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Admiral leaps, L&G dips as investors weigh up insurers
by Chris Marshall on Mar 05, 2014 at 10:09
After the crisis in Ukraine dictated two days of sharp stock market swings, investors got back to the nitty gritty of judging corporate results on Wednesday, divvying up insurance companies into the FTSE 100’s winners’ and losers’ columns.
Admiral (ADML.L) went straight to the top of a slightly depressed blue chip index, rising 5.3% to £14.95 after reporting a 7% rise in pre-tax profits for 2013. The motor insurer’s forecast-beating results nonetheless came accompanied by a warning of pressures on rates, with ‘other revenue’ under regulatory threat.
Shore capital analyst Eamonn Flanagan said Admiral’s shares weren’t worth their high market rating: ‘To us, simply outperforming a weak and struggling industry is not the stuff of double digit PERs,’ he said in reference to the price to earnings ratio.
RSA Insurance (RSA.L) wasn’t far behind, the struggling group up 2.1% to 98p benefiting from a rating rise from analysts at HSBC to ‘neutral’.
Despite reporting a 10% rise in pre-tax profits and 22% full-year dividend increase to 9.3p Legal & General (LGEN.L) was consigned to the other end of the UK’s main index, with shares down 2% to 235p.
Barclays’ Alan Devlin was undeterred even as L&G reported weak annuity sales, outflows from its investment management business and an increased loss in its workplace pension business. ‘With strong dividend momentum and an attractive yield supporting the stock, we remain Overweight,’ he commented.
Another financial company drew interest: Standard Chartered (STAN.L), the emerging markets focused bank that has fallen out of City favour. Adjusted ‘normalised’ pre-tax profits fell by 6% to $6.9 billion, the bank reported, slightly shy of City forecasts. Peter Sands, the group’s chief executive performance in the first half of 2014 ‘will remain challenged both at an income and profit level’. The shares gained 22p or 1.7% to £12.96.
Broader European markets, attempting to gauge the seriousness of the crisis in Ukraine, failed to follow Asia's move higher overnight, with small losses across Europe. The UK’s FTSE 100 fell 0.3% to 6,800, with added pressure from a clutch of shares trading ex-dividend, including miners Rio Tinto and BHP Billiton.
The British pound traded up 0.1% at $1.6684, little moved by a report showing continued strong growth in the UK's services sector, albeit slightly less rapid than in January, with a PMI reading of 58.2 in February.
All eyes are on China’s annual meeting of the National People’s Congress, where premier Li Keqiang has announced the country’s economic growth target of 7.5% for 2014, as expected.
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- Admiral Group PLC (ADML.L)
- Standard Chartered PLC (STAN.L)
- RSA Insurance Group PLC (RSA.L)
- Legal & General Group PLC (LGEN.L)