"Black box blues - Insurance Industry Europe - Investors still struggle to understand Europe’s insurers"
After watching bank shares drop by almost a third this year, most European investors probably consider the idea of buying insurance stocks a sick joke. Banks’ balance-sheets may be difficult to understand but insurers can be mind-bogglingly complex too. Insurers also have a track record of fouling up when the economic environment worsens. In the last downturn in 2002 they got things badly wrong. The big European life insurers owned far too many equities. When stock markets fell, their capital positions were whacked, forcing many to issue new shares. “Once bitten, twice shy” is the market’s motto today. The share prices of Europe’s insurers have dropped by almost a quarter this year and trade on the lowest multiple of earnings of any sector, battered banks included. Is that fair?
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