Steadfast Group Ltd


SDF Details

Expanding network:Steadfast Group Ltd (ASX: SDF) had reported for over 28% market share, out of the total $16b of gross written premium generated in 2016. The group expanded their network by adding 18 new brokers across Australia, New Zealand, Asia and London during fiscal year of 2017 while acquired hubbing strategy (entailing transferring equity interests of the broking business and its operations into a business hub headed by another entity of the group).
 

Expanding network (Source: Company reports)
 
The group launched a new agency in FY17, Blend Insurance Solutions, which focuses in the accident and health sector, as part of their strategy on focusing the niche product segments. The group forecasts that their ongoing investment in technology would generate revenue in FY18 with a further uplift in FY19. For FY18, the group also expects their EBITA to be in the range of $155 million and $165 million while NPAT would be in the range of $70 million and $75 million. This will help provide a 5% to 7% increase of premium price across brokers' portfolios driven by Broker-led organic growth and better margins. We maintain a “Hold” rating on the stock at the current price of $2.78
 

SDF Daily Chart (Source: Thomson Reuters)

Suncorp Group Ltd


SUN Details

Controlling expenses:Suncorp Group Ltd (ASX: SUN) continues to focus on digitizing the customer experience as well as optimizing their sales and service, enhancing end-to-end process redesign claims and making smarter procurement. The group has also delivered an improved cash return on equity of 8.4%, and aims to ultimately achieve at least 10%.


Marketplace drivers (Source: Company reports)
 
Their business improvement program related efforts are expected to generate a net benefit of $10 million, $195 million and $329 million over the next three years. The group is also working on its market place acceleration to deliver benefits faster to the customers. Though the marketplace acceleration effort is linked to $100 million post tax investment, the group’s efforts and strategies are expected to maintain the expense base at $2.7 billion in FY19 and beyond. Trading at a solid dividend yield, we give a “Hold” on the stock at the current price of $13.24
 

SUN Daily Chart (Source: Thomson Reuters)

QBE Insurance Group Ltd


QBE Details

Rise in claims allowance post natural calamities:QBE Insurance Group Ltd (ASX: QBE) had enhanced their individual risk and catastrophe claims allowance to $1.75 billion for 2017 post Hurricanes Harvey, Irma and Maria and other natural disasters. They reported that 2017 would be the costliest year in the history of the global insurance industry and consequently has impacted their businesses. They also forecasted a pre-tax impact to earnings of over $600 million and now expect their 2017 combined operating ratio target range to be at 100.0%-102.0%. The stock of QBE lost over 15.2% in the last three months (as of October 05, 2017) and we believe the weakness in the stock will continue. Accordingly, we give an “Expensive” recommendation on the stock at the current price of $10.33
 

QBE Daily Chart (Source: Thomson Reuters)

Insurance Australia Group Ltd


IAG Details

Solid profit growth:Insurance Australia Group Ltd (ASX: IAG) delivered a solid net profit after tax rise of 48.6% to $929 million driven by the investment income on shareholders’ funds reflecting stronger equity markets. Their FY17 insurance profit reached $1.3 billion while an insurance margin of 14.9% was achieved, which is a 60 basis points (bps) rise against FY16. Better prior period reserve releases drove the performance as well as offset a natural peril claim cost rise to a certain extent. The group’s Gross written premium (GWP) enhanced 3.9% to $11.8 billion, driven by like-for-like rise in excess of 4%. Better rates on short tail motor in response to claims inflation coupled with ongoing momentum in IAG’s Australian commercial rates drove the performance. But the underlying insurance margin, lost 2.1 percentage points to 11.9%, impacted by higher claim costs in the short tail motor businesses in Australia and New Zealand, and elevated large losses in the commercial classes. IAG also declared a dividend of AUD 0.2 payable on October 09, 2017. The group expects to have improved underlying performance in FY18 with low single digit GWP growth. We give a “Hold” recommendation on the stock at the current price of $6.42
 

IAG Daily Chart (Source: Thomson Reuters)

AUB Group Ltd


AUB Details

Concerns over NSW: AUB Group Ltd (ASX: AUB) reported that there is a major industry change to occur in NSW in the next 12 months which could impact case volumes in some of their businesses. Accordingly, given the low single digit premium rate increases in Australia, coupled with lesser extent in New Zealand, the group forecasts their Adjusted NPAT in FY18 to deliver the range of 5 to 10% growth over FY17. On the other hand, the group clarified that they would be focusing on business retention, rather than growth in NSW; and accordingly, are pursuing opportunities outside NSW. AUB forecasts an ongoing organic growth driven by their in-house efforts as well as their acquisition and start-up investment opportunities in Australia and New Zealand. They see early signs of stabilization in New Zealand. Further, the Risk Services drivers continue to be positive outside of the NSW market and this opens-up path to many opportunities. iCare’s rationalization of Managing Agents is also showing positive signs for the longer-term. We rate the stock a “Hold” at the current price of $12.73
 

AUB Daily Chart (Source: Thomson Reuters)

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