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Investing.com -- Jefferies downgraded Tryg A/S (CSE:TRYG) to “hold” from “buy”, saying the Danish insurer’s profitability leadership is offset by weaker earnings growth and limited upside for shareholders.
The brokerage set a new price target of DKK169, down from DKK180, compared with a prior close of DKK161.20.
“Tryg continues to lead the way on profitability, but top/bottom line growth is lagging peers by mid-single digits,” the analysts said.
They added that “excess capital returns also appeared to be fully within consensus expectations already. Near-term upside is therefore limited, with valuation of 18x operation earnings and 5% dividend yield screening fair.”
The analysts flagged that Tryg is expected to deliver a Return on Own Funds of about 40% in 2025–26, compared with 36% for Gjensidige and 26% for Sampo.
Earnings growth, however, is forecast at roughly 3%, well behind Gjensidige and Sampo at 7–8%.
“Arguably there is scope to Tryg to trade some margin for volume, and we need to see some proof points before crediting a higher growth rate than our current ~3%,” the brokerage said.
Capital returns were another factor behind the downgrade. Tryg reported a solvency ratio of 199% at the half-year point of 2025, above its 170% target. That level leaves about DKK2 billion in distributable capital, or roughly 2% of its market capitalization.
De-risking through a reduction in real estate holdings adds another DKK0.6 billion, equal to 0.6% of market cap.
Both measures align with consensus expectations of DKK2.7 billion in returns over 2025–27, phased at DKK0.9 billion annually.
“Medium term upside may come from quick phasing of buybacks, but any underlying capital return upside from here is predicated on stronger earnings growth to our mind,” Jefferies said.
The brokerage also noted relative share price underperformance. Tryg’s stock has gained 9% this year, compared with 40% for Gjensidige and 24% for Sampo.
“So while the shares have been weakest amongst its cohort, up +9% YTD vs GJF/Sampo +40%/24%, we see low risk of a catch-up all things considered,” the report stated.
Valuation factored heavily into the downgrade. Tryg trades at 19 times 2025 earnings, about one turn higher than peers, though closer to alignment at 18 times on an operating basis once amortization from the RSA acquisition is excluded.
Its dividend yield of 5% stands about 0.7 percentage points above competitors, and buybacks add another 1%.
Even so, Jefferies calculated only 4% upside to the share price alongside a 6% capital return yield, with little scope for rerating.
“We set our price target based on the average of a 2.7x P/NAV multiple on our 2025e NAVps estimate (giving DKK174) and a 17x P/E multiple on our 2026e Operating EPS estimate (giving DKK165). This gives a4% share price upside alongside a 6.0% total capital return yield,” the analysts said.