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The stocks of insurers under-perform

by

Shannon Pécourt

December 14, 2018 13:30

Photo : Freepik

Although the price of the shares of the insurers listed on Stock exchanges has increased in the third quarter of 2018, the industry sees its market value fall since the beginning of 2018 compared to 2017, according to theInternational Insurance Society (IIS).

The organization, which defines itself as a think tank of strategic thinking for the insurers, has analyzed the share price of insurers present in the stock Exchange around the world. It was found that the value of the shares has experienced a strong decline in the middle of the year.

The sector most affected by this underperformance is that of the life and health insurance. Property and casualty insurers are doing better, thanks in particular to new market entrants and mergers and acquisitions.

For example, we see that XL Group is doing so very well (+ 65.1 per cent) of its acquisition by AXA. We also learn in the report to IIS that the efforts of Zhong an, the first property and casualty insurer fully digital in China, have not yet borne fruit in view of the decrease of 54 % of its share price over the first three quarters of the year, the biggest decline worldwide in the field.

Insurance brokers and reinsurance sector saw the largest increase of their courses among all types of insurance, with respective increases of 6.90 % and 6,59 %.

Tumble in health

The life insurance sector and insurance in health has struggled on the stock Exchange in 2018. The share price has fallen by 4.2% since January. We see particular difficulties for companies from Asia and the Middle East. IIS says that most of the gains in Stock market courses in life insurance and health come from restructurings or turnarounds. According to them, a rise in interest rates in the sector could improve their profitability, but it remains that this is not the panacea, says the IIS. Their growth prospects remain at half-mast, adds the organization.

The IIS note, however, the performance of the InsurTech and innovation in the market, highlighting in particular the efforts of the Brazilian Porto Seguro, which has led to an increase of 42 %.

The North-South differences marked

Globally, the gap between the strongest and weakest industry is growing again and always. The CEO of the IIS, Mike Morrissey, estimated that insurers in developed countries will buy in mass of the insurers in emerging countries. A clue hinting at this trend : this course of actions in insurance in the emerging markets decreased by 9.5 %, while those of developed markets, excluding the U.s., have remained stable. The actions of the u.s. market have increased by 8.9 %.

Because of this growing gap between the companies that are successful in the stock Exchange and those which do not, Mr. Morrissey is expected that target who will be the champions of the market will be a winning investment.

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