Esure PLC (LON:ESUR) was the top faller on the FTSE 250 after the car insurer was downgraded by JP Morgan.
Analysts at the investment bank said it expects Esure to register “strong growth” in policy numbers over the coming years, but thinks the internal target “remains a stretch” as it depends on a “favourable pricing backdrop”.
“Given that the home market remains challenging, and that the valuation vs. peers already looks high (due in part to M&A speculation), we move to ‘underweight’.”
The analysts also shaved their price target from 300p to 290p.
Admiral also downgraded
Fellow motor insurance group Admiral PLC (LON:ADM) was also downgraded, this time to ‘neutral’ from ‘overweight’ while the price target was also trimmed to £19.80 (from £21).
JP Morgan noted that the “temporary competitive disadvantage” – high excess of loss retention – that hampered first growth will fall away in January, but said it could still continue weigh on the business in the final few months of the year.
On top of that, the analysts wrote that there are “no obvious catalysts on the horizon” and that, on a price-earnings ratio basis, it looks expensive compared to its peers.
Better news for RSA
Away from cars, home and business insurer RSA Insurance Group PLC (LON:RSA) was among the FTSE 100 leaders this morning after JP Morgan turned bullish on the stock.
Shares have “underperformed” in recent months, the bank said, which now makes RSA’s valuation look “attractive” once again.
They add: “RSA's restructuring plan is largely complete and we believe the company will emerge in FY18 with a cleaner balance sheet capable of supporting special dividends (we assume a 10p Special DPS for FY18 for a total yield of 5.0%).”
JPM also likes RSA’s Scandinavian business, which it reckons is a “key strategic asset” in an “attractive market”.
There was a small increase in the target price as well, to 725p from 700p.
RSA shares were up 0.8% to 635p in early deals, while Admiral and Esure were down 1.3% and 2.8% to £18.92 and 266.8p respectively.