European Insurance Sector Snapshot: Decoding Expectations

Research evidence excerpt

European Insurance Sector Snapshot: Decoding Expectations

performance of the sector, this month's

performance was driven by a relatively wide dispersion, with 30% of the stocks rising >3% in

1 month, while conversely, >20% fell >5%. The leaders amongst our coverage were Hiscox

(+16%), Conduit (+10%) and AIA (+6%), while the laggards were Munich Re (-14%) and

Hannover Re (-12%). Hiscox (+16%) was the best performing stock, thanks to the potential

takeover news, as well as high retail growth in 1Q. Conduit (+10%) also performed well, thanks

to the top-line growth (consensus expected -10% contraction), as well as the $50m buyback

announcement. Conversely, Munich Re (-14%) and Hannover Re (-12%) underperformed, as

a result of both the top and bottom-line being below consensus expectations. This comes in

spite of a benign 1Q weather environment.

Relative Strength Indicators (RSI) - Turning to the latest RSI data, there were a few notable

shifts over the past 6 weeks. We note that the sector overall has become more balanced, as it

previously screened as overbought. The only major shift amongst Conglomerates was Zurich,

which now screens as overbought and leading, whereas it previously screened as oversold.

This is not surprising, given the unexpected top-line acceleration in Non-Life across all regions

(from +6% to +20%). Conversely to Zurich, the Reinsurers now screen as oversold and lagging,

whereas they previously screened as overbought and leading, as a result of their worse than

expected acceleration in price-declines. The Nordic Non-Life Insurers appear to screen as

slightly oversold and lagging, probably reflecting the recent litigation defeat for the industry in

Denmark.

Fundamental Expectations - Turning to consensus expectations of company fundamentals,