Credit Suisse upgrades RSA Insurance on capital return potential

22nd Jan 2015 09:07

RSA Insurance's shares were given a boost on Thursday by an upgrade by Credit Suisse from 'neutral' to 'outperform', as the bank delivered an upbeat outlook for the UK insurance sector.Credit Suisse said that RSA's delivery on cost and operating return targets will "provide capacity for a sharp improvement in capital returns".It has hiked its target price for the stock from 450p to 525p."The fundamental appeal of the UK life and savings companies is underpinned by low interest rate risk, solid growth dynamics and attractive dividend profiles," Credit Suisse said."While politics (elections) and regulatory developments may provide some distractions in the coming months, the compounding growth in profits, cash and [dividends] justify continued investor support, in our view."The bank said that the property and casualty insurance sector was "stabilising" with UK motor pricing improving, and shareholder returns are likely to be driven by dividends and capital returns.Meanwhile in the life and savings sector, the bank maintaine 'outperform' ratings for Prudential and Aviva due to both companies' "sustainable growth and recovering dividend outlooks".Prudential's target price was raised from 1,600p to 1,750p, while Aviva's target was lifted from 575p to 610p.RSA was up 2.8% at 464.4p by 09:50, while Prudential was down 0.4% and Aviva gained 0.1%.