Ahead of earnings season for insurance stocks, Nomura has reviewed its coverage on the non-life sub-sector, highlighting Admiral as its top pick whilst upgrading its rating for Direct Line and downgrading RSA.

In a research report on Tuesday, Nomura said: "We are not expecting any major surprises, and expect a good set of results from all the companies."

The broker believes that the UK non-life insurance sector offers good dividend yields among the Pan-European insurance category and "should lead to good total returns, and which we believe are supported by strong balance sheets and relatively more stable earnings streams."

The broker continues to see Admiral as is sector preference, leaving its target price unchanged at 1,350p.

"Although the stock performed strongly in 2012 and has done well year-to-date, we believe a good set of results should reinforce the earnings outlook, where we look for double-digit earnings growth, and give greater confidence in the 2013 yield of 8.0%."

As for Direct Line, the shares have been lifted from 'reduce' to 'neutral' (target raised from 174p to 193p) ahead of its results, which are expected to show that the company is on track with its restructuring.

Nomura has cut its rating for RSA from 'neutral' to 'reduce' (target left at 115p), saying that after the stock's outperformance since November, it is now trading at the top of its recent price-to-tangible net asset value range. The broker said that the share price may "tread water" in the short term.

BC

Related share prices
RSA Insurance Group (RSA) share price
Admiral Group (ADM) share price