Goldman Sachs in a note dated Monday has initiated coverage on Hannover Re (OTC:HVRRY) and Scor (EPA:SCOR) with a "buy" rating, citing their strong positioning in the evolving reinsurance landscape.
The brokerage flags Hannover Re’s stability and earnings visibility, while viewing Scor as an attractive re-rating opportunity following a period of restructuring.
The European reinsurance sector has outperformed broader equity markets since 2023, supported by hardening rates, disciplined risk management, and improved returns on equity.
However, Goldman Sachs notes that the industry is now transitioning into a post-peak phase of the property and casualty margin cycle.
Despite this, the brokeage sees selective opportunities for outperformance, with Hannover Re and Scor standing out as the most compelling investments.
Goldman Sachs sees Hannover Re as well-positioned to navigate the evolving reinsurance cycle, emphasizing its consistent top-line growth, conservative risk management, and a track record of outperforming in past soft market cycles.
The bank has set a 12-month price target of €312, noting that its current valuation offers an attractive entry point.
“Hannover Re’s conservative P&C Re reserving / COR target, track record of managing earnings volatility through reserve releases, retro protection, and the stability of its L&H Re result, provides us greater earnings delivery certainty vs. its reinsurance peers,” Goldman Sachs said.
Additionally, the bank highlights that Hannover Re’s relative valuation premium, which has compressed in recent years, makes it an appealing investment at this stage in the cycle.
Goldman Sachs sees Hannover Re as well-positioned to navigate the evolving reinsurance cycle, emphasizing its consistent top-line growth, conservative risk management, and a track record of outperforming in past soft market cycles. The bank has set a 12-month price target of €312, noting that its current valuation offers an attractive entry point given its historical premium relative to peers.
Goldman Sachs views Scor as an opportunity for valuation upside if the company can maintain stable performance following recent remedial actions.
The brokerage has set a 12-month price target of €34.5, arguing that the company’s lower market share and strengthened balance sheet position it for superior top-line growth compared to its peers.
Goldman Sachs views Scor as an opportunity for significant valuation upside if the company can maintain stable performance following recent remedial actions.
The brokerage has set a 12-month price target of €34.5, arguing that its strengthened balance sheet and improved reserving position it for superior top-line growth compared to its peers.
The report also suggests that the company’s underlying earnings power is stronger than its targeted combined ratio of below 87%, creating room for potential upside surprises.
“We see the underlying earnings power of its P&C Re business as much stronger than the targeted <87% COR, and therefore see upside risks to 2025/26 VA consensus COR estimates. Acknowledging the greater risk-reward profile, in short, if Scor can move to a period of consistent delivery with no major surprises, then its very attractive valuation provides the greatest re-rating potential,” Goldman Sachs added.
Goldman Sachs points out that the overall reinsurance market remains strong in historical terms, but the industry is now entering a phase of declining risk-adjusted pricing.
“While rate adequacy remains strong in a historical context, and the 2025 California Wildfire losses limit downside risk at the mid-year renewals, our base case remains that we are in a post-peak P&C margin cycle,” the analysts said
Given this backdrop, Goldman Sachs favors Hannover Re and Scor over other players in the sector.
While Munich Re and Swiss Re (OTC:SSREY) have delivered strong returns, their valuations are seen as more stretched.
The brokerage has downgraded Munich Re to "neutral," despite raising its price target to
