RBC Capital has double-upgraded its rating for esure Group PLC (LON:ESUR) to ‘outperform’ from ‘underperform’ following the FTSE 250-listed motor and home insurer’s recent full-year results.
The Canadian bank also hiked its target price for the Shelia's Wheels brand owner to 275p from 250p after raising its 2018-2019 net income estimate by 11% to reflect firstly stronger growth than it had modelled and higher additional service revenues (ASR).
In a note to clients, RBC’s analysts said: “Our concerns around the footprint expansion have been answered and we expect ASRs to keep increasing due to more higher premium business being put on the books.”
They added: “Higher weighting to ASR vs underwriting profits should provide some protection if motor insurance pricing deteriorates significantly. With the stock trading at a discount to peers, we double upgrade esure”.
The analysts noted that UK motor growth stories - esure and Hastings Group PLC (LON:HSTG) - have both seen weak share price performances in the year to date due to concerns around the slowdown in UK motor market pricing, but for now, they think that these concerns are more than priced in at current levels at esure.
In late morning trading on Friday, esure shares were 1.3% higher at 227p.