Berenberg upgrades Beazley to 'buy'
By Iain Gilbert
Date: Monday 26 Jul 2021
(Sharecast News) - Analysts at Berenberg upgraded insurance firm Beazley from 'hold' to 'buy' on Monday, highlighting a "rare opportunity" for profitable growth.
After it outlined two reasons why it had chosen to remain neutral on Beazley at the time it initiated coverage on the stock in June, Berenberg said it now believes the company has addressed its concerns.
Berenberg stated one such worry was that Beazley had more work to do to convince the market that its profitable growth in cyber insurance could be restored, while the other was an ongoing "element of uncertainty" in regards to a potential $50.0m of additional losses from Covid-19.
As far as the cyber element was concerned, the analysts said management had done "an impressive job" of updating the market on the progress it has made on its cyber re-underwriting and risk management strategy, with strong signs emerging from claims experience year-to-date that it would most likely pay off, which in their view will be "a source of competitive advantage" in the medium term.
"Beazley is clearly ahead of peers in the fastest growing, increasingly complex and non-commoditised product line in insurance; we think this presents a rare opportunity for profitable and sustainable growth," said Berenberg, which also raised its target price on the stock from 410.0p to 460.0p.
The German bank added that Beazley also confirmed in its interim results that not only had its $340.0m Covid-19 loss estimate for 2020-21 remained "robust", but also that it had not incurred the additional $50.0m expected loss related to events in the second half, as US and European economies have largely opened up.
"In our view, this removes a source of EPS downgrade for FY21E," said Berenberg.
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