived before. The group is also benefiting from a continuing long-term trend of fewer serious bodily injury claims ... and again, much more than expected by the market," said Berenberg, which reiterated its 'hold' rating on the stock.

However, despite this, the German bank still thinks there will be some headwinds to earnings in outer years, driven by a weaker pricing environment and a lack of visibility on reserve releases.

"We feel some frustration from investors that despite Admiral continuing to deliver excellent results the transparency of earnings is relatively low and guidance on reserve releases is very limited. More details will be provided on the breakdown of this large profit beat during the half-year presentation on 11 August."