Bancherul - BANCI / ENGLISH / Erste Group: CEE insurance stocks to get a boost from rising profits, cheap valuation and stronger investor demand

* European insurance stock prices to swing from slump in 2010 (-8.7%) to strong momentum in 2011
* Insurance stocks traded at attractive multiples - earning yields to stand strongly at 11.9% in 2011 and 12.8% in 2012
* Vienna Insurance Group as top pick - high CEE exposure, good multiples and strong balance sheet

"We see the European insurance sector as highly attractive at the moment, given that balance sheets are constantly improving and valuation is cheap, despite companies' huge growth potential. As the business environment is also improving, all these factors will help steer the sector to strong stock performance in 2011. CEE insurance companies in particular will ride this wave of positive developments, as they additionally rely on a very good location in markets that are still underpenetrated. Our top pick is therefore VIG, which has a high CEE exposure and can thus benefit from rebounding growth in the region and an improved investor sentiment," explains Christoph Schultes, Insurance Sector Analyst at Erste Group.

Valuation
* The top pick remains Vienna Insurance Group. Erste Group analysts increase their target price to EUR 50 and therefore reiterate their Buy recommendation. VIG has high CEE exposure, ranking no. 1 in Czech Republic, Slovakia, Romania and Bulgaria (in addition to its no.1 rank in Austria). Analysts appreciate the company's attractive multiples and the strong balance sheet, including a solvency ratio of >200 and a war chest of more than EUR 1.2bn for further acquisitions and therefore stronger growth in the CEE region.
* Erste Group analysts upgrade their recommendation for PZU to Accumulate and reiterate their target price of PLN 400. PZU has the strongest balance sheet of their peer group and, thanks to its high financial asset position, outstanding profitability. The only flaw is the fact that PZU is still losing market share and thus does currently not participate in the fantastic CEE growth story.
* Erste Group Research reiterates its Reduce recommendation for UNIQA, but slightly raises the target price to EUR 13.8 since a liquidity discount is no longer included. The company's main problem is its low profitability, which is actually due to a very poorly performing property and casualty segment. Thus, the P/E multiples (based on Erste Group estimates) are the highest among its peer group.

You can access the full press release, report, presentation and photo of the analyst here:
http://www.erstegroup.com/tiny/pi20110209_en