European insurance shares such as Aegon, Allianz and Munich Re leapt today as investors took an upbeat view of the sector amid hopes of stronger second-quarter earnings.
Refocusing interest in the battered sector, Deutsche Bank earlier reiterated its "buy" rating on Allianz, citing the insurer's reduced exposure to equity markets and expectations of solid results.
Among other positive news cited in Deutsche's note, the bank said it believed a market rumour last week that loan losses are running at some 50 per cent below budgeted levels, which would mean a big jump in its pre-tax earnings. No one at Axa was immediately available to comment.
Market players said the Deutsche comments reinforced a change in sentiment towards insurers as recovering stock exchanges were seen padding out their equity portfolios.
German insurers Allianz and Munich Re both gained more than 5 per cent, Dutch firm Aegon rose 6.2 per cent and French insurer Axa climbed 2.4 per cent. They were the leading lights in the DJ Stoxx European insurance sector, which traded up 2.8 per cent.
Traders and analysts said a recovery was long overdue for insurers, which have been hit by tumbling marketsin which they invest the premiums they collect from policyholders.
The upturn in investment markets has eased capital pressures on the beleaguered sector and relieved market worries they might be forced to meet minimum policy payments out of their own pockets.
The head of French insurer Axa was quoted on Saturday in Belguim's Le Soirnewspaper as saying the firm said market worries over insurance companies' solvency had often been exaggerated.