Things are far from rosy in the European life insurance sector. Buffeted by profit warnings, huge investment losses and falling solvency ratios, and with shares being picked on by the hedge funds, the sector has embodied all the wild volatility of global stock markets in recent weeks.
But the slump in July, sparked by profit warnings at Aegon and Fortis, took even the bears by surprise. Few names in the sector went unscathed: Axa, Zurich, Skandia and Prudential also took a pounding. And although the subsequent bounce in global stock markets prompted a rally, analysts believe there is plenty more downside.
Rising capital adequacy problems as a result of increasingly heavy investment losses from the stock and credit market deteriorations are the key worry. "Capital adequacy is at an all-time low," says Andrew Ritchie, European insurance analyst at specialist investment bank Fox-Pitt, Kelton.
Lurking problems
Also rising fast is the concern that credit risk - whether through corporate bond investments or through the assumption of banking risk through credit derivatives, collateralized debt obligations and other forms of risk transfer - has stored up other, so far unseen, problems.