HSBC raises target price on esure Group, reiterates 'buy'
esure Group
279.60p
17:00 18/12/18
Analysts at HSBC bumped up their target price on shares of esure Group, telling clients that at current levels the stock price was discounting a compound annual rate of growth in the insurer's earnings and premiums of just 1.5% between 2016 and 2019.
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They on the other hand were expecting increases of 13% and 11%, respectively.
Furthermore, the recent drop in the Ogden rate from 2.50% to -0.75% had lifted the uncertainty regarding future reinsurance costs.
Esure also enjoyed a "strong" capital position - with a Solvency II ratio then at 153% - that showed little sensitivity to market movements.
Yet HSBC's projections did not factor in the run-rate required to hit 3.0m policies by 2020, such that delivering on that target would entail upside risks to its estimates.
On the back of its higher estimates, HSBC raised its target price for the shares from 285p to 320p while keeping its recommendation on the shares at a 'buy'.