Shares fall despite positive analyst outlook

Brit Insurance expects stabilising UK property and motor rates to improve by the end of next year, its chief executive Dane Douetil said this week.

This view was accepted by analysts, who also accepted the insurer’s reassurances over subprime risk and agreed that Brit was well in line to hit its full year targets.

But the stock market took a different view, with shares in Brit tumbling more than 2% immediately following the release of its third quarter trading update on Thursday.

Group gross premiums for the first nine months totalled £1,020.1 million, an increase of 4.3% on last year’s Q3. Premiums written by Brit UK increased by £8.8 million to £228.1 million.

Douetil said: “The UK market remains challenging but rates are generally stabilising and we expect to see an improvement in the next 12 months.”

Analyst Numis said: “We have recently discussed [subprime risk] with Brit and are comfortable that the majority of the group’s financial and professional risks lie outside the areas most likely to be impacted by the issue.”

“We think Brit UK is now starting to move in the right direction”, Numis added, reiterating its ‘buy’ recommendation but reducing target price by 10p to 390p, 2007 PBT by £10 million to £183 million and 2007 EPS by 2.2p to 40.1p.

Citi maintained its ‘hold’ recommendation but lowered its target price to 285p from 360p, which it said reflects an increase in its estimate of the company’s cost of equity.