LIVE MARKETS-Insurance: rotation on the horizon?
BofA Global Research suggests that while European insurance valuations are at record highs, a pricing cycle turn could limit gains in 2026. However, opportunities remain, especially in Property & Casualty and Life insurers. Strong balance sheets support dividends and buybacks, with M&A as a potential theme. BofA favors Prudential and AXA.
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INSURANCE: ROTATION ON THE HORIZON?
European insurance (.SXIP) has enjoyed a strong run in 2025, with valuations hitting record highs, but investors are now pondering whether the rally can extend into next year.
BofA Global Research cautions that a turn in the pricing cycle could cap gains in 2026. Yet that does not mean investors should turn outright bearish.
“We should not catastrophise – the sector deserves to have re-rated, and there are still opportunities to be found,” analysts at the U.S. bank say in a note this week.
Property & Casualty names may become a trading sector, rather than buy-and-hold, as pricing softens after a benign hurricane season, while Life insurers could stage a comeback after a decade out of favour.
“A normal yield curve and wider credit spreads are a profitable environment for Life insurers. Further, positioning is light…,” they add.
Balance sheets remain strong, supporting healthy dividends and buybacks, and M&A could also emerge as a theme, they say. BofA has buy ratings on half the sector’s market cap, with Prudential (PRU.L) and AXA (AXAF.PA) its top picks.
(Danilo Masoni)
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