Admiral: Investors Over-Reacting To Direct Line Profit Warning
(Preview) Company Update (ADM LN) (Buy)
Summary
Admiral Group plc shares are down 7% this morning after shares in Direct Line, a competitor, crashed 26% following a profit warning.
Direct Line had a number of unexpected problems during Q4. Most of these do not apply to Admiral at all, or to a much lesser extent.
We expect Admiral to still be profitable in 2022; the negatives that may affect it are temporary, and its Solvency Ratio is far stronger.
Long-term Admiral earnings should be unaffected, and shares have a 14.2x P/E and 6.6% Dividend Yield relative to pre-COVID 2019 financials.
With shares at 2,108.8p, we expect Admiral shares to have a total return of 107% (31.0% annualized) by 2025 year-end. Buy.
Introduction
We review Admiral Group plc after Direct Line Insurance Group plc, its largest listed comparable, released a profit warning. As of 12:10 p.m. in London, Direct Line shares were down 26% and Admiral shares were down 7%.
We upgraded our rating on Admiral to Buy in October 2020. With the 7% fall this morning, Admiral sha…