The stock-market performance of insurers has been historically tightly linked to the evolution of corporate spreads. In case of economic stress, spreads increase as investors want to be remunerated for the increased risk of corporate defaults. This is bad news for insurers who hold large bond portfolios and are heavily invested in corporates in their quest for yield. So it is not as surprise that the European insurance sector underperformed during the pandemic. But hold on a second : spreads have normalized in the meantime. However, stock prices of the insurers have not recovered as can be seen in the graph below from Kepler Cheuvreux.
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Léon Kirch, CIO & Partner