Insurance - Australia: FY26 reporting season handbook: Time to be selective, SUN down to U/P from Buy

Research evidence excerpt

Insurance - Australia: FY26 reporting season handbook: Time to be selective, SUN down to U/P from Buy

Taking a more balanced stance

We shift to a more balanced stance on Australian insurance after strong performance

YTD. The sector is up 12% YTD, outperforming Banks (-3% YTD) and the wider

Australian market (+2% YTD). The sector has also enjoyed a catch-up vs global peers

(+2% YTD), clawing back unwarranted underperformance from 2025.

We think improving sentiment towards the sector has been supported by investor

recognition that fundamentals are not as bad as expected, including a shallow retail

pricing cycle and sustainable outlook for margins, benign catastrophes and improving

investment income outlook. The sector has also been a likely beneficiary of reduced

position in Australian banks where the uncertainty in the outlook has weighed on

investor confidence. Banks - Australia: Reporting season preview: A tougher outlook for

Retail banks (1 Jul 26)

Exhibit 2: Despite significant price volatility, AU insurers are now outperforming AU banks

(+15%), the AU market (+10%) and global insurers (+10%) on a YTD basis

ASX200 Insurance total return relative to Banks, Market & World Insurance

40%

ASX 200 Banks ASX 200 World Insurance

20%

0%

-20%

-40%

2018 2019 2020 2021 2022 2023 2024 2025 2026 YTD

Source: Bloomberg, BofA Global Research

BofA GLOBAL RESEARCH

Our top picks within the sector are IAG and MPL. We also have a Buy on NIB. We

have Underperform ratings on QBE and SUN (downgraded from Buy).

Top picks: IAG and MPL

IAG remains our only preferred exposure within P&C insurance with 26% total return

potential on our A$10.00 price objective. We believe the market is underappreciating

EPS growth in the medium-term, supported by M&A and/or share buybacks. We estimate