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Berenberg sees opportunity in Hannover Rueck stock undervaluation, boosts outlook

EditorEmilio Ghigini
Published 13/08/2024, 08:44
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On Tuesday, Berenberg upgraded Hannover Rueck SE (OTC:HVRRY) (HNR1:GR) (OTC: HVRRF) stock from a Hold rating to a Buy rating, raising the price target to EUR260.00 from EUR235.00. The reinsurance company's stock has underperformed the SXIP index year to date and is currently valued near a two-year low.

The upgrade comes with an optimistic outlook on the company's future earnings. Berenberg highlights Hannover Re 's strong premium growth from property and casualty reinsurance (P&C Re) renewals throughout the year, which has not been fully anticipated by market consensus.

The firm believes that this growth, along with robust underlying P&C Re margins, can positively impact Hannover Re's earnings per share (EPS) for the fiscal years 2024-25.

Berenberg also forecasts a favorable scenario for Hannover Re's capital returns in the fiscal years 2024-26. The consensus payout ratio is considered modest when compared to the company's historical performance, especially in light of the revised criteria from Standard & Poor's (S&P) model. This reassessment could lead to higher capital returns for shareholders.

The firm's analysis suggests that Hannover Re's current price-to-earnings (P/E) ratio of 11.2 for fiscal year 2025 presents an attractive opportunity for investors.

Berenberg's stance is that the current valuation offers a chance to invest in a "wonderful company" at a favorable price, leading to the decision to upgrade the stock and increase the price target.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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