Hastings Group Holding PLC (LON:HSTG) share climbed on Friday morning after the motor insurer was upgraded by the London branch of Barclays investment bank.
The motor insurance industry has come under a lot of pressure in recent months, with average premiums dropping sharply while average compensation pay-outs have soared.
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As a result, Hastings’ shares have fallen by almost a third over the past six months, leaving them at two-year lows.
According to Barclays, which has gone “value-hunting in a soft market”, that means the stock is now attractively priced.
Analysts there upgraded the rating to ‘overweight’ from ‘equal weight’, although they kept their price target on hold at 243p.
There was also a small price target hike for sector peer Admiral Group PLC (LON:ADM), which Barclays moved up to 2,009p from 1,997p previously. Analysts still have the stock as ‘underweight’ though.
Ogden reforms
Another key issue for insurers of late has been the changes to the Ogden discount rate.
In the past, insurers were able to knock a small percentage off lump-sum payments on the basis that the person receiving it could invest it diligently over the years and make some extra cash.
But last February, the government surprisingly cut the discount from 2.5% to -0.75%, which massively increased insurers’ payouts.
The government has since said it might have gone too far with the initial cut and would look at reforming the discount rate soon.
But Barclays’ number crunchers don’t expect any changes to come in until late 2019.
Hastings shares rose 2.1% on Friday morning to 193p.