Investing.com -- Shares in Hannover Re and Munich Re fell 4.4% and 4.2%, respectively, on Friday after J.P. Morgan downgraded both reinsurers, warning that reinsurance prices could fall further in 2027 following a benign 2026 hurricane season.
J.P. Morgan cut Hannover Re to "underweight" from "neutral" and Munich Re to "neutral" from "overweight".
Prices for property catastrophe cover fell 12% at the January 2026 renewals and 15% at the mid-year renewals, the broke said.
It expects further declines in January 2027 as 2026 is set to be another relatively benign year for catastrophe losses, returns remain strong and new capital enters the industry. Further double-digit price falls would make growth difficult and weigh on margins, it said.
Munich Re was the first to show the impact of falling prices, with its normalised combined ratio, expected to be 80% at the start of 2026, worsening to about 82% in the second quarter.
J.P. Morgan said Munich Re shares had more than recovered their April highs and were fairly valued, maintaining its €590 price target.
It expects 2027 to be one of the toughest years of the company's 2026-2030 plan, which targets earnings per share growth of more than 8%, as property and casualty reinsurance margins are likely to shrink further and other income streams are not expected to contribute until later.
The broker maintained its €270 price target on Hannover Re, saying its valuation was elevated relative to potential earnings growth. The stock trades at 12.8 times estimated 2027 earnings.
Hannover Re's reserve buffer stood at around €3.2 billion at the end of 2025, equivalent to 1.4 times group earnings in 2026, compared with an average of 1.95 times in 2013-2016, J.P. Morgan said.
More than 70% of its operating earnings come from property and casualty reinsurance, while Talanx's ownership prevents the company from buying back shares.
Reinsurers' shares have outperformed the SXIP index since the end of May. J.P. Morgan said some of the gains reflected market positioning but saw no fundamental reason to become more positive on the sector.
The broker sees average total return potential for reinsurers at high single digits, compared with low teens for European composite insurers.
Original Article
Hannover Re, Munich Re fall 4% as J.P. Morgan sees weaker reinsurance pricing
Moderna shares surge 10% on earnings beat and raised revenue outlook
