Shares in Admiral, the motor insurer, received a boost today when Collins Stewart reiterated a "buy" rating on the stock, following last week's decision by the UK regulator against a total ban on referral fees.
The Legal Services Board, an independent body overseeing the regulation of lawyers in England and Wales, concluded not to recommend a ban on fees, and instead recommended ways to improve transparency for the consumer.
The decision comes after MPs on the Transport Select Committee called on insurers to disclose the firms with which they have referral relationships and the amount they are paid, in a report entitled The Cost of Motor Insurance.
Collins Stewart said:
[We] see last week's news as supportive for the investment case, as it removes what for us was a key short-term concern. Admiral does not break out how much referral fees contribute to ancillary income, but ancillary fees in total are a key profit contributor.
The insurer, which insures one in ten British cars and also owns the Confused.com comparison website, recently reported a 56% jump in first quarter sales. Investec said then that as "a highly profitable UK motor insurer, Admiral is an anomaly in a loss making industry".
