Insurance reporting season is approaching halfway and it’s been a mixed bag so far, with general insurers hit by soaring motor claims and weather costs, but it’s been a different, much better, story for life groups.
US bank Jefferies has given its scores on the doors so far with Legal & General Group PLC (LSE:LGEN) coming out top and Admiral Group Plc (LSE:ADM) holding the wooden spoon.
L&G rates a 'buy' (target 335p) driven by significantly higher profits in L&G Retail, due to favourable longevity assumption changes (ie higher death rates)
The underlying financial position or Solvency II ratio is remarkably strong at 236%, notes Jefferies, driven by rising interest rates, while there has been a step-up in the number of pension schemes approaching the insurance market, due to many schemes now in a surplus position and well-placed to transfer risk.
L&G remains on track to achieve its 2020-24 cash, capital and dividend ambitions.
Aviva PLC (LSE:AV.), at 'hold' (445p target), is mid-table in Jefferies’ rankings with it too beating forecasts due to a strong performance from its UK and Ireland life arm though underlying growth was still healthy at 24%.
The insurer also has a Solvency II ratio of 212% allowing the company to announce a buyback of £300m, broadly in-line with consensus.
The group is on track to meet or exceed its financial targets, adds Jefferies.
Not looking so good is Admiral, 'underperform' (1,725p), which without a compensating life arm has borne the brunt of the general insurance headwinds.
Admiral’s profit before tax of £469mln was 5% below consensus, largely driven by Admiral's International Insurance business, with "very low" market average premiums in Italy and Spain, and "persistently high" claims inflation in the US auto insurance industry.
The business has also not been immune to the headwinds impacting the motor insurance market in the UK.
Admirtal's initial underwriting year loss ratio for 2022 of 102% or the highest level in over a decade by some way, based according to Jefferies.
"Not only will this impact current year earnings, but also future profit commissions."
Share movements today saw L&G up 0.6% to 263p, Aviva up 2.5% at 461.3p and Admiral down 1.7% at 1,970p.