Admiral Group came under selling pressure on Friday, with the insurer's shares falling in excess of 4% following a downgrade and target-price reduction from RBC Capital Markets. The broker said near-term weakness in UK motor pricing has not yet fully fed through to reported earnings, prompting a reassessment of short-term profitability.
RBC moved its rating on the stock to "sector perform" from "outperform" and reduced its 12-month price objective to 3,450 pence from 3,560 pence, while keeping a 14 times multiple on its FY2027 estimated earnings per share. The bank now anticipates an 8% decline in group pretax profit for 2026 versus 2025, a downgrade from management's own outlook of "flatter" profitability.
At the centre of the broker's revisions is the UK Motor business. RBC lowered its full-year 2026 estimate for UK Motor pretax profit by 5%, pointing to weaker policy count growth and the earn-through of less profitable business into the first half of 2026. The broker said H1 2026 is "too soon to see the benefits of rate on margins or volumes," noting that earlier rate decreases from the first half of 2025 remain feeding through.
As a result, RBC worsened its H1 2026 combined ratio forecast to 85.6% from 83.6%, compared with a reported 84.2% in H2 2025. The broker also highlighted price and claims trends: consumer price index data showed UK motor insurance prices rose 4.5% in the year to May, which RBC described as "likely still lagging claims inflation." Meanwhile, the ABI Motor Price Index recorded a 4.9% year-on-year decline in transacted premiums in the first quarter of 2026, the smallest drop since the start of 2025.
RBC noted that including a 4% reduction made in March, cumulative cuts to its 2026 estimated UK Motor pretax profit now total approximately 10% year-to-date. It also trimmed non-UK Motor pretax profit for 2026 by 14%, with the bulk of reductions concentrated in the near term.
The broker extended its revisions to other lines. UK Travel and Pet pretax profit for 2026 was lowered by 25% to 12 million, a move that reflects the impact of the Iran conflict on travel claims and veterinary fee inflation. Italy pretax profit for 2026 was trimmed to 8 million from 3 million, and Spain was forecast to post a pretax loss of 1 million.
On earnings per share, RBC cut basic EPS estimates by 6% for 2026, 4% for 2027 and 2% for 2028. Those revisions imply a 2025-2028 compound annual growth rate of 2.6%, which the broker noted is below management's stated ambition to exceed a 7.6% five-year historical CAGR.
Dividend expectations were lowered as well: RBC reduced its DPS forecasts to 142 pence for 2026, 163 pence for 2027 and 173 pence for 2028. It also adjusted total capital return forecasts to 5.7%, 6.4% and 6.9% across 2026-28.
RBC concluded that a re-rating from current levels would require "either evidence of a materially stronger turn in UK Motor, or a greater contribution from non-motor lines, which is unlikely until 2028." That assessment underpins the broker's more cautious stance on near-term valuation upside for the group.
Market reaction and outlook
The downgrade and associated cuts to profit and dividend forecasts underline the broker's view that earlier rate reductions and softer policy trends will weigh on near-term margins. RBC's forecast of an 8% fall in group pretax profit for 2026 versus 2025 contrasts with management's expectation of flatter profitability, and the broker's guidance indicates it does not expect a meaningful recovery in UK Motor contribution before 2028 without additional evidence of a turnaround.