European insurers: MS prefers reinsurance and multi-liners, cautious on UK life

Tryg A/S

05/09/2023 12:19

** European insurers are still attractive thanks to their
strong fundamentals, Morgan Stanley says, preferring reinsurance
and multi-liners while being more cautious on UK life
    ** It says the sector's average solvency II ratio (stock of
capital) is 229% and average 2024 FCF yield (flow of capital) is
11%, which supports attractive capital return yield of 7.5%
    ** Reinsurance pricing outlook remains positive, given the
capacity crunch and lack of third party capital flows, the
broker says
    ** But insurers' holdings of illiquid assets remains a
concern, it says, as rising interest costs and inflationary
trends are not supportive
    ** There is also uncertainty around the major accounting
change, IFRS 17, MS adds
    ** It says the IFRS 17 transition has been well managed by
insurers, with limited negative impact in Continental Europe,
while UK life has seen the largest impact
    ** MS downgrades Hiscox  HSX.L  to "equal-weight" from
"overweight"; upgrades Lancashire  LRE.L  to "equal-weight" from
"underweight" and Tryg  TRYG.CO  to "overweight" from
"equal-weight"
    ** It keeps "overweight" on its top pick AXA  AXAF.PA ,
Allianz  ALVG.DE , Munich Re  MUVGn.DE , SCOR  SCOR.PA , NN
 NN.AS  and ASR  ASRNL.AS 
    ** MS maintains "underweight" on Phoenix  PHNX.L , Generali
 GASI.MI , and "equal-weight" on Legal & General  LGEN.L  and
Hannover Re  HNRGn.DE 

 (Reporting by Marta Frackowiak)
 ((marta.frackowiak@thomsonreuters.com))