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JP Morgan upgrades Direct Line Group and Admiral
9th Mar 2020 13:12
(Sharecast News) - Analysts at JP Morgan upgraded their recommendations for UK auto insurers Admiral and Direct Line in anticipation of continued discipline on the part of both firms on margins.
A divergence between market-wide claims inflation and pricing was evident in 2019, but listed insurers had managed to navigate those troubled waters "fairly well", the investment bank said, describing margins as "surprisingly robust" outside of Hastings.
"We expect this discipline to continue, and hence for the sector see low-growth continuing, but against the wider macro backdrop and ongoing COVID-19 concerns we believe "low growth" will increasingly be seen as attractive," JP Morgan said.
In their view, Direct Line, whose shares they upgraded to 'overweight' (and nudging up their target from 3450p to 350.0p), had emerged from the most recent earnings season looking strongest, with both a better-than-expected underlying earnings performance and a highly attractive capital return profile.
JP Morgan also upgraded its view on Admiral, from 'underweight' to 'neutral', and revised its target price from 1,925.0p to 2,125.0p, on the back of a higher likelihood of high reserve releases extending into 2020.
For Saga, another non-life UK insurer, which they rated at neutral, they cut their dividend per share forecast to zero "in light of the travel and cruise outlook".
A divergence between market-wide claims inflation and pricing was evident in 2019, but listed insurers had managed to navigate those troubled waters "fairly well", the investment bank said, describing margins as "surprisingly robust" outside of Hastings.
"We expect this discipline to continue, and hence for the sector see low-growth continuing, but against the wider macro backdrop and ongoing COVID-19 concerns we believe "low growth" will increasingly be seen as attractive," JP Morgan said.
In their view, Direct Line, whose shares they upgraded to 'overweight' (and nudging up their target from 3450p to 350.0p), had emerged from the most recent earnings season looking strongest, with both a better-than-expected underlying earnings performance and a highly attractive capital return profile.
JP Morgan also upgraded its view on Admiral, from 'underweight' to 'neutral', and revised its target price from 1,925.0p to 2,125.0p, on the back of a higher likelihood of high reserve releases extending into 2020.
For Saga, another non-life UK insurer, which they rated at neutral, they cut their dividend per share forecast to zero "in light of the travel and cruise outlook".