On Tuesday, Morgan Stanley (NYSE:MS) made a revision to its stance on Tryg A/S (TRYG:DC) (OTC: TGVSF), downgrading the stock from Overweight to Equalweight and adjusting the price target to DKK173.00 from DKK177.00. The firm's analyst cited the insurance company's solid fundamentals but limited potential for further improvement as the reason for the downgrade.
According to the analyst's assessment, Tryg holds a commanding position in the Nordic insurance market, which is known for its oligopolistic nature. The company is recognized for its superior underwriting quality, robust market share, and leading profit margins. Additionally, Tryg maintains a strong balance sheet and is known for its consistent dividend payouts.
Despite these strengths, the analyst believes that the prospects for significant further advancements are minimal. The potential for a share buyback program is also considered to be largely factored into the current consensus. With an anticipated upside of only 8% to the new target price of DKK 173, Morgan Stanley sees the stock as fairly valued at Equalweight.
The analyst's projections include annual share buybacks of DKK 1.25 billion from 2024 to 2027, which would account for approximately 5% of Tryg's market capitalization. This strategy is expected to reduce the company's solvency ratio from 202% to around 170%, bringing it in line with industry peers.
Finally, while a buyback announcement is likely to be a key point of interest at the upcoming Capital Markets Day (CMD), the analyst's estimates largely match the consensus. This alignment with market expectations has tempered the firm's enthusiasm for the stock's near-term prospects.
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