Berenberg raises target price on 'top pick' Beazley

Berenberg raised its target price on Beazley from 685.0p to 720.0p on Monday, stating the group was still its "top pick" in the UK insurance sector.

Berenberg believes that Beazley's current earnings momentum, stemming from its "highly diversified book", will enable it to absorb losses from Hurricane Ian better than its peers can, and still meet its "high-80s" combined ratio guidance.

The German bank stated that, depending on the quantum of the loss, there could be "some downside risk" to the group's combined ratio but said it was "reassured" by the fact that Beazley had not pulled its guidance, which it reckons suggests it is still achievable.

"Beazley has been the best performing stock in our coverage ytd thanks to strong growth and improving underwriting profitability momentum. We believe losses from Hurricane Ian should be manageable, and in our view, if Beazley keeps its combined ratio guidance intact, it will cement its position as the number one highest-quality insurer in the subsector," said analysts.

"This is because doing so will prove to investors that its margins are structurally more attractive than those of its peers, and that it can deliver them despite significant nat-cat activity. Beazley remains our top pick in London Market."

Looking at the wider sector, Berenberg lowered its target price on Hiscox and Lancashire from 1,045.0p to 990.0p and 700.0p to 630.0p, respectively.

Reporting by Iain Gilbert at Sharecast.com