Credit Suisse downgrades Hiscox on valuation grounds

14th Jul 2015 10:41

(ShareCast News) - Credit Suisse downgraded Hiscox to 'underperform' from 'neutral' but raised its target price on the stock to 720p from 655p."Whilst we continue to believe that Hiscox's exposure to retail customers has the ability to offset partly the negative trends seen at peers, the group trades at an all-time high premium to peers which we struggle to justify," it said.The broker said Hiscox is a high-quality, low volatility and well-capitalised operator. Its differentiated product mix provides the group with higher growth prospects than peers as it seizes opportunities with retail clients, said CS.This also helps diversify income streams for the group and partly offset lacklustre trends in reinsurance lines."Whilst we continue to regard Hiscox's unique set-up as a competitive advantage, we forecast underlying deterioration, albeit at a slower pace than peers. We also expect excess capital return to continue in the near term, given the group's solid capital position."Credit Suisse upped its target prices for Amlin and Lancashire to 410p from 386p and 650p from 640p, respectively. It kept Amlin at 'underperform', saying it remains the bank's least preferred name, given its higher exposure to poor reinsurance trends, continuous restructuring I the UK operations and lower capital returns than peers.The bank said it prefers Lancashire, which it kept at 'neutral'.At 09:48, Hiscox shares were down 2.2% at 884.50p, Amlin was 0.7% lower at 505p and Lancashire Holdings was up 1% at 661.83p.