European insurance stocks have lost momentum as weakening pricing conditions in property and casualty businesses weighed on valuations, prompting rating changes across the sector, according to a Goldman Sachs dated Wednesday.
Stay informed beyond the headlines with premium market insight, AI stock picks, and deep research tools from InvestingPro - 55% off today The European insurance sector rose about 2% over the past 12 months, broadly in line with the EuroStoxx 600, but underperformed the index by roughly 3 percentage points over the past three months.
Goldman Sachs said the slowdown reflected stretched valuations and a softer P&C outlook. The sector’s one-year forward price-to-earnings ratio stood at the 96th percentile of its 20-year range, while dividend yields were closer to historical norms, at the 47th percentile, supported by higher payout ratios.
Goldman Sachs downgraded three insurers with significant P&C exposure and upgraded two life-focused groups. Admiral was cut to “sell” from “buy,” with its price target lowered to 2,920p from 3,954p.
The brokerage said expected pricing improvements in UK motor insurance had not materialised, while burn costs were set to rise as prior frequency gains rolled off.
Earnings estimates for 2026 were reduced by about 16%, and the report cited growing risks from claims inflation and longer-term structural pressures.
SCOR was downgraded to “neutral” from “buy,” with its price target reduced to €29 from €33.5. Goldman Sachs said the reinsurer traded at the lowest P/E among peers but did not stand out on capital returns, reflecting its comparatively lower solvency ratio.
While solvency was expected to improve following the Solvency II review, the bank said any earnings upside would likely be retained to strengthen reserves rather than support higher distributions.
Swiss Re was downgraded to “sell” from “neutral,” with its price target cut to CHF121 from CHF133.
Goldman Sachs said reinsurance pricing had moved off peak levels in 2025 and was expected to face further pressure in 2026.
Despite meeting its net income target, Swiss Re was described as having greater earnings volatility than German peers Munich Re and Hannover Re, while trading on similar valuation multiples.
By contrast, ASR was upgraded to “buy” from “neutral,” with its price target raised to €69 from €61. Goldman Sachs said ASR’s Solvency II ratio was projected to rise to about 219% by 2027, implying excess capital equal to roughly 20% of market capitalisation above a 175% deployment threshold. The brokerage cited clearer visibility on capital deployment as a key factor behind the upgrade.
Phoenix was upgraded to “neutral” from “sell” rating, with its price target lifted to £7.52 from £5.93. Goldman Sachs said Phoenix generated one of the highest capital generation yields in the sector at about 14%, compared with a sector average of 10%, and produced around £0.5 billion of excess cash annually.
Recent debt reduction measures and commitments to grow shareholders’ equity were cited as mitigating earlier leverage concerns.
Across the sector, Goldman Sachs estimated excess capital averaged about 6% of market capitalisation, supporting potential capital returns.
