Brit shares soar on private equity bid

Brit's share price has risen more than 20% this morning after the insurer rejected an unsolicited cash offer from a private equity firm - believed to be Apollo - for the group.

At 10.42am the share price was up 20.23% to 876.5p, an increase of 147.5p from its price at the close of trading yesterday.

Execution Noble analyst Joy Ferneyhough said: “We welcome the interest in the sector given our view that these stocks are significantly undervalued vs ROE and historic trading levels by, 25-30%.

"Our preferred plays on fundamentals remain Hiscox, Amlin and Catlin however we also see bid speculation could help the smaller names in the near term as well. We struggle to see how Appolo could justify a higher price than the indicated £10 per share given Brit’s ROE is only 10% and therefore the 1x TBV could be argued to be more than fair, and b) lack of a counterbidder.

"The attraction of Brit is clearly its high dividend yield (7%) as well as the low valuation. However in Brit’s case the low valuation is somewhat justified given their low ROE, more casualty weighted focus, where margins are under pressure and where management have suggested premiums are unlikely to grow anytime soon (Q1 -13%).”