ShoreCap resumes coverage on Beazley at 'buy' on rate momentum and valuation grounds

(Sharecast News) - Analysts at ShoreCap resumed coverage of Beazley with a 'buy' recommendation, arguing that the insurer was "best placed" to benefit from the rating cycle across its cyber and liability (casualty) lines - where rate momentum was accelerating.
"We expect management to grow the top line through predominately aggressive rate increases to protect its profitability from the onset of increased ransomware and social inflation costs," they added.

Furthermore, they judged the business to be "well capitalised" following an equity issuance in 2020 and the active use of reinsurance.

The shift into casualty and away from property catastrophe had also lower the volatility of its earnings, even as it maintained a sector leading return on equity.

Valuation was also supportive.

"We forecast mid to high teen RoE as it recovers from recent Covid-19 losses, however the stock continues to trade in line with its own cross-cycle average, despite double digit rate momentum on two thirds of its book.

"We resume coverage with a BUY recommendation and a fair value of 530p."