(Alliance News) – The European reinsurance sector is experiencing a marked improvement in ratings and prices, driven by strengthened capital solidity and the rising quality of earnings, according to MF-Milano Finanza on Thursday.
According to a report from Intesa Sanpaolo, "today, capital strength is a key factor, while the quality and robustness of earnings have significantly improved across the sector."
Analysts favor groups with "broad financial flexibility, excess capital, and low leverage, as well as strong diversification" – characteristics enabling "effective capital management both through organic growth and acquisitions" in areas that promise the highest long-term value creation.
Among top picks is Munich Re, rated as a buy, praised for its "best-in-class solvency," low financial leverage, and high diversification. With over EUR16 billion in excess capital, the German group has ample room for increased shareholder returns in addition to internal growth and mergers & acquisitions.
The French company SCOR also receives a buy rating, considered "a unique turnaround story" and still trading at "a significant discount to peers, which is no longer justified" given the renewed "strength of its reserves."
A more cautious stance is taken on Swiss Re, which is rated underperform: the restructuring has "led to a rerating that has removed the discount compared to competitors with stronger profiles and significant track records."
Hannover Re is rated neutral: analysts appreciate its fundamentals but note that "in the current phase of the cycle, upside potential may be more immediate in names with more favorable positioning and entry valuations," although they believe the group will continue to "generate value in the long term."
By Antonio Di Giorgio, Alliance News reporter
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