ADM: Greater caution ahead of H1 results

Research evidence excerpt

ADM: Greater caution ahead of H1 results

nes (including European Insurance) growing at 3% to reflect Lines.

a structural reduction in claims inflation due to improving

Risks to rating and price targetmotor safety. Thereafter, we assume flat Motor lines PBT to

reflect possible attrition from improving driving safety, with a • Motor pricing and claims trends. Any changes to frequency

and severity levels beyond those currently assumed withinterminal growth rate for the entire business of -1% after 2040,

pricing and reserving levels.against the new outlook from Admiral management for UK

motor premium growth for the next 20 years. These valuations • Long-term growth. UK Motor claims inflation is a key

long-term growth driver. While drivers assistance featuresderive a rounded down price target of 3,450p supporting our

have had limited impact to date on claims inflation, anySector Perform rating.

technological improvements that reduce claims inflation

Upside scenario could impact Admiral's growth. The successful roll-out of

In the upside scenario, we assume a target FY27E PE of 16x autonomous vehicles, currently only in the test phase in the

which gives an upside scenario of 4,000p. UK, could amplify this impact.

• Expansion into new areas. Admiral's effort to replicate its

Downside scenario UK Motor model abroad continues to be challenging, and

In the downside scenario, we assume a target FY27E PE of 12x it’s unclear what the long-term value creation potential

which gives a downside scenario of 3,000p. looks like in these segments. Italy and Spain have pivoted

to a brokered distribution model, which will take time

to mature. Commercial Motor and SME offer longer-term

opportunities, but are currently loss-making.

• Household, Pet and Travel. Admiral has set out ambitious