Broker tips: Beazley, Centamin

Analysts at Canaccord Genuity reiterated their 'buy' rating and 610p target price on insurance and underwriting service Beazley on Friday, a day after the firm warned claims from the recent California wildfires had cost it roughly $40m.

In response, Canaccord cut its 2018 pre-tax profit forecasts 38% to $67.5m to reflect the loss. The Canadian broker also nudged back investment income to $27.1m but noted that all other assumptions were unchanged.

"Whilst another profit before tax downgrade is likely to have a near-term (small) negative impact on the share price, the fact that Beazley has suffered a loss from these horrific wildfires should come as no surprise," said Canaccord.

The broker reminded investors that it had been warning "for a while" that the insurance sector would see heightened claims activity as a result of the fires, with insured losses now being forecast at more than $10bn.

However, Canaccord noted that there was a silver lining in all this, noting that losses from the second half will help underpin rates going into 2019.

"We have previously commented that we look for overall flat reinsurance rates at the January renewals and for the incremental uplift in most commercial insurance lines to continue into 2019."

"Arguably, the market has already accepted that 2018 is going to be another more challenging year for (re)insurers and so it's focused on the underwriting outlook for 2019 and the improving investment return on the back of interest rate rises."

Berenberg downgraded gold miner Centamin to ‘hold’ from ‘buy’ on Friday, cutting the price target to 106p from 115p, citing caution over 2019 guidance.

The bank said it continues to like Centamin’s high-quality asset, strong improvements in forecast free cash flow and 4-6% dividend yield.

"However, 2018 has been a challenging year for the company, marked by two production downgrades. As such, we expect Centamin to be cautious on 2019 guidance," it said.

Berenberg previously sat at the upper end of the consensus range for 2019 production but is now pulling back its forecasts.

"These changes take 2019E production to circa 540koz (down 7% from circa 580koz). Given the impact that this has on our price target, and the fact that the shares have rallied 9% since our October update, we now downgrade to hold," it said.

"There is potential for Centamin to better this forecast; equally, we expect the market to be very disappointed by a number lower than this."