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Investing.com -- UBS has downgraded NN Group (AS:NN) to “neutral” from “buy,” citing limited upside after a sharp rally in the stock this year.
The brokerage said NN Group’s share price has risen about 50% year to date, outpacing the European insurance sector’s 20% gain and peer ASR’s 30% advance, leaving the shares fairly valued in its view.
The analysts raised their 12-month price target to €66.30 from €63.00, reflecting modest increases to capital generation and share buyback forecasts.
They now expect €375 million in annual buybacks from fiscal 2025, up from €350 million, and a further rise to €450 million from fiscal 2027.
However, UBS said these small upgrades are already priced in, with the new target only 6% above the August 11 closing price of €62.06.
UBS noted that NN’s valuation metrics appear full compared with historical levels. The company’s forecast 2026 all-in yield of 8.2% is below its historical average of 9.5%, and its excess yield over 10-year European swap rates is 5.6%, compared with an average of 8.2%.
On a price-to-operating capital generation basis, NN (NASDAQ:NNBR) trades broadly in line with its long-term average.
The brokerage’s updated modelling points to €2.3 billion in operating capital generation by fiscal 2028, slightly above NN’s €2.2 billion target, driven mainly by stronger contributions from its Japanese, Netherlands Life, and Insurance Europe operations.
UBS also forecasts €1.5 billion in excess holding company cash by fiscal 2028, but sees this as a binding constraint on further capital returns.
Despite the downgrade, UBS said it still prefers NN Group to ASR within its Dutch insurance coverage, citing the predictability of NN’s capital returns and its solvency position above 200%.