J.P. Morgan backs Benelux insurers on valuation discount, shareholder returns
J.P. Morgan backs Benelux insurers on valuation discount, shareholder returns
J.P. Morgan upgraded Dutch insurer ASR Nederland and insurer Ageas to "overweight" from "neutral" because Benelux insurers trade at about 8.5 times expected 2027 earnings, against about 11.5 times for European insurers.
The broker raised its December 2027 price target on ASR to €90 from €80 and on Ageas to €90 from €80. ASR shares closed at €74.58 and Ageas at €74.95 on Oct 21.
The broker forecast annual earnings-per-share growth of 7% to 9% for the sector over 2026-29, and said Benelux insurers offer high single-digit to double-digit returns to shareholders through dividends and buybacks.
It called ASR the most direct listed beneficiary of Dutch pension reform, citing its sole exposure to the Dutch insurance market and larger pensions business after buying Aegon Netherlands.
The reform shifts pensions from guaranteed-benefit schemes to defined contribution plans, with legislation taking effect on Jan 1, 2028.
J.P. Morgan expects ASR to announce higher capital returns at its Dec 1 investor day and forecast a €300 million buyback in 2027.
It estimated surplus capital of about 5% to 10% of ASR’s market value after that, leaving room for acquisitions in the Netherlands.
Ageas does not benefit from the pension reform, J.P. Morgan said, but it sees a cheap valuation, improving earnings and large cash at the holding company after Ageas sold its Malaysian joint venture to Maybank.
The broker assumes UK synergies of £130 million, up from £110 million.
It named Ethias, the Belgian government-owned non-life insurer, as the most relevant possible acquisition target if the government sells, though it called that an option rather than its base case.
J.P. Morgan kept Dutch insurer NN Group at "overweight" with a €95 target, saying it expects its share buyback to grow by €50 million each year.
It cut insurer Aegon to "neutral" from "overweight" and lowered its target to €8.15 from €9.45 because the company has left the Dutch market and its move to the United States and U.S. accounting rules create valuation uncertainty.