Buy signal on Swiss RE (SREN-CH)

We had an Enter Long Strategic signal on January 3, 2022, triggered by our system on Swiss Re, SREN-CH, the Swiss Reinsurance Company.

Our system also triggered a Enter Long Tactical signal on January 5 that suggest a bullish acceleration. Swiss Re has a reasonnable track record, with a Behavioral score of 4/10, therefore the bullish signal is to be considered as mainly Strategic.

Swiss Re is a € 29.7 Bn market cap and one of the world's leading reinsurance groups. Earned premiums are split betweeen 1/ non-life reinsurance (52%) including primarily damage, civil liability, automobile, accident, credit and guarantee, and other types of reinsurance. 2/ Life and health reinsurance (34%; No. 1 worldwide) of which primarily life (2/3 of earned premiums) and health (1/3); 3/ financial services (10%) including asset management, investment capital, financial consulting, sales of structured products, etc.; and 4/ life and health insurance (4%).

Swiss Re is exposed to higher than normal global catastrophes as the primary risk factor. A secondary risk factor would be higher-than-expected inflation trends where Swiss Re does not have an explicit cap on the costs covered.

The large asset base of Swiss Re benefits from higher interest rates. Indeed, Swiss Re has worth € 170 billion in assets versus equity market capitalization of near €30 billion. The difference is what it expects to pay on its policies over time. A 1% higher interest rate on those assets goes a long way to generate income for the equity base. Hence Swiss Re becomes a very strong play on rising rates.

Swiss Re looks like a value play with a 2022 P/E of 10x and a current dividend yield of 6.8%.

Short term catalyst : Increase in long rates.

This signal looks consistent with the European Insurance sector currently in bullish momentum. There is currently 81% of European Insurance stocks in bullish tactical signals and 68% in bullish strategic signal.