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There are few industries with a more “old world” feel than European insurers. The average age among the continent’s 10 largest listed players is almost 170. Yet quietly, these old-timers have been racking up the sort of market gains that would make many tech start-ups jealous.
The Stoxx 600 insurance sub-index, which tracks 30 large European insurance groups, climbed 15 per cent in the first half of 2025 for its best half-year since 2019. And the performance is no flash in the pan: in euro terms, it has outperformed the S&P 500 over one and three years, and is in touching distance over five.
The growth has been hard-fought; it has taken almost 25 years to recover the record highs set in late 2000. Profit-taking in recent weeks has taken the edge off, however.
Like banks, insurers have since 2022 benefited from higher interest rates, which boosts the income they earn from their bond-heavy portfolios. Bumper government spending plans have lifted yields across much of the continent this year even as central bank rates fall.
The sector has also benefited from broader interest in Europe in response to unpredictable US trade policy: insurers’ relatively stable cash flows look particularly attractive in such volatile times. Andy Briggs, CEO of London-listed Phoenix Group, told the Financial Times’ Global Insurance Summit last month that the company was getting much more attention from US investors.
However, shares are no longer cheap. The Stoxx insurance index is trading at 12.3 times estimated earnings over the next 12 months, according to Bloomberg, well above its long-term average of 10.5 times. On a price to book basis, the index is around its most expensive in more than two decades.
Swiss groups have an extra challenge, as a surging franc led the central bank last month to drop its benchmark rate back to zero. Swiss Re and Zurich are the worst performers on the insurance index year to date.
There are some reasons to remain optimistic on the outlook for these dinosaurs though. The 2022 surge in inflation was painful, particularly for non-life insurers, but the growing belief among economists that inflation will settle at higher levels than previously — causing bond yields to remain higher — is good for insurers’ investments. Indeed, analysts at KBW reckon it is the most positive macro environment in a generation.
Aviva’s £3.7bn takeover of Direct Line — completed this week — has also fuelled speculation about the potential for further M&A while, after more than two decades of cautiousness, some companies are also seeking more organic growth. Allianz, the largest, is now aiming for earnings per share growth of up to 9 per cent compared with about 6 per cent for most of the past decade. That is hardly Nvidia levels, but suggests there is life in these old bones yet.