European reinsurance stocks face renewed pressure as JPMorgan expects a prolonged softening cycle into 2026, downgrading Swiss Re to Neutral while maintaining Overweight ratings on Hannover Re and Munich Re.
The bank cut its price target on Swiss Re to CHF 160 from CHF 170, arguing that while the group has successfully rebuilt resilience, its valuation has caught up with peers.
“We have been fans of the Swiss Re turnaround and improved resilience in earnings but given its current relative valuation vs peers, we pause for now,” analysts led by Kamran Hossain wrote.
Swiss Re now trades at a small premium to Munich Re and only a slight discount to Hannover Re, levels analysts said are not justified given longer track records of delivery at its rivals.
The company reset its business with a $2.4 billion U.S. liability reserve charge in 2024 and, with that issue behind it, is expected to focus on delivering earnings guidance.
JPMorgan also anticipates Swiss Re will resume a $1 billion share buyback program after fiscal 2025 (FY25) results.
In contrast, Hannover Re remains JPMorgan’s preferred name for resilience. The reinsurer has built significant reserve buffers since 2009, estimated at more than €3 billion, giving it room to absorb price declines. Hannover Re targets a combined ratio below 88% in property and casualty reinsurance, with underlying profitability in the low 80s.
JPMorgan expects net income to rise from €2.4 billion in 2025 to around €2.6–2.7 billion in 2026. The analysts removed Hannover Re from their Analyst Focus List but continue to see its long-term story as compelling given its consistent cross-cycle performance.
Munich Re is also rated Overweight, with a price target of €650. Analysts pointed to the upcoming December Capital Markets Day (CMD) as a potential catalyst, expecting the group to lift its return-on-equity (ROE) target to 16–18%.
They forecast operating earnings outside property and casualty reinsurance to reach about €5 billion by 2027.
Analysts said share buybacks could rise from €2 billion in 2024 to €4 billion by 2028, though it would not rule out mid-sized M&A to diversify the business.
The team recalled that in the 2013–17 soft market, earnings resilience proved decisive. Hannover Re and SCOR outperformed while Swiss Re and Munich Re lagged. Share price performance was mixed across the cycle, with companies that had built buffers and delivered smoother earnings ultimately rewarded by investors.
This time, all major reinsurers have incorporated more prudence into their business models, building reserves and adopting cautious profit recognition.
With buffers now more widespread across the sector, JPMorgan sees downside risks cushioned, but continues to favor companies with stronger long-term delivery records and track records of consistent execution.
Source :
https://www.investing.com/news/stock-market-news/european-reinsurance-jpmorgan-downgrades-swiss-re-prefers-2-other-stocks-4252464
