I think Admiral‘s (LSE:ADM) one of the FTSE 100’s most impressive companies. And after falling 17.5% in six months, the share price just reached a crucial level.

The stock’s now almost exactly where it was a year ago. I didn’t buy it back then and regretted not doing so – so is this my second chance at a missed opportunity?

Insurance

My investment thesis is relatively simple. It operates in an industry that’s extremely important and it’s a business that has a unique competitive advantage that I think will prove to be durable.

Everyone who wants to drive needs car insurance – there’s no real way around this and I don’t see that changing in the future. But customers mostly don’t care who provides it as long as it’s cheap.

Unfortunately for insurers, they don’t find out whether or not they’re going to have to pay out on a policy until it expires. And that makes working out how much to charge for a policy very difficult.

Setting them too high means customers go elsewhere, but setting them too low results in making losses overall. That’s a tough industry, but Admiral has a big advantage over the rest of the field. 

Underwriting

Admiral’s edge comes from its data and analytics. Its telematics devices collect information about how people drive and this gives it a better understanding of how likely they are to have an accident.

That means it’s much better at underwriting than other UK insurers and it has consistently maintained better margins than the competition. And I don’t see this changing in the near future.

Despite this, the stock’s been downgraded by analysts twice in the last week. Goldman Sachs and RBC have both lowered their ratings on Admiral shares, for a couple of reasons.

The insurance market’s currently going through a cyclical downturn and the company looks likely to lower its dividend. These are risks, but I think these might be less important than they look.

Risks?

It’s true that insurance pricing’s been weak of late and this is likely to weigh on profits in the near future. But I think this is likely to be a temporary issue rather than a long-term one.

Demand for car insurance isn’t going away and when prices get too low, companies lose money. My view though, is that Admiral’s one of the best-positioned insurers to deal with a cyclical downturn.

In terms of the dividend, it looks almost certain that future distributions will be lower. But this is because of a change in how Admiral’s funding its employee share scheme going forward. 

The firm’s switching to share buybacks, which will reduce the amount it can use for special dividends. But this looks to me like a change in how it returns cash, not a cut to the overall amount.

Buy time?

Admiral shares are back where they were a year ago. And while things have changed with the company and the wider industry, I don’t think there’s anything that ought to concern investors. 

As a result, I see this as a potential long-term opportunity. Having regretted missing the chance to buy at these levels in 2025, I’m looking to take advantage of it in February.