Berenberg cuts Helvetia to 'sell', cites deteriorating margins

Helvetia Baloise Holding AG

12/10/2023 11:56

** Berenberg downgrades Swiss insurer Helvetia  HELN.S  to
"sell", citing shrinking underwriting margins from price
pressures and recent accounting changes "covering the cracks"
    ** In Switzerland, Helvetia's most profitable market, flat
pricing due to modest inflation weighs on margins, the broker
says, and the combined ratio in the country has risen to above
90% since 2020
    ** Recent growth in less lucrative Spanish and speciality
markets also drags margins, Berenberg says, with Switzerland
accounting for 25% of gross written premiums in 2022 from almost
40% in 2015
    ** Recent IFRS 17 accounting changes also "artificially
boosted near-term earnings" by allowing Helvetia to discount
claims equivalent to 10% of H1 2023 net group income, the broker
says
   ** "This discounting benefit  ...  is expected to reduce over
time, meaning that we think Helvetia's non-life earnings will
struggle to grow in outer years," it says
    ** The insurer looks expensive compared to peers, the broker
also notes, adding current valuation is not supportive of the
underwriting returns it expects the company to deliver
    ** Helvetia shares are down 3.8%

    
    

 (Reporting by Louis van Boxel-Woolf)
 ((Louis.vanBoxel-Woolf@thomsonreuters.com))