Yesterday saw QBE Insurance (QBE) follow closely on the heels of Suncorp (SUN) in beating market expectations & Insurance Australia (IAG) talking about a better outlook leading to a solid +8.1% rally in the stock. The Insurance Sector appears to be delivering the perfect recipe in todays market with a battered sector that’s on the improve operationally (i.e. rising premiums) which also benefits from rising bond yields, a recipe for higher share prices it would seem.
One thing that QBE said yesterday really grabbed my attention i.e. “Customers will have to pay even more for insurance after some premiums went up by more than +10%” e.g. +12% home insurance & +14% for professional indemnity. Historically an industry that can raise prices and expand margins is in a very healthy position, plus importantly this is a global trend which bodes well for the domestic sector.
The local Insurance Sector is accelerating higher and we can comfortably see an initial 15-20% upside as investors search to add value / alpha through cheap stocks / sectors – remember, the insurance sector has been through a very difficult decade.
