Motor insurers help FTSE edge higher as price war eases

Fri Jan 17, 2014 7:21am EST

* FTSE 100 up 0.2 pct

* Motor insurers rally as pricing competition eases

* Shell profit knocks index to underperform peers

* Set for best week of 2014

By Francesco Canepa

LONDON, Jan 17 (Reuters) - Britain's top share index edged higher on Friday and was on track for its best weekly gain this year, lifted by strong UK retail sales data and a rally in motor insurer stocks.

Insurer Admiral Group rose 5.4 percent to the top of the FTSE 100 as data showed a multi-year decline in car insurance prices slowed in the last quarter of last year, potentially opening the door for some earnings upgrade for shares in the industry.

"The trend would be consistent with a stabilisation and, hopefully, an improvement in prices sometime in 2014," said Ben Cohen, an analyst at Canaccord Genuity.

"We are in an environment where there hasn't been a lot of upward earnings revision across the whole sector and investors are keen to buy into sub-sectors where you've got some signs of positive earnings momentum."

Analysts have cut their profit estimates for insurers in Britain's FTSE 350 index by 0.7 percent in the past three months, with non-life insurance companies such as eSure , Direct Line and RSA Insurance Group suffering some of the steepest downgrades.

The three stocks rose between 1.6 percent and 4.6 percent on Friday, with the broader FTSE 350 non-life insurance up 1.5 percent.

The blue-chip FTSE 100 index was up 11.27 points, or 0.2 percent, at 6,826.69 points at 1210 GMT. The index is up 1.3 percent so far this week, its biggest rise since late last year.

Sentiment was also supported by data showing British retailers reported the fastest annual sales growth in more than nine years in December, with activity expanding at more than double the expected pace.

On the downside, Royal Dutch Shell's two listings knocked a combined 12 points off the FTSE after the oil major warned its fourth-quarter figures are expected to be significantly lower than recent levels of profitability because of oil and gas prices and problems with its refining business.

"When you're talking about higher costs and lower production volumes, it's a lethal combination," Nick Xanders, who heads up European equity strategy at BTIG, said.

"It's symptomatic of the entire market, with costs rising but revenues not coming through. Some hope that it's a company specific thing, but I don't think it is."

Miners extended a bounce after Rio Tinto's good results on Thursday. The sector is up 7.5 percent this week.

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