Suncorp Group Ltd (SUN)
Hi James, Shawn and Team Your view please on Suncorp-They have fallen after they estimate a 350m cost from Qld-NSW storms. Would you still hold SUN? regards Debbie
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Answer
Hi Debbie,
We believe there are a couple of factors at play behind SUNs recent weakness:
- SUN’s catastrophe allowance is less robust than IAGs for example and after five months of FY26 the perils cost are already 65-70% of its annual natural hazards allowance. The QLD storms and subsequent more than 10,000 claims have clearly hurt the company with downgrades hitting the stock which made fresh 2025 lows on Friday.
- The Fed is now expected to cut rates in December which generally weighs on the Insurance Sector which holds cash in fixed interest bonds as cover against claims moving forward hence lower rates produces lower interest income.
- Thirdly, and more of a structural shift around insurance, we think this sector is one likely to be disrupted by AI, particuarly the insurers that generate most of their earnings from more vanilla car and home policies.
We have SUN on the Income Portfolio Hitlist given recent weakness, however, it feels wrong at this stage, and we are likely to remove it.
