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FTSE rises as insurers rally on Irma downgrade

FTSE rises as insurers rally on Irma downgrade

by Daniel Grote Sep 11, 2017 at 11:02

The FTSE 100 has risen, while shares in insurers rallied on hopes the impact of hurricane Irma would be less bad than feared.

The UK blue-chip index rose 54 points, or 0.7%, to 7,431, recovering nearly all of the ground lost last week.

But the big movers were to be found outside the FTSE 100. Lloyd's insurers topped the FTSE 250 on hopes the impact of hurricane Irma, which has now hit south west Florida, would be less bad than feared.

Irma has been downgraded to a category one storm, down from category four yesterday when it hit the Florida Keys.

'The impact is far less than the worst-case scenario predictions, with insurance companies topping the performance tables today,' said Rebecca O'Keeffe, head of investment at Interactive Investor.

Lancashire (LRE) was the biggest FTSE 250 rises, up 7.6% at 657.5p, having fallen 12% over the previous two weeks amid fears over the impact of first hurricane Harvey, then Irma.

It was closely followed by rival Beazley (BEZ), up 5.7% at 476.6p, while Hiscox (HSX) rose 3% to £12.61.

Peel Hunt analyst Andreas van Embden, who holds an 'add' rating on Lancashire, said the stock was the most attractive, given its current valuation.

'Despite the recent pullback, Beazley and Hiscox still trade as if 2017 will be another benign hurricane year and we continue to see the risk-regard as unattractive,' he said.

'In Lancashire's case there will be the inevitable losses; however, the company's underwriting and capital strategy has been geared to respond to these types of situations, subject to the extent of major losses they take on the chin themselves.

'Lancashire is the most interesting stock to focus on during these types of events with earnings at cyclical lows following a derisking strategy and poised to bounce back significantly in a dislocated market, as capital is put to work again and exposures are increased.'

Shares in the Catco Reinsurance Opportunities (CAT) investment company, which provides protection to reinsurers, rose 3.2% to $1.13, although remain heavily down over the last two weeks amid fears over the impact of claims.

Petra Diamonds (PDL) was meanwhile the biggest FTSE 250 faller, down 8.1% at 82.7p, after halting operations at one of its mines in Tanzania as the government seized a consignment.

Among small cap stocks, shares in UP Global Sourcing Holdings (UPGS) lost nearly half their value after the homeware brands maker warned revenue growth in 2018 was unlikely.

'The overall trading environment for general merchandise has become tougher, with wage inflation running behind general inflation,' it said.

'Consumers' discretionary spend is under pressure and confidence is therefore lower than it has been for some time, which is inevitably being reflected in purchasing behaviour.'

The news will be a blow to major shareholders BlackRock and Henderson, who hold 10.4% and 6% of the companies shares respectively.

Thomson Reuters lists the BlackRock UK Smaller Companies fund and the Henderson Smaller Companies (HSL) investment trust as among the major investors. 

Servelec (SERV) was another heavy faller, down 8.9% at 257p as the technology group warned of delayed orders. Shares in the Strategic Equity Capital (SEC) investment trust, which holds nearly a tenth of its portfolio in the stock, fell 1% to 225.1p.

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