Europe's long-underperforming insurance stocks are primed for a summer rally, according to investors and analysts.
A report in the Wall Street Journal said insurers have weathered low interest rates and storm seasons by keeping a tight grip on costs and by sticking to their vows of strict underwriting discipline, shunning growth for growth's sake.
Now investors and analysts say share prices could rise further on a mix of rising demand for pensions, the opening of new markets in Asia and thriving capital markets that could spur steady growth.
Merger speculation could give the sector an extra kick.
The WSJ said the insurance subindex has risen 10.6%, including a 1.1% rise so far this month.
The paper cited Swiss-based Zurich Financial Services AG, as among those stocks expected to rise with J.P. Morgan forecasting an increase of about 11% over the next year.
Under chief executive James Schiro, Zurich Financial posted a record net profit in 2005 despite huge claims related to last year's US hurricane season.
As recently as 2002, the company needed to raise capital to prop up its battered balance sheet.
However, there was also a warning that industry share prices could be hit by huge damages linked to either man-made disasters or spiraling claims from natural catastrophes, hurting profits and denting balance sheets.
Several insurers have already warned that this year's hurricane season could be as fierce as last year's, which saw insured losses of about $60bn.
