LONDON (ShareCast) - (Sharecast News) - Admiral's share price attaches value to unsustainable reserve releases, Berenberg said as the broker maintained its 'sell' rating on the FTSE 100 company's shares.


The insurer's first-half results were "the same old story" with exceptional reserve releases driving better-than-forecast profitability, Berenberg said.

Investors have built higher releases into their expectations but the releases, which will be strong for the next two years, are too high, the analysts, led by Iain Pearce, said.

Berenberg increased its price target to 1,849p from 1,723p. At the time of publication the shares were valued at 2,076p.

Admiral's European businesses were profitable for the first time in the first half but France and Spain remained loss-making and only Italy was profitable, the analysts said. Growth rates in these businesses are unimpressive given their "disruptor" position and small size. It will therefore be difficult for Admiral to replace earnings when reserve releases reduce, Berenberg said.

"To reach the current share price, one has to assume that releases remain well above guidance, attribute a significant premium to these 'above-trend' earnings and assign generous valuations to the international operations. We believe this is a very rosy view to take."

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