Berenberg outlines top European insurance stock picks for 2025

By Aidan Gregory

Jan 28 - (The Insurer) - Analysts at Berenberg have laid out their top picks among European insurance stocks in 2025, as rising premiums continue to drive strong equity returns and cash distributions to shareholders across the sector.

In a note on Tuesday, Berenberg said that there is “still more upside” for European insurers in 2025 due to the sector’s “attractive outlook for revenue, earnings and dividend growth”.

European insurance stocks have already had a strong run, with the Stoxx 600 Insurance index rising 18 percent in 2024, outperforming the 6 percent gain for the broader Stoxx 600 benchmark. Including reinvested dividends, the Stoxx 600 Insurance index gave investors a 24.4 percent shareholder return versus a 9.5 percent gain for the Stoxx 600 last year.

Berenberg said that its top picks for 2025 are Aegon, NN Group and Chesnara for life insurance; Allianz, Zurich and Axa among composites; Scor, Swiss Re and Conduit Re for European reinsurance; and Admiral and Sabre Insurance in UK motor insurance.

In the non-life segment, higher catastrophe costs, strong reinsurance discipline and rising market concentration are helping primary insurers to raise pricing to cover social inflation and give themselves a better buffer for potential future claims cost growth, according to Berenberg.

“We believe pricing is currently strongest in Germany (we forecast a 15 percent rise in German motor at the January 2025 renewals) and weakest in UK motor (down by 5-10 percent), where, however, we expect pricing to firm again in H2 2025,” said Berenberg in the note. “We believe that market concentration is set to rise further, helped by 'insurtechs'. Insurtechs are now almost all focused on increasing efficiencies in the value chain of the incumbent insurers.”

With earnings per share rising, the sector’s solvency remains high, enabling insurers to continue lifting their dividends and expanding their share buybacks to up to 75 percent of earnings.

“Allianz’s economies of scale mean it is targeting a 30 [basis point per annum] cut in its expense ratio,” said Berenberg. “Zurich is set to benefit from a return to policy count growth at Farmers. Axa has been penalised because of overdone French tax concerns, and trades at a discount to its peers (8.9x 2026E P/E versus 10.5x for Allianz).”

Among the European reinsurers, Berenberg highlighted Scor, which has underperformed its peers since a profit warning last year, as offering an opportunity to play rising pricing, while Swiss Re’s earnings are “understated” due to its $2.4bn strengthening of its US liability reserves in November.

“Conduit delivers underwriting excellence and is still at a discount to book value,” added Berenberg.

In life insurance, Berenberg identified NN Group in the Netherlands due to its promise of a cash return yield of more than 11 percent, and the potential for this to grow further when its solvency ratio rises beyond 200 percent.

“Aegon is set to return a quarter of its market cap as dividends and buybacks in 2025-26E,” Berenberg added. “Chesnara should, we believe, deliver more deals in 2025E.”

The UK motor market has been battered by the rising cost of servicing claims since the pandemic, and there remains intense competition among carriers, which is fuelling M&A such as Aviva’s £3.7bn bid for Direct Line Group in December.

Admiral, which is widely regarded as the market leader, remains a top pick, according to Berenberg, while Sabre Insurance is also an attractive bet right now.

“In the near term we prefer Admiral, as its resilient earnings and attractive valuation make for a compelling opportunity,” said Berenberg. “Sabre’s new target of £80mn in PBT by 2030 looks appealing, but it will take time before we see the full benefits. However, at a 7.6x 2026E P/E and 11 percent yield, we think Sabre is too cheap to ignore.”