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Munich Re JP Morgan’s top insurance pick

JP Morgan has touted Munich Re as its top insurance pick for investors.

The investment bank published an overweight rating yesterday claiming a relatively strong balance sheet meant the firm was on good footing.

JP Morgan says Munich Re has relatively limited exposure to equities, real estate and structured products. It also has been careful to limit its exposure to banks, the report states.

Munich Re has hedged against interest rate risk which JP Morgan commends and still has strong solvency capital.

JP Morgan states: “We reiterate our overweight on Munich Re, raise our earnings forecasts 10 per cent for 2009 and 2010 and raise our target price from €148 to €161. The reason for the higher forecast is January 2009 renewals where we forecast average rate rises of 5 per cent. We raise our forecasts 10 per cent to reflect better underwriting partly offset by lower investment returns due to lower yields.”

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