Prudential and Beazley are ways to take advantage of the sell-off in insurance stocks following the collapse of SVB, analysts at JP Morgan suggest.
Concern over the sector has ranged from liquidity, mark-to-market losses on bonds and asset risk.
Taking an overview, JP Morgan says insurers have more solid balance sheets than suggested by the share price movements and do not face the liquidity issues of the banks.
“Insurers do not take asset-liability duration risks and are heavily incentivised not to do so under the Solvency II/SST capital,” said the US bank.
“Unrealised bond losses are not an economic loss and do not exist under the Solvency II regime and will be far lower under IFRS17 when netted off against liabilities.
“Insurers are not big users of hold-to-maturity accounting for traded assets.
“Finally, the European insurance sector is very well capitalised, with an average 2023E SII ratio of 210%.”
Prudential and Beazley, both overweight, have been chosen for low balance sheet risk.
Pru was also punished too severely after its results while Beazley has strong top-line growth potential.
Shares in Prudential were 4.2 % lower today even so at 1,005p, while Beazley shed 2.1% at 522p.