Broker tips: Rathbones Group, Sabre Insurance

Analysts at RBC Capital Markets lowered their target price on investment manager Rathbones Group from 2,100.0p to 1,950.0p on Monday as it updated its model on the firm ahead of its third-quarter trading statement.

RBC said it was updating its forecasts for Rathbones across its forecast period, as it expects "negative recent market movements" to outweigh the benefit of higher interest rates.

The Canadian bank expects group funds under management to have reduced by 3% quarter-on-quarter to £58.9bn, within this it expects minor positive net inflows of £100.0m to be offset by said market movements.

"We expect net operating income of £109.9m for the quarter, up 3% year-on-year, helped by higher net interest income as well as the positive contribution from Saunderson House," said the analysts, who also reduced their earnings per share estimates by 5% across all years.

"The changes to our forecasts lead us to lower our price target, however, we still see clear upside potential in the shares. Rathbones remains one of the leading franchises within a UK wealth market that has secular growth drivers. We consider the current FY23E P/E of 12.7x as undemanding (particularly given multiples paid acquisitions in the sector over the last two years), and retain our 'outperform' rating."

Analysts at Berenberg slightly lowered their target price on car insurer Sabre Insurance from 123.0p to 119.0p on Monday, stating the group's strategy was "consistent" but telematics still posed a risk.

Berenberg said Sabre's nine-month trading update was "more of the same", with the group's core motor book reporting a 16% decline, only partly offset by better motorcycle volumes.

The German bank, which reiterated its 'hold' rating on the stock, highlighted that market pricing had continued to improve, which has gone a way to reduce the gap to claims inflation.

"We remain cautious on Sabre given we are unconvinced about its ability to meet its long-term combined ratio guidance and believe competition from telematics providers will continue to be a headwind," said the analysts.

"We reduce our group premium estimates by £8.0m, as described above, which causes earnings per share to fall by circa 2%. We maintain our combined ratio estimates for 2022 (96.0% versus guidance of mid-90%) and 2023 (87.0%), but forecast Sabre to miss its long-term guidance of 70-80% from 2024 onwards. We reverse the government policy change in corporation tax rate and use a 25% tax rate from 2023 onwards."

Berenberg added that it remains "cautious" on the outlook for the company given its concerns about long-term combined ratio guidance.