Analysts this week rushed out bullish notes on Lloyd's underwriters, saying they could be in line for upgrades.

KBC Peel Hunt was particularly upbeat. "There is scope for earnings upgrades if we get through this hurricane season," it said. "The general expectation is for rising capacity next year. Supernormal profits could therefore persist through to 2007 with great scope for strong dividend increases."

It zoomed in on a number of insurers, particularly Amlin, Atrium, Chaucer, Hardy, Heritage, Hiscox, Kiln and Wellington.

The sentiment was shared by Morgan Stanley, which lifted its target price on Amlin by 5p to 315p and published an overweight rating on the stock. It also raised its target price on Hiscox by 5p to 225p, although it has an underweight recommendation on the insurer.

Besides looking at fundamentals, dealers were also in search of the next takeover target. Again they speculated Prudential could be snapped up by AXA or Generali. Others said a more likely bid candidate could be Legal & General.

As Insurance Times went to press, Prudential was trading at 632p and Legal & General was at 141p.

Admiral was revved up. The motor insurer has had terrific runs since it floated at the tail end of 2004 at under 300p. It now stands at 858p. Investors reckon it is in the process of renegotiating its reinsurance deal.

Yvette Essen is stock market reporter for the Daily Telegraph