FTSE 100 insurance giant Admiral (LSE: ADM) is down 11% from its 21 August one-year traded high of £36.85.

This could signal a bargain buying opportunity for one of the UK’s most reliable high-yield stocks.

So, is it?

Powered by solid earnings growth

Any company’s share price is driven by a sustained rise in its earnings (‘profits’) over time. A risk to Admiral is any further surge in the cost of living that could prompt customers to cancel policies.  

However, analysts’ consensus forecasts are that its earnings will grow 5% a year to end-2028. This looks extremely conservative to me, based on its recent run of results.

The latest of these — full-year 2025, released on 5 March — saw pre-tax profit surge 16% year on year to £958m. This was supported by a 7% rise in motor insurance profit and by other UK insurance lines and Admiral Money.

This latter division offers unsecured personal loans, car finance, and specialist mortgages. Overall, the operation more than doubled its profit in 2025, as did the firm’s other UK non-motor insurance businesses. 

How much yearly dividend income?

Admiral’s current dividend yield is 5.3%, based on 2025’s 175.9p payout and its current £32.91 price. This far outstrips the FTSE 100’s present 3.1%. However, analysts forecast the dividend yield will rise to around 7% by the end of 2028.  

So, investors considering a £20,000 holding in the firm (the same as mine) could make
£20,193 after 10 years. And after 30 years, this could rise to £142,330.

These figures are based on the average 7% forecast yield, but this can alter over time. They also assume that the dividends are reinvested into the stock to harness the turbocharging effect of ‘dividend compounding’.

After 30 years — the end of the standard investment cycle for long-term investors — the holding’s value could be £162,330.

And this would generate an annual income from dividends of £11,363!

Deeply discounted price

Price is not the same thing as value in stocks. The former is whatever the market will pay at any moment. But the latter reflects the fundamentals of the underlying business.

The difference between the two is crucial for the profits of long-term investors over time. This is because asset prices (including shares) tend to converge to their ‘fair value’ over the long run.

The cornerstone method to establish any stock’s fair value is discounted cash flow analysis. This identifies where any stock should trade by projecting future cash flows and discounting them back to today.

Some analysts’ DCF modelling is more bullish than mine, depending on the variables used. However, based on my own DCF assumptions — including a 7.2% discount rate — Admiral shares are 47% undervalued at their current £32.91 price.

This implies a fair value for the shares of around £62.09 — nearly double where they trade today.

That gap suggests a potentially terrific buying opportunity to consider today if those DCF assumptions prove accurate.

My investment view

Admiral looks a rare mix of dependable income, steady earnings growth, and major undervaluation for the quality on offer.

Consequently, I will add to my holding in the stock very soon and think it well worth the attention of other investors.