WSJ Says European Insurance Stocks Due for Rally

December 2, 2002

According to the Wall Street Journal, the shares of European insurance companies, which have been one of the most depressed sectors of the global equity markets, are due for a rally.

The WSJ cited recent moves by the companies to restore their capital base by issuing new debt securities, selling off assets and raising new funds from shareholders.

It noted that on average the prices of shares in Europe’s insurers have already risen by around 40 percent since Sept. 30, “compared with a 14 percent rise in the Dow Jones Stoxx 600 index of European blue-chip companies.” However it also noted that they are on average 42 percent lower than they were at the end of 2001.

The WSJ indicated that confidence in the sector is being buoyed by reassurances that companies will be able to meet future claims, as they have significantly bolstered their cash reserves. The recent rise in stock market values has also helped, as many companies may now be able to avoid further writedowns in the value of their equity portfolios.

Among companies mentioned in the article the were the Netherlands ING, which recently raised around $650 million from the sale of unneeded pension allotments; Swiss-based Zurich Financial Services (ZFS) which is raising $2.5 billion from a rights offering; the Netherlands Aegon which raised around $2 billion when its main shareholder sold a major portion of its holdings, and Credit Suisse’s ongoing efforts to raise capital to support its Winterthur insurance subsidiary.

The article cited the U.K.’s Royal & Sun Alliance and ZFS as being particularly well positioned among P/C insurers to profit from rising premium rates, and France’s AXA Group and Germany’s Allianz as being well positioned in then life sector to profit from increasing share values.

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