Source: Sharecast
RBC Capital Markets said the discussion focused on Admiral's "competitive advantage in UK Motor and Household", its two largest divisions, and factors behind its more than 8% earnings per share growth ambitions over the next five years, supported by its target to double profit contributions from other lines by 2028.
The Canadian bank said it remains "comfortable" with recently raised EPS forecasts, and considers current multiples to represent "an attractive entry point" as the outlook for UK Motor pricing begins to improve.
"Our target multiple is 14x FY2027E EPS which we think is appropriate with management willing to commit to high single digit EPS growth through 2030. This is supported by a multistage DCF including forecasts out to 2030E. This assumes 'midterm' low-single digit PBT growth through 2035, with Motor lines (including European Insurance) growing at 3% to reflect a structural reduction in claims inflation due to improving motor safety," said RBC Capital.
"Thereafter, we assume flat Motor lines PBT to reflect possible attrition from improving driving safety, with a terminal growth rate for the entire business of -1% after 2040, against the new outlook from Admiral management for UK motor premium growth for the next 20 years."
Reporting by Iain Gilbert at Sharecast.com