Goldman Sachs has initiated extensive coverage in the European insurance sector, focusing on both life insurers and composite multi-line insurers.
This coverage includes nine key companies and Goldman Sachs is introducing a new valuation framework based on IFRS 17, providing insight into the sector’s strong fundamentals, opportunities for stock-specific performance and the implications of central bank policy easing.
The European insurance sector has performed well over the past twelve months, outperforming the Eurostoxx 600 by around 7%, although lagging the wider financial sector.
Despite its performance, the sector remains attractively valued, with a price-to-earnings ratio of around 10x (twelve-month consensus), which is the fifth lowest among the sectors in the Eurostoxx 600 index.
Dividends are well covered, with an expected average total return of around 8.5% in 2026, thanks to both dividend growth and recurring share buybacks.
Solvency in the sector is also robust, with excess capital representing approximately 9% of market capitalization, providing resilience to market shocks and additional potential for capital returns.
The sector’s fundamentals remain strong thanks to earnings diversification and geographic exposure, especially among multi-line insurers, which provide downside protection in volatile markets. The easing of policy by central banks is expected to create a favorable environment for insurers, especially in the retail real estate and life insurance segments.
Analysts at Goldman Sachs introduced a new valuation framework based on Price to Adjusted Tangible Book Value (P/ATBV) under IFRS 17 standards.
This framework takes into account the contractual services margin (CSM) – a store of future profits – and risk adjustments above reserves, providing a clearer picture of future capital return potential.
Return on Adjusted Tangible Book Value (RoATBV) is used as a key indicator to assess growth potential and capital deployment opportunities.
Goldman Sachs initiated coverage on nine key companies and issued buy recommendations for Generali (BIT:), Allianz (ETR:), Aviva (LON:), and Munich Re.
1. Generali (Buy, 12M price target €31.5)
Generali stands out as one of the insurers best positioned to benefit from interest rate easing by central banks.
More than 60% of Generali’s new sales come from Italy and France, where there are concerns about policy distortions.
With short-term interest rates falling, these lapse concerns are expected to subside, and Generali’s life insurance business should become more competitive.
Additionally, Generali’s strong contractual service margin (CSM) is growing at one of the fastest paces among multi-lines, providing a significant premium for future profits.
2. Allianz (Buy, 12 million price target € 349)
Allianz is positioned to benefit from an easing of policy rates, especially through its asset management business, led by PIMCO, which has significant assets under management by third parties.
Allianz’s fixed income business saw a net outflow in 2022 due to rising interest rates, but inflows resumed in 2024, supported by the central bank’s easing of policy.
The company’s retail P&C division also offers upside potential, with analysts estimating a favorable combined ratio for 2025 and 2026.
3. Aviva (Buy, 12 million price target 572p)
Aviva is characterized for its underappreciated earnings potential, especially due to continued improvements in its business mix. The company’s transition from capital-intensive life insurance to capital-poor segments such as non-life, health and asset insurance makes the company suitable for revaluation.
Aviva shares are expected to deliver a total return of around 11% in 2026, with DPS growth forecast at 7.5%.
Analysts view Aviva as increasingly comparable to European multi-line insurers, with the potential for multiple expansions over time.
4. Munich Re (buy, 12 million price target €560)
Munich Re is expected to benefit from the favorable non-life reinsurance market, with potential upside gains in life insurance through financially motivated reinsurance (FinMoRe).
Analysts estimate that Munich Re will exceed consensus expectations by 5-7% in 2025 and 2026, driven by growth in both the reinsurance and life insurance sectors.
5. AXA (neutral, 12 million price target € 37.5)
AXA has made significant progress in repositioning its business away from financial risks, but analysts see limited upside as much of this growth is already reflected in consensus forecasts.
AXA’s commercial P&C bias also limits its ability to outperform compared to peers with a stronger retail focus.
6. Zurich (neutral, 12 million price target CHF522)
Zurich has been one of the top performers in the sector over the past decade.
However, analysts note that the company’s commercial P&C focus limits further revaluation opportunities, with consensus estimates already at the high end of Zurich’s 2023-2026 strategic plan.
7. Swiss Re (OTC:) (neutral, 12 million price target CHF127)
Swiss Re’s reserved approach and focus on long-term resilience are beneficial, but the short-term positive potential is limited.
While the hard reinsurance market offers opportunities, analysts view Swiss Re’s approach as limiting immediate profit potential.
8. Legal and general (neutral, 12 million price target 231p)
Increased competition in the UK annuity market is expected to balance supply and demand, limiting L&G’s potential for significant outperformance.
Furthermore, the company’s credit leverage exposes it to downside risk in the event of macro shocks, even as underlying fundamentals remain strong.
9. Phoenix (Sell, 12 million price target 543p)
Phoenix faces the most challenges among UK insurers, with declining adjusted book value and limited capital return potential.
Analysts point to Phoenix’s high financial debt and slow capital generation as major concerns. While Phoenix’s cash flow numbers aren’t necessarily bad, they don’t stand out compared to peers.
