KBW WARY OF SWISS RE, ALLIANZ, NORDIC NON-LIFE

Investment Bank Keefe, Bruyette & Woods has declared itself “wary” of European insurance leaders Allianz and Swiss Re, while also warning of an expected deterioration in the combined ratios of Nordic insurers Topdanmark and TrygVesta. Analyst William Hawkins said that, at Allianz, “we remain on watch for the degree to which Dresdner Kleinwort’s trading book will suffer”. At Swiss Re, KBW is “cautious on the credit-related profits”. On more general terms, KBW prefers large caps to mid- and small caps. “Large caps’ generally better momentum and more attractive valuations make them our preference on a top-down basis”. In analysing stated operating profits of the large caps, Mr Hawkins observed that there was no consistent definition of operating earnings across the sector. “For this metric to have relevance across the sector, we would look for greater consistency to emerge”, he wrote. Looking forward to Q3 earnings, a deteriorating combined ratio was predicted at four of the five larger insurers/reinsurers — the exception being Generali, where a year on year improvement from 95.9% to 94.2% was predicted.