"There have been a number of rulings and proposals that we believe have the potential to significantly reduce claims inflation," said Ravi Tanna, an analyst at Goldman Sachs. These include a ban of legal referral fees, a potential ban on credit hire referral fees and a reduction in fixed fees paid to lawyers.
The introduction of a whiplash diagnosis panel may also reduce the cost of claims against Admiral, said Mr Tanna.
Mr Tanna concluded that Admiral could see earnings per share growth of 16pc over the next few years. This could bring about an increase in the company's dividend, which already yields over 8pc.
Goldman Sachs reckons the shares could rise by 28pc to £15.00. Admiral shares yesterday advanced 57p to £12.11.
Overall, the FTSE 100 (FTSE: ^FTSE - news) gained 26.57 points to 6180.98, which according the FTSE Group is the blue-chip index's highest level since May 22, 2008. The FTSE 250 also moved up 48.82 points to 12,994.94. US markets were closed.
Financial stocks were generally in demand after HSBC (LSE: HSBA.L - news) equity strategists gave the sector a push. Peter Sullivan, strategist at HSBC, said: "They [financial company shares] benefit from QE [quantitative easing] and they [financial company shares] don't rely on strong economic growth to justify their valuations." Royal Bank of Scotland (LSE: RBS.L - news) put on 8.1 to 366.9p and Aviva (LSE: AV.L - news) climbed 8.7 to 374.0p.
Credit Suisse (NYSE: CRP - news) upgraded International Consolidated Airlines Group (IAG), owner of British Airways and Iberia, to "outperform" and raised its target price to 259p. Analysts at Credit Suisse said: "We think BA can grow earnings by €400m in 2013 ... helped by a €60m swing at bmi." IAG rose 4.1 to 212½p.
Some utilities were in demand as Seymour Pierce took up coverage of the sector. Angelos Anastasiou, an analyst at Seymour Pierce, reckons United Utilities is the cheapest water stock and will benefit from improving price controls. The shares put on 9½ to 720½p. Elsewhere in the sector, Pennon also climbed 12½ to 675p as Seymour Pierce noted that South West Water continues to perform strongly,
Some mining companies made it onto the leaderboard. Rio Tinto (Xetra: 855018 - news) increased 52½ to £35.55 and Xstrata (Other OTC: XSRAF - news) put on 16½p to £11.54. Gold mining companies were also in vogue, with Randgold Resources rising 95p to £59.10.
On a less positive tack, Diageo (LSE: DGE.L - news) was hit by a UBS (Berlin: UBRA.BE - news) downgrade to "neutral" from "buy". Melissa Earlam, an analyst at UBS, lowered full-year organic sales and operating profit growth forecasts to capture slightly reduced US spirits growth and reflect a short-term weakening in current trading.
Pearson (LSE: PSON.L - news) , publisher of the Financial Times, took the wooden spoon. The shares dropped 36p to £12.02 following a trading update in which the company downgraded 2012 operating profits due to weak market conditions in the fourth quarter.
Meggitt (Other OTC: MEGGF - news) slipped 7.8 to 422p. Traders were spooked by reports the US National Transportation Safety Board has widened its inquiry into the recent problems with the new Boeing (NYSE: BA - news) 787 Dreamliner to include Securaplance Technologies, part of Meggitt.
Burberry drifted 19p lower to £13.67 as Switzerland-based rival Richemont, whose brands include Cartier watches, unveiled third quarter sales that were below forecast, in part due to flat sales in China.
Among the second liners, Informa (Other OTC: IFPJF - news) was out of favour as traders chewed over reports that Swedish private equity firm EQT had decided to cancel the sale or flotation of German academic publisher Springer Science because it is unlikely to get the price it wants from a deal. Springer is seen as logical merger candidate for Informa, which has been the subject of takeover speculation in recent months. Informa lost 8.3 to 491½p.
easyJet fell 14½ to 857½p as several brokers downgraded the stock or cut their target prices. Citigroup (NYSE: C - news) , for example, downgraded easyJet to "neutral". easyJet founder Sir Stelios Haji-Ioannou also yesterday threatened to sell down his 37pc family stake in the airline if directors persist with an order for new aircraft, reigniting a row over the company's expansion plans.
Oil explorer Afren (LSE: AFR.L - news) gained 3.7 to 138¾p after saying in a trading update that revenue will probably rise in 2013 as production increases in Iraq's Kurdistan region. Afren, which is focused on Nigeria and Iraq, said in a statement that sales probably more than doubled to about $1.5bn last year.
Online grocer Ocado jumped 8 to 95p. The shares are heavily shorted, so yesterday's gains could have been due to short covering by funds with short positions. Those funds may have decided to cover their positions amid speculation WM Morrison could be lining up a bid for Ocado.
Morrisons, which perked up 2.6 to 255.4p, is expected to move into online food retailing and an acquisition of Ocado could be one of way of carrying out the strategy.
Small cap Ultra Electronics (LSE: ULE.L - news) fell 3p to £16.55 as Espírito Santo downgraded the stock to "neutral". Although the broker continues to regard Ultra as being well positioned for medium term growth relative to its peers, the shares now trade 2pc from what it thinks is fair value.