EU Insurers: What Sensitivities Reveal for FY24

• For 2H24, extrapolating from recently disclosed sensitivities suggests that the average solvency ratio for our European insurance coverage likely deteriorated during 2H24.
• Decreasing interest rates should have generally pushed average solvency ratios down during 2H24, although the impacts on various insurers are mixed. CAA, Mapfre, CNP Assurance, and Achmea would benefit from falling interest rates, while PIC, Vienna Insurance, and Zurich Insurance would be most negatively affected.
• Spread movements are expected to have benefitted average solvency positions. CAA would be most negatively affected by spread widening, while Aviva and PIC would benefit the most.
• Largely unchanged equity values should have limited impact on the average capital position. AXA and Allianz are the most sensitive to changes in equity values, benefiting the most from increases but losing the most if values drop.
• Recent real estate developments are likely to have a negative impact on the average solvency. Swiss Life, Aviva, and NN Group would see the most negative impact from declines in real estate values, while M&G, Phoenix Group, and La Mondiale are viewed as the most resilient among the insurers who reported relevant sensitivities.

The latest sensitivities for the solvency positions of insurers in our coverage suggest that in 2H24, average solvency ratios are likely to be negatively impacted by decreasing interest rates and a decline in property values, partially offset by recent credit spread developments, while equity values should have a broadly neutral impact.

We analyze how European insurers are positioned for the latest and upcoming trends in interest rates, credit spreads, and investment values of equities and properties. We apply the latest disclosed sensitivities of European insurers in our coverage to their solvency ratios at 1H24, excluding transitional measures for those reporting under Solvency II (SII). We highlight the impact of the latest trends on the industry and show the best and worst positioned names. Of note, actual solvency positions of the respective insurers at FY24 and beyond will result from various trends, business portfolios, investment allocations, and hedging strategies. Other factors, such as earnings, shareholder distributions, M&A, and insurance-specific drivers like lapse rates, are not covered in this note.