The Insurance Sector was under some pressure yesterday as would be expected with NSW being battered by floods however QBE was the worst performer and it only fell -3%, overall a solid performance in our opinion. The rain continues in Sydney this morning with up to 10cm forecast to be dumped over 24-hours before the clouds depart our fair city, in other words the rains almost old news already although its clearly been an awful period for many people in our state and our heartfelt wishes goes out to anyone struggling with the conditions this week.
From a market perspective the underlying kick up in bond yields is laying the foundations for a brighter future for the sector as the insurers enjoy increased revenue from received premiums parked in fixed interest. However there are risks this will be offset by rising claims as weather patterns in particular continue to nudge extremes in all directions. The Australian insurers remain down ~25% from their 2019 highs whereas the global sector has made fresh all-time highs this month, not a great advert for the local names, while the sector isn’t high on the shorted stocks list it’s certainly not in many investors “Top 10 picks” for the year but with pessimism often comes opportunity!
Conversely this months has seen global insurers breakout to fresh all-time highs, its hard to know how far they can rally before we see some consolidation but we would not be sellers until further notice
