1. Hello Guest Click here to check FX Binary Point Financial Directory

Admiral moves higher on hopes of a £300m payout but esure slips

Discussion in 'Market News' started by Lily, Mar 8, 2016.

  1. Lily

    Lily Forum Member

    Aug 29, 2015
    Likes Received:
    Nomura moves from neutral to buy on positive outlook for the car insurer

    Motor insurer Admiral has accelerated in a falling market on a positive outlook for the business and talk of a higher than expected payout to shareholders.

    Its shares are up 12p to £19.56 as Nomura raised its recommendation from neutral to buy, partly on the prospect it could afford a capital return of some £300m to investors over the next two to three years. Nomura said:

    We believe Admiral offers an attractive combination of: 1) defensive qualities; 2) growth given rising UK motor rates; and 3) attractive returns via special dividends, which could surprise to the upside.

    The stock de-rated in the wake of reserve strengthening due to bodily injury claims in 2011 (which ultimately proved to be too conservative) and then additional regulatory headwinds and UK motor rate declines. Now we are seeing strong reserve releases, regulatory headwinds have subsided, and UK motor rates are rising again. We believe against this backdrop the stock should enjoy a good performance.

    esure reported 2015 results which were broadly in line with our and the market’s expectations at the trading profit and underlying earnings level but yet again disappointed and confused regarding its dividend policy.

    A pay-out of 70% resulted in a dividend of 11.5p compared to our expectations of an 80% pay-out and a 13.1p dividend…consensus was at 12.9p. Although the group suggests that it has decided to retain capital to fund “profitable growth”, the Solvency II coverage ratio of 123% (post dividend) implies that it didn’t really have much room for manoeuvre.

    It seems the longer investors have had to digest the morning’s dramatic plunge in Chinese exports, the worse they are taking it, the European indices sporadically widening their losses as the day continued.

    Despite Brent Crude holdings its head above the $40.50 per barrel parapet (around halving its initial 1% decline) the FTSE struggled to gain any positive traction, lingering at a 40 point loss for most of the morning. That does, however, make it the best performing major indices, a few specks of green found in its commodity stocks (which are caught between oil’s continued recovery and the ominous signs out of China) and a 6% surge from Burberry, following some surprising takeover speculation, keeping the FTSE from the lows seen by its European peers.

    Continue reading...

Share This Page