On Wednesday, Deutsche Bank raised its price target for Beazley PLC (BEZ:LN) (OTC: BZLYF) to GBP 9.77 from GBP 8.73, while maintaining a Buy rating on the shares.
The adjustment reflects the stock's robust year-to-date performance, which has seen it climb 46%, earning the title of top performer in the bank's non-life UK/EU sector coverage. This surge places Beazley well ahead of its UK-listed peers Lancashire and Hiscox, which have seen increases of 16% and 9%, respectively.
The significant driver behind Beazley's rally has been the recovery in its price to tangible net asset value (P/TNAV) ratio, which has risen from 1.2x to 1.6x since the beginning of the year, based on spot basis calculations.
The company's tangible net asset value (TNAV) has also grown by 15%, although this has been slightly offset by a negative impact from currency exchange rates, specifically a 5% decline due to the sterling to dollar conversion.
Despite the substantial recovery in its P/TNAV ratio, Beazley's current spot valuation remains in the middle range when compared to its UK-listed peers and is notably below its previous ratio of 1.96x as of December 31, 2022.
Market sentiment towards Beazley has been buoyed by strong full-year 2023 and first-half 2024 results, along with improved combined operating ratio (COR) guidance provided in August of this year, which has realigned the P/TNAV ratio with that of its UK counterparts.
Looking ahead, Deutsche Bank anticipates further upside potential for Beazley's share price, driven by expected TNAV growth and distributions. These projections are supported by the bank's return on tangible net asset value (ROTNAV) estimates of 30% for the full year 2024 and 22% for the full year 2025. For the full year 2025, the bank models a TNAV growth of 12% and a distribution yield of approximately 7%.
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