Insurance companies have been underperforming the broader market on the back of rising natural disasters and COVID business disruption. Will the sector result be seen as a catalyst for better times ahead? Raymond Chan takes a look at QBE, SUN and IAG and reveals which one he recommends as a BUY.
1. QBE
“When I first joined the stockbroking industry in the late 90s, QBE was a star performer, with industry leading insurance margin,” said Raymond. “Since then, the company spent years with earning disappointment and declining underwriting margin,” he added.
“QBE’s first-half result was well ahead of consensus forecast. Its dividend of $0.11 also exceeded expectation.
“This result was the best in a decade, with a 5-year high underwriting margin, strong revenue growth and good cost control … the rising revenue trend may continue into this financial year,” he said.
QBE (QBE)
2. SUNSUN’s results was ahead of consensus. The highlight was a better than expected “capital return” with dividend of $0.40 plus special dividend of $0.08 special dividend and buyback.
“After a strong rally from COVID low, we think SUN is now trading at fair value,” he said.
Suncorp (SUN)
3. IAG
“IAG result was largely pre-realised but its price fell on results on the suspicion that its revenue growth trend might not be as strong as SUN,” Raymond said.
“IAG is now trading around a 7-year low.
“Last financial year was clearly a difficult one, however from here we feel IAG looks attractive at its current price given:
- Rising premiums
- Improving underwriting costs
- other cost control programmes
that should see the stock recover from here. Overall, our analyst has maintained an ADD/BUY recommendation on IAG,” Raymond concluded.
IAG (IAG)
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