Direct Line Group PLC (LON:DLG) was the top FTSE 100 gainer this morning after JPMorgan Cazenove upgraded its rating for the household and motor insurer after recent sharp falls in the stock in the fall-out from the cut made to the Ogden discount rate used for personal injury claims.
The US bank upgraded its stance on Direct line to ‘overweight’ from ‘neutral’, albeit with a reduced target price of 395p, down from 410p.
In early trading, Direct Line shares were up 3.4%, or 11.5p at 352.5p.
In a note to clients, JPMorgan’s analysts said: “The UK non-life sector has seen significant volatility in the year to date, largely due to the Ogden discount rate change.
“While the impact of this has clearly has not fallen uniformly across the sector, in our view the underperformance of Direct Line looks increasingly disproportionate.”
They added: “For a business with strong brands, a conservative balance sheet, and a long-term expense opportunity, we see this as highly attractive and upgrade to Overweight."
Others downgraded …
Elsewhere in the sector , the analysts said that although they continue to see a more favourable earnings trajectory at Esure PLC (LON:ESUR) and Hastings Group PLC (LON:HSTG), recent share price strength has caused them to move their ratings for both to ‘neutral’ from ‘overweight’ on valuation grounds.
Esure shares were down 1%, or 2.3p to 236.2p, while Hastings fell 1.9%, or 5.3p to 270p.
The analysts said Direct Line is now their top pick in the UK non-life sector, followed by FTSE 100-listed peer Admiral Group PLC (LON:ADM) , on which they maintain an ‘overweight’ stance.