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There are few industries with a extra “previous world” really feel than European insurers. The common age among the many continent’s 10 largest listed gamers is nearly 170. But quietly, these old-timers have been racking up the kind of market good points that might make many tech start-ups jealous.
The Stoxx 600 insurance coverage sub-index, which tracks 30 giant European insurance coverage teams, climbed 15 per cent within the first half of 2025 for its greatest half-year since 2019. And the efficiency isn’t any flash within the pan: in euro phrases, it has outperformed the S&P 500 over one and three years, and is in touching distance over 5.
The expansion has been hard-fought; it has taken virtually 25 years to get well the file highs set in late 2000. Revenue-taking in latest weeks has taken the sting off, nevertheless.
Like banks, insurers have since 2022 benefited from larger rates of interest, which boosts the earnings they earn from their bond-heavy portfolios. Bumper authorities spending plans have lifted yields throughout a lot of the continent this yr at the same time as central financial institution charges fall.
The sector has additionally benefited from broader curiosity in Europe in response to unpredictable US commerce coverage: insurers’ comparatively secure money flows look notably enticing in such unstable occasions. Andy Briggs, CEO of London-listed Phoenix Group, instructed the Monetary Instances’ World Insurance coverage Summit final month that the corporate was getting far more consideration from US buyers.
Nevertheless, shares are not low-cost. The Stoxx insurance coverage index is buying and selling at 12.3 occasions estimated earnings over the subsequent 12 months, in accordance with Bloomberg, nicely above its long-term common of 10.5 occasions. On a value to e-book foundation, the index is round its most costly in additional than 20 years.
Swiss teams have an additional problem, as a surging franc led the central financial institution final month to drop its benchmark charge again to zero. Swiss Re and Zurich are the worst performers on the insurance coverage index yr so far.
There are some causes to stay optimistic on the outlook for these dinosaurs although. The 2022 surge in inflation was painful, notably for non-life insurers, however the rising perception amongst economists that inflation will settle at larger ranges than beforehand — inflicting bond yields to stay larger — is nice for insurers’ investments. Certainly, analysts at KBW reckon it’s the most constructive macro atmosphere in a era.
Aviva’s £3.7bn takeover of Direct Line — accomplished this week — has additionally fuelled hypothesis concerning the potential for additional M&Some time, after greater than 20 years of cautiousness, some corporations are additionally in search of extra natural development. Allianz, the biggest, is now aiming for earnings per share development of as much as 9 per cent in contrast with about 6 per cent for many of the previous decade. That’s hardly Nvidia ranges, however suggests there may be life in these previous bones but.
nicholas.megaw@ft.com
