James Dean comments on the stock market action
Spitzer has gone and Bear Stearns, the investment bank being bought by JP Morgan this week for a reported $230m, was close behind him. Like an echo of the Northern Rock collapse, Bear investors, fearful of the bank’s declining ability to fund itself with short-term loans – its lifeblood – withdrew money in vast amounts. The 85-year-old institution, once the fifth largest investment bank in the US, was close to becoming the credit crunch’s biggest victim. The incident is a stark warning that no company is safe.
And with Spitzer now facing prison, bond insurers need a new hero. Thanks to securing a $1.5bn capital injection – in which Spitzer is believed to have been key – Moody’s affirmed bond insurer Ambac’s triple-A rating, but placed the company on negative ratings watch, citing lingering uncertainties while its capital plan is implemented.
Meanwhile, ABN AMRO analyst Joanna Parsons pointed to Novae’s combined ratio of 90.4%, reserve releases of £5.8m and investment income of £46.8m as the driving force behind a “superb” set of results. She continued: “Novae’s larger-than-average speciality book and lower-than-average reinsurance book means it is less exposed to firmer catastrophe rates”, and reiterated a ‘buy’ recommendation.
Novae also impressed Numis, beating the analyst’s profit forecast by £9m. Reiterating an ‘add’ recommendation and target price of 39p, Numis said: “Attractive upside could be unlocked with resolution of the legacy run-off units.” Novae shares were trading at 34.50p as Insurance Times went to press.
Shore Capital hammered Benfield for its disappointing results, pointing to greater than expected losses in its new corporate risk division. Analyst Eamonn Flanagan said: “Results were impacted by foreign exchange, to the tune of £10.3m, but then again so was JLT.”
He reiterated a ‘sell’ recommendation and suggested a switch to JLT stock. Benfield shares were trading at 244p as Insurance Times went to press.
Omega was given a better write-up, as the continued prospect of a takeover remained. “The group is still in talks with a number of interested parties, with a bid below 200p per share unlikely to succeed, in our view”, Flanagan said, reiterating a ‘buy recommendation. Omega shares were trading at 158.5p as Insurance Times went to press.