According to S&P Global Ratings, insurers based in Europe, the Middle East, and Africa (EMEA) maintain strong capital foundations and capital buffers that enable them to endure external shocks effectively.

S&P’s criteria show that the aggregate capital adequacy of these insurers consistently surpasses a 99.99% confidence level, reflecting a highly secure financial footing.

This strong capitalisation is a key contributor to their generally stable outlooks, with average ratings concentrated in the ‘A’ category and a larger proportion of positive outlooks than negative ones.

S&P Global Ratings highlights that insurers rated in the ‘AA’ category within the EMEA region all possess at least very strong competitive position assessments.

This rating group is characterised by steady operating performance, supported by leading market positions and the ability to set favourable pricing.

The ratings agency emphasises the importance of earnings diversification, noting that insurers with less reliance on a single market or business line tend to have a more resilient business model.

In 2024, primary insurers rated ‘AA’ and ‘AA-‘ reported robust aggregate earnings, with an average return on equity (ROE) of 13.4% and a combined ratio of 92%, underscoring their operational strength.

S&P Global Ratings evaluates an insurer’s financial strength by examining several factors, including competitive position, capital and earnings, risk exposure, and funding structure.

In the EMEA region, most insurers enjoy high credit quality, with 63% of all financial strength ratings falling within the ‘A’ category and 9% in the ‘AA’ category. Those rated highest demonstrate very strong underwriting capabilities, market leadership, and pricing power, along with diversified sources of income that reduce vulnerability.

The rating agency’s recent analysis focused on a select group of primary insurers rated ‘AA’: Allianz SE, Aviva PLC, AXA, Covéa Cooperations, Legal & General Group PLC, Sampo PLC, Talanx AG, and Zurich Insurance Co. Ltd.

These companies share key traits such as very strong competitive positions and business risk profiles. S&P Global Ratings notes that while individual strengths and weaknesses vary, the group consistently delivers robust financial results.

“EMEA-based insurers that we rate in the ‘AA’ category all have competitive position assessments of at least very strong. This reflects their consistently robust operating performance, supported by market-leading positions and pricing power,” S&P Global Ratings Credit Analyst Johannes Bender added.

Profitability is viewed by S&P as a natural outcome of a strong competitive position. The agency expects insurers with better competitive standing to consistently deliver higher and more stable profitability metrics over time.

The ‘AA’ rated insurers recorded an average ROE of 13.4% and a combined ratio of 92% in 2024, with five-year averages of 11.2% and 94%, respectively, supporting their steady performance. S&P also acknowledges the positive impact of IFRS 17 accounting standards, which tend to lower the present value of future claims and benefit combined ratios.

Examining individual companies, S&P Global Ratings highlights Allianz SE’s broad international reach, market leadership in key European countries, and gradual expansion in Asia-Pacific as key drivers of its AA rating with a stable outlook.

Allianz reported a 7% increase in insurance revenue in 2024 and an ROE of 18.2%, reflecting its solid underwriting discipline and diversified earnings from asset management operations like PIMCO.

Aviva PLC, rated AA- with a stable outlook, benefits from strong brand recognition and leadership in the UK, Ireland, and Canada. Its diversified product offering spans general, life, and health insurance, supported by a growing asset management business. Despite a decline in IFRS 17 net income in 2024, Aviva’s insurance revenue increased by 12%, underpinned by favorable premium rates and strategic acquisitions.

AXA, with a positive outlook and an AA- rating, demonstrates profitability resilience due to extensive geographical and business diversification. S&P credits AXA’s improved combined ratio in property/casualty insurance and strong revenue growth, despite high shareholder remuneration. The agency notes that AXA’s capital adequacy remains strong even considering France’s sovereign credit rating pressures.

Covéa Cooperations, also rated AA- but with a negative outlook, benefits from a solid position in the French property/casualty market and an expanded global footprint following its acquisition of PartnerRe. S&P highlights this acquisition as enhancing Covéa’s earnings stability by diversifying risks across regions and lines.

Legal & General Group PLC maintains a stable outlook with an AA- rating, supported by its leadership in pensions, protection, and asset management within its core markets. Though less geographically diversified than some peers, L&G’s consistent earnings demonstrate its competitive resilience.

Sampo PLC’s stable AA- rating reflects its dominant positions in Nordic property/casualty insurance markets and expanding scale in Denmark through strategic acquisitions. S&P recognises Sampo’s improved net income and underwriting performance, despite increased weather-related claims.

Talanx AG, rated AA- with a stable outlook, has enhanced its diversification through geographic expansion and balanced portfolio management. The company’s strong underwriting controls and disciplined pricing have supported improved combined ratios and rising net income.

Zurich Insurance Co. Ltd., rated AA with a stable outlook, is praised for its balanced life and non-life insurance portfolio and steady fee income from subsidiaries. Zurich’s global market leadership and revenue growth contribute to its robust operating performance.

In summary, S&P Global Ratings identifies the combination of strong capitalisation, very strong competitive positions, diversified earnings, and disciplined underwriting as defining characteristics of the highest-rated EMEA insurers.

These factors collectively underpin their stable outlooks and solid financial performance, positioning them to navigate future market challenges with confidence.

The post S&P highlights strong capitalisation and competitive strength of top EMEA insurers appeared first on ReinsuranceNe.ws.