James Dean looks at key market influencers

The US bond insurance market saw further investor activity this week, with reports suggesting that Assured Guaranty is in line for a $1bn cash injection from US financier Wilbur Ross. Meanwhile, Ambac was reported to be talking to eight banks in a bid to secure $3bn capital, as all the big monoliners seek to cling to triple-A ratings – something that corporate investors worldwide are keen that they do.

Elsewhere in the US, AIG suspended its share buy-back programme after its $5bn fourth quarter loss was officially announced this week. This figure was already known following an investigation by PricewaterhouseCoopers auditors, who uncovered a “material weakness” in AIG’s method for estimating the value of sub-prime linked investments.

Back in the UK, full-year results continued to roll in. Royal & SunAlliance (RSA) saw a £814m group operating result that was well ahead of expectations, but Numis decided to remain cautious on the insurer. Analysts said: “Despite continued progress on underwriting, with investment earnings accounting for roughly 80% of earnings, we think the shares are largely a call on macro economic issues.”

Downward pressure on interest rates in the short term would likely impact on investment earnings, they added, reiterating a ‘hold’ recommendation and target price of 130p. RSA shares were trading at 127.7p as Insurance Times went to press.

Looking ahead, Numis expects Omega to come in with strong EPS growth on the back of a recent expansion in premiums when it reports its results on 13 March. Omega revealed a 26th consecutive year of closed year profits when unveiling its 2005 syndicate results. Analysts believe Omega’s share price reflects ongoing bid talks, and reiterated a ‘hold’ recommendation and target price of 170p. Omega shares were trading at 170p as Insurance Times went to press.

Admiral reported a profit of £182.1m, an increase of 24% on the previous year. A hint from Admiral’s Spanish trading data pointed to better than expected growth potential as the insurer seeks to expand on the Continent. Analysts said: “Overall we see scope for Admiral to beat expectations and would be surprised to see weakness in numbers.” Numis reiterated its ‘add’ recommendation and target price of 1180p. Admiral shares were trading at 892p as Insurance Times went to press.