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Investing.com -- J.P. Morgan analysts have upgraded NN Group (AS:NN) to "overweight" from "neutral," raising its price target to €70 from €52.
This follows the company’s recent Capital Markets Day, which revealed a more diversified and strong growth outlook than previously expected.
In a concurrent move, ASR Nederland N.V. was downgraded to "neutral" from "overweight."
The upgrade reflects NN Group’s improved earnings potential and valuation compared to ASR.
Analysts project that NN Group will narrow its price-to-earnings and free cash flow yield gap with ASR in the coming years.
Earnings per share estimates for NN Group have been raised by 4% to 10% for 2025-2028, driven by growth across multiple business units, especially in Japan.
There, a significant turnaround in new business profit growth is expected, aided by the potential lifting of a “regulatory improvement order” and the introduction of new products.
NN Group’s business mix is set to become more diversified, reducing its reliance on the lower-growth Netherlands Life division.
By 2028, analysts forecast that over 50% of NN Group’s earnings will come from other units, including its European and Japanese operations.
Europe is expected to maintain its solid track record in protection and savings policies, while Japan is poised for a substantial recovery in new business profits.
In contrast, ASR’s growth is primarily driven by acquisition synergies and remains largely dependent on the Dutch life market, which has lower growth prospects.
Analysts at J.P. Morgan expect NN Group’s diversified business mix to generate more consistent and higher long-term growth compared to ASR’s more concentrated operations.
Additionally, J.P. Morgan analysts project a stronger balance sheet for NN Group, paving the way for a progressive share buyback program starting in 2026.
NN Group’s ability to generate improved capital, coupled with a softening of Solvency II sensitivity to Dutch mortgages, gives the company confidence in increasing its share buyback to €350 million annually by 2026.
This amount would rise by €50 million each subsequent year, further enhancing shareholder returns.
J.P. Morgan’s projections for NN Group’s earnings and operational capital generation are above consensus.
The brokerage expects operating profit for 2025-2028 to exceed consensus by 3% to 7%, thanks to stronger growth expectations for its European and Japanese life divisions.
Analysts also forecast NN Group will surpass its OCG target of €2.2 billion by 2028, reaching €2.3 billion, driven by improved margins in its non-life business and stronger OCG growth in Japan.
Currently, NN Group trades at approximately 7x its estimated 2026 P/E, compared to ASR’s 9.5x.
Additionally, NN Group is expected to deliver a higher OCG yield of approximately 13.5% for 2026, compared to ASR’s 11.5%.
Given these factors, J.P. Morgan analysts believe the discount applied to NN Group’s valuation is no longer justified, as the brokerage’s more diversified business mix, stronger balance sheet, and improved growth prospects in Europe and Japan position it for stronger future performance.
By 2027, NN Group is expected to offer an approximate 10% total capital return yield.