The Euro Stoxx Insurance index is down more than 20% so far this year, trailing the broad Euro Stoxx 600 stock-market index, which is down more than 10% over the same period.
Insurers are being affected by the pandemic in a few ways: They’re paying claims from businesses that have had to cancel events or aren’t able to operate properly. They’re facing losses in their investment portfolios from careening stock markets and falling interest rates. Their capital positions have also taken a hit, with solvency ratios, a measure of financial strength, down since the start of the pandemic.
Not all insurance stocks are being perceived the same way by investors, however. Some insurers have made clear the extent of their Covid-related losses and have made moves to reprice their offerings, while others are still tallying up the effects of the pandemic, said Jonny Urwin, an analyst at UBS. Among property-and-casualty insurers, balance sheets are generally still strong, despite lower solvency ratios, he said.
British insurer Prudential, whose share price is off 13%, said last week that government measures taken to limit the pandemic across the world “impacted sales levels and new business profitability” in the first half of the year. For example, Asia insurance sales on an annualized premium equivalent, or APE, basis fell 35% in the first half to $1.66 billion, fueled by weak sales in Hong Kong. The insurer said Covid-19-related claims haven’t been material.
Reinsurer Munich Re, whose shares are down 11%, said earlier this month it had sustained €1.4 billion ($1.7 billion) in Covid-19-related losses in its property-casualty business in the first half, as well as €100 million in Covid-19-related losses in its life-and-health business. The group said most business-interruption policies haven’t been affected because they require physical damage to trigger coverage. The company earlier scrapped profit guidance of €2.8 billion for the year, and said in August it wouldn’t provide further profit guidance.
German insurer Allianz reported its operating profit in the second quarter fell 19% to €2.56 billion, driven lower by €500 million in Covid-related losses. The company’s shares are off 17% this year, and it declined to disclose updated profit guidance.
A Moody’s report from earlier this month found that travel- and event-cancellation claims piled up through March, while business-interruption claims accumulated between March and June. The ratings firm expects business-interruption claims to taper off gradually in the second half of the year, while life-mortality claims are expected to shoot up.
Some European insurers are also facing lawsuits from companies whose claims they rejected. The outcome of these cases will affect the final cost of the business-interruption claims, Moody’s said.