2 September 2010

Brokers Views: Panmure Gordon & Co

09/02/2010

In a report focusing on quoted UK life insurers, Panmure maintains its 'positive sector stance’ due to a number of factors: share prices have stabilised following the dramatic recovery from their March 2009 lows, and the broker expects ‘sentiment to improve in 2010’.

Valuations will move higher this year, predicts Panmure, recovering further ‘to embedded value multiples rather than discounts for all insurers’, and ‘dividend yields will come back into greater focus’. Consolidation, or the expectation of it, ‘will never be far away’, spurred on by deal-hungry Resolution and likely underpinning the share prices of the sector’s larger constituents.

Accordingly, the broker highlights the attractions of Aviva, its top pick for 2010, urging investors to buy at 415p and setting a 526p target price, on the basis of a valuation gap between the FTSE 100 firm and its blue-chip benchmark-traded peer Prudential.

Insurance insights

Other stocks receiving positive stances are Legal & General, a buy at 83p with a 99p target, Prudential, worth snapping up at 611p and St James’s Place, which represents good value at 271p. Meanwhile, investors are urged to sit tight and ‘hold’ Standard Life at 209p.

Amid the small-cap ranks, Panmure reaffirms its faith in the well-managed Chesnara – with a £211 million market cap at the current 208p – on the strength of last year’s value-enhancing Moderna acquisition. With a target price of 238p and a ‘sustainable and growing’ dividend yield of 7.7 per cent, based on an estimated dividend of 16p, the shares are a buy.

Tags: Buy/Hold

Sector: Life Insurance

Companies: Chesnara , Aviva , Legal & General Group , Prudential , St James's Place , Standard Life

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