December 22, 2022

Agree with Swiss Re: best buy when global insecurities and yields rise

Agree with Swiss Re: best buy when global insecurities and yields rise

The time for buying reinsurance shares may as well be as good as it gets. Increased global security risks mean higher premiums and more revenues for this industry and raising yields mean better business. Swiss Re may be a perfect Swiss representative and our CEO, Dr. Hermann J. Stern, discussed it with our guest investors during our Coffee Break chat. Inspired by their talk and a “Call of the week” buy recommendation from NZZ’s The Market from December 8th, we also wanted to take a closer look into the details.

JPMorgan recently upgraded Swiss Re’s shares from neutral to overweight, meaning that investors should consider making them a large part of their portfolios. They’ve also added them to their focus list of stocks with the greatest potential.

The previous period wasn’t particularly good for reinsurers and especially ones like Swiss Re, which are known for their global leadership when it comes to extreme risks, as we’ve had several years of natural catastrophes. This weighed heavily on their capital and profitability, which is also seen in Obermatt’s Safety and Growth ranks for Swiss Re: both in lower 20s.

Both are expected to change, though. The inflation and expected prices increase across all industries, especially insurance premiums, will mean higher profits and the company will be able to grow and improve their portfolio.

With an Obermatt Combined rank of 70 and a Value rank of 65 (which means that Swiss Re is cheaper than 65% of the company’s competitors), we do believe it is a good catch, especially as we don’t think the current lower price is justified. We hence agree with NZZ The Market’s buy recommendation and buy the stock ourselves for our Swiss Value Wikifolio.

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