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.
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