By Carlos Pallordet

Feb 3 - (The Insurer) - Shares in Norway’s Protector Forsikring and Gjensidige led the gains in Europe in January while US P&C stocks grappled with losses from Los Angeles wildfires and a weaker Wall Street performance.

• European Stoxx 600 Insurance index rose 5.6% in January

• Protector Forsikring and Gjensidige top performers with gains of 16.1% and 15.5%, respectively

• Continental insurers Generali and Mapfre among strongest January risers

• Big four reinsurers also performed strongly with all but Scor rising more than 5%

• Mixed showing for US P&C stocks with S&P 500 insurance benchmark up only 2.1%

• Over half of US panel closed lower, weighed down by LA wildfires, with Mercury General shedding 25%

• Skyward Specialty and SiriusPoint followed with losses of 12.4% and 11.2%, respectively

• Brokers bucked trend with all seven intermediaries ending January in positive territory

After lagging behind their US peers in 2024, European P&C stocks kicked off the year on a strong note, boosted by broad gains across European equity markets.

The Stoxx Europe 600 index hit a record high on Friday to deliver a 6.3 percent gain for January — its best monthly performance since November 2023.

Among national benchmarks, the German DAX rose 9.2 percent while France’s CAC 40 gained 7.7 percent.

Meanwhile, the UK’s FTSE 100 added 6.1 percent, its best monthly performance since November 2022.

In contrast, the S&P 500 posted a more modest gain of 2.7 percent. Its performance was impacted by a sell-off in technology stocks, triggered by Chinese AI start-up DeepSeek’s unveiling of a groundbreaking, cost-efficient model that called US AI dominance into question.

A stubborn inflation reading for December, lower-than-expected GDP growth for the fourth quarter and the announcement of new US tariffs on Canada, Mexico and China added further volatility to the market in January.

According to a report from Bank of America, January saw the biggest rotation from US stocks into eurozone stocks in almost a decade, with investors shifting from high-valued US tech stocks into European defensive and growth stocks.

Shares in Europe-listed P&C (re)insurers benefited from this trend, with the sector-specific Stoxx 600 Insurance index up 5.6 percent in January.

Only three of the 21 listed European (re)insurers tracked by The Insurer ended the month in negative territory while 11 of the carriers in the group recorded gains of 5 percent or more.

Protector Forsikring led the gains among Europe-listed (re)insurers with shares its soaring 16.1 percent in January, after the insurer pre-announced 30 percent growth in gross written premium for the fourth quarter of 2024, along with an 8.4 percentage point improvement in its combined ratio.

The Oslo-based carrier had an exceptional 2024, with its shares rising 58.3 percent over the year.

Meanwhile, Norwegian peer Gjensidige surged 15.5 percent in the month, as it revealed a better-than-expected combined ratio of 83.3 percent for the fourth quarter of 2024, with its operating earnings for the period coming in comfortably ahead of analysts’ consensus forecast.

Italian insurer Generali was also among the strongest January risers with its shares rising 12.3 percent, adding to a gain of 42.7 percent in 2024, one of the highest in the European cohort.

At the end of the month, the insurer unveiled new underwriting and operating targets under its latest strategic plan, which aims to achieve an undiscounted P&C combined ratio of 94.5 percent by 2027.

Spanish insurer Mapfre and UK-based Aviva also performed strongly in the month, rising 9.9 percent and 9.6 percent, respectively.

Among the big four reinsurers, Munich Re rose 7.2 percent, while Swiss Re and Hannover Re added 6.3 percent and 5.3 percent, respectively. French reinsurer Scor trailed its peers but still posted a 4.3 percent increase.

Despite the reinsurance sector looking set to take a sizeable hit from the California wildfires – which are forecast to cost the insurance industry anywhere between $20bn and $50bn – these losses are expected to remain within natural catastrophe budgets.

Still, Citi analyst James Shuck warned that a $30bn industry loss would likely mean Europe’s major reinsurers will have used up around one-third of their annual cat provisions.

At a $30bn industry loss, Citi estimates Munich Re would see an $801mn impact from the wildfires, with Swiss Re facing a $667mn loss, Hannover Re taking a $534mn hit and Scor’s impact rising to $133mn.

In addition, Citi has estimated Munich Re will face a $217mn hit through its direct participation in the California Fair Plan, with the reinsurer's 7 percent share bringing its overall loss bill to more than $1bn.

Wildfire losses have also weighed down European insurers with exposure to the events, including Conduit Holdings and Lancashire, which fell 2.9 percent and 1.5 percent in January, respectively.

The picture in the US

In contrast to their counterparts across the Atlantic, US P&C stocks recorded their weakest January performance since 2022, with the sector-specific S&P 500 Insurance benchmark edging up 2.1 percent.

Out of 41 carriers in the US cohort, 22 remained in negative territory in January, with 13 of them falling by more than 5 percent during the month.

Mercury General recorded the most significant drop, with its shares down 25.0 percent for the month after the LA-based insurer – which is the fifth-largest homeowners carrier in California – revealed that wildfire losses are expected to exceed the $150mn reinsurance retention on its $1.29bn cat program.

On 24 January, Fitch Ratings revised its outlook to negative from stable on the A (strong) insurer financial strength ratings of Mercury General's property casualty operating subsidiaries, in response to the potential for further catastrophes to follow the LA wildfires.

Meanwhile, Skyward Specialty was down 12.4 percent in the month, while SiriusPoint and RLI lost 11.2 percent and 11.0 percent, respectively.

In a report published on 12 January, a few days after the wildfires ignited, JMP analysts Matthew Carletti and Karol Chmiel suggested stock reactions were – in many cases – overdone, with Skyward Specialty standing out as the most notable example.

“We simply do not see the potential for any meaningful exposure, and even if there were its reinsurance retention is only $12mn,” they explained.

Separately, Selective Insurance Group’s share price closed out the month 10.0 percent down, as investors responded to the carrier’s Q4 2024 earnings miss.

The insurer reported a 4.8 point combined ratio deterioration to 98.5 percent for the fourth quarter, with the results hit by $100mn of reserve strengthening in general liability and excess and surplus lines.

Meanwhile, Fidelis Insurance Holdings ended the month down 9.0 percent while Bermudian reinsurer RenaissanceRe lost 6.5 percent despite reporting a Q4 earnings beat as its combined ratio deteriorated 15.7 points and analysts highlighted lower-than-expected top-line growth.

At the other end of the spectrum, shares in insurtech Root jumped 34.3 percent in January while Kingstone Companies added 11.8 percent.

Both companies had been among the standout performers of 2024, rising 592.7 percent and 613.1 percent, respectively, in the year.

Meanwhile, shares in Markel and International General Insurance Holdings were up 5.9 percent and 5.5 percent, respectively.

Among brokers, price momentum picked up in January following a pause in gains for all seven intermediaries in December 2024.

Arthur J Gallagher led the gains in January with a 6.3 percent rise, followed by The Baldwin Insurance Group, which was up 5.7 percent.

Shares in WTW climbed 5.2 percent in January, while Ryan Specialty and Aon were up 3.8 percent and 3.2 percent, respectively.