HSBC upgrades RSA, downgrades Hastings

The bank noted RSA shares are up 19% year-to-date, outperforming the FTSE 100 index and the DJ Stoxx Insurance index by 9% and 36%, respectively.

“We upgrade the shares given we see more scope for management actions around the legacy portfolio, debt restructuring, cost savings and a further improvement in attritional loss ratios.”

“The capital position is comfortable while there is more scope for EPS upgrades if the management team achieves its 2018 ambitions, increases cost targets or restructures debt further.”

HSBC downgraded Hastings to ‘reduce’ from ‘hold’ and upped the price target to 193p from 185p.

It said while the company remains a beneficiary of rate increases in the UK motor insurance segment and is well-placed to achieve its IPO targets, it is concerned about consensus earnings estimates.

In addition, it said the stock screens expensive trading at 15% above its new target price.

The bank kept Admiral at ‘hold’ given the lack of upside and as it awaits more disclosure on the company’s UK home segment.

It retained Direct Line at ‘reduce’, pointing to declining earnings during 2015-18 despite the group being a beneficiary of rate increases in the UK motor segment.

HSBC held Esure at ‘buy’ saying it has a comfortable capital position and should experience around 17% compound annual growth rate in 2015-18 operating earnings.

At 1007 BST, RSA shares were up 1.2% to 503p, Hastings was down 0.5% to 218.90p, Direct Line was up 0.1% to 376.70p, Admiral was up 0.4% to 2,004.57p and Esure was up 0.3% to 285.90p.