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Investing.com - Morgan Stanley (NYSE:MS) has upgraded Admiral Group Plc (LON:ADML). (LON:ADM) from Underweight to Equalweight and raised its price target to GBP33.00 from GBP26.12, citing potential stabilization in the UK motor insurance market.
The upgrade reflects Morgan Stanley’s recognition that recent market consolidation, including Aviva/DLG and Ageas/Saga deals, could increase discipline and reduce pricing competition in the UK motor insurance sector, where Admiral generates more than 90% of its profit before tax excluding central costs.
While Morgan Stanley remains cautious on the UK motor market due to its fragmentation and competitive pressures, the firm noted encouraging commentary from peers indicating that pricing decreases in UK motor insurance are stabilizing, making Admiral "one of the purest (liquid) ways to play any inflection."
The investment bank acknowledged ongoing risks, including potential regulatory intervention from the Financial Conduct Authority’s scrutiny of installment income and pricing practices, to which Admiral has relatively higher exposure due to its concentrated UK non-life business.
Morgan Stanley also pointed to Admiral’s undemanding valuation compared to historical averages, stating that while they "don’t necessarily see an immediate reason for a significant re-rating," it remains "hard to argue for a further de-rating."
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