Admiral Group appears to be doing a great job managing its stock

Admiral Group, an insurer, is using AI to diversify its business while paying record dividends to investors

Admiral Group (LSE: ADM), an insurer, is one of several companies whose share prices plummeted earlier this year due to concerns that AI-powered competitors might steal most or all of their business. But since then, a lot of these stocks have recovered, and investors have concluded that these concerns are unfounded.

Admiral Group's stock dropped 14% in January following the introduction of a low-cost policy for self-driving cars by US company Lemonade, which processes claims using AI. The policy increased concerns about AI being used to undercut traditional insurers, even tho it was targeted at US consumers.

Investors were also concerned that the need for auto insurance might decrease due to autonomous vehicles' superior driving records when compared to human-driven vehicles. Some analysts, like Dan Coatsworth of AJ Bell, wonder if automakers will eventually buy auto insurance instead of individual drivers.

How Admiral Group uses AI to reduce expenses.

However, it's important to remember that full self-driving for individual carsas opposed to the comparatively small number of taxis currently on the roadis at least ten years away from widespread adoption, even if such concerns materialize in the distant future. In any event, Admiral Group has been utilizing digitization and AI to reduce expenses and gain an edge over its primary competitors.

Admiral Group also purchased Flock, a technology company it had been collaborating with, earlier this year. It now has complete access to and ownership of Flock's technology, which evaluates drivers' driving skills using artificial intelligence (AI) and telemetrythe process of gathering data from distant sources and sending it to a receiving system.

Admiral Group has been expanding into home, travel, and pet insurance as part of its efforts to diversify its business. Even tho they currently account for a very small percentage of total profit, these areas are expanding incredibly quickly, which should enhance the group's medium-term prospects.

Sales, meanwhile, nearly tripled between 2021 and 2025 and are expected to continue rising over the coming years. Profits have grown since 2021, despite being more erratic. Admiral has a double-digit return on capital employed and impressive margins. As a result, the company has been able to increase dividends to all-time highs. At 15 times projected 2027 earnings and a dividend yield of slightly less than 5%, the stock's valuation also appears appealing.

After outperforming the UK market as a whole over the past one, three, and six months, Admiral Group's share price has a lot of momentum. It has been among the top performers in the FTSE 100 for the past six months and is currently trading well above its 50- and 200-day moving averages. Going long at the current price of 3,772p at 1 per 1p is what I advise. I would set the stop-loss at 2,800p, so your total loss would be 972p.