On Friday, Morgan Stanley (NYSE:MS) updated its rating on Swiss Re (OTC:SSREY) stock, upgrading the stock from Underweight to Equalweight and raising the price target to CHF134.00, up from the previous CHF113.00. The adjustment follows a period of significant performance by Swiss Re, which has seen a 15% price-to-earnings re-rating year-to-date (YTD).
The firm's analyst cited Swiss Re's demonstration of earnings power and the resolution of issues related to US liability reserves as key reasons for the upgrade. Swiss Re recently addressed these reserve concerns with a $2.45 billion charge in the third quarter of 2024.
Despite the upgrade, Morgan Stanley noted that there remains a wide margin on earnings estimates for Swiss Re, and there is uncertainty regarding the trajectory for property-catastrophe (prop-cat) pricing in 2026. This uncertainty has influenced the decision to assign an Equalweight rating at this time.
Swiss Re's performance has stood out within its subsector, with the company outperforming peers who also have high exposure to volatile prop-cat risks. The firm's ability to manage these risks and move past the overhang of US liability reserves has contributed to its positive re-rating.
The new price target of CHF134.00 reflects Morgan Stanley's updated assessment of Swiss Re's stock value, considering the recent developments and the outlook for the coming year. The Equalweight rating suggests that the firm views Swiss Re's stock as adequately valued at the current level, with balanced risk and reward.
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