Sign in Subscribe
Banking industry

European Insurance Stocks Surge on Positive Broker Sentiment

Strategic Insights

— 1 min read

European insurance stocks made significant gains yesterday after major brokers Citigroup and Deutsche Bank upgraded their stance on the sector, citing recent strong second-quarter results and the potential for cash returns to shareholders. The brokers' positive outlook was fueled by the adoption of IFRS accounting standards, which they believe will generate significant free capital for the industry. Top picks in the sector included Germany's Allianz, France's Axa, and Zurich Financial.

Key Takeaways:

  • Citigroup upgraded its stance on the European insurance sector from "neutral" to "positive", citing strong second-quarter results and the potential for cash returns to shareholders.
  • Deutsche Bank also named Allianz, Axa, and Zurich Financial as its top picks in the sector, and praised their potential for cash returns.
  • The adoption of IFRS accounting standards is expected to generate significant free capital for the industry, which the brokers believe will be returned to shareholders.
  • Returning cash to shareholders is becoming more prevalent outside the financial sectors, with dividends and buybacks on the rise.
  • European airline stocks received a boost as the UK lowered its security alert and lifted some of the restrictions on passengers at UK airports.

Statistics:

  • Citigroup's upgrade of the European insurance sector resulted in a 1.2% gain for Allianz, 1.6% gain for Axa, and 1.5% gain for Zurich Financial.
  • Deutsche Bank's preference for Allianz, Axa, and Zurich Financial resulted in a 1.4% gain for Munich Re and 2% gain for Swiss Re.
  • The FTSE Eurofirst 300 rose 0.9% to 1,343.55, driven by weaker oil prices and positive sentiment in the insurance sector.
  • Oil prices fell after a ceasefire in the conflict between Israel and Hizbollah.
  • European airline stocks:

+ Lufthansa gained 2% to Euros 14.52

+ Air France-KLM climbed 1.8% to Euros 19.60

+ Ryanair fell 1.2% to Euros 7.150 after complaining about airport congestion

Sources:

  • The Financial Times
  • Citigroup
  • Deutsche Bank
  • Lehman Brothers
  • Lehman Brothers' analyst Ryan Kloster
  • Centaurus Capital
  • Paulson & Co.

Read more