While indexes like the Nasdaq, FTSE, ASX, Dow Jones and Nikkei are all down, European markets kicked off the year on a good foot. European banks and the insurance sector have blasted off into 2022, with STOXX Europe 600 banks boasting 20% growth for the year, while the STOXX Europe 600 Insurance Index is rapidly gaining as well with growth of 14%. JPMorgan analysts are confident that Europe’s pandemic recovery is in full swing, with strong momentum likely to carry these sectors much further. Given the stability and lack of general volatility combined with the stellar performance, European insurance stocks are quickly starting to look like a solid investment for the year.
STOXX Europe 600 Insurance Index Performing Well
The European insurance sector is benefiting from strong cash flow exiting the pandemic, bolstered capital, a broader earning perspective, and rising interest rates. Insurance is realistically looking at attaining a lucrative capital position with an average S2 ratio of 211%. That’s a massive jump from the 190% low observed during COVID-19 and the 200% high in 2020. Another sign that the insurance sector is doing well is the average dividend yield of between 5%-6% paid out, which is well ahead of the 3% average from STOXX Europe 600 companies
Favourable SXIP Momentum
The SXIP was trading just below the 340 EUR mark, which is dangerously close to its 52-week high of 343.46, leading many investors to raise concerns over whether or not the insurance sector is done gaining. With the 52-week range falling between 264.96 and 343.46 at the end of January, according to MarketWatch, it has been months since the index dipped below 300. All signs point towards momentum carrying SXIP far from its September 20th, 2021 low of 291.
European Insurance Stocks Growing & Healthy
Deloitte Insights expresses complete confidence that global insurers are poised for growth in their 2022 insurance industry outlook report. One-third of 424 insurance companies surveyed report that they expect a significantly better revenue year for 2022 due to rising demand for global insurance. Already, global life insurers have reported above-average premium growth rates of 3.8% for 2021, with 4% or more expected for the current year.
European Insurance Stocks With High Growth Potential
Only time will tell when the recovery rebound will begin to slow, but for now, Europe’s insurance industry is in an upswing which opens up several opportunities for keen investors. Here are three insurance stocks making up a part of the SXIP that have good potential for decent earnings:
Nordic insurance group Sampo is off to a promising year. Not only did Sampo recently purchase a 30% stake in the British property and casualty insurer Hastings for roughly $907.08 million, but the company recently began a share buyback program as well. This typically indicates a massively undervalued share price, and Sampo PLC has been buying back its own shares since October 1st, 2021. Quick investors may still have an opportunity to ride the coming growth. Sampo is currently trading far from the ground level of its 52-week range falling between 34.44 to 47.33. The price target for 2022 is estimated at 53.92 and with a reasonable PE Ratio of 33.48 as of the end of January and a close of day price on the 27th of 43.25, SAMPO.HE appears well on its way to attaining average forecasts at the very least.
Prudential Financial had a fantastic 2021 and jumped a massive 38% in stock value. The growth speeds the company far ahead of the S&P 500’s 27% return for the year. After a year of cutting costs and raising efficiency, Prudential entered 2022 with a $400 billion balance sheet spread between bonds and assets and a brilliant debt-to-equity ratio of just 0.6. Even though PRU has been rallying for quite some time, revenues are increasing at roughly 40% year on year. Prudential Financial Inc. hit its 52-week high of $117.96 on January 13th, 2020, but the price target for 2022 is still sitting at a high of 131 and a median of 115.50, with median estimates steadily increasing upon recent stock reevaluations. We feel that Prudential will end up exceeding expectations and once again surprising investors by the end of the year. There’s little chance of the valuation touching ground anywhere near its low anytime soon.
With 11.27% weighting, Zurich Insurance stands as the second-largest component of the STOXX Europe 600 Insurance Index. The company is largely accepted to be a safe haven investment with excellent solvency and a rock-solid record of fantastic management. Zurich Insurance currently has an excellent Combined Ratio that’s in an upswing, outperforming AXA and Allianz over a ten year period, according to independent research. Furthermore, Deutsche Bank and Zurich have come to an agreement whereby a team of over 1085 financial advisors overseeing approximately €16.5 billion in assets have been acquired in Italy. The acquisition is a significant Italian market expansion that is likely to bring immense growth in the near future signalling opportunity for early investors.
Note: Please do not invest money or assets in the financial markets that you cannot afford to lose. This article should not be construed to be investment advice and is for information purposes only.