Insurance - Australia: Inflation pressures are building. Looking for a hedge?

研报英文原文证据摘录

Insurance - Australia: Inflation pressures are building. Looking for a hedge?

BE shares would trade at 10.0x 2027E earnings.

Upside risks: 1) shorter-than-expected softening insurance pricing cycle, 2) Better-than-

expected improvements in QBE's underwriting profitability after restructuring and

reinsurance transactions, 3) Longer-than-expected interest rate cycle.

Downside risks: 1) longer-than-expected or worse-than-expected softening insurance

pricing cycle, 2) worse-than-expected improvements in QBE's underwriting profitability

after restructuring and reinsurance transactions, 3) worse-than-expected volatility in

earnings, such as above-allowance large losses or other unexpected underwriting losses,

4) a shorter-than-expected interest rate cycle, 5) significant volatility in equity and credit

markets that could affect QBE's investment portfolio. 6) QBE's US claims could also be

vulnerable to the impact of tariff-induced inflation.

Suncorp Group Ltd (SNMYF)

Our SUN price objective of A$21.00 is based on an adjusted Gordon Growth Model. We

use a discount rate of 9.0% and growth rate of 3.0%. This reflects our view of an

attractive market backdrop for Australian domestic insurers, which benefit from high

market concentration and very strong pricing discipline. In our valuation, we adjust for

excess capital based on our view of minimum group capital requirements. We also adjust

for debt and non-controlling interests. At our PO, we estimate SUN shares would trade

at 18.1x FY27E earnings.

Upside risks: 1) Stronger than expected personal lines pricing cycle, 2) Better-than-

expected improvements in SUN's underwriting efficiency due to claims and/or expense

management, 3) A softer-than-expected reinsurance pricing backdrop, 4) A longer-than-

expected interest rate cycle.