Morgan Stanley Upgrades Admiral to Overweight on UK Motor Margin Rebuild

British motor insurer Admiral Group Plc received an upgrade to "Overweight" from "Equal-weight" from Morgan Stanley analysts, who said in a Monday note that rising car insurance prices across the UK are set to help the company recover its margins.

The Wall Street bank increased its price target on the FTSE 100 firm to 4,450 pence from 3,575 pence, which represents approximately a 16% upside from Admiral's previous closing price of 3,816 pence.

Morgan Stanley said UK motor insurance has become one of the most attractive pricing areas in European property and casualty (P&C) insurance, in contrast to weaker conditions in commercial lines, reinsurance and continental European retail markets.

Motor Insurance CPI Acceleration and Margin Recovery

The upgrade is based on a sustained improvement in UK motor pricing, where motor insurance CPI rose 8% year-on-year in July, accelerating for five consecutive months.

As the purest UK motor insurance play in the sector, with around 90% of profits coming from that line, Admiral is well positioned to take advantage of this turning point. In the first half of 2026, Admiral implemented high-single-digit percentage rate increases, well above its estimated 5% to 7% full-year claims inflation.

"Admiral is now rebuilding margins, not just maintaining them, with rate increases well ahead of claims inflation," Morgan Stanley analysts said, adding that written margin deterioration in UK motor insurance has reached its worst point.

The bank increased its group pre-tax profit forecasts for 2027 and 2028 by about 6.5%, driven by a 7% to 8% rise in UK motor profit expectations.

Autonomous Vehicle Risks Considered Manageable

Morgan Stanley also suggested that market concerns about autonomous vehicle (AV) disruption, which caused a sector selloff earlier in the year after new industry partnerships, have been premature in the near term.

Obstacles to commercial deployment, including regulatory delays facing robotaxi operators such as Waymo in London and paused Level 3 autonomous rollouts by major automakers, indicate that structural changes to vehicle liability will take a long time to materialize.

Valuation and Sector Recommendations

Admiral trades at roughly 14.5 times estimated 2027 earnings per share, below its 10-year average multiple of 16.5 times. Morgan Stanley predicts the stock's valuation gap versus broader European peers will narrow as underwriting profitability improves.

In addition to Admiral Group, Morgan Stanley reiterated "Overweight" ratings on commercial insurer Hiscox Ltd (price target 1,878 pence) and French counterpart AXA SA (price target €44.64).

Conversely, the bank maintained "Underweight" ratings on Legal & General Group PLC (price target 296 pence) and Norwegian insurer Gjensidige Forsikring ASA (price target NKr 282.20).