Insurer shares worth buying compared with overpriced banks
The Stoxx Europe 600 Insurance Index is priced at 10.7 times its companies’ reported earnings, 35% below the ratio for banks, making insurer shares worth buying, Bloomberg reports.
Bank of America and Morgan Stanley strategists are telling clients insurers are too cheap to pass up. “There are more opportunities today in terms of valuations to buy insurers,” said Sofia Nevrokoplis, senior fund manager at BNP Paribas Asset Management in Paris.
Allianz SE and Axa SA, Europe’s largest insurers, are trading at 6.5 and 9.2 times their respective profits. Munich Re, the world’s biggest reinsurance company, has a ratio of 7.8, near the lowest since 2008.
That compares with 28.1 for London- based HSBC Holdings Plc, Europe’s largest bank by market value.
Raising dividends
Insurance companies are also trying to lure investors by increasing their dividend payouts. Allianz, Germany’s biggest insurer, raised its dividend for 2009 by 17%. Assicurazioni Generali SpA, Italy’s largest, more than doubled its cash payout, while Switzerland’s Zurich Financial Services AG announced the biggest dividend in 10 years.
The Stoxx 600 insurance gauge’s dividend yield of 3.9% compares with 2.7% for banks.
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